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Editorial: 5 lessons from the startup report

Editorial: 5 lessons from the startup report

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Why do some communities thrive in the new economy and others don’t?

The answer’s not all that hard. The winners have the things that the new economies want – among them, a tech-savvy workforce, a quality of life that makes that tech-savvy workforce want to live there as opposed to someplace else, venture capital to help fund new companies.

OK, well, guess we settled that one, eh? Shall we move on to the sports pages? Not so fast.

We’ve been drilling deep into a new report on the startup economy around the world – “The Global Startup Ecosystem Report 2020” produced by Startup Genome, a San Francisco-based non-profit that studies the economy. Sunday, we looked at how the Washington metro area now ranks as a global tech capital. Monday, we looked at how the world’s economic hotspots today are mostly outside the United States. Today, we’ll conclude by looking at the lessons gleaned from the cities that make the report’s Top 40, because these economically successful cities from different countries and different cultures have many things in common. More to the point, many of those lessons can be scaled down to apply here in Virginia.

1. Universities are economic engines. Yes, this is like saying the sky is blue, yet apparently we need to point that out. Columnist Philip Carl Salzman of PJMedia recently wrote that instead of defunding police, we should defund universities on the grounds that they are breeding grounds for radicals who hate capitalism and lots of other things: “Stop donating to universities. Better, encourage others to stop donating. More important, do not send your children to university . . .” Irony is rich: Salzman is a retired professor. In any case, this report – put together by capitalists with a cold eye for the bottom line – repeatedly credits the universities turning out tech-skilled graduates as the key behind successful economic hotspots. What’s the secret behind Beijing? “Beijing’s greatest innovation asset lies in its preeminent education resources.” What’s the secret behind Melbourne, Australia? “It is only one of three cities in the world to have two top 20 universities in the global biomedical rankings.” What’s the secret behind Stockholm, Sweden? “Almost one-fifth of the entire workforce works in tech, the highest share of any other city in Europe.” They didn’t get there by not going to school. We could go on and on but you get the idea. The real question is what this means for communities that don’t have a university. We’ve seen some localities across the country create incentive programs to recruit more college graduates. Virginia’s tobacco commission – a misnomer because it’s charged with creating a new economy in former tobacco-growing counties – has joined this movement. Is that enough? Before his death last year, former Gov. Gerald Baliles urged a modern-day “Marshall Plan” to dramatically raise the educational levels in Southwest and Southside Virginia. Why haven’t we heard anyone follow up on that suggestion? For that matter, why haven’t we heard more about the campaign promise that Ralph Northam made in 2017 – to transform the University of Virginia’s College at Wise into a major research university with a specialty in renewable energy?

2. Government funding helps. Free marketers won’t like this but facts are facts: Many of these global economic hotspots have lots of government funding behind them. Much of that appears to come in the form of research and development funding. In Germany, “the government will invest $3.4 billion over the next six years to develop the country’s research and AI [artificial intelligence] capabilities.” In South Korea, the city government in Seoul has pledged $1.6 billion over three years to help jump-start new companies. In Canada, the province of Ontario “has allocated $350 million to focus on the development of AI, 5G, autonomous vehicles and other technologies.” And that’s just a single province – whose population is a little north that of Pennsylvania. Canada’s federal government is in the process of spending about $700 million over five years to spur the growth of technology companies in certain sectors. The StartUp Genome report says that’s working – singling out just about every major Canadian city for some kind of special mention and often crediting Prime Minister Justin Trudeau’s “supercluster” project for providing some – though not all – of the impetus behind the economic growth. Even the rural provinces of Atlantic Canada – in some ways the Appalachia of Canada – merit their own section in this global report: “Something special is happening here.” We don’t have to like any of this philosophically, but be advised this is what the competition is doing. If the United States had the same kind of economic policies that Canada does, how much money would Washington be investing in trying to create a new economy in Appalachia?

3. Immigration policy matters. Immigration hard-liners won’t like this part of the Startup Genome report. It says cities that are in countries that welcome immigrants do best because those are cities “are magnets for talent across the globe. Magic is sparked when people from different backgrounds come together to solve problems.” It says that’s been part of the reason why Silicon Valley has been so successful – and also Singapore. Under the section of “best practices” – especially during a pandemic — it encourages governments “to extend visas so foreign talent does not immediately leave if they are furloughed or laid off due to disruptions.” The United States, under President Trump, has been pursuing exactly the opposite of the policies this report says are keys to economic success.

4. Less government regulation matters. Some conservatives may not like the two points above, but liberals may not like this one. The report says cities with a light regulatory hand attract the most investment (although, to be fair, it spends a lot more ink on other points than it does this one).

5. A bad economy is actually a good time for certain ventures. More than half of today’s Fortune 500 companies were founded during a bear market. The report advises this is a good time for lower-cost cities to poach talent from higher-cost cities. That wasn’t written with us in mind, but it’s a lesson communities in this part of Virginia may want to act on. Who has an action plan?

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