The Kauffman Foundation, a charity/think tank that focuses largely on entrepreneurial activity, job growth and education, says a lot of what people think matters in creating an entrepreneurial ecosystem doesn’t do a thing.
Having strong research universities? Nope. Having a lot of innovation, as measured by patents, in the region? Nope. Winning more National Institutes of Health funding or Small Business Innovation Research Grants? Not significant.
The Hartford region was strong on federal research money, and Fairfield was strong on patents, according to this analysis.
How much venture capital investment comes to your region? Irrelevant. In fact, the paper says explicitly, “Policymakers should not rush to create public venture funds in the hope of creating more startups or a startup culture.”
Connecticut recently pledged to dedicate $125 million over five years to its public venture fund precisely with that goal, though Connecticut Innovations has not been spending that fast.
Co-author Jordan Bell-Masterson said, “There’s not a whole lot of policy levers that you can pull that’s going to increase startup rates.”
How can this be? Well, for one, Kauffman makes a distinction between the frequency of the creation of new firms, and the concentration of new tech startups. (Tech being defined as aerospace, pharmaceutical, engineering services, scientific research, information technology and communications). There are regions that look good in tech entrepreneurship — think Boston and Silicon Valley — that still don’t do well on overall entrepreneurship.
The metro areas in the same size grouping as Hartford and Fairfield that did well in the broad business-creation category included Fort Myers and Sarasota, Fla.; Boise, Idaho; Colorado Springs, and Portland, Maine.
The paper does acknowledge that doing better in high-tech areas tends to correlate with fast-growing firms.
The Hartford region — which includes the University of Connecticut — and Fairfield County were weak on most measures, according to this analysis. The Hartford area ranked in the bottom quartile for all new businesses, and even lower for tech startups. Fairfield County was average for new businesses and also in the bottom quartile for tech startups..
But, oddly, the two areas did very well on high-growth firms per capita, arguably the most important measure of all. Fairfield County, in the years 2010 to 2012, was 34th in the country, top 10 percent, with 34 fast-growing firms. The Hartford area ranked 49th, still in the top 15 percent, with 12 fast-growing companies.
Basically, the factors that have the highest correlation with dynamic business creation, the authors found, were:
College education. Connecticut does very well on this. Very few states have a higher proportion of college graduates. And Fairfield County was particularly strong on the proportion of 25 to 34-year-olds with college degrees, a measure that was supposed to correlate well with entrepreneurial success. Fairfield was ranked 13th in the country by this measure.
How big your city is. Generally, the bigger the better. And if it’s growing fast, even better. “Larger metropolitan areas tend to have higher entrepreneurial rates, possibly from the diversity and resilience of their economies,” the authors write.
Both the Hartford region and Fairfield County were a little below average in population growth, but not among the worst.