Friday, August 17, 2018
Business

Tampa Bay startup activity feels vibrant, but are other metros passing it by?

In downtown St. Petersburg on Wednesday morning, it was once again standing room only for the weekly "1 Million Cups" gathering to hear local entrepreneurs pitch their business startup ideas.

On Thursday, the annual "Startup Bus" of local entrepreneur teams left Tampa, heading for Tennessee. They will build a startup from scratch en route and face off against other bus teams from around the country in Nashville.

On Friday, the Tampa Bay WaVE accelerator in downtown Tampa hosted Startup Surge, a full-day mentoring program for entrepreneurs to learn tips on launching a tech business.

On any given day, it feels like Tampa Bay's so-called entrepreneurial ecosystem — the complex support system for new-idea business startups — is alive, well and making progress. And it is. But perhaps less than we would like to believe.

Nationwide reports measuring "startup activity" in major metro areas and states find that while the Tampa Bay and Orlando areas are reasonably active areas for startups, both are losing ground to other metros — especially Miami, which rose to the No. 2 spot in the nation behind Austin, Texas.

Tampa Bay fell five spots to No. 20 among metros for startup activity, while Orlando plunged 12 spots to No. 33. These are not catastrophic changes. Tampa Bay's landing at No. 20 among major metros is commendable, and Orlando placing 33rd is hardly a poor showing. But the magnitude of both metro areas' declines is concerning because they are among the largest drops in 40 major metro markets analyzed.

They suggest a loss of momentum at a time that startups are surging nationwide. The reports found startup activity had the biggest increase in 2015 over the past two decades, even though overall activity remains lower now than before the recession.

Ranked by states, Florida remained impressively in the top 10, though it dropped from No. 8 in the 2014 report to

No. 9 this year. Most top-ranked states have small populations, while Florida outpaced bigger states like California, Texas and New York.

The reports are the work of the Ewing Marion Kauffman Foundation, a Kansas City-based nonprofit research group dedicated to entrepreneurship and one of the leading third-party experts on the subject of business startups.

Kauffman researchers measured metro and state startup activity based on the number of new businesses and entrepreneurs per 100,000 people, differentiating startups created by "necessity" (no job, more common in the recession) or "opportunity" (creating a startup by choice).

The foundation's look at startup activity across the country is an important and reasonably dispassionate way for places like Tampa Bay to gauge if they remain competitive for entrepreneurial activity. While Tampa Bay keeps adding business incubators, accelerators and university programs for entrepreneurs, the area still suffers as an underdog when it comes to attracting venture capital.

Typical of entrepreneur communities, there's plenty of debate here whether Tampa Bay spends more time marketing its startup brand than it does nurturing quality entrepreneurs and promising startups with greater chan­ces of building breakthrough businesses. Some claim the scarcity of capital is a distraction because the best startups will find investors regardless of geography.

When this story went online, ahead of the version intended for the newspaper, area entrepreneur and self-described "rabble rouser" Ken Evans messaged me. "Kauffman poll not a surprise," he said. "Activity is not the same as action. … Tampa is still heavy on hype, light on tech revenue."

In a phone conference with journalists this past week, Kauffman researchers tried to shed light on why some metro areas are rising and others falling while some remain top-tier areas for startup activity year after year.

What caused Orlando and Tampa Bay to suffer sharp declines?

"The rate of entrepreneurs in Orlando has really dropped off in the last couple of years," said Kauffman's E.J. Reedy, director in research and policy, "as did Tampa (Bay), at a lower level."

One argument might be that with the recession easing in Florida and more and better jobs emerging, fewer potential entrepreneurs feel stuck in dead-end positions and are less willing to pursue startup ambitions.

"If there are plenty of jobs and local companies are hiring, it would take a lot to say, 'I'm making a bunch of (money) and things are good, but I'm going to go start a business,' " Jerry Ross, executive director of the National Entrepreneur Center in Orlando, told the Orlando Sentinel in response to the Kauffman findings. "Why mess with that?"

But that does not explain why Miami rose one spot to No. 2, overtaking San Jose, home to Silicon Valley, based on Kauffman's measures. (Remember, this is about startup activity, not about which metro areas get the most investor funding.)

The counterargument is that risk-taking can be driven by greater confidence in the economy and job market. Reedy points to a rise in the percentage of people who voluntarily leave their jobs, which Labor Department figures show has increased since 2009 to near pre-recession levels.

Reedy suggested Miami bounced back quickly from the recession and enjoys a "significantly higher rate of new entrepreneurs" than any of the 40 other measured metro areas. The foundation's national report also pointed out that immigrants and Latinos helped drive startup growth, reinforcing immigrant-rich Miami as a hot spot for that trend.

Kauffman research analyst Arnobio Morelix described the components of the best metro areas for startups. They benefit from a high density of entrepreneurs and young firms, a fluidity of population that brings in new skills and new ideas, high connectivity so people know what others are doing, and diversity — "not only in race but in economic diversity of specialized jobs," he said.

The best news from this analysis? Tampa Bay may have 19 major metro areas ahead of it in startup activity. But it is ahead of 20 others.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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Published: 08/17/18