Creating A Sustainable Start-Up Future

Posted by on Aug 19, 2013

After reading an interesting article in the Boston Globe, Priced Out of the Innovation District by Paul Morrow I started to think of the sustainability of our start-up communities and the overall effect these communities can have on cities.  Morrow discusses the transitional real estate that is occurring around innovation districts in Boston as the start-up/entrepreneurial community is being priced out of the market.  Start-up communities have been seen as economic drivers and cities have been positioning themselves to attract bright, young entrepreneurs to their cities.  Brad Feld, the author of Startup Communities, discussed in a recent article by the MIT Review titled It’s Up to You, Entrepreneurs that the desire for start-up communities is now “planetary”.  He also states that the entrepreneurial community must be led by the entrepreneurs themselves who are willing to invest twenty years into the start-up community and not the government, universities and investors.

Interestingly the success of these communities can be closely linked to the actual place that these communities create both professional and personal.  These communities are active, energetic, creative and eclectic “places”.  They require vibrant third places like bars, restaurants and coffee shops where people meet and interact.  There is diversity of gender, race and class.  These are the think tanks of America.  The very energy created inside these places creates a demand and desire to be a part of them.  People who have invested in real estate are starting to see investing in innovation districts can lead to long-term rewards with market demand and increased rents but, how sustainable is that community?

Start-up businesses have such a low success rate (see the info-graphic which indicates that even veteran entrepreneurs only have a success rate of 30%) that the demand for flexible rents with shared resources are integral to the success of the community.  Feld, in his book recognizes the real estate problem in Boulder and states it best when he calls the transition of spaces “an endless game of musical chairs”.  So, how does an innovation district maintain its true integrity as a place of innovation if those entrepreneurs cannot afford the high cost of rent?  As companies grow larger, does the cost of being downtown in an innovation district force those successful companies to move out and ultimately displace their connectivity to the innovative energy?

For cities to create a sustainable economy built on start-up/entrepreneurial  businesses, spaces will need to be flexible with a mix of sizes and price points for rents that offer a wide range of spaces and amenities to meet the changing needs of these entrepreneurs or the very essence of these communities will be lost.  Property owners who are savvy enough to understand that the economic diversity of large companies and small companies being next to each other with varying rents will be essential to the  long-term success of these places versus the larger short-term payout.