To Attract Entrepreneurs to Philly, Just Make Philly More Attractive
As we all know, the millennials love Philly for its vibrancy, culture and nightlife. But when asked whether they expected to live in Philadelphia in five to ten years, half said they would not, citing career reasons as the primary reason, along with concerns over schools and crime, for their potential departure. While it’s not certain whether other cities have similar numbers of millennials expecting to move, or whether this differs from the expectations of previous generations, some reacted to this news with the sort of pre-emptive guilt trips that would make a Jewish mother proud.
But hold your kvetching: a new survey by Endeavor Insight suggests that Philly may be poised to attract and retain entrepreneurial millennials – and thus create new jobs, the exact thing the city needs to keep less-than-entrepreneurial millennials – simply because so many millennials (of all entrepreneurial persuasions) have moved to Philly, making it more vibrant and attractive to millennials. What admittedly sounds like a tautology might actually be the beginning of a virtuous cycle.
Endeavor adopted a novel approach in attempting to figure out what attracts startup businesses: they actually asked them. Endeavor surveyed 150 CEOs of companies listed on the Inc. 500 list of fastest-growing U.S. firms in 2010, 2011 and 2012. It’s these self described “young adults” whose “companies had an average of approximately 100 employees and $20 million in annual revenues” who the city really wants to attract – not underemployed quasi-hipsters like me.
Despite being highly mobile, once these entrepreneurs started their business, they tended to stay put: nearly 90% in the study kept their companies in the cities they were founded in. 75% of those companies were located in a different city from where the entrepreneurs last went to college, meaning entrepreneurial “brain drain” is a common malady.
According to a Kauffman Foundation report, Philadelphia ranks 10th in cities with the highest number of founders (also based on the Inc. 500 data), with 29, but is 4th in cities with the highest number of founders educated, with 43. But Philadelphia’s “brain drain” is actually better than many of its peers – Philadelphia was 9th in founders retained. Philly’s real problem is the number of founders attracted from elsewhere. Thus, Philadelphia’s challenge with this particularly desirable population isn’t so much keeping City 6 graduates, but attracting kids educated outside the Delaware Valley.
Why do entrepreneurs decide to stay where they started? Some people argue low-taxes and streamlined regulations are the key to attracting and keeping new businesses. But some people are wrong: only 5% of the respondents listed low taxes and only 2% mentioned business-friendly regulations. While these might matter more for established companies, it does not seem to be a large factor for rapidly-growing companies.
The primary challenge for cities in attracting entrepreneurs is finding the ur-entrepreneurs – 80% of the Endeavor-surveyed CEOs lived in their city for 2 years before starting their company. This suggests cities need to already having the type of jobs that employ young entrepreneurial types. Hopefully, Comcast’s expansion and Urban Outfitters continued growth, building on the region’s already established “Eds and Meds” sector, bodes well for creating this environment here.
Moreover, bright young company owners are looking for bright young employees. By far, access to talent was the primary factor in deciding to stay, with31% citing that (and 20% specifying access to technically skilled employees). Where do companies find these wunderkinder? As the report’s conclusion put it: “The magic formula for attracting and retaining the best entrepreneurs is this: a great place to live plus a talented pool of potential employees, and excellent access to customers and suppliers.”
Thankfully, Philly has young talent in spades. 37.5% of Philadelphia’s millennials have a college education, higher than our peers in most other American cities and well above the national average. (Then again, a majority of millennials apparently believes astrology is scientific, so maybe I’m overselling my generation’s academic achievements.) Moreover, while I’m hardly unbiased, I believe Philadelphia is a wonderfully dynamic and vibrant city to live in (and I’m not alone in that opinion).
Philadelphia has plenty of educated young go-getters, attracted by the city’s many amenities. Those same group of go-getters say that their careers are the primary reason they might leave the city. Meanwhile, the entrepreneurs of America’s fastest growing companies say they want to locate their businesses where they can find talented employees, and that they look for talented employees in cities chock-full of amenities. We can either fall into the virtuous cycle of college graduates attracting entrepreneurs attracting college graduates, or both will spin right out of Philadelphia.