Entrepreneurial Density and Venture Capital

Richard Florida continues to write amazing stuff about Startup Communities in The Atlantic Online. Two of his latest articles talk about entrepreneurial density and venture capital.

For a long time I’ve suggested that an interesting measure of entrepreneurial density would be ((entrepreneurs + employees of startups) / total population). I asserted in my book Startup Communities: Building an Entrepreneurial Ecosystem in Your City that I thought Boulder had the highest entrepreneurial density in the world. I qualified this by staying I had no real empirical data – it was merely an assertion based on my experience.

Richard took this notion a step further in his article High-Tech Challengers to Silicon Valley and actually did some math. In it, he looked at Venture Capital financing (total dollars and number of deals) on a per-capital basis. Boulder came in third, behind “San Jose-Sunnyvale-Santa Clara, CA” (what most of us think of as “Silicon Valley”) and “San Francisco-Oakland-Fremont, CA” (what most of us think of as San Francisco.)

Venture Capital investment per capita


The comments are fascinating and generally miss the point. One in particular, called Richard unethical, although it was from “WithheldName” (also known as Anonymous Coward).

“It’s totally unfair to make Boulder separate from Denver. Combine Boulder and Denver. It’s called the Denver-Boulder Metropolitan Statistical Area for a reason. Was Cambridge separated from Boston? Of course not. The author was from Boulder. This data was slanted to Boulder. It was totally unethical.”

This particular person doesn’t understand that Boulder and Denver are separate startup communities. In contrast, Cambridge and Boston are one startup community, consisting of six startup neighborhoods (three in Cambridge, three in Boston, all within a 15 minute drive of each other, even in traffic.)

More importantly, the author of the article wasn’t from Boulder. I’m from Boulder. I didn’t write the article – Richard did. And – he was pretty clear about all of that, so our friend needs to rethink his definition of the word “unethical.”

That said, the more interesting study is by zip code, not by city or MSA. Mixing MSAs and cities creates a comparison that isn’t precise. And Richard acknowledges this:

“I’ll continue to track the evolving geography of start-ups and venture capital in future posts. Next week, I’ll look at the economic, demographic and social characteristics of metros that are associated with venture capital and start-up activity. In future posts, I’ll delve more deeply into all of this, using detailed data by area code and zip code level to tease out the changing geography of venture capital and start-up activity and its distribution across cities and suburban areas.”

I think the real magic in the analysis around entrepreneurial density will happen at the zip code level on a per capita basis. Look for 80302, 02139, and 10003 to show up high on the list along with some starting with 94xxx.

  • Max Mulvihill

    Boulder high on this list is not curious to me. I am wondering what is going on in Lawrence. I know it’s a wonderful college town and there is a lot in the region but there can’t be this much venture capital.

    • kipsteele

      That looks interesting/great to me being in Vermont as well. Anyone have the data on this ?

    • Eric Hedstrom

      It looks like there is a lot of pharma and life sciences going on in Lawrence. The same is true in San Diego.

      • Super important point. A lot of people get confused about where the actual startup activity is and think the only thing going on is “tech”. It’s not – life sciences, natural foods, LOHAS – all are alive and well, largely outside the bay area.

  • I think density is “interesting” but not sure it matters very much if you’re trying to answer questions like, “Where should you be to start a company? Where are the interesting entrepreneurial opportunities happening?” I think density is helpful but only broadly — i.e., having colleagues or partners within a 20-30 minute drive or subway matters; having everyone on a single Main Street isn’t worth the tradeoff of small numbers. If I were an aspiring entrepreneur, VC, or service provider, I’d certainly opt for a little less density in exchange for a larger overall ecosystem or opportunity set. Looking at this list, it seems obvious that Lawrence, KS is not a more vibrant ecosystem than Los Angeles. Provo and Austin are not more active than NYC. Etc.

    • You’ve got to go deeper my friend. If you look at a place like Los Angeles, you’ll see that it’s actually a series of Startup Communities. It’s not “LA” – it’s “Santa Monica”, it’s “Downtown LA”, and a few others. You can call these “Neighborhoods” and then roll them up.

      But physical density matters a ton. It matters in NY (six Neighborhoods – the densest being Union Square).

      • panterosa,

        YAY I’m in 10003, and Union Square and any luck my way would be awesome!!

  • Wow, great data. Here’s the link to the total data: http://www.theatlanticcities.com/jobs-and-economy/2013/06/americas-top-metros-venture-capital/3284/ Couple questions tho. Sorry I haven’t read you book yet, but why is density an interesting measure vs. totals? Also, my intuition would lead me to assume that you should be looking at regions rather than individual towns? For example, I’d lump SF and SV into a region. Likewise, I’d look at Denver/Boulder/Ft.Collins all together and the greater Boston area and the greater NY/NJ area, and NoVA/SouthernMd as areas.

  • Thanks, Brad. Speaking of density, San Diego emerges a high (IMO) because the area included is vast. Carlsbad is 35 mi from downtown San Diego. The Carlsbad – San Marcos – San Diego triangle includes several ‘mini-hubs’ that will hopefully emerge as separate startup communities. I look forward to the zip code analysis. Break down by sector (Life sciences, tech, etc) would be interesting, as well.

  • Karridy

    Having just returned from San Francisco, back to Dallas, this just further confirms that I’m in the wrong place.

  • You know what the important point is? It doesn’t fucking matter.

    Do your shit. Kick ass.

    • Yup!

    • exactly. I read a couple of the comments on Richard’s post and… felt like Slashdot all over again

  • Key to the magic of the “startup density” thing are all of the institutions big and small that it enables. Coffee shops, meetups, coworking spaces, etc. it hits you in the face at the University Cafe in Palo Alto, Sightglass in SoMa, Atlas or Ozo on Pearl in Boulder — people coding, pitching, meeting, recruiting, sharing, helping … Even in places that have “bigger” startup scenes, the lack of density doesn’t afford for these serendipitous encounters. LA has many more and bigger Startups than Boulder, but walk into any coffee shop and you’re more likely to hear talk of real estate or Hollywood… that’s their density.

  • Palermo Deschamps

    First of all I want to thank you for your book Venture Deals as me and my co-founder are approaching the fund raising stage of our startup Dezzmo (linkedin for artists). Both me and my co-founder moved to San Francisco to have a better chance at funding and your blog posts are really helpful. Its investors with your insight are the kind of investors we want to work with.

    • Awesome – glad it was helpful.

  • Nikki Braziel

    As a Denver-based founder, I’m interested in finding advisors and employees who believe in our mission, who are knowledgable, and who fit our culture. I’m wondering if, being right outside one of these “hot” start-up ecosystems, you’d advise recruiting and networking “across the border.”

  • Austin

    Having trouble finding a reference for the author’s source for venture capital. Do you happen to know what he’s using, Brad?

    I don’t think it’s this, as the $$$/geo data don’t quite align:


    • Florida has used several different databases.

      The PWC Moneytree data is NOT the authoritative data.