Cities on the coasts created the most ‘innovation-sector’ jobs, or jobs within the most heavily STEM and R&D intensive industries.
Change in ‘innovation-sector’ jobs by metro area, 2005-17*
Number of ‘innovation-
sector’ jobs in 2017
200,000
100,000
–10
–5
0
5
10
25%
10,000
Seattle
+41%
Chicago
Lost 13% of innovation- sector jobs since 2005, about 96,000 to 83,500
Boston+18.2%
Milwaukee
–13.8%
New
York
City
+3.5%
S.F.
+89%
San Jose
+33%
Philadelphia
–10%
Los Angeles
–4.0%
San Diego
+30.4%
200,000
Change in ‘innovation-sector’ jobs by metro area, 2005-17*
Number of
‘innovation-
sector’
jobs in 2017
100,000
–10
–5
0
5
10
25%
10,000
Seattle
+41%
Milwaukee
–13.8%
Chicago
Lost 13% of innovation-sector jobs since 2005, about 96,000 to 83,500
Boston
+18.2%
S.F.
+89%
N.Y.C.
+3.5%
San Jose
+33%
Philadelphia
–10%
L.A.
–4.0%
San Diego
+30.4%
Change in ‘innovation-sector’
jobs by metro area, 2005-17*
Number of
‘innovation-
sector’
jobs in 2017
200,000
100,000
10,000
–10
–5
0
5
10
25%
Seattle
+41%
Milwaukee
–13.8%
Chicago
Lost 13% of innovation jobs since 2005, about 96,000 to 83,500
Boston
+18.2%
S.F.
+89%
N.Y.C.
+3.5%
San Jose
+33%
Philadelphia
–10%
L.A.
–4.0%
San Diego
+30.4%
Change in ‘innovation-sector’ jobs by metro area,
2005-17*
–10
–5
0
5
10
25%
Number of 2017
‘innovation-sector’
jobs (in thousands)
200
100
1
10
8
6
7
2
9
3
10
4
5
WEST COAST
MIDWEST
EAST COAST
Boston
+18.2%
Milwaukee
–13.8%
1.
Seattle
+41%
6.
8.
N.Y.C.
+3.5%
Chicago
–13.1%
2.
S.F.
+89%
7.
9.
Philadelphia
–10%
3.
San Jose
+33%
10.
4.
Los Angeles
–4.0%
5.
San Diego
+30.4%
San Francisco entrepreneur Madhu Chamarty got the idea for his latest startup from Amazon. com Inc.’s search for its second headquarters, which included finalists like Indianapolis, Pittsburgh and Columbus, Ohio.
For him, the search highlighted overlooked cities away from the coasts that had the talent pools to host tech companies. Early last year, he launched Beyond HQ, a startup that uses technology to find new homes for Silicon Valley firms looking to move inland.
“It’s not that magic only happens in San Francisco and New York,” he said.
Mr. Chamarty is part of a group of entrepreneurs working on spreading tech talent more evenly across the U.S. The goal is to attract funding and workers to places far from the large tech hubs in Silicon Valley, New York City, Boston or Seattle.
Five metropolitan areas—Boston, San Diego, San Francisco, Seattle and San Jose, Calif.—accounted for 90% of all U.S. high-tech job growth between 2005 and 2017, according to a recent study led by Rob Atkinson of the Information Technology and Innovation Foundation and Mark Muro of the Brookings Institution.
States between the coasts have long touted their low cost of living or quality of life to attract talent away from more-populous peers. The new crop of entrepreneurs is bringing relocation services, tech training and investor dollars to accomplish similar goals.
Patrick McKenna, a Silicon Valley entrepreneur, started the nonprofit One America Works in 2019 that provides similar services to Mr. Chamarty’s BeyondHQ. He says tech concentration in just a few cities has led to problems such as a lack of affordable housing and traffic congestion.
“You can’t keep moving everybody to Silicon Valley,” he said.
Coastal Concentration
The West Coast has held or has been a few percentage points shy of a majority share of U.S. venture-capital investment for the past several years. Its most recent average deal flow was a whopping $17.1 billion.
Share of venture-capital investment by region, quarterly rolling average
2014
’15
’16
’17
’18
’19
Rocky Mountains investments peaked in early 2017.
Once higher up in the rankings, the South has not seen the same level of investment enthusiasm as other regions in recent years.
Midwest, 0.6%
Share of venture-capital investment by region, quarterly rolling average
Pacific Northwest, 3.4
2014
’15
’16
’17
’18
’19
Once higher up in the rankings, the South has not seen the same level of investment enthusiasm as other regions in recent years.
Midwest, 0.6%
Share of venture-capital investment by region, quarterly rolling average
2014
’15
’16
’17
’18
’19
Once higher up in the rankings, the South has not seen the same level of investment enthusiasm as other regions in recent years.
Midwest, 0.6%
Share of venture-capital investment by region, quarterly rolling average
West Coast,
48.5%
Mid-Atlantic,
23.4
New England,
8.3
Southeast, 4.5
Great Lakes, 4.1
Rocky Mts., 3.8
South, 3.5
PNW, 3.4
’15
’16
’17
’18
2014
’19
Midwest, 0.6
Once higher up in the rankings, the South has not seen the same level of investment enthusiasm as other regions in recent years.
Matt Humphrey, the chief executive of LendingHome, a specialty loan startup founded in San Francisco, opened a second office in 2017 in Pittsburgh. About 40% of the company’s 300 employees live in Pittsburgh.
Mr. Humphrey said he found it easier to hire outside San Francisco.
“There would have been more strain on recruiting when you’re in a hypercompetitive market with thousands of sexy tech companies within 2 miles of your office,” he said.
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Many economists say getting tech workers to settle outside the major hubs won’t be easy. They cite “agglomeration”—when companies and talent cluster in a few places—which allows for ideas to spread more quickly and for companies to have a larger recruitment pool.
“The problem is [these cities are] battling against these unbeatable agglomeration economies,” said Jonathan Gruber, an economist at the Massachusetts Institute of Technology.
Traditional economic theory holds that as business costs rise in one place, companies move to cheaper and less crowded alternatives. But companies aren’t leaving because in today’s economy, talent is the most sought-after asset—and tech hubs have the largest pool.
Max Brickman, 28 years old, founded Heartland Ventures in South Bend, Ind., to help connect Midwestern companies and investors to the latest technology coming out of Silicon Valley.
His first fund of $20 million is made up of investors who represent 30, mostly family-owned Midwest manufacturing and logistics businesses. The firm also helps Silicon Valley companies understand more clearly what their customers need.
“If you’re developing a manufacturing technology startup, you should be where your customers are, not in San Francisco,” said Mr. Brickman, whose firm has helped five companies move or open up offices in Indiana.
Pittsburgh was an easier place to hire people than Silicon Valley for one West Coast startup executive who opened an office in the Pennsylvania city.
Photo: Michael M. Santiago/Associated PressSome startups are focusing on how to cultivate the Midwest’s existing talent. Kenzie Academy, an Indianapolis startup, has built an academy to teach coding skills to lower skilled-workers. It offers a 12-month online course paid for by a share of the student’s future revenue. Co-founder Chok Ooi, who started the company in Silicon Valley before moving it to Indianapolis in 2018, said the only way to attract startups is to make sure a base of talent is available.
Former AOL chief executive Steve Case says startups aren’t growing as quickly outside tech hubs because there has historically been little or no venture funding available. Since 2014, he has run an annual “Rise of the Rest” bus tour that avoids top tech hubs like Silicon Valley and New York and seeks out startups to invest in. In 2017, he started the first of two $150 million funds investing in companies from Birmingham, Ala., to Chattanooga, Tenn.
“We do believe unless you solve the money challenge, you’re not going to solve the talent challenge,” he said. “Unless you solve the talent challenge, you’re not going to be able to cluster to be a leader in the future.”
Chris Olsen, founder of venture firm Drive Capital, says he already sees strong tech clusters from his base in Columbus, Ohio. He points to his investments in startups like Pittsburgh’s Duolingo, the language learning app, or Root Insurance, an auto insurance app in Columbus that most recently was valued at $3.65 billion.
“People perceive the startup economy as something that only happens in California,” Mr. Olsen said. “It’s a matter of time before every city in America has a startup success.”
Write to Shayndi Raice at shayndi.raice@wsj.com
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2020-03-08 16:23:17Z
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