I read this piece on venture capital with some interest, because it addresses a topic I’ve thought about (and which has come up several times on this blog): where startup companies get funded. It’s been clear for some time now that that the biopharma industry has been concentrating more and more in the San Francisco Bay area and around Boston/Cambridge, for example, and it’s a trend that’s seen with both startups and large companies. New Jersey still has some big pharma, for sure, but they’ve lost quite a few facilities as well over the last twenty years. San Diego is still hanging in there, although people I talk to from there have been saying for a long time that the biotech scene is either not what it used to be or not what they’d like it to be, or both. (It did get a lot of votes in my “most scenic biopharma location” question, though).
And those are the big ones. There are other centers that have had their ups and downs over this span, but the downs have been big ones – Michigan, Research Triangle, Seattle. All of these (and others) have had some really big biopharma organizations leave, gradually or suddenly, and although some of them are surviving, there’s no doubt that they feel the losses. The situation can look different if you expand your focus to agricultural biotech, or if you count in university funding and not just companies, but they still cluster in defined spots around the country.
So that brings up the question that the VC article addresses: what happens to you if you try to start up something well outside these regions? What if you want to get a small biotech off the ground in Phoenix, Spokane, Memphis, Columbus, or Miami? That’s going to be more of a challenge, because the ecosystem isn’t nearly as robust in these cities (or a lot of others). One reason it’s easier to start something in Cambridge or the Bay area is that there are plenty of people around who’ve done it before, who have funded startups, been on their boards, and have personal experience with how things work. There are also larger talent pools to draw from, at every level from top management down to entry-level bench scientists. Getting people to come work at your new place will also be easier if people know that there are other options in the area, whereas they might feel as if they’re going more out on a limb in Charlotte or Sacramento. (This older post on “most isolated company” has some thoughts on that as well).
The thing is, there are people out in these cities with ideas, and with potential companies. Many of them may not know the ropes at all, since the local ecosystems are not so robust. But the opportunities can be there, which is what that AVC post I linked to is talking about:
Beyond the third tier lies a lot of even smaller markets. I am in one today in Nashville. It has a huge health care sector that produces a lot of entrepreneurial and executive talent. It has a decent amount of local seed capital. But it is not a major VC destination. The southeast VCs will come here regularly looking for opportunities. But it suffers even more from the issues I talked about in the third tier. The same is true of places like Pittsburgh, Des Moines, and Kansas City. I mention those three cities because USV has investments in companies in all three places.
The truth is you can build a startup in almost any city in the US today. But it is harder. Harder to build the team. Harder to get customers. Harder to get attention. And harder to raise capital. Which is a huge opportunity for VCs who are willing to get on planes or cars and get to these places.
There is a supremacism that exists in the first and second tiers of the startup world. I find it annoying and always have. So waking up in a place like Nashville feels really good to me. It is a reminder that entrepreneurs exist everywhere and that is a wonderful thing.
Speaking as someone who grew up in Arkansas (and who has spent a good amount of time living in Tennessee), I’m very glad to hear things like this. Getting a startup going in Little Rock is definitely going to be harder, but it shouldn’t be impossible. Boston and San Jose have a lot going for them if you’re trying to start a company, and just picking up and moving there (or nearby) might still turn out to be the right solution. A lot of smart people have done just that over the years, and it’s worth remembering that some of them have moved from just one of those to the other for better prospects. But whatever magic those places have, or seem to have, is because of those migrations, which are eventually self-catalyzing.
Other fields have similar concentrations, and some of them make biopharma look rather widely distributed in comparison. If you’re going to make it big in acting, you’re probably going to move to either LA or New York. New York’s probably the place for you if you want to make a big splash in the art world, too. As Tom Wolfe put it in The Painted Word back in 1975:
For getting away from the bourgeoisie there’s nothing like packing up your paints and easels and heading for Tahiti or Brittany, which was Gauguin’s first stop. But who else even got as far as Brittany? Nobody. The rest got no farther than the heights of Montparnasse or Montmarte, which are what? – perhaps two miles from the Champs Elysées. Likewise in the United States: believe me, you can get all the tubes of Winsor & Newton paint you want in Cincinnati, but the artists keep on migrating to New York all the same. . .
Universities and research hospitals keep biopharma’s possibilities spread out more widely, as does the internet, of course. And I’ve only been talking about the US here, where the startup culture in places like Boulder or Atlanta, if transplanted somehow to a lot of other industrialized countries, might still be the wildest thing going. I’m not even going to get started on the nonindustrialized world; if there has been a great inventor’s mind born in Afghanistan, Haiti, or the Democratic Republic of the Congo in the last fifty years, that’s been too bad for them and too bad for the rest of the human race, because odds are that we never got to see what they could do. Some people find comfort in Thomas Grey’s Elegy Written in a Country Churchyard, but the section of the poem that talks about mute inglorious Miltons has always saddened me. It may have done the same to Grey; it’s hard to tell. He tries to balance things out a bit by pointing out that people born to obscurity didn’t have as much scope for great disruptions and crimes, but I’m not so sure about that, considering that some real rousers have come from various boondocks in Macedonia, Georgia (the country), Sardinia, and Austria, among others.
But from what I can see, we in the United States live in one of the countries where it’s easier to get your wild ideas funded, on balance, than anywhere else on the planet. And while it may be still easier to do that if you’re within driving range of the Charles River or the San Francisco Bay, those aren’t the only places to do it. I hope as many people in as many places as possible keep having those wild ideas and finding ways to realize them.