The imaginations of entrepreneurs are unlimited. But the data show that the imaginations of investors who fund startups seem to be very limited. Half of all the venture capital in America goes to just two places: the San Francisco Bay Area and New York. It’s worrisome to many that entrepreneurship funding isn’t getting to a broader section of the country.
Venture capitalists have long been criticized for their relative lack of support for startups founded by women and minorities. Now there’s an emerging conversation about another kind of diversity problem: geographic diversity. The topic is hotter than ever, with big questions swirling after the election about how to create jobs and economic growth across America, not just in a handful of thriving cities. It’s a message that’s a key theme for people as different as President Trump and Steve Case, the billionaire tech investor and AOL co-founder.
An example of a young business that’s part of the movement to build startups in a broader range of cities is LeagueSide, based in a Philadelphia co-working space. The company matches up national advertisers with youth sports leagues around the country that are looking for sponsors.
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Big national companies are eager to get their names on kids’ jerseys. But it’s hard for a youth sports parent to know how to even reach a Verizon or New York Life Insurance. LeagueSide fills the gap. The idea is that youth sports leagues get access to much-needed funds, advertisers reach potential customers and LeagueSide takes a cut.
The co-founders said revenue is growing and outside investors have put in $800,000. The company has been hiring, and it's up to eight full-time employees. Someone whacks a gong in the office whenever the company notches a win. Lately, the gong’s been taking quite a beating as new advertisers have come on board.
The co-founders said they’re passionate about building a company that makes it possible for more kids to participate in sports. And they’re also excited about driving opportunity beyond Silicon Valley and New York.
“If you want to create more jobs, if you want to stimulate economic growth, all of that, you need to keep talented people in the city to help build it from the ground up,” said co-founder Zubin Teherani, LeagueSide’s chief operating officer.
LeagueSide’s founders met through Venture for America, a fellowship program that puts top college graduates to work at startups in cities like Detroit, New Orleans and Cincinnati. The idea is to provide an alternative path for the kind of bright students likely to get scooped up by Google or Goldman Sachs and shipped off to Silicon Valley and New York. VFA wants to put that brain power to use in other communities.
“This is the key issue facing the country right now,” said Andrew Yang, VFA’s founder and CEO. “How to create an economy that spreads its benefits to broad sections of the population. And really that’s why geographic diversity is so important.”
But the fight for it is a challenging one. Startup investors tend to back ventures similar to those that worked in the past, which often means pouring more money into the same old places.
“It’s going to be a tough challenge for those metros who don’t already have the ecosystem that kind of nurtures and attracts venture capital,” said Karen King, of the University of Toronto’s Martin Prosperity Institute. “For these small metropolitans, it’s difficult. It’s hard to compete with a Silicon Valley.”
She and others suggest that other places can compete by building businesses that capitalize on their unique advantages, such as automotive engineering expertise in Detroit, or the food and cultural scene in New Orleans.
Geographic diversity isn’t just about convincing investors to think more broadly. It’s also about persuading entrepreneurs that they can start great businesses apart from the herd in the San Francisco Bay Area and New York. LeagueSide’s founders said their company is stronger because it’s elsewhere.
“Starting a company in a place like Philly has tremendous perks, including access to talent from incredible universities,” explained co-founder and CEO Evan Brandoff. “The cost of living in Philly is much lower; rent is lower”
On a recent visit to LeagueSide, two new hires were introducing themselves. In interviews, the co-founders were excited to actually be creating jobs, rather than just talking about job creation in the abstract.
Every new job helps, but America needs hundreds of thousands of them every month to keep growing. The expanding movement for geographic diversity in entrepreneurship is fighting to create those new opportunities not just in a couple places, but all across America.