If you want something to grow, you have to give it an environment in which it can thrive. That simple equation works as well for businesses as it does for plants.
And it's exactly what the states recently ranked among the best in helping entrepreneurs start successful new businesses did. In a variety of ways, they welcomed new business with open arms and were rewarded with more business startups and higher tax revenue.
- New York
- New Hampshire
- New Jersey
The Metro Denver EDC compiled its report from information from numerous sources, including the U.S. Department of Commerce, Kauffman Foundation, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, National Science Foundation and TechAmerica. The rankings measured innovation by assigning equal weight to entrepreneurial activity, new businesses, venture capital investments, spending on research and development, patents granted per capita, and high-tech employment per capita.
When it comes to helping entrepreneurs get off the ground, a key factor in that success is often getting a state's innovation environment just right.
Location, Location, Location
Home to both Silicon Valley's numerous cutting-edge tech businesses and Stanford University, known for having strong programs in business, engineering and science, it may come as no surprise that California ranked number one on the EDC's list. Similarly, Massachusetts gets a boost from the impact of MIT and the many high tech companies located in the state.
In the number-two spot is Colorado. Tom Clark, CEO of the Metro Denver EDC, points to the state's history of adding new jobs as one factor for its top position. Home to such companies as MapQuest and Photobucket, Colorado ranks fifth highest in the United States for employment growth—quite a ranking considering it climbed there from 49th place in 2002.
And while landing in the top five is nice, what Colorado needs, according to Patty Silverstein of Development Research Partners is a closer look at its tax laws. "A continuing issue for Colorado is its tax structure," Silverstein says, "and little progress is apparent in making the tax structure more aligned with promoting economic growth.”
According to the Metro Denver EDC, Colorado has the lowest state sales-tax rate—among states that levy one—but when local tax burdens are included, Colorado ranks as having the seventh-highest sales-tax burden (state and local).
Straight To The Source
Another way to get the inside scoop on business innovation is to talk to the people actually working on business development and to the small-business owners who are making new business happen. And these entrepreneurs can come from just about anywhere, when provided with the right conditions. Ini Augustine, CEO of SocialWise Media Group in West Des Moines, Iowa, is proof of that.
"The state of Iowa has gone above and beyond in its efforts," Augustine says. "As my young business grew, I found myself hampered by not having an office, by not being able to afford one either. My counselor at [ISED Ventures] connected me with the West Des Moines Business Incubator, which offered space at significantly reduced rates for startup businesses. The Iowa Technology Association partnered me with a mentor as well.
"Iowa is unique in that support for startups comes from the top down," Augustine continues. "College students are partnered with technology companies, startups are paired with successful businesses, and everyone has profited as a result."
Business owners in other states have similar stories to tell. For instance, Phillip Luebke, founder of Brilliant Swim, just launched his first product, the PaceWatch for swimmers, in Bozeman, Montana. Along the road to entrepreneurship, he's gotten help from Startup Weekend Missoula, StartupBozeman and his local chapter of SCORE.
"If I fail," Luebke says, "it won't be for lack of an entrepreneurial ecosystem here in Montana."
Moving On Up
One factor that Clark also mentions as having impact on the state rankings is the effect of ambition. States that have implemented new programs to help them innovate in new and powerful ways have the opportunity to move up significantly.
For example, Utah (currently number seven on the list) may soon surpass some of the higher-ranked states in such areas as research and development expenditures and job growth. “Colorado would be well-served to examine its once economically weak neighbor, because Utah is gaining significant ground on our state,” Clark points out.
By measure of that advice, perhaps state business builders should begin looking at such places as Iowa and Montana. Even Pennsylvania has something to say about new business. "Pennsylvania isn't known for innovation," says Chris Dima, founder of Walnut St. Labs, "but Philadelphia's startup scene is pretty robust."
Dima says his Philadelphia-based new-business incubator has started to garner a lot of interest—surpassing even its complementary mission as a shared working space. "Why? Well, it's cheap to live here," Dima says. "And the surrounding suburbs have many affluent citizens. That's a good mix."
And a good mix may be exactly what it takes, in Pennsylvania and elsewhere.
Freelance writer James O'Brien, PhD, covers business, technology, travel, food, wine, home improvement, writing and news. His book on writing, The Indie Writer's Survival Guide, is now available.
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