Wednesday, November 28, 2012

Accolades for Washington state's business climate just keep on coming!

During the past few years, everyone from Forbes and U.S. News to the Small Business & Entrepreneurship Council and the U.S. Chamber of Commerce – not a left-leaner in the bunch, mind you – has lauded the Evergreen State as one of the nation's top spots for small businesses, big corporations, importers, exporters . . . pretty much the whole enterprise gamut.

The specific criteria vary from source to source, but common elements repeatedly show up. Among them:
  • economic and infrastructure incentives;
  • business-friendly regulatory climate;
  • healthy talent pool;
  • manageable cost of living;
  • access to recreation;
  • pristine environment; and the state's relatively low taxes.
That last item rankles folks who make political points, and sometimes careers, out of crying about Washington's "punitive" taxes, but what can you do? Facts are facts. That's why just last month, the non-partisan Tax Foundation ranked Washington sixth out of the 50 states in its annual State Business Tax Climate Index. To clear up any misconceptions, that's sixth from the top, as in, sixth-best.

Now comes a new piece of recognition, of a type and specificity that most people probably never imagined. But the fact that our largest city, Seattle, comes in fourth in a global ranking of high-growth technology startup ecosystems is quite a new-economy coup. Silicon Valley, not surprisingly, tops the list. Next in line are Tel Aviv and Los Angeles, then Seattle. And who did the Emerald City beat out? Well, pretty much everyone else. Here's a link to the entire list, but notable "ecosystems" placing down the chart include New York and Boston here in the U.S., and a long list of international tech hotbeds – London, Toronto, Paris, Sydney, Sao Paulo, Moscow, Berlin and Singapore, to name a few.

To produce the comprehensive report, Startup Compass (SC) essentially put the entire world under its microscope to judge "ecosystems" on eight counts – which we'll list here verbatim, along with SC's description. They're pretty interesting. <

  • Startup Output Index: The startup output index represents the total activity of entrepreneurship in the region, controlling for population size and the maturity of startups in the region.
  • Funding Index: The funding index measures how active and how comprehensive the risk capital is in a startup ecosystem.
  • Company Performance Index: The Company Performance Index measures the total performance and performance potential of startups in a given startup ecosystem, taking into account variables such as revenue, job growth, and potential growth of companies in the startup ecosystem.
  • Mindset Index: The mindset index measures how well the population of founders in a given ecosystem thinks like a great entrepreneur, where a great entrepreneur is visionary, resilient, has a high appetite for risk, a strong work ethic and an ability to overcome the typical challenges startups face.
  • Trendsetter Index: The trendsetter index measures how quickly a startup ecosystem adopts new technologies, management processes, and business models. Where startup ecosystems that stay on the cutting edge are expected to perform better over time. There's a good chance the trendsetter index is a leading indicator of the future success of a Startup Ecosystem. The trendsetter score for example corroborates with the prevailing excitement expressed about the Berlin and Sydney Startup Ecosystems, while also aligning with the anecdotal evidence we have received about the conservative culture and slow pace of adaptation in the Chicago and Tel Aviv startup ecosystems.
  • Support Index: The support index measures the quality of the startup ecosystem's support network, including the prevalence of mentorship, service providers and types of funding sources.
  • Talent Index: The talent index basically measures how talented the founders in a given startup ecosystem are, taking into account age, education, startup experience, industry domain expertise, ability to mitigate risk and previous startup success rate.
  • Differentiation Index: The differentiation index measures how different a startup ecosystem is to Silicon Valley, taking into account the demographics and what types of companies are started there. Since Silicon Valley is the #1 ecosystem it is assumed that other ecosystems will perform better if they differentiate themselves from Silicon Valley and establish their own strengths.

Conventional wisdom says small businesses are, depending on which anatomical metaphor you prefer, either the backbone or the heart of our state's, any state's, economy. And technology startups are, at least at the beginning, small businesses. Some never go beyond that point, and many cease to exist before the ink on their new stationery is dry. But Microsoft was a startup. Amazon, too. Farther afield, there's Twitter, and Google, and Zynga, and Instagram (which was recently snapped up for $1 billion by another former startup called Facebook). These enterprises and others like them, including the ones that are just a notion in a future billionaire's brain right now, are STEM in action. They're not the only part of the new economy – we still need dry cleaners and machine shops and that great little restaurant that's going in down the street – but they're a significant part of how Washington can thrive in the 21st century.

So eat your heart out, Chicago and Melbourne and Bangalore, and good luck next year.

To read this story in Spanish, please click here.