Startup Ecosystems: Seeding The Land With Startups

Locations are nurturing startup ecosystems with access to skilled labor, angel investors, higher ed resources and an affordable quality of life that is attracting talent.

By the BF Staff
From the September/October 2020 Issue

A successful startup ecosystem is about much more than seed money, incubators and accelerators. Don’t get us wrong: those tools are essential elements in any fertile startup landscape, crucial to planting your business idea and letting it take root.

But the best startup ecosystems provide the intangible nutrients that enhance the growth of business startups and put them on a proven track record to success. The locations that know how to do it right have the highest score in the only metric that counts with startups: how many of them succeed.

There are numerous subsets of a successful startup ecosystem, including universities, funding organizations, R&D resources, co-working spaces and services providers like legal and financial services. A startup ecosystem also is a network of people: mentors, fellow entrepreneurs, investors, educators and advisors. Funding resources include angel investors, venture capital, loans, grants and crowdfunding portfolios. Startup accelerators and incubators are enhanced by startup blogs and other promotional tools.

According to Startup Genome, which issues an annual Global Startup Ecosystem Report, when the term startup ecosystem entered the lexicon in 2013, there were only four ecosystems that produced “unicorns” (billion-dollar startups.) This number has rapidly increased each year to 2019’s tally of 84.

Here are some good examples of successful startup ecosystems:

ACCELERATING GROWTH IN WINSTON-SALEM, NC

In the heart of North Carolina, the city of Winston-Salem is defining itself as a standout mid-sized metro with an entrepreneurial ecosystem to rival America’s biggest cities. Winston-Salem is proving itself as a startup-friendly city where entrepreneurial resources are both accessible and effective. It’s ranked as one of the top cities in the nation for new small business growth (WalletHub), and for being one of the best cities in which to start a small business (Zen Business).

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The Innovation Quarter in downtown Winston-Salem, NC (above) is one of the fastest-growing urban-based districts for innovation in the U.S., with more than 1.9 million square feet of office, laboratory and educational space.

The entrepreneurial ecosystem offers a city-wide footprint with anchor points at each end of the downtown district. On the east end, the Innovation Quarter is one of the fastest-growing urban-based districts for innovation in the United States with more than 1.9-million square feet of office, laboratory and educational space, and home to more than 170 companies and five academic institutions.

A few blocks west in the city’s walkable downtown, you’ll reach the 500 West Fifth Building where some of the city’s incubator and accelerator programs support dozens of growing startups and provide direct connections to business mentors and local colleges and universities, which offer entrepreneurship courses on-site.

Winston-Salem’s value proposition to startups is that founders can find a soft landing here. The city offers just the right balance between access to resources and affordability on one hand, and plenty of amenities, talent and infrastructure on the other.

Winston-Salem is ranked among the top 25 cities nationally in terms of Housing Affordability (Realty Hop) and has a lower cost of living than Raleigh, Charlotte and many other peer cities across the country.

There are 310,000 workers in the local workforce with access to a regional labor force of 800,000. A diverse higher education system of six local colleges and universities supports talent development.

More than $2 billion has been invested in the downtown area over the past ten years on projects such as the Innovation Quarter, the renovation of Business 40/Salem Parkway and much more. This expansive economic development supports a thriving culture of arts, entertainment and small business creation in the downtown area and beyond.

Winston-Salem’s entrepreneurial ecosystem includes more than 30 business, civic and nonprofit organizations that work collaboratively to foster startup activity. There are programs that cater to startups in all stages of inception and growth, creating a smooth runway for companies to find early-stage funding and receive continuous support as they scale.

The Winston Starts incubator is a key component of the $10 million renovation of 500 West Fifth, an 18-story skyscraper in downtown Winston-Salem that has been reimagined into a collaborative hub where businesses, startups and educational institutions come together to share ideas and innovate.

Since launching in 2017, Winston Starts has provided office space, mentors and support services to 30 companies. The founding cohort of twelve startups have earned $10.6 million in combined revenue, with $30.7 million in combined capital investment.

The startup Swipeby is an example of how Winston Starts generates scalable companies. Swipeby is a SaaS+ platform enabling restaurants and small businesses to offer easier curbside pickup through an app. Prior to COVID-19, it was growing 17 percent MoM and adding new restaurants throughout the Southeast U.S. and beyond. When the Coronavirus pandemic created an explosive increase in demand for restaurant ordering and pickup solutions, Swipeby answered the call. From Q1 2020 to Q2 2020, volume grew 1,380 percent.

Founder Carl Turner credits the entrepreneurial ecosystem in Winston-Salem with setting his business up for success, saying, “Winston-Salem offers the perfect mix of access to a strong entrepreneurship community and an ideal customer base, which have benefited my startup. Stakeholders are very supportive and I have been able to build a strong network here which is priceless.”

Take the elevator up a couple of floors in 500 West Fifth and you’ll be at Flywheel Coworking—another partner organization in the entrepreneurial ecosystem which offers coworking space and programming for startups. Flywheel hosts a premiere accelerator called the New Ventures Challenge which has created a portfolio of 18 companies over four cohorts that are now valued at more than $40 million.

One of its graduates, the tech company Fluree, recently raised $4.7 million of investment in one of the largest seed funding rounds in North Carolina history and has won a contract from the United States Air Force (USAF) to provide a blockchain data management platform for the Air Force and the U.S. Department of Defense.

This year’s cohort includes five startups which are primarily developing apps and web-based platforms serving a variety of industries. Founder Merle Murrain is looking to perfect his investor pitch and find collaborators to develop a beta version of his platform UWallet, a financial app that helps college students become aware of their spending. Murrain says, “While teaching Personal Finance, I realized a large number of my students, many of them graduating seniors, were ill informed about budgeting, saving and loans. I knew an app could help, but I didn’t know how to develop one. After finding New Ventures and enrolling through a minority scholarship, I can see a path to market for my idea and I have the support needed to get there.”

With its nickname “the City of Arts and Innovation,” Winston-Salem’s entrepreneurial ecosystem wouldn’t be complete without a partner organization that fosters the growth of creative entrepreneurs. The Center for Creative Economy features an accelerator program called Velocity, in which the top startups split a pool of $50,000 in seed-stage funding. Since its inception in 2016, Velocity has launched 40 companies, which have earned $8.1 million in revenue, raised $7.4 million in investments and created 177 jobs. This year’s Velocity accelerator kicked off in August with a cohort of 10 startups—50 percent are run by women entrepreneurs, and 50 percent are founded by people of color.

Winston-Salem’s largest industry is healthcare, making it an ideal location to develop new life science and healthtech solutions. IQ Healthtech Labs is located in the Innovation Quarter and focuses on bridging the gap between emerging startups and established corporations in the healthcare sector. The aim of iQ Healthtech Labs is to shorten the life cycle of taking healthtech solutions to the marketplace by creating collaborations between Innovation Quarter tenants, traditional and non-traditional partners, commercial markets and potential investors.

The entrepreneurial ecosystem in Winston-Salem provides a stepping stone approach to scalability, with many startups taking advantage of multiple resources as they move through inception and growth phases. More than 200 entrepreneurs a year utilize the services of Forsyth Tech’s Small Business Center, located in the Innovation Quarter, to learn the building blocks of launching a business enterprise.

There are programs that focus on networking, such as Hustle WS, which promotes inclusive entrepreneurship and equitable access to business resources for women and people of color. Other ecosystem partners like Mixxer Makerspace and the SG Atkins CDC’s Shared-Use Kitchen provide space and tools for entrepreneurs to take their products to market. All of these organizations and more provide a continuum of support that makes Winston-Salem and Forsyth County a unique hot spot for small business creation.

Greater Winston-Salem, Inc., which promotes the economic development of Winston-Salem and Forsyth County, also serves as a partner in the entrepreneurial ecosystem and incorporates startup development as a part of the city’s economic growth strategy. President and CEO Mark Owens says, “As our entrepreneurial ecosystem continues to mature, it generates new interest from investors and it attracts more founders to bring their companies here, where they know they’ll be supported. Our small businesses, entrepreneurs and startups are diversifying the economy and making Winston-Salem more resilient to economic change.”

INNOVATION CORRIDOR DEEP IN THE HEART OF TEXAS

As various publications continue to rank Texas as the top state for business, it is no surprise that companies from across the country and around the world are flocking to the one state in the U.S. offering the greatest opportunity for success.

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Amazon’s 850,000-square-foot Fulfillment Center, pictured above, employs over 3,000 at full capacity. (Photo: Greater San Marcos Partnership)

Texas offers low taxes, including no state income tax, plus low business costs, a fair regulatory system, a skilled workforce, and a high quality of life that is attractive to growing companies. Companies and jobs go where a productive and talented workforce can be found: The Greater San Marcos Region.

The Greater San Marcos region, also known as the heart of the Texas Innovation Corridor, is made up of Hays and Caldwell Counties, including the communities of San Marcos, Buda, Kyle, Dripping Springs, Lockhart and Luling. It provides access to a talent pool of 1.3 million people within a 45-mile radius, which is roughly a one-hour commute. While jobs in Texas have grown to an impressive 20.6% in the last ten years, Greater San Marcos has more than doubled that figure (47%) in the same time period. The strong population and economic growth of the two counties and its access to talent is a direct result of its ideal geographic location.

The region is known as the Texas Innovation Corridor because of its strategic location between the tech hubs of Austin and San Antonio. Just 30 minutes north of San Marcos, Austin boasts a reputation of the next Silicon Valley with its 6,500 high-tech companies and 85 incubators, accelerators, and co-working spaces. Down south by 30 minutes, San Antonio has built a strong reputation for having one of the largest concentrations of information technology, information assurance and cybersecurity professionals in the nation. A host of federal government and private sector cybersecurity agencies also call the Alamo City home.

Situated mid-way between these cities is the Greater San Marcos region. Stretching along the corridor of Interstate 35 and SH130, the region has unexpectedly developed its own innovation ecosystem. According to U.S. Patent & Trade Office, and U.S. Census data, the Greater San Marcos Region has filed over eleven times the number of utility patents per capita than the entire state of Texas and nine times that of the U.S.

This innovative spirit and strong educated talent pool have been noticed by both brand-name companies and disruptive high-tech manufacturers like Urban Mining and Visionary Fiber Technologies, along with many others who have found success in the region.

In 2016, Amazon opened the doors to one of their most technologically advanced fulfillment centers in their network in San Marcos. The 850,000 square foot facility represents a $191 million capital investment and more than 2,000 permanent full-time jobs with benefits. In the years since, Amazon has announced facilities in Kyle and Buda, expanding their role in the region.

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Best Buy’s first Texas e-Commerce sales facility opened in 2016. (Photo: Greater San Marcos Partnership)

Other successes have included Best Buy, which invested $1.25 million in a 20,000 square foot facility to establish its first Texas e-commerce sales facility. H-E-B, the largest privately held supermarket chain in Texas and one of the top 20 retail chains in the U.S., has also had a long-time distribution center in San Marcos. The center employs approximately 750 individuals and serves stores across Texas and Mexico.

The region also features the state’s fifth-largest university with Texas State University. Designated as an Emerging Research Institution, the university is doing cutting-edge research in materials science, nanotechnology, life sciences, and computer science. The 58-acre research park better known as the

Science, Technology and Advanced Research (STAR) Park serves as a technology incubator for new commercial ventures related to Texas State technologies in applied research. STAR Park companies have raised more than $32 million through equity and strategic alliance investments, providing opportunities for many businesses to flourish in these fields.

There are very few places in the country that are still considered “hidden gems”–the Greater San Marcos region is one of them. With an ideal location, proximity to higher education institutions, a spirit of innovation and impressive cost saving factors, this region is on the brink of transformational growth and prosperity. Judging by the current rate of growth, many have already recognized the great opportunity deep in the heart of the Texas Innovation Corridor. Learn more by visiting TexasInnovationCorridor.com.

TOPEKA: SILICON VALLEY COMES TO THE PRAIRIE

Topeka is where startups find more than just their home on the range.

A thriving startup ecosystem doesn’t spring up overnight, the conditions must be just right. But between Topeka’s prime location within the Animal Health Corridor and its key partnership with global innovation platform and startup gurus Plug and Play, the capital city of Kansas is steadily cultivating its startup ecosystem, not-so-quietly setting the stage to become the hub of innovation in the Midwest.

Topeka is at the center of it all, including the Animal Health Corridor. The Corridor, anchored by Manhattan, Kansas and Columbia, Missouri, is home to more than 300 animal health companies, representing the largest concentration in the world.

Moreover, within the Corridor there are a variety of value-added benefits that drive the success of startups (e.g., networking, specialized education and training, research collaboration, legislative advocacy, specialized tax and incentive programs and business relocation assistance).

A key contributor to the world of animal health science, and major player in the Corridor, is Hill’s Pet Nutrition. A cornerstone of the Topeka business community for over a century, Hill’s has since stepped out as a global leader in the development and research of nutritional pet products.

Within the last year, Hill’s has made major investments in Topeka. The first being a $20 million expansion of its globally-recognized “Small Paws” pet nutritional center and the development of its new Engagement Center. The nutrition center will focus on the nutritional needs of small breeds dogs; whereas, the Engagement Center will be developed to offer engagement opportunities to veterinarians and other pet caregivers. The second investment was finalized in September and consists of a wastewater treatment facility, followed by a new diet-making system. This $31 million dollar investment is expected to yield a total economic impact of $495 million for the community in the next 10 years.

In August 2019 it was announced that Topeka had been chosen as the location for the Plug and Play’s animal health and ag tech startup accelerator program. Plug and Play is a global innovation platform headquartered in Silicon Valley.

Plug and Play will bring eight to 10 startups to the city every six months. Later this fall, the company will run their first virtual accelerator out of the Topeka location. Those startups will go through three-month accelerator programs aimed at helping the businesses get off the ground, providing mentorship, resources and office space. There is a 70 percent average success rate for companies that go through a Plug and Play accelerator program, measured in follow-on capital raised.

Plug and Play announced Cargill and Hill’s Pet Nutrition as founding partners for this new Topeka, KS location, which focused on animal health and agriculture technology. With the former being announced in July and the latter in September. Plug and Play will collaborate with both organizations to create successful opportunities for startups as well as foster a culture of innovation and change across the animal health space. Plug and Play’s partnership with Cargill will focus on working with startups that are creating new technologies and products to build successful food and agricultural businesses and communities; while Hill’s Pet Nutrition will primarily focus on innovations surrounding animal health for companion animals.

A cluster of ag tech and animal health programs are offered at various area universities, many within a 60-mile radius of Topeka. These resources contribute to a skilled, industry-focused workforce that only serves to strengthen the Capital City’s startup ecosystem.

Click here to check out these educational institutions offerings.

POWER OF INNOVATION SHINES IN FLORIDA

A pack of mules, a fishing boat and an ice plant hardly seem like innovation but in 1925 it more than fit the bill. From this unlikely patchwork of enterprises came Florida’s first energy company, Florida Power & Light Company (FPL). Today, FPL is one of the largest rate regulated electric utilities in the U.S. and a subsidiary of NextEra Energy, Inc., a Fortune 200 company and the world’s largest generator of renewable energy from the wind and sun, and a world leader in battery storage.

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Florida Power & Light’s 35 Mules (pictured above) provides startups with dedicated workspace on FPL’s campus for 12-18 months and access to experts in renewable energy and smart grids. (Photo: Florida Power & Light)

The company’s almost 100-year journey may have had humble beginnings, but today it permeates every aspect of the organization and also has ignited a growing entrepreneurial spirit across the state.

Florida leads the way and provides a path for big thinkers with big ideas. The state’s low-cost, low-tax business-friendly environment is one of many reasons it has earned the highest rate for new entrepreneurs in 2019, according to The Kaufmann Foundation.

“Florida is an incredible place for innovation. When you add a growing population to a favorable tax climate, anyone with a great idea can grow it into a business that can succeed,” said Crystal Stiles, senior director of economic development for FPL.

Small businesses make up 99 percent of Florida’s 2.1 million businesses and employ more than 42 percent of the state’s workforce. Entrepreneurs are front and center when it comes to Florida’s business climate. FPL has always helped propel up-and-coming businesses that make Florida their home and help grow the Sunshine State’s economy. A big part of that, many would say the backbone, are startups.

“Startup success begins with conversations where everyone is invited to share pain points, needs and wants. From there, we develop flexible and creative regulations, permitting and incentives that support our entrepreneurial values,” Stiles said.

Since 2010, Florida State regulations have been cut 3,000 times and taxes were reduced nearly 40 times. Plus, residents pay no personal income tax.

Named SeedCapital’s second-best place to start a business in 2019, Florida is amplifying its commitment to entrepreneurs. GrowFL, the Florida Venture Forum and the Florida High Tech Corridor Council are some of the state’s advocates on behalf of startups. Business leader roundtables, ongoing education, industry recognition, introductions to potential investors and funding options are some of the resources offered to early-stage and second-stage startups.

At Enterprise Florida, Inc. (EFI), entrepreneurs have access to organizations that provide small, minority and startup companies with training, development and financing options. EFI leverages its network of state, federal and non-profit relationships to help startups and early-stage companies access capital, enter new markets and create revenue growth and job creation. Online, the Florida Virtual Entrepreneur Center hosts a directory of resource agencies organized by type of business and startup stage.

A genuine desire in the success of next generation businesses is the driver behind Florida’s steadfastness for startups. Stiles attributes it to a pay-it-forward mentality. “FPL walked the same path as any small, up-and-coming company. Those lessons and experiences served us well as we’ve grown to lead the clean energy market,” Stiles said. “Now it’s our turn to support Florida startups and entrepreneurs through resources and partnerships.”

FPL’s 35 Mules will help entrepreneurs develop their game-changing ideas into a business based in Florida. The startups will have a dedicated workspace on FPL’s campus for 12 to 18 months, access to subject matter experts in solar, renewables, innovation and smart grid, and free coaching from executives, along with a $100,000 grant program.

“Our innovation hub is uniquely equipped to tap into creativity and bring brilliant ideas to life and not only develop a thriving business, but also change the world,” said FPL President and CEO, Eric Silagy.

The incubator is welcoming its first seven startups in September. Selected companies represent a number of areas, from technology and energy storage to consumer products developed to solve unique challenges that have emerged during the COVID-19 pandemic.

“We’re excited to welcome our first 35 Mules startups and offer them a unique prescription for success to help take their businesses to the next level,” said Stiles. At a time when small businesses are facing unprecedented challenges, 35 Mules offers companies with game-changing ideas a unique opportunity to bring their ideas to life faster, smarter and at scale.

FPL and NextEra Energy know it’s possible to change the world from Florida because it’s where they started and grew.

Beyond the targeted support for entrepreneurs, no startup ecosystem is complete without a strong market, access to talent and an infrastructure that allows for the rapid movement of ideas, people and goods.

Florida’s global market and GDP ranks 16th among the world’s largest economies. It is home to the second-largest Foreign Trade Zone network in the U.S. Florida is one of the most connected states in the U.S. Among its 20 commercial airports are two of the world’s busiest: Miami and Orlando. Hundreds of thousands of interstates and highways, as well as 15 deep-water seaports, easily connect people and products with the rest of the East Coast and parts beyond.

According to Enterprise Florida, the state is home to the nation’s third-largest workforce—more than 10 million people. A growing number of high-tech professionals highlight the workforce. In 2020, the state ranked third for innovation by CompTIA, which also placed Florida in the top five states for largest year-over-year increase of net-new tech businesses.

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