Far and away the most noted element of any entrepreneur ecosystem is the specialized facilities that house early-stage ventures. Unlike many of the other elements needed for successful startups, facilities are tangible, physical assets that can be visited, photographed and touched and thus they get the lion’s share of press and general community attention.
For instance, the effort to support Greenville/Upstate entrepreneurs was relatively unknown until the opening of the NEXT Innovation Center in 2009 as the first high-impact entrepreneur facility in the Upstate region. They are high-profile and a critical resource for early-stage innovation-based companies.
Unfortunately, many entrepreneur facilities never deliver on their promise to fill with high-growth ventures and generate high-paying jobs as they often misunderstand what drives success. Here are some of the biggest myths that often doom well-intending efforts to create thriving entrepreneur facilities.
It’s all cool buildings and shared conference rooms
Though these aspects are important and often the first things visitors notice when they visit co-location spaces, they are actually well down the list of wants by tenant entrepreneurs. More important to startups are density of companies, ecosystem support elements, and flexible lease terms, just to name a few. Yes, shared resources and cool architecture are important, but not primary.
As long as the space is cool, location isn’t that important
Location is still key. Though entrepreneurs are very committed to the community and redevelopment projects in struggling parts of town, they are still primarily motivated to find the optimal location for their venture to compete globally. After all, that is their job as CEO. The location must contribute to the company’s operating results by helping them attract world-class talent, close investment rounds, and serve as their operations hub for producing innovative goods and services. Yet communities sometimes force fit entrepreneur facilities where they desire future development but without checking to ensure the startups they target are interested in locating there.
Rent must be subsidized or free
Yes, discounted lease rates are attractive to young, cash-strapped ventures. But facilities that depend on deep discounting in order to attract entrepreneur tenants is not a sustainable model over the long term. Instead, communities should develop spaces that make market lease rates attractive even to early-stage startups through a combination of building attributes, support services and density of companies. To anyone skeptical of this market-driven approach, I encourage you to look at the NEXT Innovation Center in Greenville which has remained full since opening during the recession of 2009 without any lease subsidies or discounts.
If we build it, they will come
This is the biggest mistake I see here in South Carolina and around the country. Communities that realize the importance of entrepreneurs to their economic future usually make the mistake of starting their ecosystem development efforts by building an entrepreneur facility and then working feverishly to fill it up. Like the mantra from the movie “Field of Dreams,” communities mistakenly believe that if they “build it, they will come.” Far too many locales invest major community resources, energy and political will to rehab an old downtown building, give it a hip new name, and announce it is open for business – all in hopes of attracting a groundswell of entrepreneurs to fill it up.
Unfortunately, this very rarely works. Instead, the hoopla and energy surrounding the new facility announcement and opening is typically the high-water mark for the effort and several years later the facility remains half-full, if it remains open at all.
In Greenville, we have taken a totally different approach with NEXT. We focused first on the entrepreneurs themselves and the variety of needs they have in the short term like support services, connections to investors, attraction of talent, etc. In fact, NEXT was in place for several years meeting and providing support services to more than 30 high-impact entrepreneurs before a building was ever envisioned. It was only when a group of existing entrepreneurs began asking about a co-location facility that we began working on the idea of a specialized facility, resulting two years later in the opening of the award-winning NEXT Innovation Center in partnership with Hughes Development, a Greenville-based real estate development firm.
Notice that there were no resources expended on a facility until (1) our customers began asking for one and (2) there were enough of them seriously interested to warrant community and private developer attention. To further mitigate the risk of developing such a property, the project was not finalized until a reasonable percentage of the space was committed to by NEXT companies. In other words, the NEXT Innovation Center was not a sure thing until the demand for the space was proven and entrepreneurs were committed to leasing space.
Following this principle, we were thrilled to open the new NEXT on Main space in downtown Greenville this summer and are planning an exciting new NEXT space for early-stage manufacturing entrepreneurs later this year.
Specialized facilities are a critical for many high-growth companies, and getting that element right is critical for any community’s effort to attract and support entrepreneurs. Avoiding these myths and learning from the successes and mistakes of others is critical for developing new startup spaces that truly meet the needs of entrepreneurs and thus help generate substantial returns for the community.