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Builders / Builders Conference / Ecosystem development

Entrepreneurs need housing more than tax policy

It’s simple: Investing in better cities is key to fostering innovation.

Light from the setting sun falls on a rowhome in Philadelphia (Danya Henninger/
Entrepreneurs don’t choose places to start companies. Entrepreneurs choose places to live, and then start companies where they live.

The trouble is the competition for attracting new residents is getting fiercer. 

For econ dev leaders, the obsession over millennials in the 2010s was entirely rational. Regions and colleges and corporations fought over millennials because there were boatloads of us. Our jeans may be too tight and we may overuse the tears-of-joy emoji, but we breathed life back into American cities. You’re welcome. 

A few more new millennial parents might still move from Brooklyn to Philadelphia, and Hopkins and CMU post-docs might bring their partners in tow to Baltimore and Pittsburgh. But the Millennial dividend is over. We are mostly settled where we’re gonna settle. 

Gen Z presents lots of virtue but it is a far smaller generation than millennials. Retaining college grads is still important, but the gains will be smaller in the 2030s than in the 2020s, and smaller in the 2020s than in the 2010s. We’re getting less juice from the squeeze.

So where will our entrepreneurs and tech workers come from?

Well, regions can poach from each other. That’s something. As Americans have fewer kids, and our birth rate declines, any regional talent or business attraction strategy looks very zero sum. Tulsa lures remote workers from Rochester, NY; Virginia courts entrepreneurs from North Carolina. Texas and Florida say we won’t have schools, roads or functioning electrical grids but your taxes sure will be low. 

Two other tools we have. 

The first is immigration. This won’t last forever, the global population is expected to decline by the year 2100. But for now the United States is still the most desired destination for people migrating to a new country. Where are your region’s immigrants and why aren’t they a focus of your innovation strategy?

The second tool we have is your existing population. Develop more of your neighbors becoming the entrepreneurs and tech workers you desire. This includes older residents, poorer residents and even the ones in boring jobs. The apprenticeship is still underused in tech because it takes a daunting upfront investment.

As more of your residents opt for independent contractor work, your entrepreneurship and tech workforce strategies must merge.

Embrace density, expand the workforce lens and invest in community progress

What’s my advice?

For entrepreneurs, there really is no magical place to go to start your company. Urban density does appear to help your outcomes. The agglomeration effects of being able to work alongside other entrepreneurs are real. Spending as much time with paying customers is good, and any place that makes that easier is justified. 

Tech employers that don’t support workforce programs and local tech events are free-riders

For people who hire tech workers, your toolbox is widening. When possible, hiring in lower cost centers, be it in the United States or internationally, is a 30-year trend that has now become normal as noted in Technically’s recent four-part series. Additionally, retaining older workers and making investments in your local ecosystem are not just civic goods, they are necessary for your workforce. Hot take: Tech employers that don’t support workforce programs and local tech events are free-riders. 

For ecosystem builders, your views of entrepreneurship ought to change, including how and who you’re attracting to your region.

Keep two tracks: Entrepreneurs that might be better seen as part of your regional workforce, and entrepreneurs aiming to grow in a way that might just have a major economic impact. They need different support and they offer different outcomes. 

More generally, you should be the fiercest champions of policies that may not sound all that directly tied to tech: Build more housing to make it cheap; encourage walkable density, care about pre-K-12 education; encourage pro-immigration and childcare policies as a bipartisan, pro-growth agenda.

In Austin, for example, housing costs have declined over the past year. It’s no sign of a distress, but rather that one of the country’s fastest-growing big cities has invested in density and speeding housing supply. That’s better news for Austin’s workforce and entrepreneurship circles than it is for VC charts. But it affects founders just the same.

Entrepreneurship is an extension of workforce

Local tourism and business attraction strategies are merging. Before anyone moves anywhere, they visit first and before they visit they have to have heard of the place. Economic storytelling is a necessary part of this work. And there is a story. 

One of the biggest economic stories of the pandemic era was booming rates of business incorporation. A main contributor? Sole proprietors

Before the pandemic, 1 in 4 Americans was full-time freelance or operating a company with no employees as their primary source of income. By 2022, it was 1 in 3. In a new survey of Gen Z workers, 53%, more than half of Gen Z, are going full-time independent contractor. The highest increase of business creation has come from Black women.

Many people report choosing entrepreneurship less for financial reasons — the average self-employed American earns less than her peers — than for work-life balance. 

Crisis can breed opportunity. Another contributor to booming entrepreneurship in the last year is a higher-than-usual rate of laid off tech workers becoming entrepreneurs. A whole bunch of them were all those tech workers cut by big tech firms.

According to one survey of these post-tech-layoff entrepreneurs, 3 in 5 began working on a business they had already incorporated while employed — those side-hustles we talked about. Another 25% had spun up a business within 90 days of being laid off. That means more than 90% of tech layoff-entrepreneurs were working on their own thing after a layoff. About half of them ended up earning more than in their previous job but more of them made the move for better work-life flexibility. 

That’s part of the story why all those tech layoffs (1) didn’t contribute to the national unemployment rate and (2) didn’t make your tech hiring any easier.

Entrepreneurship is an extension of workforce. Every freelance designer, independent cybersecurity consultant and contract software dev shop is part of a bigger company’s workforce. In the 2000s, M&A replaced R&D. In the 2020s, third-party vendors are an alternative to hiring. 

What are the best tools to attract entrepreneurs and tech workers? Affordable living, better schools, great culture. Put simpler still: Making your city a great place to live.

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