Providence is a Top Startup Market in U.S.
Friday, December 18, 2015
Based on criteria of affordability, availability of capital, success of early-state companies, and a community of entrepreneurs, new research company DataFox placed Providence in its fifteenth - and final -- spot on its "2015's Best City to Found a Startup" list.
"Though Rhode Island's economy took a hit during the recession, its tech scene remains a bright spot and source of pride. The cost of living is much lower than nearby Boston, and Providence boasts intellectual and cultural capital to spare. The city stands out in our study for the rapid growth of its young startups, as well as its affordability high density of entrepreneurs," wrote DataFox.
The top five markets identified were Cambridge, MA; Santa Monica, CA; Fayateville, AR; Boulder, CO; and Wilmington, DE.
Saul Kaplan, who founded the Business Innovation Factory in Providence in 2005, spoke to the role that startups play in the state.
"The entrepreneurial spirit is alive and well in Rhode Island. With limited opportunity in large institutions, we are dependent on start ups, small and midsize companies across the state to create jobs as the national and regional economy improves," said Kaplan. "Economic cycles are inevitable. If we can enable more entrepreneurs to create their own jobs we will build more resilience into our local economy and be better able to withstand future economic downturns."
"City and state government officials have realized the importance of supporting the local entrepreneurial community," continued Kaplan. "The most important thing our government leaders can do is to make entrepreneurship and innovation central to our state's economic vision, shine a big storytelling spotlight on the existing startup community and focus on creating the conditions for more entrepreneurs to start more companies. Progress on the ground is encouraging and our current leaders have a unique opportunity to help accelerate it. Let's start more stuff in Rhode Island!"
Withers, who recently helped promote a number of Providence's startups for a Founders' League holiday gift guide, said that while things are "steady," that new ways of approaching startup financing present major potential for the sector.
"I think we're at a steady state. We're lucky to be in a region where there's a lot of activity - we're benefiting from that," said Withers. "We think beyond local however. Our best bet is to embrace the regional momentum that's happening, and we're focused on global trends. For 2016 for starts up in general, it's coming to a head in terms of the bubble, and that's good news for places like Rhode Island and New England. We weren't on that bubble, we don't have over-valued companies."
"There's a reason New York's been giving Silicon Valley a run for its money - there's room in this world for more than one model. It's one card in a deck of cards," said Withers. "You see a lot of capital -- and fatigue - tied up in that market. That machine is running out of gas. There's room in the non-Silicon Valley markets, for people to try new pathways. We're seeing a growing awareness that a myopic focus on a big exit isn't the only way."
Withers said that both the RevUp model -- and others nationally -- are indicators of what she sees as changing trends in startup financing.
"There's excitement for alternative models. We're seeing investor fatigue around the equity model. It's coming to roost," said Withers. "There's been lot of announcements this month about non-equity based financing -- that's the RevUp model There's another way to get money back -- royalties, structured debt. Lighter Capital on the West Coast is an example. Theres a growing sense that one size fits all venture model doesn't work for most of the country."
"Even in Boston, we need more than just the [VC] model to facilitate the economic growth. In some ways the start-up ecosystem is maturing," said Withers. "There's alternative financing, different expectations around growth."
Anisha Sekar with DataFox -- who is a recent Brown University graduate -- spoke to where Providence scored high by their standards.
"Newly founded startups can't survive on just a good idea - they need to be part of a culture of growth while remaining financially viable. Our study found the cities that meet both of those needs by providing access to funding, remaining affordable, cultivating a strong network of entrepreneurs and having a high density of early-stage startups," said Sekar. "Providence ranks above average in three of those categories: early-stage startups per capita, cost of living and startup growth potential."
"The top cities in our study often build their startup ecosystems on local universities and governments. Providence offers both: RISD and Brown contribute to the city's prominence in design and social entrepreneurship, while state-supported programs like the Venture for America and Wave Maker fellowships help attract new talent," continued Sekar. "Add in the mentorship and access to funding that comes from incubators like Social Enterprise Greenhouse and Betaspring, and Providence becomes an exciting city to found a company."
Related Slideshow: 5 Economic Projects - Can Raimondo Get Them Done?
#5 Wexford-CV Properties
The Raimondo administration continues to work with the 195 Commission to seal the deal with the Baltimore-based Wexford Science and Technology for development of prime real estate on the former highway land. While a proposal was made back in June for a mixed-use project, the negotiations between the state and the life sciences have been mostly behind the scenes, with a key vote taken on the proposal taking place Monday night -- in closed session.
"It is important to note that a P&S while an important milestone, is still just a step in the development process," said Commission spokesperson Dyana Koelsch. You can see the plan as presented on the Jewelry District's website HERE. Will we see shovels shortly?
#4 General Electric
Reports that the Connecticut giant is eyeing a move elsewhere — with Rhode Island on that short list — has many a Ocean Stater excited at the possibility. The Boston Globe not surprisingly made the case that their state should top the list (taking a dig at the others), saying that the "Boston area is on the short list of contenders for the headquarters and its 800 people, as GE’s search focuses on high-cost states in the Northeast. In relation to those states, Massachusetts compares favorably on its business tax climate."
However a Connecticut State Rep told the Hartford Courant a month earlier that Rhode Island as an option “wouldn’t surprise him.” Said State Rep John Frey in November, “It's been expressed to me by a couple of people at GE that they've been impressed by what the governor has done with state employee liabilities." To say a GE coup by Raimondo would be monumental for Rhode Island would be an understatement.
#3 Citizens' Campus
The Rhode Island-based banking powerhouse has indicated that is looking for a vacant location state as a potential new campus for 4,000 + of its employees — while maintaining its headquarters downtown at One Citizens Plaza. There is little indication at this time however of consideration of a vacant parcel of prime Providence real estate just to its HQ's south (that being the Industrial National Bank “Superman” building); the bank is indicating that keeping its support facility in Cranston is still an option.
“The lease for our service and support facility in Cranston expires in 2018. We are exploring several opportunities ranging from renewal to potentially consolidating some of our staff and back office functions at a new location in Rhode Island," said Citizens spokesperson Jim Hughes. Watch to see how Citizens moves forward -- and what, if any, role Raimondo has in the process -- and outcome.
#2 Superman Building
The arguably most iconic building in Providence — and Rhode Island’s - skyline lost its last tenant in 2013, and a year later an appraiser deemed it to have “zero value.” A failed effort to utilized tax credits and public investment by High Rock Development has left watchers asking if and when anything is going to move into the historic (if slightly aging) building.
Former Mayor and real estate developer Joseph Paolino, who has been a vocal supporter of trying to get Citizens Bank into Superman, told GoLocal, “I think the biggest problem [in the city] is Superman, because it depresses everything around it. Paolino, who bought three properties nearby downtown back in 2014 — said the revelation that the Industrial National Bank building was empty had cost him a mortgage with a major lender.
Whether there is an opportunity for a Citizens Bank move, or a new developer to re-package a viable mixed-use proposal, if the Superman building is still empty in several years' time, that is not a win for anyone -- not the city, not the state, and not the Governor.
#1 195 Rollout
When Raimondo took office, she understandably made a number of changes on the 195 Commission. A tax stabilization agreement (TSA) structure was finalized this past summer, and the Commission has the Wexford biotech proposal moving forward — but how much more development, and how soon, will the Raimondo administration be able to accomplish what it pledged it would do?
Raimondo called for the 195 land to be a manufacturing hub during her campaign — and while year one might have been setting the stage, the next years are critical for the state — and Governor. Will she usher through her proposed Innovation Institute?
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