Humans have lived in San Marcos, Texas, longer than they have lived almost anywhere else on the continent. An archaeological fact, I might concede we can’t be sure, but that fact doesn’t matter to what got my attention; it should matter to entrepreneurs, investors, and economic development professionals.

People have been here for 12,000 unbroken years of water. Spring-fed, constant-temperature, never-stopped-flowing water rising from the Edwards Aquifer into Spring Lake, feeding the San Marcos River, sustaining everything within reach. And while the city has developed a charming identity around mermaids, tube rentals, and Texas State University traditions, the world is catching up to what the Coahuiltecans figured out in 10,000 BC: water is the most limiting factor in what Texas can become, and San Marcos has been protecting and researching the template for handling it since before any civilization thought to write things down.

Texas is staring down one of the most consequential resource crises in its history, and to entrepreneurs, that breeds innovation.

I am a water baby. People ask why I moved to Texas and while many refer to the culture, the economy, or the startup scene, for me it was because I grew up on lakes, rivers, and beaches. When people beat the heat by staying inside, I find a float and let the current take me.

A growing population, aging infrastructure, prolonged drought, and an AI data center construction boom that nobody seems to have put into a water planning model have combined to make fresh water the single most contested economic input in the state. In the Texas Tribune in September 2025, “We have a shortage of water, but on the other side, we like the Texas economy. It’s a tough balance, but we are coming to terms with the fact that water in Texas is the most limiting factor, and we need to find an answer.” Meanwhile, Jeremy B. Mazur, director of infrastructure and natural resources policy for Texas 2036, has noted that the state faces $154 billion in water infrastructure investment needs over the coming decades, with the $1 billion voters approved in 2023 being “literally just a drop in the bucket.”

Into this context swims San Marcos, a city of roughly 67,000 people sitting exactly at the midpoint between Austin and San Antonio on Interstate 35, home to the second-largest spring cluster in Texas, built on top of the Edwards Aquifer recharge zone, operating one of the country’s premier water research institutions through Texas State University, and officially designated by the Texas Legislature as the Mermaid Capital of Texas. That is more serious than it sounds. It means the state government formally recognized San Marcos’s water identity in statute, which is the kind of thing you can build a sector strategy on. Most cities spend decades trying to manufacture an identity, or worse, they just claim “tech” or being innovative; San Marcos is sitting on one 12,000 years in the making and largely underutilizing it as an economic engine.

The argument makes itself; San Marcos is positioned to become the water innovation capital of Texas, and the framework for doing so is already partially assembled. What it lacks, to borrow from my own framework in Startup Ecosystems, is design intentionality. The assets exist; the architecture connecting them into a functioning innovation economy does not yet. That is not a criticism; that is a diagnosis. And as I have written about Abilene, Bellevue, Baltimore, and Miami, the cities doing interesting things are not the ones imitating Silicon Valley; they are the ones excavating what is authentically theirs and building something no one else can copy.

Cities, History Builds Your Startup Ecosystem Case; Let me Explain…

The San Marcos Springs area may be the oldest continually inhabited site in North America, with evidence of human activity dating back approximately 11,500 years. That cannot be ignored as a minor historical footnote; it is the whole argument for why the city has a legitimate, defensible, substantial identity.

Every civilization that settled here settled because of the water. The springs were sacred to the Coahuiltecans, who regarded the area as the site of their creation. Spanish explorers named the river for the feast day of Saint Mark when they encountered it in 1691. The Camino Real, the Old San Antonio Road, was routed specifically to pass through this water source because travelers and traders could not reliably cross Texas without it.

The Meadows Center’s Spring Lake contains more than 200 springs with water from the Edwards Aquifer that discharge an average of 123 million US gallons of water daily. Artifacts discovered in digs conducted from 1979 to 1982 date back 12,000 years. When General Edward Burleson, hero of the Texas Revolution and former Vice President of the Republic of Texas, arrived in 1847 and built a dam across the river, he was not making an aesthetic choice; he was recognizing the same economic logic the Paleo-Indians had recognized ten millennia earlier: this water is the resource that makes everything else possible.

His dam created Spring Lake and powered gristmills, sawmills, an ice factory, and an electric light works before most of Texas had any of those things.

From about 1691 until the Mexican Revolution in the early 1800s, Spanish explorers and settlers used the nearby Camino Real, and several attempts were made to establish a mission around the remarkable San Marcos Springs, because millions of gallons of clear water bubble up from the earth. The Chisholm Trail’s cattle drives used the river as a water stop. The longest known canoe race in the world, the Texas Water Safari, still begins at Spring Lake. And Texas State University’s students famously jump into the San Marcos River after graduation, which is either a beautiful tradition or a deeply on-brand signal that this city understands its identity.

Why am I explaining all of that when I tend to write about startups and ecosystems? Because the culture of a region of the world has more to do with HOW people work, why, who they are, and what motivates them, than any employer or startup ideal. This defines here.

The San Marcos River has been described as “one of the planet’s most precious resources” in the Federal Register, and recent archaeological evidence suggests that the river area is the oldest continually inhabited site in North America. That federal designation sets the regulatory and research context in which Texas State operates its The Meadows Center for Water and the Environment, and it establishes that the federal government has already validated what San Marcos knows about itself, that the water part of here is categorically different from water elsewhere.

The city’s modern growth trajectory has been no less remarkable than its ancient one. In 2013, the United States Census Bureau named San Marcos the fastest-growing city in the United States. Forbes called the greater region “America’s Next Great Metropolis.” Hays County, in which San Marcos sits as the county seat, has been among the fastest-growing counties in the nation for most of the last decade. The population of the city has grown from under 35,000 in 2000 to over 67,000 today, with the broader Hays Caldwell County region growing faster still. Population growth at that rate in a water-stressed state is, in itself, a market signal for water innovation investment.

Texas State University was founded in 1899, and it graduated a future President of the United States in Lyndon B. Johnson. The university grew from a teachers’ college into a comprehensive doctoral research university with over 44,000 students and $183M in research expenditures last year, making it one of the largest universities in Texas. That growth trajectory mirrors the region’s own: steady, increasingly serious, and no longer willing to be dismissed as a second-tier player in the Texas university landscape.

Innovation and Invention: The Creative Thread

San Marcos does not have the invention mythology of a Baltimore (first telegraph, first railroad) or the concentrated R&D identity of an Abilene (to pick a similarly sized town: military technology, nuclear energy research at Dyess), but its innovation story is threaded through water, biology, and the creativity that emerges when a city has been problem-solving the same resource challenge for twelve millennia.

The glass-bottom boat, now synonymous with Spring Lake, was introduced to San Marcos in 1946 by Paul Rogers at Aquarena Springs. It was a genuine product innovation: a vessel specifically designed to make an invisible ecosystem visible to people who had no other way to experience it. Aquarena Springs itself became one of the most-visited attractions in Texas before the amusement park era, drawing 350,000 visitors annually at its peak and appearing on the cover of Popular Mechanics. When Texas State acquired the property in 1994 and converted it from a tourist attraction into the Meadows Center for Water and the Environment, that represented one of the more consequential institutional decisions in the city’s history, transforming a commercial entertainment asset into a research infrastructure for the most pressing resource issue in the state.

The Meadows Center participates in underwater archaeology, led the search for Henry Morgan’s lost fleet, and played a role in rediscovering the Satisfaction in 2011. That is not where most water research centers spend their time, but it illustrates the cross-disciplinary creativity that characterizes the institution. The Meadows Center has overseen a 53% increase in Texas wild rice since 2015 through ecosystem restoration work. It maintains the Spring Lake Management Plan, coordinates with the Edwards Aquifer Habitat Conservation Plan to ensure minimum continuous spring flows and operates educational programs that reach thousands of students and policymakers annually.

I have floated, snorkeled, swam, and shared experiences with loved ones in this water more times than I can count. It’s life here.

Okay, but only water? The Materials Application Research Center (MARC), established at Texas State in late 2017, operates as an in-house innovation lab with robust entrepreneurship components and has attracted more than $5 million per year in funding from the Texas Legislature. MARC’s efforts include launching an advanced prototyping center, now called the Ingram Hall Makerspace, which provides prototype development services and applied research activities, as well as the more recent BobCatalyst initiative that will empower Texas State innovators to navigate the path from campus breakthroughs to global impact. The university’s computer science Ph.D. program, launched in fall 2017, was the first in Texas to combine computer science practice and theory with entrepreneurial and commercialization skills, a structural decision that changes everything because commercialization skills gaps is one of the main reasons university research never becomes startups.

Texas State’s STAR Park (Science, Technology, Advanced Research Park), now with the STAR One incubator, serves as the university’s research and commercialization hub, and is positioned at the center of what the university calls its Innovation Corridor role within Central Texas. Texas State STAR Park is where the gap between research and startup formation gets the most institutional attention in San Marcos, and it represents the kind of infrastructure that can anchor a serious sector strategy if the surrounding ecosystem develops correctly.

The Forensic Anthropology Center at Texas State, known informally as a “body farm,” is the largest forensics research facility in the world of its type, and while it is a research asset rather than a commercial technology opportunity, it represents the university’s willingness to be the best in the world at uncomfortable things, which is a cultural signal worth noting when you are trying to build an ecosystem around a resource as politically charged as water.

At the inaugural Texas Innovation Conference & Awards, I reconnected with Texas State’s Director of Venture Development, Matt Sorenson, and he confirmed that the innovation and invention culture at Texas State is flourishing. “Record-breaking levels of research, top-level leadership support, increased investment into innovation & entrepreneurship resources, and a collaborative, can-do spirit across campus among the faculty, staff, and students have created an environment ripe for innovation and impact.”

Regional Macroeconomics and the Government’s Role

The Hays Caldwell Economic Development Partnership, the economic development group representing Hays and Caldwell counties, describes the region as part of the Texas Innovation Corridor, “anchored to the north by Austin’s Silicon Hills and to the south by San Antonio’s biotech industry, the burgeoning Texas Innovation Corridor has boasted unprecedented population growth, job creation, new business startups, and economic expansion for the better part of a decade.” That corridor framing is useful but also a little misleading in the way all corridor framings are; being the geographic midpoint between two major metros means you can either function as a thoroughfare that talent passes through on its way to bigger cities, or you can function as a distinct economic node that attracts capital and founders on its own terms.

San Marcos is currently doing more of the former than the latter, so let’s change that.

The major employers in San Marcos today reflect a transitional economy that has not yet committed to a sector identity. Texas State University itself is the dominant employer, with the Gary Job Corps Center (the largest in the United States) serving as another anchor institution. The retail sector is significant in a way that is often the case between major metros: Premium Outlets and as Texans know and love, Buc-ee’s, Ltd.; the busiest retail centers in the country as a regional commercial engine that has little to do with innovation. Health care, education, and government round out the major employment categories but that’s often the case in every small-midsized city. The economy is growing rapidly, but it is growing as a bedroom community and service economy, not as an innovation hub.

That is the gap this article is about.

The government’s role in San Marcos’s entrepreneurship story is simultaneously its strongest asset and its most underutilized one. The Texas Water Development Board, the Edwards Aquifer Authority (EAA), the Hays Calwell Economic Development Partnership (HCEDP), Texas State’s research infrastructure, and the Meadows Center collectively represent a depth of public investment in water management and research that no other small city in Texas can match. The policy environment is also shifting in San Marcos’s favor with extraordinary speed.

In 2025, the 89th Texas Legislature passed Senate Bill 7 and House Joint Resolution 7, paving the way for up to $1 billion annually in water infrastructure funding, with Texas voters approving the constitutional amendment as Proposition 4 in November 2025. The legislation expands eligible projects to include desalination, water reuse, out-of-state water acquisition, and other alternatives, while establishing a Water Supply Conveyance Coordination framework. The Texas Water Development Board followed by completing its largest bond issuance in agency history, approximately $2.5 billion, to fund projects in the State Water Plan. As of December 2025, a total of $235 million had been distributed to 45 projects through rural and water-loss assistance programs.

The Environmental Defense Fund characterized the 2025 legislation as positioning Texas “for long-term water resilience, unlocking significant funding to address aging infrastructure, support new water supplies, and invest in local groundwater science.” What none of that policy apparatus has yet done is direct capital toward water innovation startups as a category, a notion I similarly just covered about Texas Biosciences. State procurement, federal infrastructure programs, and the Texas Water Fund represent addressable markets for water technology ventures, and San Marcos has the research pipeline to feed those ventures.

The data center water crisis adds urgency that borders on panic. Texas is building dozens of massive data centers, and according to the HARC | Houston Advanced Research Center, existing data centers in the state will consume approximately 25 billion gallons of water in 2025, with projections suggesting that number could rise to between 29 billion and 161 billion gallons annually by 2030. Margaret Cook, Vice President of Water and Community Resilience at HARC, has warned that “it is concerning that we have this explosive growth in data centers but no way to forecast that water use from a state or regional planning perspective.” The innovation sectors being called for in response, liquid immersion cooling, heat reuse systems, atmospheric water generation, on-site desalination, are precisely the categories where a university with a water research center and a research park with commercialization infrastructure could be producing startups right now.

The Edwards Aquifer Authority, headquartered in San Antonio, manages the aquifer that makes San Marcos’s springs possible. The EAA is an institutional stakeholder with both regulatory authority and deep technical knowledge of the water systems that underlie everything San Marcos is building on. A startup ecosystem oriented around water innovation would find the EAA a critical partner for both research access and regulatory navigation, and currently, that relationship appears to be largely inactive on the innovation side.

Notable Companies and the Commercial Foundation that Establishes This

San Marcos does not have a recognizable portfolio of breakout technology companies the way Austin or even San Antonio does, and pretending otherwise would be exactly the kind of boosterism that makes economic development reports useless.

What it does have is a set of companies and commercial patterns that point toward what is possible.

The outlet mall economy, anchored by San Marcos Premium Outlets and Tanger Outlets, made the city one of the most recognized retail destinations in Central Texas. This is not irrelevant to a startup ecosystem; retail density creates hospitality and service infrastructure that makes a city livable for talent, and the foot traffic and consumer research data generated by that retail concentration have actual startup applications for commerce analytics and consumer behavior ventures.

On the technology and innovation side, STAR One’s tenant companies represent the most direct line from research to commercial activity in San Marcos. The park has attracted medical device companies, materials research ventures, and technology commercialization activities that leverage Texas State’s growing research capacity. The presence of these companies in proximity to the university creates the kind of spillover that generates founder populations when managed correctly, an example being startup company Material, founded by Texas State graduate Christopher Reyes, PhD and now a tenant at STAR One.

The Meadows Center’s research activities have commercial adjacency in water quality monitoring, species conservation technology, aquifer modeling, and environmental impact assessment. None of these have been fully commercialized through spin-out ventures, which is itself a significant observation: San Marcos has research that the market needs but lacks the venture infrastructure to convert it into products.

Splash Coworking, San Marcos’s water-themed coworking space, is worth noting because being so-named it understood the city’s identity better than most economic developers, and founder Carina Raquel Boston Pinales beat me to the punch. Their language around “springs creativity” and “headwaters of entrepreneurship” is on-brand in someone who has already drawn the connection between the water identity and the entrepreneurship story.

“Splash Coworking invites you to a space that flows and springs creativity, by creating a splash in the community of San Marcos, Texas. Splash Coworking creates a ripple from the headwaters of entrepreneurship, business, social innovation, culture, and community. We create a platform to dive into the river of business development and sustainable practices.”

The execution of that brand promise as a city is an opportunity unparalleled.

Startup Development Organizations in San Marcos, Texas

The Center for Innovation and Entrepreneurship (CIE) at Texas State University is an active and promising piece of the ecosystem. CIE runs the Bobcat Bazaar (a student marketplace program with 65-plus vendors), the Campus to Community Fund (which has secured over $100,000 for student ventures), Student Made Texas State (supporting 25-plus student businesses), the Open Penny Founder’s Table, the Bobcat Innovation Challenge, and an Innovation and Entrepreneurship Minor available to students across the university. CIE is doing real work with real students and deserves more recognition as the founder pipeline it actually is. Its constraint is that it is primarily oriented toward student entrepreneurship and early-stage idea development, which means it serves the left side of the startup ecosystem bow tie but leaves founders without meaningful bridge to growth-stage capital and commercialization infrastructure.

Texas State University BobCatalyst, is a new university-wide initiative designed to help faculty, staff, and students transform impactful research and ideas into market-ready innovations. Led by the Office of Innovation, Commercialization, and Engagement, BobCatalyst provides a continuum of support and resources from idea generation and validation through prototyping and launch. From customer-discovery training through their BobCatalyst Innovation Accelerator Program, to internal funding via Proof of Concept Grants, this initiative is forging the connections between the University’s record-breaking research growth and economic growth and impact.

ThinkBIG at BCL of Texas is a City of San Marcos initiative operated through a partnership with BCL of Texas that offers no-cost, one-on-one business and financial coaching at 302 W. Hopkins Street. The program supports businesses at every stage from exploration through capital acquisition and is specifically designed for the San Marcos business community. ThinkBIG is most useful as a bridge between early exploration and formalized business planning, and its integration of financial coaching with business coaching makes it more practically useful than programs that treat business strategy and capital access as separate conversations.

One Million Cups San Marcos is the local chapter of the Kauffman Foundation’s national peer networking and presentation program for entrepreneurs. The San Marcos chapter provides a weekly venue for founders to present their ventures and receive feedback from a community audience, creating the kind of low-stakes repetition that helps early-stage founders develop narrative clarity. One Million Cups is not a funding mechanism or an accelerator; it is community infrastructure that makes the ecosystem feel alive to newcomers. Its value is social cohesion, not capital formation.

Splash Coworking functions as both physical workspace and community hub for San Marcos entrepreneurs. As a 2019 recipient of Texas Workforce Innovation and Opportunity Act funding in partnership with Texas State and Rural Capital Area Workforce Solutions, it has demonstrated the ability to operate at the intersection of economic development, workforce development, and entrepreneurship support. Splash’s water-themed brand identity is genuinely distinctive and represents the kind of authentic regional character that makes an ecosystem memorable. Whether it evolves into a formal innovation hub or remains primarily a coworking facility will depend on whether it attracts anchor tenants and programming that make it a gravitational center for the ecosystem rather than a desk rental.

Meadows Center for Water and the Environment is not formally a startup development organization, but it functions as one for water technology ventures the way university wet labs function as pre-commercial infrastructure for biotech. Its research pipeline, institutional relationships, and technical expertise represent a de facto incubation infrastructure for water innovation that simply has not been formally activated as such. Texas State should be spinning ventures out of the Meadows Center the way UT Austin spins ventures out of its Energy Institute, and the fact that it is not yet doing so is the most significant gap in the entire San Marcos ecosystem.

STAR Park is the physical manifestation of the university’s research ambitions and is where the connection between Texas State’s growing doctoral research infrastructure and the private sector is most directly expressed. It has attracted technology and medical device tenants and serves as the bridge between the lab and the market. Its primary limitation is similar to such efforts everywhere: commercialization of university IP is a long, legally complex, politically navigated process that tends to favor licensing over spin-out formation, which produces revenue for the university but fewer founder-led companies than the ecosystem needs. Its primary opportunity is the ideal location between campus and the hospitality and service infrastructure near the outlet malls, and room for growth on its 58-acre site.

San Marcos Chamber of Commerce provides the standard chamber infrastructure including business listings, networking events, and policy advocacy. For startups, it is most useful as a gateway to established business relationships and local government access, and less useful as a venture growth resource. Chambers and startup ecosystems have an uncomfortable coexistence in most cities because chambers are structurally designed to serve existing businesses while startups need support for businesses that do not yet exist in their final form.

What is notably absent from San Marcos’s startup development landscape: a dedicated (actual) accelerator program for water technology ventures, a formalized angel investor network, a venture fund with a sector thesis aligned to water innovation or related climate technology, and a structured mentor network with documented domain expertise in water systems, environmental technology, and the regulatory landscape governing Texas water law.

These are not small gaps; they are the difference between an ecosystem with assets and an ecosystem that produces venture-scale outcomes. I mentioned an accelerator and yet I’m also known for being very critical of them, because most fail to deliver; it isn’t remotely difficult to create an actual accelerator that knows how to scale innovation.

So, honesty first: San Marcos does not have a mature venture capital ecosystem but it is close enough to the cities that what you have in the Austin – San Antonio Corridor is something more accurate of “Silicon Valley” than this misleading comparison of the City of Austin to the region of Silicon Valley. None of that means any of this part of the world, or yours, should aspire to be Silicon Valley, far from it, it reinforces though that cities trying to be startup ecosystems are too narrowly focused when within hours are, often, investors, colleges, companies, and more that matter to the region. The 35 corridor between the major cities here is the fastest growing region of the United States, and overlooking all this insults the founders who are actually trying to raise capital here.

What it does have is a set of funding access points ranging from federal programs to adjacent-city capital networks, with genuine white space for a locally capitalized water innovation fund that would be both strategically sensible and currently non-existent.

Federal and Program Funding: The SBA programs accessible through Texas State SBDC provide the standard federal infrastructure for small business lending, SBIR (Small Business Innovation Research) grants, and STTR (Small Business Technology Transfer) grants. SBIR and STTR are specifically relevant for water technology ventures with a research component, as they provide non-dilutive early-stage capital to companies commercializing federally relevant research, and the Texas Water Development Board’s funding landscape creates clear federal-state alignment for water innovation companies seeking grant capital.

The Texas Water Fund itself, now constitutionally supported at up to $1 billion annually through the voter-approved Proposition 4, creates a public procurement market for water innovation companies that is more valuable than grant funding in the long run. A San Marcos water technology company that establishes a relationship with the Texas Water Development Board is not just accessing capital; it is building a customer relationship with the entity that controls the largest water infrastructure budget in the state.

Campus to Community Fund (C2C): The CIE’s $100,000 Campus to Community Fund is the closest thing San Marcos has to a locally deployed seed capital vehicle specifically designed for student and early-stage founders. It is a start, not a finish, and its primary value is in signaling that the university is willing to partner with alumni and partners to put real capital behind the entrepreneurship programs it runs, rather than just running workshops and hoping founders figure out the money on their own.

Angel Capital: San Marcos founders currently access angel capital primarily through adjacent metro networks in Austin and San Antonio rather than through any organized local angel infrastructure. Austin’s Central Texas Angel Network (CTAN), San Antonio’s Geekdom Fund and LaunchSA ecosystem, and statewide networks like the Texas Halo Fund represent the practical capital sources for San Marcos founders who have outgrown the local support infrastructure. This is both a limitation and an opportunity; organized angel activity in San Marcos, particularly if oriented around water technology as a sector thesis, would give the ecosystem a funding identity that regional and national investors could evaluate on its own terms rather than treating it as an Austin suburb.

Venture Capital: The practical VC landscape for San Marcos founders is Austin and San Antonio first, with a handful of Texas-wide firms like LiveOak Ventures, Next Coast Ventures, Silverton Partners, and S3 Ventures evaluating companies across the Texas geography. For water technology specifically, there is a growing national interest from climate-focused funds: Piva Capital, Breakthrough Energy Ventures, S2G Ventures, and several impact-oriented funds have active water technology investment theses. The problem is not that capital for water innovation is unavailable nationally; the problem is that San Marcos lacks the investor relations infrastructure to route that national capital into local ventures. We know why venture capital avoids startup ecosystems, the issue is rarely the absence of capital; it is the absence of a compelling, legible ecosystem narrative that makes investors believe the deal flow quality justifies the visit.

Strategic Capital and Corporate Venture: The data center operators, water utilities, and municipal water authorities that are most urgently seeking water technology solutions are also potential strategic investors for water innovation companies. Microsoft, Amazon, and Google all have sustainability and water commitments that create corporate venture rationale for investing in cooling technology, water reuse systems, and aquifer management tools. None of them are currently looking to San Marcos for those solutions, but the structural logic is clear: the company that solves data center water consumption sits at the intersection of two of the largest capital pools in Texas right now. That company should be in San Marcos.

Capacity Building Considerations: Where San Marcos Floats

The framework in Why Startup Ecosystems Fail at Scale identifies ten specific structural considerations that determine whether an ecosystem has the capacity to produce and sustain venture-scale companies. Applied to San Marcos, the diagnosis is simultaneously encouraging and instructive.

1. Overcoming Silos: Shared Infrastructure and Community

San Marcos has the classic silo problem that every university town develops when the university is the dominant institution: Texas State operates in one world, the city government operates in another, the chamber of commerce operates in a third, and the startup community that exists despite the absence of coordinated support operates in a fourth. The Meadows Center’s water research, the CIE’s student entrepreneurship programming, and the coworking community-building work are not coordinated into a single pipeline. A founder in San Marcos who is building a water technology company has to navigate these institutions independently because no single gateway routes founders across all of them. Imagine trying even beyond that to connect to similar work in Austin or San Antonio… impossible.

Extending convenings explicitly to startup ecosystem coordination, with water innovation as the sector lens, would be the single highest-leverage structural intervention available to San Marcos right now. As this work on how ecosystem builders start ecosystems explains, the problem is that most ecosystem-building efforts try to build what healthy ecosystems look like rather than building the relationships and trust that make ecosystems function.

San Marcos needs a coordinator, not more programs.

2. The Missing Middle: Widening the Gap Between Early Startup and Established Company

San Marcos has good support for very early-stage founders and some support for established businesses (chamber, SBDC business advising). What it does not have is meaningful support for the companies that have found product-market fit, are generating early revenue, and need capital and operational expertise to scale. This is the “missing middle” that every mid-sized ecosystem struggles with, and it is particularly damaging in a university town because the student ventures that graduate from the CIE have nowhere to go except Austin or San Antonio the moment, they start to look serious.

The solution is not another accelerator program; it is a dedicated growth-stage support structure, probably in the form of a venture studio or accelerator with a specific water technology thesis, that can take post-CIE companies and connect them to the investors, customers, and advisors they need to move from $500,000 in revenue to $5 million. That entity does not exist in San Marcos. Its absence is measurable in the founders who left.

3. Secure Long-Term Funding and Incentives for Ecosystem Builders

The people running most of what’s here operate on grant cycles, university budget allocations, and SBA cooperative agreements that have no guaranteed continuity beyond the current funding period. Ecosystem building is a decade-long endeavor, and funding it in two-year chunks produces exactly the kind of short-term programming orientation that generates metrics (workshops attended, businesses advised) rather than outcomes (companies funded, jobs created, exits achieved).

San Marcos has a genuine opportunity here that most cities do not: the Texas Water Fund’s growing infrastructure creates a rationale for aligning water innovation ecosystem funding with state water infrastructure investment. An economic development case to the economic development efforts, the Texas Water Development Board, or the Edwards Aquifer Authority for sustained ecosystem development funding around water innovation is not a long shot; it is a natural extension of their existing missions. The political environment has never been more favorable to that ask, given the 2025 water legislation.

4. Measuring Outcomes Not Activity, and Promoting Success

Like most cities, what I can easily uncover is the data that doesn’t matter: number of workshops held, attendees counted, businesses advised, loans processed. None of those numbers tell you whether the ecosystem is producing founders who go on to build fundable companies. The Kauffman Foundation’s work on ecosystem metrics has been clear for years that activity metrics and outcome metrics are not the same thing, and communities that measure activity reward the wrong behaviors in their ecosystem builders.

What San Marcos should be tracking: the number of student and community founders who pursue their ventures beyond the university, the capital raised by those founders in the 24 months after their last formal ecosystem interaction, the companies that remain headquartered in San Marcos three years post-founding, and the proportion of those companies operating in water technology or adjacent sectors. None of those numbers exist publicly right now, which means the ecosystem cannot demonstrate its value to investors, cannot make the case for sustained public investment, and cannot attract the mentors and advisors who want to work with ecosystems that are producing visible outcomes.

5. The Culture and Behaviors That Make Collaboration Natural, Not Forced

San Marcos’s culture is collaborative in the way that small cities often are, and large metros rarely manage. Texas State’s student community, the downtown creative economy, and the river culture that brings people together physically (sometimes whether they want to be or not, given the tubing culture) create a social density that is genuinely useful for ecosystem development. People know each other here, which is not something you can manufacture in Austin or San Antonio regardless of how many networking events you hold.

The risk is that this collaborative smallness becomes insular. San Marcos founders need connections to investors, customers, and mentors who are not in San Marcos, and the local collegiality that makes the community warm also makes it easy for founders to spend too much time with people who cannot write checks or open enterprise sales channels. The ecosystem needs to be intentional about routing external relationships into San Marcos rather than routing San Marcos founders out of it.

That requires an external-facing narrative about what the city is building; not a tourism pitch, but a sector pitch aimed at investors and corporate partners who need what a water innovation hub would produce.

6. Including the Full Spectrum of Talent, Not Just Those Already Visible

Texas State University’s student population is majority-minority and the first in their families to attend college at rates that significantly exceed the national average. That is one of the most powerful founder pipeline assets any startup ecosystem could ask for, and it is almost entirely invisible to the venture capital community because the students are not going to TechCrunch conferences or appearing on Forbes 30 Under 30 lists. The CIE’s language about “underestimated talent becoming unstoppable” is exactly the right framing for what the ecosystem has, but framing alone does not change where capital flows.

Making inclusive entrepreneurship real in San Marcos means connecting the actual student founder population to the investor networks that can fund them, not just the investor networks that feel comfortable funding people who went to UT Austin. It also means extending ecosystem programming explicitly into the surrounding Hays and Caldwell county communities, where population growth is occurring fastest, but economic development attention is thinnest.

7. How to Architect Environments That Enable People to Perform at Their Highest Potential

Physical infrastructure matters in ways that ecosystem developers consistently underestimate. San Marcos has spaces but would benefit the concentrated, mixed-use innovation district that creates the accidental collisions between founders, researchers, investors, and mentors that drive ecosystem velocity. The Meadows Center at Spring Lake is the most intellectually obvious anchor for a water innovation district: build a dedicated facility adjacent to the world’s most significant water research institution, on the banks of the oldest inhabited spring system in North America and tell every water technology company in Texas they should be operating out of it.

That is not a small ask, and it requires capital and political will that the city does not currently have fully assembled. But it is the kind of architectural decision that distinguishes ecosystems that become destinations from ecosystems that remain pleasantly functional.

San Marcos should be building toward a physical presence that makes the water innovation identity undeniable.

8. What It Really Takes to Align Government, Academia, and the Private Sector

The 7th Americas Competitiveness Exchange on Innovation and Entrepreneurship brought decision-makers from more than 20 countries to San Marcos specifically to explore partnerships and economic development opportunities, including a Glass Bottom Boat Tour at The Meadows Center for Water and the Environment. That event happened years ago, and the alignment it catalyzed has not been institutionalized into ongoing sector development. Government-academia-private sector alignment is the hardest thing to build in any ecosystem because all three parties operate on different timescales, measure success differently, and are accountable to different constituents.

For San Marcos, the alignment around water is the clearest path because all three sectors have explicit, documented, high-priority interests in water. The Texas Legislature just committed $1 billion annually to water infrastructure. Texas State runs a nationally recognized water research center. The private sector is desperately looking for water technology solutions in the face of a data center-driven crisis. The organizational infrastructure to align those three interests around a shared water innovation strategy is the work nobody has yet formalized. It is the most consequential thing San Marcos’s civic leadership could decide to do in the next 18 months.

9. Ecosystems Accelerating Innovation and Reducing Risk by Unlocking Local Competitiveness

San Marcos’s competitive advantage is not that it sits between Austin and San Antonio; any city on I-35 can say that. Its competitive advantage is that it has the research infrastructure, the water identity, the regulatory relationships, and the cultural authenticity to build a water innovation cluster that nobody else in Texas can replicate. As I noted in the Bellevue analysis, “nearly half of Seattle’s unicorns were actually founded in Bellevue; that’s the kind of quiet outperformance worth paying attention to.” San Marcos has the opportunity to do for water technology in Texas what Bellevue did for enterprise software in Washington: establish a specialty identity that produces disproportionate outcomes relative to size.

The risk reduction argument for locating a water technology company in San Marcos is substantial: proximity to the Edwards Aquifer Authority and Texas Water Development Board (regulatory navigation), access to Meadows Center research and Texas State technical expertise (R&D cost reduction), and the state’s growing water infrastructure procurement market (customer development). That is a compelling package for a category-defining water technology company, and it is currently being offered to no one because San Marcos hasn’t yet formalized the pitch.

10. How Global Best Practices Can Be Adapted, Not Copied, for Local Realities

Water technology ecosystems exist in Singapore, Israel, the Netherlands, and Australia, and all of them have built their clusters around a specific local water problem rather than trying to serve a generic global market. Singapore’s water innovation cluster emerged from the city-state’s existential concern about water independence; the Netherlands built its global water technology leadership out of centuries of flood management necessity; Israel’s drip irrigation technology emerged from agricultural water scarcity in the Negev. San Marcos has a similarly compelling local problem: the Edwards Aquifer is facing increasing pressure from population growth, data center demand, and climate volatility, all while the river system that has supported life for 12,000 years is now being asked to support a 21st-century tech economy.

The lesson from every successful sector cluster is that global best practices are research inputs, not operational blueprints. San Marcos does not need to copy what Singapore built; it needs to study why Singapore built what it built (necessity plus research infrastructure plus government coordination plus export market orientation) and apply those design principles to the specific assets and constraints of Hays County, Texas. The result should be something that looks like San Marcos, not something that looks like anyone else.

The Small-Town Argument: A Model for Every Town in a City’s Shadow

This is perhaps the most important point in this entire article, and it is directed at every economic developer, mayor, university administrator, and ecosystem builder sitting in the shadow of a major hub trying to figure out what their city’s story is.

San Marcos is not going to become Austin. It is not going to become San Antonio. It should not try. It should not study Silicon Valley or travel to New York to learn from them. The moment a city in the shadow of a major hub commits to being a smaller, more accessible version of its neighbor, it has lost. Founders who want Austin move to Austin; founders who want San Antonio move to San Antonio.

The founders who come to San Marcos, or stay in San Marcos, come because of something San Marcos has that no one else does. Water is that thing.

“Abilene’s opportunity lies in being radically different, because that’s the defining quality of an entrepreneur and it’s the purpose of a startup.” In fusing what is uniquely theirs into an identity that cannot be copied, small cities in the shadow of major hubs become something no metropolis can be: specific. The cities doing the most interesting ecosystem work right now, as I covered in the Bellevue and Baltimore analyses, are not the ones trying to be more like Silicon Valley; they are the ones doubling down on what makes them irreplaceable.

For San Marcos, “irreplaceable” is straightforward to define. San Marcos Springs have never been known to stop flowing.

In a state and a world where water scarcity is becoming a first-order economic constraint, that is not a tourism curiosity; it is a strategic asset. Every smaller city in Texas watching Austin extract talent and capital from its region should be studying what San Marcos does next with water, because the template San Marcos builds for leveraging a specific natural and research asset into a sector identity will be the most replicable model in Texas.

The argument for San Marcos is ultimately the argument for every second-tier city that refuses to accept second-tier as a permanent condition: find the one thing you have that no one else has, build the most serious research and commercial infrastructure around that thing that anyone has ever built, and let the specificity speak for itself. The venture capital that currently bypasses San Marcos on its way to Austin is the same capital that bypassed Austin on its way to Silicon Valley until Austin stopped trying to be Silicon Valley and started being Austin. San Marcos already knows what it is. The work is making that identity economically productive at scale.

AcquiferTech, SpringTech, WaterTech (too obvious), I like SourceTech

San Marcos SourceTech

San Marcos does the cultural foundation exceptionally well. The water identity is authentic, the university community is engaged, the physical environment is compelling, and the civic institutions understand the region’s potential. The research infrastructure at the Meadows Center and STAR Park is genuinely distinctive, and the presence of a major public university with a growing research mission and a majority first-generation student body creates exactly the kind of founder population that builds companies grounded in real problems.

What San Marcos has not yet done is connect those assets into a sector strategy with teeth. There is no water innovation accelerator, no locally capitalized seed fund with a water thesis, no formalized mentor network with domain expertise in water technology, no organized effort to route national water technology investment to San Marcos, and no systematic measurement of whether the existing ecosystem programming is producing founders who build companies rather than founders who attend workshops. Those are not fatal gaps; they are design decisions that have not yet been made. We know how to do it.

The cities most worth watching in the Texas startup ecosystem right now are the ones that are about something specific. San Marcos is about water. It has always been about water. The Edwards Aquifer Authority, the Meadows Center, the spring-fed river, the 12,000 years of human habitation, the Texas Legislature’s multi-billion-dollar water infrastructure investment, the data center water crisis, and the global market for water technology innovation all point to the same conclusion:

San Marcos has a singular, defensible, and economically urgent sector identity available to it. It’s the source of all that flows here, it’s the source of Texas’ future, and let’s be realistic about the challenges throughout the world: San Marcos could be the source of water innovation desperately needed everywhere.

The challenge for Kansas City (to start out with what to fix), isn’t proving it can generate innovation (the evidence for that fills museums and SEC S-1 filings), the challenge is converting a genuinely impressive foundation of history, talent, capital, and civic infrastructure into a repeatable engine for scaling the kind of companies that put cities on the global venture map permanently.

I don’t write hype pieces. While I do praise a region appropriately, we’re here to fix what’s failing in startup ecosystems; to close the gaps and orient my work in policy and economic development globally, to what we can do in a city or country to make a difference for entrepreneurs.

Kansas City startups have earned serious attention from investors, founders, and economic development professionals, and it warrants serious analysis. What follows is the full story (well, my full story) of where KC came from, what it has built, who is building it now, and where, frankly, it still has work to do.

The Geography of Ambition: Kansas City Was Always Going to Be a Crossroads of Commerce and Risk

The founding condition of Kansas City’s entrepreneurial identity is geographic and economic. Established as a trading post at the confluence of the Kansas and Missouri Rivers in the 1830s, Kansas City became the literal and figurative gateway to the American West. By the mid-nineteenth century it was the western terminus of the Hannibal and St. Joseph Railroad, making it the last major supply depot before the frontier. Outfitting wagon trains, provisioning expeditions, and financing the westward push was the original Kansas City startup economy, and the risk tolerance embedded in that culture never fully left.

By 1900, Kansas City ranked as one of the largest railroad hubs in the country, second only to Chicago, with over 200 trains passing through daily, making it a center for meatpacking, grain trading, and manufacturing. The stockyards and the Board of Trade were the original exchange infrastructure; markets for setting prices, managing supply chains, and taking positions on the future. The city developed a merchant and entrepreneurial class that was comfortable with calculated risk in ways that coastal cities, shaped by shipping and manufacturing oligarchies, often weren’t.

The culture that emerged from this crossroads character is that Kansas City has always been a place where people showed up with an idea and a plan, because the alternative was starvation or being eaten by something on the prairie. That instinct (practical, resourceful, and suspicious of anyone who confuses talking about a thing with doing it) runs directly through the city’s entrepreneurial DNA. It is the same instinct that caused J.C. Hall to rebuild his entire inventory from scratch after a fire consumed it in 1915 and caused Ewing Marion Kauffman to start a pharmaceutical company in his basement with a $5,000 investment and build it into a billion-dollar enterprise. You don’t survive the frontier by being timid, and Kansas City, even after generations of urbanization, has not forgotten it.

The artistic and cultural layer reinforces this. Jazz emerged from Kansas City in the 1920s and 30s as an improvisational, entrepreneurial art form. Musicians like Count Basie and Charlie “Bird” Parker didn’t wait for permission from New York or New Orleans to define a new genre; they built it in the clubs along 18th and Vine Street, testing, iterating, and performing in a way that sounds a lot like what we now call product development. The parallel is not a metaphor, it is the same population density, the same creative risk culture, and the same willingness to build something new in the space between established institutions.

That culture made Kansas City the right home for a set of inventions and companies that have shaped modern American life in ways most people don’t attribute to a city in Missouri and Kansas.

Kansas City’s Approach to Innovation

Let me be direct about something that most startup ecosystems get backward: innovation isn’t a product of startup programs. Startup programs are a product of innovation culture.

Kansas City’s innovation culture predates every accelerator, every pitch night, and every government incentive by about a century, and understanding that is essential to understanding why today’s ecosystem has structural advantages that most Midwest cities are still trying to work out by drawing capital in from the coasts.

The Country Club Plaza was the first planned outdoor suburban shopping center in the United States. A real estate footnote, but it wasn’t, it was a retail innovation that redesigned the relationship between commercial development and the automobile, a planning and design invention that the entire country eventually copied. This was a system, with parking, mixed uses, and controlled aesthetics, that became the template for American suburban commerce for the next hundred years.

J.C. Hall arrived in Kansas City in 1910 with two shoeboxes of postcards and an 18-year-old’s ambition. He built was an entirely new category of consumer product and retail distribution. After a 1915 fire destroyed his inventory and left him in debt, Hall pivoted to greeting cards with envelopes, a privacy-enhancing innovation that differentiated Hallmark from every competitor.

A personally amusing aside, when I was a kid and made cards for family, I wrote on the back of the card, Paulmark Greeting Cards

In 1917, the Hall brothers accidentally invented modern gift wrapping when they ran out of tissue paper and substituted French envelope lining paper, selling out immediately and then building an industry. That accidental innovation “created the modern-day gift wrap industry” out of necessity. By 1935, Hall Brothers had invented the Eye-Vision display rack, the vertical greeting card fixture standard that every retailer still uses today.

Hallmark Cards‘ J.C. Hall is a better founder case study than most Silicon Valley darlings. He experienced total inventory loss, rebuilt with debt, pivoted the product, vertically integrated manufacturing, built a national brand through advertising at a time when no one in his industry advertised, and turned a seasonal commodity into an emotionally driven consumer product category with near-infinite margin.

“Product-Market Fit,” wasn’t a thing.

Walt Disney, whose global entertainment empire is worth over $200 billion today, started his animation career in Kansas City. His studio, Laugh-O-Gram Films, was incorporated on May 23, 1922 at 1127 East 31st Street and while the business went bankrupt within a year, it was in that Kansas City building that Disney assembled the first generation of animation pioneers. Every Warner Brothers cartoon, every MGM animated short, every Looney Tunes character, traces its lineage to a group of animators that Walt Disney recruited in Kansas City. It was also in that building that Disney first befriended a mouse he kept at his desk, the mouse that later became Mickey. Kansas City was, literally, the birthplace of modern animation.

Marion Trozzolo here combined Teflon with cookware, the non-stick pan you used this morning. Samuel Coffman invented the electric hair clipper in KC, ending a practice in barbershops where scissors alone were used. Stanley Durwood built the world’s first twin-screen multiplex theater in Kansas City, AMC Entertainment, now the nation’s largest theater chain, began right there. Bob Bernstein, a Kansas City advertising executive, invented the Happy Meal for McDonald’s. The bumper sticker was created in Kansas City in the 1940s. As the Kansas City Museum has documented, the city’s patent history spans hay balers to firefighting equipment to consumer goods, reflecting a practical engineering culture that solves problems rather than seeking validation for solving them.

The pattern here is not random. Kansas City produces inventors who build businesses, not inventors who license patents. That is an entrepreneurial disposition, not an intellectual property strategy, and it is the correct one.

The Kansas City Economy and the Government’s Role

The Kansas City metropolitan area spans two states, Missouri and Kansas, and encompasses roughly 2.2 million people, making it the 29th largest metro in the United States. The regional economy is diversified across financial services, agriculture and food processing, transportation and logistics, healthcare information technology, bioscience, and advanced manufacturing. That diversification can be an asset for startup ecosystems in a way that single-industry cities are not; founders have a wider range of potential enterprise customers, hiring pools are deeper, and the economy is more resilient to sector-specific shocks.

The Federal Reserve Bank of Kansas City, established in 1921, remains one of the twelve regional Federal Reserve Banks and is a significant economic research institution. The IRS maintains a major processing center here. Fort Leavenworth in Kansas, one of the oldest continuously active Army installations in the United States, creates defense-adjacent demand. Whiteman Air Force Base, home of the B-2 Spirit stealth bomber, anchors aerospace and defense contracting in the western Missouri region.

More recently, the federal government has been an active player in Kansas City’s innovation economy in ways that can be overshadowed by Virginia and Texas. In 2023, the Kansas City Inclusive Biologics and Biomanufacturing Tech Hub ( KC BioHub ), led by BioNexus KC, received a federal Tech Hub designation under the CHIPS and Science Act. That designation positions Kansas City, which already hosts the largest concentration of animal health and nutrition companies in the world, as a globally competitive center for biologics and biomanufacturing. This is federal economic development determination backed by institutional capital and research infrastructure.

The state governments of Missouri and Kansas both play roles in startup support, though with characteristically mixed results. Missouri Technology Corporation (MTC) administers programs including the Missouri Technology Corporation Seed Capital Matching Program and the Innovation Campus program. Kansas operates the Kansas Angel Investor Tax Credit (KAITC) program, which offers investors up to a 50% tax credit on qualified investments in Kansas-based startups, one of the more aggressive angel investor incentive structures in the Midwest. The appropriate role of government in startup ecosystems is not to directly fund startups (that’s a fool’s errand for government) but to reduce regulatory friction, support ecosystem infrastructure, and create conditions that make private capital deployment less risky.

Kansas City’s municipal governments have been more active than average in startup support. LaunchKC, arguably the city’s most visible startup grant program, is funded in significant part through the Economic Development Corporation of Kansas City, MO (EDCKC). The city of Kansas City, Missouri, has used its Neighborhood Tourist Development Fund (NTDF) to support Startland News, the primary startup-focused media outlet for the region. These signal that KC’s civic leadership understands, at least partially, that startup ecosystems require ongoing infrastructure investment, not ribbon-cuttings on programs.

Kansas City’s tech jobs were projected to grow 20.5% between 2019 and 2024, and tech wages in the region run roughly 42% above the metro average. The cost of living, compared to coastal tech hubs, creates a talent retention advantage: a founder who can hire a strong engineer at $120,000 in Kansas City would need to offer $200,000+ for the equivalent talent in San Francisco.

This growing momentum is not going unnoticed; Kansas City was recently named the Midwest “City of the Year” in 2026, given the region’s economic and innovation trajectory and, no doubt, Kansas City’s selection as a host city for the FIFA World Cup 2026. Perhaps a SportsTech hub in the making, the first stadium in the world purpose-built for a women’s professional sports team, calls this home.

The Founding Generation: Notable Kansas City Companies

The Kauffman Foundation’s list of Kansas City entrepreneurs reads like a mid-century American business history course: J.C. Hall (Hallmark), J.C. Nichols (Country Club Plaza), Ewing Kauffman (Marion Laboratories), Henry and Richard Bloch (H&R Block), James Stowers (American Century Companies), Edward and Stan Durwood (AMC Entertainment), Gary Burrell and Min Kao (Garmin), Neal Patterson and Cliff Illig (Cerner). This is not a list of nice regional companies; this is a list of industry-defining businesses.

Cerner deserves attention as the defining proof point of what Kansas City can produce; founded in 1979 by Neal Patterson, Cliff Illig, and Paul Gorup while studying for the CPA exam, Cerner grew from a single-product health IT company into a global health informatics platform that surpassed $5 billion in revenue and employed 25,000 people globally before its acquisition by Oracle for $28.3 billion in 2022. For four decades, Cerner Corporation was the most important proof that you could build a world-class technology enterprise here.

Garmin, headquartered in the region, was founded in 1989 with a focus on GPS navigation for aviation. It has grown into a $4.98 billion revenue global leader in wearables, automotive navigation, marine electronics, and outdoor recreation technology. Outside Magazine has ranked Garmin the most innovative company in outdoor recreation. This is a global technology company that chose to remain rooted in here.

C2FO, founded in 2008 by Sandy Kemper, built a working capital marketplace that now approves roughly 50 million invoices daily for more than 2 million in-network businesses globally. Payit, the govtech platform founded by John Thomson, raised over $135 million and delivered a compelling proof point for the region; Thomson put it directly, “We’re evidence — based on the $100 million-plus growth equity investment we closed this spring — that you can build a world-class tech company in Kansas City.” Torch.AI, BacklotCars (acquired), RiskGenius, and the cybersecurity startup Invary, which raised a $1.85 million pre-seed led by Flyover Capital, represent the current generation of KC’s emerging tech sector in AI, fintech, automotive, insurtech, and security.

H&R Block, founded in Kansas City in 1955, built an entire consumer financial services category around tax preparation. Burns & McDonnell, HNTB, and Black & Veatch Construction, Inc. (BVCI) built global engineering and infrastructure firms. Lockton, founded in Kansas City in 1966, became the world’s largest privately held independent insurance brokerage. Kansas City is not short on examples of companies that scaled. What it has historically lacked is enough of them, and specifically enough venture-backed, high-growth technology companies reaching breakout scale.

“Kansas City does not have a founder problem. It has a repeatable capital activation problem.” – Jessica Powell; founder of Social Balances and one of KC’s most active ecosystem connectors

Startup Ecosystem Infrastructure: Development Organizations

Kansas City earns serious respect. The density and diversity of startup support organizations here is significantly greater than most cities of comparable size, and much of it traces to the Kauffman Foundation’s decade-long investment in entrepreneurship infrastructure.

Ewing Marion Kauffman Foundation (kauffman.org) is the irreducible starting point. Founded in 1966 by Ewing Marion Kauffman (who built Marion Laboratories from a basement with $5,000 into a billion-dollar pharmaceutical company) the Ewing Marion Kauffman Foundation holds approximately $2.6 billion in assets and is the largest private foundation in the world focused principally on entrepreneurship. Its programs have seeded ecosystem building infrastructure not just in Kansas City but nationally: 1 Million Cups (a free weekly founder presentation program that expanded to nearly 150 cities), Kauffman FastTrac (entrepreneurship education reaching over 350,000 people worldwide), and Kauffman Founders School are all Kansas City exports. The Foundation’s ESHIP Alliance, research publications, and policy work have shaped how the entire field of ecosystem building thinks about its craft. The Foundation has, in recent years, refocused more on Kansas City’s own economic mobility challenges, which has shifted resources but also deepened local impact.

KCSourceLink (kcsourcelink.com) is a practical marvel of ecosystem coordination. Jointly founded by the Kauffman Foundation, UMKC Innovation Center, and the Small Business Administration, KCSourceLink connects a network of 230+ nonprofit resource organizations that provide business-building services across the metro. Their annual “WeCreate” reports track capital landscape data and entrepreneurial benchmarks. Their Watch List of high-growth startups provides visibility for companies that would otherwise receive no attention. Their free guidance service (call a number, get a real human, get a custom roadmap) is one of the most underappreciated startup resources in any American city. As Kauffman has documented, the founding director Maria Meyers observed that the Google Fiber announcement and the Chamber of Commerce’s ambition to be “America’s most entrepreneurial city” created a revolution in how KC thought about entrepreneurship, and KCSourceLink was at the center of connecting that revolution to actual founders.

LaunchKC (launchkc.org) is the city’s flagship grant competition for high-growth tech startups, investing more than $1 million annually. LaunchKC offers $60,000 in non-dilutive funding plus access to mentorship, office space, and support services to innovative early-stage startups willing to establish a presence downtown. It is backed by the EDCKC and has become one of the primary on-ramps for startups that have gained initial traction and need both capital and community. LaunchKC is frequently cited by founders as their first meaningful institutional validation.

KC Digital Drive (kcdigitaldrive.org) was founded in 2012 following Kansas City’s selection as the first Google Fiber community, with early backing from civic and regional partners including the cities of Kansas City, Missouri and Kansas City, Kansas and the Mid-America Regional Council (MARC). It has since evolved into a sophisticated nonprofit operating as a regional convener and builder at the intersection of digital infrastructure, emerging technology, and community impact; focused on advancing digital equity, supporting applied innovation, and creating environments where founders, researchers, corporates, and public sector leaders collaborate on real-world solutions.

Notably, since this is too rare in cities, the organization’s role is less about running isolated programs and more about building connective infrastructure, aligning stakeholders, piloting new technologies, and helping the region translate innovation into tangible outcomes.

KC Digital Drive leads the Regional University Research Collective (RURC), a collective impact initiative that unites the Kansas City region’s research universities (KU, K-State, and UMKC) with civic, industry, and philanthropic partners. Matt Heelan, a serial entrepreneur and venture advisor deeply embedded in KC’s ecosystem has been central to this work. His LinkedIn posts consistently articulate what the best KC ecosystem players understand: that building community infrastructure requires genuine relationship capital, not just programmatic architecture. The RURC is the right structural response to one of the most persistent failures in American regional innovation; universities conducting research in isolation from the founders and investors who could deploy it commercially. Connecting KU in Lawrence, Kansas State University in Manhattan, and UMKC in Kansas City’s own backyard under a shared economic development framework is the kind of institutional architecture that produces durable competitive advantage rather than temporary activity spikes.

I’ve pushed hard for this in the book: Startup Ecosystems.

BioNexus KC (bionexuskc.org) is the region’s life sciences hub which led the consortium that secured the federal KC BioHub Tech Hub designation for biosecure manufacturing. Given that the KC region hosts the world’s largest concentration of animal health and nutrition companies, BioNexus’s work in translating that industry strength into a full pipeline of research, commercialization, company formation, and industry growth is one of the most strategically important initiatives here.

Digital Sandbox KC is a proof-of-concept funding program that awards $20,000 to early-stage startups to help them accelerate their innovations toward commercialization. It is one of the fastest and most accessible capital injections available to KC founders, specifically designed for the validation phase where most founders can’t yet qualify for LaunchKC grants or angel investment.

Pipeline Entrepreneurs (pipelineentrepreneurs.com) is a founder-first entrepreneurial support organization serving high-growth entrepreneurs across Kansas, Missouri, and Nebraska. Its flagship Fellowship is a year-long, cohort-based program with intensive modules focused on business models, financials, customer discovery, investment readiness, and growth. Pipeline also supports earlier-stage founders through its Pathfinder program, which is designed for women, minority, and rural entrepreneurs.

UMKC Innovation Center (innovation.umkc.edu) is the university-embedded commercialization engine housed at the University of Missouri-Kansas City, which now holds a Carnegie R1: Very High Research Activity designation. The Innovation Center runs programs spanning startup incubation, faculty commercialization, student entrepreneurship, and regional economic development. Its founding connection to KCSourceLink makes it one of the structural pillars of the broader ecosystem network.

Startland News (startlandnews.com) occupies a role that most cities don’t have covered: dedicated, independent startup journalism. As editor-in-chief Tommy Felts put it at the 2025 Startup Crawl: “Innovation doesn’t happen in silos. When we bring these communities together (whether they’re building apps or crafting a new catnip) we see ideas collide and opportunities multiply.” It is a model for other regional startup media.

The Enterprise Center in Johnson County (ECJC) provides an education / mentoring model similar to MIT’s VMS program, office space, and capital connections.

Network Kansas connects entrepreneurs statewide to 500+ partners for funding and business development resources.

KU Innovation Park in Lawrence connects University of Kansas research to commercial applications.

BV IgniteX promotes technology commercialization and efficient resource allocation for regional innovation.

Keystone Innovation District offers the physical space of KC’s innovation economy in the urban core, hosting programming, collaborative events, and AFCEA sessions that connect defense tech with startup founders.

Spark Coworking, Switchyards, and what seems like countless physical community spaces provide the meeting and working infrastructure that founders need without requiring long-term leases.

The Money: Angel Investors, Venture Capital, and the Capital Stack

Capital is where Kansas City’s ecosystem reveals its primary structural gap; not for lack of money, but for lack of capital infrastructure at the right stages.

At the pre-seed and seed stage, Digital Sandbox KC (up to $20,000) and LaunchKC grants ($60,000) provide non-dilutive entry-level capital. The Missouri Technology Corporation provides seed capital matching. The Kansas Angel Investor Tax Credit (KAITC) program, offering up to 50% tax credits to qualified Kansas investors, is one of the most aggressive angel incentive structures in the Midwest and has meaningfully increased early-stage deal flow on the Kansas side of the metro.

KCRise Fund (KCMO) represents one of the more intentional efforts to address the region’s capital gaps at scale. Formed as a collaboration between corporate, civic, and institutional partners, the fund is designed to invest in high-growth companies while also attracting outside capital and attention to the region.

Now on its third fund, with more than $90 million in assets under management, KCRise Fund has built a portfolio of nearly 50 companies and achieved multiple exits, including BacklotCars, one of the largest startup exits in Kansas City’s history at $425 million.

Flyover Capital (Leawood, KS) is aprominent homegrown venture firm focused on early-stage B2B companies in the Flyover region, Flyover has built a portfolio that includes Invary, TripleBlind, and other KC-area tech companies. It has also served a critical signaling function: a VC firm with “flyover” in its name, choosing to stay in the Midwest and invest in Midwest founders, is a deliberate cultural and commercial statement.

Other notable capital sources include Fulcrum Global Capital (AgTech and Animal Health focus), SeedFolk Partners, Accelefund, AltCap (community development lending), and various family offices anchored in the region’s wealth base. The Greater Kansas City Community Foundation | Greater Horizons and the Hall Family Foundation have historically provided philanthropic capital that has supported ecosystem infrastructure.

One emerging layer addressing the connectivity gap is the growing use of curated visibility around companies actively raising capital. Social Balances’ The Balance Sheet, a monthly investor-focused newsletter, highlights Kansas City-based companies actively raising capital and distributes those opportunities directly to engaged investors. This type of consistent, targeted visibility plays an outsized role in markets like Kansas City, where strong companies often exist but are not surfaced in ways that reach the right investors at the right time.

Early evidence suggests that when deal flow is presented in a clear, trusted, and repeatable format, investor engagement increases and capital begins to move more efficiently. Visibility itself is part of a region’s capital infrastructure and most cities fail to serve this well.

Startland reported, KC’s VC-backed funding reached $908 million in 2019, up nearly 90% from the prior year, driven by large rounds at PayIt ($135M+) and C2FO ($295.5M). The venture capital landscape saw a 53% increase in total investment in 2021. However, StartupBlink’s 2025 global rankings keep Kansas City at #114 globally, with total startup funding around $93.9 million; a figure that reflects the gap between occasional large rounds and consistent early-stage capital density. The national and global VC community generally views Kansas City as a place where you can find strong companies at reasonable valuations, but not yet a place where they proactively source deals.

Closing that perception gap is the ecosystem’s most important capital challenge.

T-Mobile (formerly Sprint), headquartered in Overland Park, Kansas, has operated accelerator programs focused on smart city and IoT applications, drawing national startup attention to the metro. Honeywell, Garmin, and Burns & McDonnell provide corporate venture activity and strategic partnership opportunities.

That said, in markets like Kansas City, early-stage non-dilutive funding often functions as the entry point to private capital rather than a distortion of it. Programs such as proof-of-concept grants and local innovation competitions are frequently the only mechanism by which founders reach a stage where they can engage credibly with investors.

The distinction is not whether public capital exists, but whether it is structured to accelerate founders.

Ten Dimensions of Capacity Building

The ten considerations of startup ecosystem capacity building aren’t hypothetical frameworks; they are the actual dimensions on which regions succeed or fail at turning innovation culture into economic infrastructure. Here is where Kansas City stands on each.

1. Overcoming Silos (Shared Infrastructure and Community)

Kansas City does unusually well here relative to its size. Unusually well in general. KCSourceLink’s 230+ organization network is genuine connective tissue, not a directory. The Startup Crawl, LaunchKC Liftoff, and Global Entrepreneurship Week programming create physical collision opportunities. The Keystone Innovation District and ECJC provide shared physical infrastructure. KC Digital Drive’s RURC is the right structural response to the most persistent silo in regional innovation, the university-industry gap.

Where KC still struggles: the two-state boundary creates real friction. Kansas and Missouri operate separate tax incentive programs, separate economic development agencies, and separate political cultures. A founder incorporating in Kansas can access KAITC tax credits; the same founder in Missouri cannot. Investors calibrate their portfolios to state-level benefits. This cross-state fragmentation is manageable, but it is not costless, and no one has fully solved it. KC would benefit from a more deliberate regional governance framework for startup policy that treats the two states as one economic unit, because that’s what the metro already is.

Really not difficult to do; I’m involved in developing cross-state startup associations throughout the country.

It’s worth acknowledging that a growing layer of informal, relationship-driven infrastructure is actively reducing these silos in ways that are not always captured in formal ecosystem maps. These mechanisms are not programs in the traditional sense, but they are increasingly where deals originate, talent relocates, and trust is built. Back2KC (back2kc.com) is one example of this in practice.

It’s not a program, it’s an environment. And in many cases, those environments are where the real movement happens.

The next phase of Kansas City’s ecosystem development may depend less on adding new institutions and more on scaling these connective environments.

2. The Missing Middle: Widening the Gap Between Early Startup and Established Company

This is Kansas City’s most structurally significant gap, and it is not unique to KC; it is the most common failure mode in Midwest ecosystems.

Digital Sandbox KC and LaunchKC serve early validation. BioNexus KC and Flyover Capital serve growth-stage companies with some traction. But the gap between a $60,000 LaunchKC grant and a $2-5 million Series A is largely unfilled by KC-native capital. What founders need in that middle stretch (proof-of-concept to $1 million ARR) is patient capital, experienced commercial advisors, and access to enterprise customers. The region has entrepreneurs who understand this, but lacks the density of Series A investors who will lead rounds.

The solution is not another accelerator. As I’ve argued, the missing middle is filled by investor networks willing to write $250K-$1M checks into revenue-generating companies, and by corporate partner programs at Garmin, T-Mobile, Cerner/Oracle Health, and Burns & McDonnell that provide enterprise customer access to validated startups before they reach Series A. KC has the corporate base to do this, it needs the programs to make it happen systematically.

One nuance worth noting: the “missing middle” is not purely a capital gap. It is a coordination and trust gap. In practice, the same investors who are perceived as “not active” will write checks when they are operating in environments where they have shared context, peer validation, and direct access to value aligned early-stage companies. Thanks to MTC’s backing, this is beginning to emerge through KC BioHub’s Investor Education series.

3. Secure Long-Term Funding and Incentives for Ecosystem Builders

Kansas City has the Kauffman Foundation. That is an enormous structural advantage; there is no other mid-sized American city with a $2.6 billion private foundation dedicated to entrepreneurship. But the Foundation’s recent shift toward local economic mobility has reduced some of the operational funding that previously sustained smaller ecosystem-building organizations. The National League of Cities has concluded that sustainable entrepreneurial ecosystems depend on sustained investment in intermediary organizations; which means multi-year operating grants to organizations like KCSourceLink, KC Digital Drive, and Startland News, not just grant cycles for programs.

The risk KC faces is the risk every ecosystem built on a single major philanthropic anchor faces: mission drift at the Foundation level translates directly into resource contraction at the ecosystem level. Diversifying ecosystem funding to include more state government programmatic support, corporate sponsorship, and membership-based sustainability models is a strategic priority, not an optional nice-to-have.

4. Measuring Outcomes Not Activity

This is one of Kansas City’s more promising areas. KCSourceLink’s annual WeCreate Capital tracks. Startland News’s Startups to Watch uses multi-month research and quantitative criteria. The Nasdaq Entrepreneurial Center’s ARIE (American Regions Innovation Ecosystem) report rated KC a top 20 region for per capita high-earning entrepreneurs. The Kauffman Foundation’s research publications, while increasingly national in scope, have given KC’s ecosystem builders better measurement frameworks than most cities have access to.

Where KC underperforms: the tendency, common to all regional ecosystems, to count events, applications, and cohort participants as evidence of ecosystem health. Demo days are not outcomes. Pitch competitions are not outcomes. A startup raising a Series A, hiring 20 people, and signing enterprise customers, that is an outcome. The ecosystem needs more systematic tracking of company-level post-program performance, and the organizations producing that data need the resources to publish and promote it consistently. Success stories need to be visible and repeatable to attract the next wave of founders and investors.

The challenge is not only generating outcomes but making them visible and connecting them to measurable outputs that reinforce momentum across the ecosystem.

5. Culture and Behaviors That Make Collaboration Natural, Not Forced

Kansas City’s ecosystem has a genuine collaborative culture that is not common. The cross-organizational trust among organizations like KCSourceLink, LaunchKC, KC Digital Drive, BioNexus KC, and Pipeline Entrepreneurs is evident in co-sponsored programming, shared referral networks, and the fact that founders report being passed between organizations without significant friction. This is largely a product of the Kauffman Foundation having funded most of these organizations at some point, creating a shared institutional DNA.

Copy this everyone.

The collaborative spirit extends to an unusual willingness among KC founders to help other founders, a pay-it-forward culture that distinguishes the KC ecosystem from more competitive environments. As I’ve written about ecosystem building, this culture is built on trust, and trust is built on relationships that take years to develop. KC has those years behind it. What it needs now is more intentional cultivation of the next generation of ecosystem connectors; the people who will hold those networks together as the founding generation ages out.

As Jessica Powell put it to Startland News with Austin Barnes, “We consider ourselves competition. What if we just worked together? … We have so many silos. And I feel charged to bring them all together.”

6. Including the Full Spectrum of Talent

Kansas City has structural advantages that it has not yet fully leveraged. The gap is execution. As the Kauffman Foundation has noted, corporate engagement with the entrepreneurial ecosystem remains underdeveloped, which matters particularly for founders from underrepresented backgrounds who often lack the network connections that enable introductions to enterprise customers and lead investors. KC’s corporate base has not yet developed systematic programs to source innovation from all levels that would make a measurable difference. The talent is there, the pipeline architecture isn’t. This is a solvable problem, and some of the tools for solving it are already in the KC ecosystem; they need scale and sustained operation.

7. Architecting Environments for Peak Founder Performance

KC’s ecosystem infrastructure has improved significantly in the past decade. Keystone Innovation District, Switchyards, Spark Coworking, and the UMKC Bloch School’s programming spaces provide genuine community environments where founders can work The KC Startup Village era, catalyzed by Google Fiber’s arrival, established that intentional physical clustering accelerates founder development in ways that dispersed remote-working cannot.

The gap is programming depth within those spaces. Physical community is necessary but insufficient. What produces founder performance is access to the right experience at the right time; someone with relevant startup experience, not just general encouragement. The Enterprise Center in Johnson County’s Growth Mentoring Service, modeled on MIT’s VMS program with lead mentors and teams of three to four advisors working with founders monthly, is closer to the right model than a pitch night. KC needs more of that structure, and specifically more mentors who have built and scaled healthtech ventures and bioscience startups, the sectors where KC has the deepest opportunity, rather than generalists who offer advice calibrated to businesses.

8. Aligning Government, Academia, and Private Sector

KC Digital Drive’s RURC is the most structurally important alignment in the region. The RURC unites KU, K-State, and UMKC with civic, industry, and philanthropic partners to strengthen the region’s innovation economy, which, translated from initiative-speak, means connecting billions in annual research spending at three major research universities to founders and investors who can commercialize it.

What alignment actually requires, and where most cities fail, is not MOU signings between university presidents and EDC boards. It requires incentive structures that reward faculty for commercialization activity, not just publication; that create career paths for technology transfer professionals who are both technically sophisticated and commercially oriented; and that fund the translation layer between university research and fundable startup companies. KC is building this but building it is a five to ten year project, not a press release. Government’s role should be to set policy that rewards this kind of cross-sector collaboration, and both Missouri and Kansas have policy levers they have not yet fully pulled.

9. Accelerating Innovation and Reducing Risk by Unlocking Local Competitiveness

Kansas City’s genuine competitive advantages (animal health, biomanufacturing, fintech, govtech, transportation and logistics technology, and defense-adjacent software) are now more clearly defined than they were five years ago. Beyond what I’ve covered, the region’s logistics and supply chain infrastructure (the largest rail hub in the country) is a natural home for supply chain technology startups.

The ecosystems that reduce risk most effectively are the ones where founders have access to pilot customers, subject matter experts, and reference customers within their home market. KC has all three in these sectors. The risk is that its ecosystem organizations spend as much time recruiting generic software startups as they do building sector-specific pipelines in areas where KC has structural advantages. LaunchKC should be, and increasingly is, more explicitly focused on sectors where KC customers can become early adopters. That is smart capacity building. The alternative, competing with Austin and New York for AI-agnostic SaaS startups isn’t smart for anyone.

10. Adapting Global Best Practices to Local Realities

One of the most important things KC has gotten right is that it has not tried to be Silicon Valley. The Kauffman Foundation’s research tradition has produced genuine intellectual frameworks for ecosystem building; 1 Million Cups, FastTrac, and SourceLink were not copied from Stanford Research Park, they were designed for regions without Stanford Research Parks. As I’ve argued in the context of Miami’s ecosystem, the ecosystems that succeed are those that build from local competitive reality, not those that build scale replicas of someone else’s success.

Where KC needs to be more intentional is in importing mentor quality and founder cohort operations. The ECJC’s MIT VMS-inspired mentor team model is correct. More accelerators should adopt structured mentor assignment, accountability metrics, and feedback loops rather than informal coffee-meeting mentorship (this is really rather true of accelerators everywhere). Programs like the Founder Institute, which operates a structured, methodology-driven program with global mentor networks, offer global pattern recognition that local-only mentor pools cannot match. KC’s ecosystem is large enough and mature enough to operate at that level of program rigor, what it sometimes still falls back on is the warmth of community as a substitute for operational excellence. Community is necessary but excellence is not optional. Both together is what produces outcomes that are visible, repeatable, and promotable.

Where Kansas City Startups Go From Here

Kansas City proves the link between ecosystem craft and economic mobility when civic muscle keeps opening doors, and founders keep walking through them. We have here an ecosystem that has been doing real work for a long time. The challenge now is converting that per-capita entrepreneurial density into a higher rate of breakout companies (the C2FOs and PayIts of the next decade) and that requires the same deliberate capacity-building work that produced the current ecosystem, applied specifically to the missing middle, cross-state coordination, mentor quality, and sector-specific pipeline development.

Kansas City has always been a crossroads; it has always been a place where people with an idea and a plan showed up, built something real, and changed an industry. J.C. Hall did it with greeting cards. Walt Disney did it with animation before he could afford a desk without a mouse in it. Ewing Kauffman did it with pharmaceutical sales and then pharmaceuticals and then a foundation that funds the entire next generation.

The pattern is Kansas City. The next breakout company is already somewhere in this ecosystem right now, and the work is making sure it doesn’t leave.

The constraint isn’t talent, capital, or institutional support in isolation, it’s the speed and efficiency with which the right people find each other.

Get a Copy of Startup Ecosystems

If you’re building, investing, or developing policy in the Kansas City region and want to think through where your ecosystem has leverage and where it has gaps, the frameworks developed in Startup Ecosystems: Understanding Why Startups Thrive and Ecosystems Fail were built for exactly this kind of regional analysis.

I’m just a messenger, and this is a message that everyone needs to hear so that we can raise expectations, better allocate capital, rethink public policy, and work together from a place of known best practices to ensure our entrepreneur class isn’t struggling when it need not be.

If you’ve spent any time in startup ecosystem development, you’ve heard some version of, “We need an accelerator.” I heard it today, in a discussion of a small town in Missouri, that some there too think they need a startup accelerator.

City councils say it. Economic development offices say it. MPs and ministers say it, usually right before they approve a grant and cut a ribbon in front of a glass building with exposed brick and a ping-pong table. The UK has been saying it, and funding them, for long enough that the country now holds a distinction nobody seems to be talking about in any meaningful way other than pointing it out: according to the Entrepreneurs Network’s July 2025 report, Full Speed Ahead, and Steve Rigby note that Britain is the world’s most heavily incubated economy per capita. and Philip Salter, Founder of The Entrepreneurs Network, took a closer look noting in Tech.eu that the UK hosts over 500 accelerator programs, with £219 million invested through Innovate UK alone since 2016.

I’ve quickly come to respect , whose brevity and clarity brings reason to social media; she has backed 13 unicorns from seed contributes to all that we’re trying to improve by writing about how capital actually works at her Substack, She writes for founders who don’t yet know what they don’t know, and the picture I saw her paint of the UK’s early-stage support infrastructure is something between admiration and concern. The UK’s tax incentive architecture for early-stage investment, via SEIS, the Seed Enterprise Investment Scheme, and EIS, keeps catching my attention as she writes about it because her various concerns often align with my own. She often asks, I’m paraphrasing, “Is it working?” Perhaps, is the accelerator ecosystem we’ve built throughout the world, in cities everywhere, often built on grants, tax incentives, and public funding, producing the results we should expect from that investment?

I’m fond of asking cities if their accelerator is actually accelerating. This year, the responses are resoundingly consistent, increasingly frequent, and alarming to say the least, “Our accelerator is little more than coworking space with office hours and events.”

So, with such density in the UK, we have an opportunity to explore this with a little more clarity. Not whether Britain’s intentions are good. They obviously are. The question is whether a high density of programs labeled “accelerator” produces a higher density of outcomes that justify that label.

By almost every available metric, the answer is no.

Density Without Direction Is Just Real Estate

First let me share why this can’t be ignored. Most cities have an accelerator now; many have two or more. To a great extent, they’re celebrated, revered, promoted, and home to celebrity photo shoots where the mayor wants to show off that they’re being innovative and supporting entrepreneurs.

Obviously, with such programs in place, we can expect a rate higher than average of successful startups.

At the very least, an accelerator is doing due diligence to pre-qualify developed startups to ensure they are worth being accelerated. That alone should result in a success rate greater than 1 in 10. Moreover, we don’t accelerate an idea or a founder with a dream, that’s ludicrous, we accelerate that which is ready to go, bringing to bear partnerships, media attention, and investor meetings primed to write checks; the validation work is done, the MVP is iterating to more, and the business model is being worked out. Or perhaps in fairness, if an accelerator is taking in idea stage founders, it would be “accelerating” the testing and helping founders find failure more quickly, resulting in less waste, and in turn still, more success.

With one accelerator in a city, barely disclosing metrics, it can be hard to tell if it’s delivering. We can look to local sentiment, which already noted, seems to be gravitating toward, “these aren’t working for us,” but a direct analysis is challenging. At the scale of a country though, with much more economic data available, we have a responsibility to dig in.

When you compare the UK’s startup ecosystem to peer economies of roughly similar size and development, a strange pattern emerges. Germany, France, Canada, and Australia all run broadly comparable startup success rates. SpdLoad’s startup failure statistics compendium puts UK’s 5-year failure rate at roughly 70%, Germany’s at 75%, France’s at 80%, and Canada and the US each around 80%. On that face, the UK actually looks quite a bit better given the conventional wisdom that 90% fail. Its success rate, at roughly 30% over five years, outpaces France and Canada and that would strike me as remarkably better than the U.S. perception of success rates.

Still, is it working? The UK is spending dramatically more than any of those countries on accelerator infrastructure to produce that edge, making me ponder something I frequently ask about, “are these actually startups or are we launching businesses?”

We’ll get to that.

Switzerland runs a 65% failure rate, meaning roughly 35% of startups survive five years; it achieves that without anything resembling the UK’s accelerator volume. Israel, which has earned its “Startup Nation” branding through decades of deliberate, selective, strategy-linked ecosystem investment, runs comparable figures with far higher precision and intentionality.

Now, hold on a second. That’s remarkable. I have a moral responsibility to the founders who follow me to give you the best conceivable advice, “move to Switzerland!” To heck with Lean Startup, Go To Market advisors, and Venture Capitalists’ opinions, Switzerland figured it out!

And yet, neither country achieved better-than-average startup survival by funding 500 accelerator programs and hoping the outcomes sorted themselves out; they got there through specificity, sector depth, and a relentless, something I preach about, very intentionally preach, in the book, Startup Ecosystems… often there, with a ruthless commitment to asking whether what they built was actually working.

The chart I put together above captures some of what we should be studying as cleanly as I can get at the data.

And then I saw it. Did it catch your attention? The U.S. startup success rate plotted is 20% while the conventional wisdom is 10%. Something doesn’t smell right.

There is a methodological problem sitting under every number in this comparison because it makes the UK’s position look better than it probably is. The failure rate data cited for the UK, Germany, France, and the rest draws from government business registration datasets, primarily Bureau of Labor Statistics-style business employment dynamics reports and their international equivalents. Those datasets generally include all new businesses in the startup category: new franchises, a barbershop, a florist. They are initially small and new companies, but they do not necessarily have disruptive or compound growth options.

Perhaps you’re seeing more clearly why I harp on our needing to draw these distinctions. A startup is “a temporary organization designed to search for a repeatable and scalable business model” which, by implication, a barbershop is not. Or fine, if everyone wants to co-opt the word startup, then we need a new distinction of everything that isn’t just a new business; I don’t care what we call things, they’re not the same.

Failory, which runs one of the more rigorous failure-rate tracking operations, is explicit about the contamination problem: “Statistical sources from government institutions are largely concerned with the failure rate of new businesses… Most newly registered businesses aren’t true startups, so you shouldn’t assume your likelihood to fail in the first year is only 20% if you’re trying to do something innovative. Some articles out there are quoting those statistics in the context of startups, which is misleading.” When the Bureau of Labor Statistics reports that only 20% of US businesses fail in year one, that denominator includes dry cleaners, tax preparers, and restaurant operators who signed a known playbook on day one. The per-country comparisons used throughout this piece carry the same contamination: they compare new venture registrations, not scalable startup formations. The UK’s 30% five-year success rate certainly includes a substantial volume of service businesses, sole traders, and lifestyle companies that have nothing to do with what the accelerators are supposed to be accelerating. Strip those out and the true scalable-startup survival rate in every country on that chart drops; the relative performance of each country may or may not shift, but the UK’s apparent advantage over Germany and France almost certainly compresses. The chart still holds as a directional argument. The point it makes, that the density of accelerator programs produces little improvement in survival rates, is not weakened by this. If anything, it is strengthened: if the UK’s headline numbers include a high proportion of non-scalable (ahem, nothing to accelerate) new businesses padding the survival count, the programs that claim to be accelerating scalable ventures are performing even less impressively than the aggregate figures suggest.

The appearance of ecosystem activity is a dangerous thing because the appearance satisfies the political requirement without satisfying the economic one. Founders don’t fail demo days in accelerators; they survive or fail customers.

The Incubator-Accelerator Confusion Is Not an Accident, It’s a Policy Failure (or political pandering)

Here is where the conversation gets awkward but I get fired up because pointing out that most accelerators aren’t accelerating anything requires you to also explain what accelerating would actually mean, and most of the people running programs would prefer you didn’t ask.

So, let’s reiterate it.

An accelerator, in the original sense that Y Combinator proved in 2005, takes a startup that has cleared the basic existential questions, meaning it has a product concept, a founding team, and at minimum a hypothesis about a customer, and then applies intensive, structured pressure around the three things that determine whether that startup survives the next 18 months: marketing and customer growth, partnerships and distribution, and capital access. Not workshops about those things. Not panels featuring people who have opinions about those things. Actual execution: introductions to customers, not just investors; earned media coverage, not just pitch prep; term sheets, not just “office hours with a VC who might be interested someday.”

That is a narrow, demanding, operationally intensive job. It requires the people running the accelerator to have specific, current, credible experience in the domain where they’re accelerating. A fintech accelerator needs people who have sold into banks. A healthtech accelerator needs people who understand NHS procurement. A deeptech program needs people who know how to bridge from lab to Series A without burning the founder. University programs, discussed in a conference in which I just found myself, have an obligation to actually commercialize IP and not just “tech transfer” otherwise they are being irresponsible in claiming to develop entrepreneurs and startups. Most accelerators fail founders precisely because they are running education programs for pre-idea founders under a label that implies they are scaling post-product companies. They take on anyone, they celebrate cohort size, they give lectures on marketing fundamentals to founders who should have cleared that bar before applying, and they call it acceleration.

How can we possibly support so many “accelerators” in the UK unless most are actually, per the operational reality, a combination of coworking infrastructure, some education, and networking events? Those are coworking spaces. Good spaces, maybe, perhaps with a hint of an incubator, but neither accelerator nor specific to startups. The distinction here are critical, and it matters not because one is superior to the other, but because they serve founders at entirely different stages while only capably doing so when it’s clear if it’s a program for a business or a startup. Labeling an incubator as an accelerator and then funding it with public money under the assumption it will produce accelerated company growth is like hiring a tennis coach, having them only teach nutrition fundamentals, and then measuring their success by whether your improved lap time in the pool.

What the UK provides, and I really feel bad for pointing this out in a way that will sound like criticism, is the most glaring impact of misuse of programs, expectations, and the malignment of resources and experiences. It’s not in the UK that my goal was to be critical, it’s for all that I hope these observations help you fix this for founders!

The challenges in UK accelerator provision, as ChangeSchool London MD Viren Lall observed at a roundtable convened around Full Speed Ahead, aren’t about a lack of resources but about misaligned incentives, fragmented delivery, and fundamental questions the ecosystem has avoided asking. A dominant theme was the VALID assumption that all 860 incubators and accelerators across the UK should be optimized for high-growth ventures but that’s a valid assumption only because that’s where those programs apply. In this case, we don’t have 860 incubators and accelerators, they can’t, we have coworking spaces, startup hubs, small business development centers, and innovation districts with, we should fear, a mix of business and startup founders, advisors, and mentors, diluting quality throughout.

Moreover, the problem we all face isn’t just that calling all of these startup programs “accelerators” creates an expectation on the founder’s side that isn’t being met, it’s that it creates a public accountability gap on the government’s side that nobody is closing.

£219 Million Is Not Nothing. What Did It Buy?

Between 2016 and today, £219 million has been invested in accelerator programs through Innovate UK alone. The questions that should persist for everyone in every city, everywhere, are about effectiveness, strategic alignment, and return on investment. Outcomes not impact. Despite such investment, it would seem there is limited coordination of how these funds are allocated and patchy strategic oversight of what outcomes they achieve and how these programs fit into the wider ecosystem of advisers, funders, and other parts of the economy.

For context, £219 million is approximately what Sequoia Capital invests in a moderately sized fund. It is not trivial.

And yet what it has produced seems to be more a proliferation of programs rather than a proliferation of outcomes.

Here’s a note of progress with which to call your attention to something else that should appear odd in my chart. Most of the data I’m referring to is a year or more old. Things have changed. Beauhurst data cited in the Full Speed Ahead report shows that nationally, only 57% of listed incubators or accelerators are active, with 33% since closed, and 10% are in a state of limbo. That’s why you see an indicator for the UK way out there on the right, and then too, closer with the other countries. But it still warrants showing you how things were, because again largely throughout the world, people like me are hearing that “accelerators are not working,” and I’d rather stress to you that you need to check on that, than worry about the minutiae. Think about that for a moment: one in three UK accelerators received public funding but no longer exists (granted, probably shouldn’t, but still received the funding!). One in ten is, charitably, not sure if it exists. And the founders who signed up for programs that subsequently evaporated? Presumably, in limbo.

Steve Rigby, Co-CEO of Rigby Group, warned that “public funds should not be used to generate more of the same programmes but should instead focus on creating fewer, deeper, outcome-linked programmes and only where it genuinely adds value, rather than crowding out private capital.”

This is not a criticism of the founders and program managers who built these things with genuine conviction!

Most people who run accelerators are not charlatans; they are people with good intentions and inadequate feedback loops. The rub is that the government grants that fund them rarely require proof that startups actually grew faster, raised capital, or survived longer than startups outside the program while the policymakers who allocate funds rarely know if those good intentions are matched with experience and know-how. They require proof of activity: cohort numbers, mentor hours, demo days attended.

People increasingly say, “our accelerator isn’t helping,” because public funding allocated to people with good intentions who then sell the ideal of an accelerator to business owners and would-be founders alike, are not likely helping anyone. An accelerator that produces 40 LLC filings, but zero Series A rounds has not succeeded; it hosted a workshop.

Comparing UK Outcomes to Comparable Markets

Germany makes for an instructive comparison.

With roughly 1.2 accelerator programs per million people (compared to the UK’s 7+ per million when counting all 500 programs, or roughly 2.8 per million counting only the active ones), Germany achieves a 25% startup success rate. The UK achieves 30%. That five-point edge over Germany exists despite a German startup ecosystem that by many accounts runs deeper domain expertise, stronger corporate-to-startup partnership infrastructure in sectors like automotive and industrial tech, and a longer-standing culture of serious engineering as a foundation for venture development.

Still, those can’t be actual “startup” metrics but the comparison and contrast becomes much clearer despite the mix of entities.

France, which has invested heavily in its La French Tech initiative and has a more deliberate public-private startup infrastructure than is often acknowledged, still lands at roughly 20% success; it runs fewer programs per capita than the UK but invests more per program in specific verticals. Canada and the US sit at that 20% figure with dramatically lower accelerator density. The US, the country that invented the modern accelerator through Y Combinator, Techstars, and 500 Startups, runs somewhere around 0.6 accelerator programs per million people, against the UK’s 7.5. U.S. startup success rate, in this data, is roughly equal to France’s.

Regardless of what’s going on, we don’t have encouraging numbers for the theory that accelerators, let alone more of them, are doing their job.

Israel’s ecosystem is the relevant counter-example because we could characterize their economy as an example of startup integration. Military technology pipelines produce technically sophisticated founders early. Government R&D investment is co-designed with VC infrastructure from the beginning, not layered on top afterward. Accelerators in Israel are predominantly sector-specific, narrow, and run by people with direct operating experience in the domain. The result is a startup success rate that outperforms most comparable economies. The lesson is not that Israel built more programs; it is that Israel built fewer, better-integrated, more accountable ones. I’ll explore Israel in detail in the future but what’s evident already is knowing this is an ecosystem design question, not an enthusiasm question; one explained in Startup Ecosystems.

What Acceleration Should Require and Expect

The startup has a product.

With evidence of customer interest, not just customer curiosity, we have something to accelerate. With a team that can execute, we have a reasonable use of funding; without that team, we need an education program or coworking space. What an accelerator needs to provide is not a workshop on product-market fit since the startups should have that. What it needs is distribution: relationships with the first ten customers who matter, access to the distribution channels the founder can’t open alone, introductions to journalists and analysts who cover the space, and warm connections to investors who have already backed comparable companies. That is marketing and growth in its functional form, not its theoretical one. It also needs partnership access, meaning the corporate or government or channel partners whose endorsement or integration would transform the startups’ credibility. And it needs capital access, not “we can introduce you to our network of VCs” (which I can do with LinkedIn and my gmail) but “here is the specific partner at the specific fund who has deployed capital into this exact problem in the last 24 months.”

Three requirements: marketing-driven growth, partnership development, and direct capital access, are what distinguished an accelerator from everything that came before it in the ecosystem. Most UK programs, per the evidence, are delivering something closer to education and community, which is valuable, genuinely, but it is not startup specific and it is not acceleration. Angie Mahtaney, Principal at Aroundtown, told Tech Funding News: “Accelerators should not just be about fast-tracking fundraising, they should focus on deepening founder capabilities and helping entrepreneurs understand how to navigate complex, highly regulated industries.” That framing is more honest than most, but I want to nuance it a bit if I may because “accelerators” should absolutely fast-track. Agreed, they should not just be about fundraising, but fast-tracking growth, partnerships, and capital? Yes. On the other hand, incubators, founder development programs, venture studios, and classes deepen capabilities.

Most cities don’t have an accelerator. That they call it one is irrelevant.

The Metrics Problem Is Actually the Accountability Problem

founder of The Entrepreneurs Network, said: “The UK has plenty of startup support programmes, but we don’t always know if they actually work. Founders can’t even be sure these programmes will still exist before they finish. We need reforms that make programme outcomes transparent and reward schemes that create lasting impact.” That framing is exactly correct, and yet it understates how deep the structural problem runs throughout the world.

The issue is not just that outcomes aren’t measured; it is that the incentives are misaligned at every level. The government body that funds accelerators is measured on deployment, not return. The accelerator that receives the funding is measured on cohort size, not company survival. The founder who enrolls is measured on participation, not growth. At no point in this chain does anyone’s performance metric actually correspond to whether startups improved their odds of survival, raised capital, found customers, or built companies that lasted.

What we too often have is policy theater, not policy infrastructure, and thanks to the UK, we can see the cost of that in extremes so that we might better appreciate the implication everywhere.

What’s more difficult to discern but equally important is when we have a program seeking funds, claiming to be an accelerator, and our decision makers are incapable of discerning if they’re capable. This doesn’t mean we don’t dismiss the intention to start an accelerator, it means we need to be establishing outcome based metrics so that the accelerators that we have, and those which emerge, deliver, discern themselves correctly, or disappear.

What should be measured instead? The answer is not complicated; it is simply uncomfortable for programs that are not delivering, and those programs have historically been louder in policy conversations than the ones that are. Meaningful accelerator outcomes include:

• Whether companies raised follow-on capital at a rate higher than the baseline for startups outside the program

• Whether revenue growth in the 12-18 months post-program outpaces sector averages

• Whether founders remained in the ecosystem and went on to found subsequent ventures

• Whether the program’s alumni survival rate at three and five years exceeds the national baseline

If your accelerator cannot answer those questions with actual data, it is not an accelerator; it is a community event series with better branding.

Salter added to my push that, “We also need a better understanding of impact. Success is often measured by immediate startup outcomes, but this can miss the longer-term development of entrepreneurial talent. Tracking founder progress over time, including across several ventures, can provide a more meaningful picture of what impact support programmes have.” It acknowledges something startup ecosystems largely avoid: that founder development is a multi-year, multi-venture process, not a 12-week cohort. A founder who goes through an accelerator, fails, learns, and builds a second company that succeeds is a program outcome. Most current metrics would count that as a failure.

Call It What It Is

Here is the part that will annoy some people, if I haven’t already (hey, I never said I was kind at the expense of being nice): the honest answer to this problem is not that the UK needs to shut down its incubators and coworking spaces. Everyone needs to stop calling everything an accelerator. Incubators are real, valuable infrastructure. Coworking spaces with programming create genuine community. Office hours with experienced practitioners provide real value to early-stage founders. None of that is the problem. The problem is the label, because the label creates an expectation that the program isn’t delivering and doesn’t intend to deliver.

When a founder walks into a program that calls itself an accelerator and gets educated on finding product-market fit, that founder has been misled, however gently. They went in expecting distribution, capital access, and growth partnership, and they got a curriculum. No… they went in deserving that. The mismatch is not malicious; it is systemic. In the broader analysis of why accelerators fail founders, the problem shows up everywhere from Boise to Brussels: “participation is celebrated (it looks and feels good to appear to be trying) while the outcomes that matter to founders — funding, or at least accelerated growth — are ignored.”

The UK’s ecosystem is not failing on intentions. It is not failing on enthusiasm or even on investment. It is struggling on design. A country that has deployed the world’s highest per-capita density of startup support programs and produced startup survival rates indistinguishable from Canada and France has demonstrated, empirically, that program volume is not the variable that matters. Program quality, specificity, accountability, and outcome design are the variables. Every serious ecosystem builder has known this for years. The Full Speed Ahead report knows it. The Beauhurst data confirmed it. The only question is whether the institutions holding the grant funding will act on it or go on funding the same programs under different names until the next report asks the same questions.

The Entrepreneurs Network has proposed a reasonable path, one I’ve argued for as well for decades: establish a classification taxonomy so that incubators, accelerators, and coworking programs are labeled accurately; tie public funding to outcome metrics, not activity metrics; replace annual grant cycles with three to five year outcome-linked contracts; and give founders vouchers they can redeem with accredited programs, shifting demand power to the people the programs are supposed to serve. These are not radical ideas; this is basic accountability infrastructure. The fact that any of this reads as reformist or even criticism, is a statement about how low the bar has been set.

, Co-Founder of Antidote, “There’s a lot of talk about a ‘failing UK startup scene.’ The truth is, the UK isn’t failing, it’s drifting. The talent and capital are still here, but the confidence has gone.” Drift is an accurate description. Britain has a world-class early-stage investment framework in SEIS and EIS. It has London, which remains Europe’s most significant startup hub by most measures. It has Seedcamp, with 10+ unicorns in its portfolio, and Entrepreneurs First, and Founders Factory, and a handful of other programs doing real acceleration work. The infrastructure for a genuinely high-performing startup ecosystem exists. The problem is that it gets diluted, in public perception and in public funding, by 500 programs, a third of which have already closed, calling themselves something they aren’t.

What you’re struggling with in your own ecosystem, whether it’s London or Leeds or elsewhere several time zones removed, probably looks something like this. Let’s fix it.

On the heels of my return from Phoenix Biosciences Core and a talk about the Arizona startup ecosystem, Texas announces ARPA-H funding, Advanced Research Projects Agency for Health supporting transformative biomedical and health breakthroughs. It didn’t luck into it with a last-minute pitch deck and a prayer. Four major cities put aside their egos, formed a coalition, and outmaneuvered the coasts at a game the coasts invented.

Thomas Graham, founder of Crosswind Media & Public Relations and the strategist behind the Coalition for Health Advancement and Research in Texas (CHART), wrote in the Dallas Morning News that Texas “licked partisan politics and regional rivalries” to land one of the most coveted bioscience investments in the country. He described a tone of collaboration across Houston, Dallas, Austin, and San Antonio, noting, “We compete, but we also collaborate.” Graham framed the dynamic between Texas cities as something close to “co-opetition,” a balance of healthy competition paired with intentional collaboration to win against other states, not each other. I say, “finally,” with a sigh of relief about Texas. He’s right; that spirit is rare and it matters enormously. When the Dallas Regional Chamber’s Kelly Cloud was asked to highlight recent developments in the Dallas economic development landscape, she paused and responded: “How much time do I have?” Let’s look at why.

Because Graham’s article, and the institutional wins he rightly celebrates, tells a story to which I want to add. Where I focus, is among the questions that should follow every announcement of a new hub, a new $6.5 billion Eli Lilly investment, or a new CPRIT allocation: what does it mean for the startups, the venture capitalists, and the entrepreneurs? Not the research. Not the recruitment of established pharmaceutical firms and not the real estate, but for our slice of an economy where risk is highest. The people who are building the companies that will either commercialize the science emerging from these institutions or watch that science get licensed, shelved, or exported to Boston.

That question, is the one few answer honestly because the answer is complicated, uneven, and in some cases, embarrassing relative to the scale of the institutional assets. So, let’s answer it.

The Institutional Foundation Is Formidable (and That’s the Easy)

Texas’ bioscience infrastructure would make most countries jealous, let alone most states. CPRIT (the Cancer Prevention and Research Institute of Texas) is a $6 billion initiative, making Texas the largest state funder of cancer research in the nation and the second-largest public funder behind only the National Cancer Institute. As of August 2025, CPRIT has awarded more than $3.9 billion through over 2,148 merit-based grants across 149 Texas institutions, organizations, and companies. One county alone has received $2.3 billion of that, roughly 60 percent of the total. CPRIT allocates approximately $70 million annually specifically for company investments through milestone-based contracts, covering SEED, therapeutics, diagnostics, and new technology company awards. That is non-dilutive capital (meaning founders don’t give up equity for it), and it flows through a legitimate peer-review process that should be the envy of every state in the country.

The Texas Medical Center in Houston is the largest medical complex on the planet. UT Southwestern, in Dallas, is a research powerhouse that attracts federal funding at scale. Dell Medical School at UT Austin only opened in 2016 and has already begun reshaping the capital city’s life sciences trajectory. San Antonio generates more than $44 billion annually through its bioscience and healthcare sectors and houses the Texas Biomedical Research Institute alongside a substantial military medical community through Brooke Army Medical Center. The ARPA-H Customer Experience hub at Pegasus Park in Dallas sits within a $2.5 billion national health innovation network. UT San Antonio’s Barshop Institute just secured up to $38 million from ARPA-H for the first nationwide clinical study in healthy longevity. The proposed Dementia Prevention and Research Institute of Texas (DPRIT), modeled after CPRIT, would add another $3 billion if approved.

But ingredients don’t cook themselves and as I’ve looked to other hubs of innovation in health, we want to look to the strengths and weaknesses of what we can cook. A state that accumulates this much institutional firepower while leaving the startup pipeline structurally incomplete is a state building a mansion on a dirt road.

Where the Startups Actually Are

The 2025 Austin Bio & Health Report, authored by and , documented that Austin alone is home to over 1,100 bio and health companies, employing 21,000 people, and generating a total ecosystem valuation of $77 billion, a staggering 45 percent surge in 2025 alone that pushed total value growth to a 52 percent compound annual growth rate over the last eight years. Venture capital investment has reached $1.6 billion in bio and health sectors in 2025 alone, vaulting Austin to 6th nationally in health sector VC funding, up from 18th in less than a decade, with only roughly $100 million separating Austin from overtaking legacy hubs Los Angeles and San Diego. Bio and health now capture one in five venture dollars invested in Austin, up from just 12 percent. The report identifies multiple companies that have crossed $100 million in valuation alongside several unicorns valued above $1 billion, with 665 additional startups below the $100 million threshold forming the base of the pipeline. The top five investment deals of 2025 tell the story: Function Health at $298 million Series B, Curative at $150 million Series B, Harbor Health at $140 million, Ollin Biosciences at $100 million Series A, and Alleviant Medical at $90 million.

But they also conceal a pattern that anyone who has studied startup ecosystem capacity building will recognize. Most of that value is concentrated at the top; the middle is thin and the bottom, the aspiring founders, the first-time biotech entrepreneurs, the researchers who have commercializable science but no idea how to form a company, that population is largely underserved.

Dallas healthcare startups raised $448 million in 2025, with notable companies including Osteal Therapeutics, MicroTransponder, ReCode Therapeutics, and Colossal Biosciences (which recently became Texas’ first decacorn at over $10 billion in valuation). Houston closed out 2025 with significant biotech funding rounds alongside its energy-tech corridor. The Texas Medical Center Innovation’s 2025 Accelerator for Cancer Therapeutics supports over 50 startups advancing immunotherapy, diagnostics, and targeted cancer drugs.

The 2025 Report frames these cities as the “Texas Bio Triangle,” one interconnected mega-region powered by four distinct hubs. The VC funding breakdown across the triangle tells an important story: Austin led with $1.6 billion, Dallas-Fort Worth contributed $218 million, San Antonio $151 million, and Houston $108 million, for a combined total of $2.07 billion in health sector venture capital across the state. Austin is positioned as the tech-enabled innovation and commercialization hub; Houston as the home of foundational discovery and clinical trials at the Texas Medical Center; San Antonio as the center of applied research and military medicine; and Dallas-Fort Worth as the scale, distribution, and financial gravity of what is being called “Y’all Street.”

Jason Scharf, the early-stage bio and health investor who co-authored that report and hosts the Austin Next podcast, has been one of the most consistent voices making this exact point. Scharf, who previously held leadership roles in strategy and market intelligence at Illumina, BD, and Amgen, would likely tell you something that echoes what he’s said publicly, “An ecosystem isn’t built when a giant established player moves in. It grows and thrives by helping the companies already here go from scrappy beginnings to real winners, even unicorns. That is how Austin’s Bio & Health stack went from a small outpost to a hub of real significance.” He’s been hammering the thesis that Austin’s path isn’t to recruit big pharma but to grow its own, and he’s correct. The lesson from Boston and the Bay Area wasn’t that big companies moved there; it was that startups grew there, and the big companies followed.

, an Austin-based physician, pediatric endocrinologist, and HealthTech innovation leader who connects founders, investors, clinicians, and global partners across 40+ countries through her community IMPACT-HEALTHTECH, frames the challenge plainly: “Texas has the institutions, the patients, and the science. What it’s still building is the translation layer; people who understand both clinical development timelines and startup velocity. Founders need someone who can help them navigate FDA pathways, de-risk their regulatory strategy early, and avoid spending their runway on mistakes the pharma and CRO world solved decades ago. That gap between a university breakthrough and a fundable company with a real development plan is where most of this potential quietly disappears.”

For Sizova, this isn’t abstract. As a physician who has spent over two decades at the intersection of clinical research, global health, and the startup ecosystem, she has watched brilliant science stall not for lack of funding, but for lack of translation; the kind that only comes from someone who has stood inside a clinical trial and inside a pitch room. Her work building IMPACT-HEALTHTECH, co-founding an AI surgical startup, and mentoring founders through programs like Nucleate has made that gap clear: the distance between a published paper and a funded company with a credible pathway is vast, and most ecosystems have almost nothing filling that space.

The Venture Capital Landscape: Promising but Incomplete

Texas’ venture capital ecosystem for biosciences is real, growing, and rapidly maturing, though still not fully proportional to the institutional assets it appropriately should be capitalizing. S3 Ventures, the largest and longest-serving VC firm born in Texas, manages over $1 billion in assets across healthcare technology and B2B software and just closed a $250 million Fund VIII. Silverton Partners brings over $700 million under management. ATX Venture Partners, PTV Healthcare Capital, and LiveOak Venture Partners all play active roles in early-stage health and biotech.

The 2025 Report reveals substantial new venture capital dry powder entering the Austin bio and health market: 8VC closed a $998 million Fund VI, Sante Ventures raised a $330 million Fund V, and Virtue VC launched a $56 million Fund II. The report identifies 13 venture capital firms with bio and health as their sole investment focus in Austin (including 4D Capital, Create Health Ventures, HealthQuest Capital, KdT Ventures, Sante Ventures, TEXO Ventures, and Virtue VC), eight additional firms with bio and health as a key focus (including 8VC, Next Coast Ventures, and S3 Ventures), and 19 more that have made bio and health investments.

That capital stack is diversifying and deepening in ways that were simply not true two years ago.

Bios Partners, a venture capital firm explicitly focused on identifying advanced biotech in overlooked and under-invested U.S. markets, directly addresses what they call “geographic favoritism” in venture capital, the well-documented tendency of capital to concentrate on the coasts. Their thesis is that great science is evenly distributed throughout the country, but venture funding is not. They’re right.

National firms have significantly increased their Texas activity: Sequoia Capital, Andreessen Horowitz, and Kleiner Perkins have all made Dallas investments in 2024 and 2025. The influx of national capital has helped Texas startups scale more quickly, but it has also driven up valuations and created a dynamic where the very best deals flow upward to coastal capital while the middle tier of promising-but-not-yet-flashy startups struggles to find appropriate funding locally.

This is exactly the pattern I’ve written about extensively. Venture capital avoids your startup ecosystem not because investors are ignorant of what’s going on but because the ecosystem hasn’t built the density of deal flow, the mentor infrastructure, and the market-readiness preparation that makes investing rational. When I talk about why startup ecosystems fail because of investors, I’m not blaming VCs for being cautious, I’m blaming the ecosystem infrastructure for not making caution unnecessary. You can’t yell at money for being rational, you have to make your region so structurally sound that money has no excuse not to show up.

Startup Development Organizations: The Good, the Missing, and the Siloed

The organizational infrastructure supporting bioscience startups in Texas is a mixed bag. Some of it is excellent but much of it is fragmented. And a disturbing amount of it is doing the same thing three other organizations are already doing, in isolation, while using the word “collaborative.”

BioAustinCTX serves as the Central Texas life science industry organization, working to bring together entrepreneurs, infrastructure, capital, and talent. The ACC Bioscience Incubator provides wet lab space and connections. The Texas Medical Center Innovation operates accelerators in Houston. The Biotechnology and Healthcare Industry Alliance of North Texas (BHIANT) focuses on workforce development and industry partnerships.

A significant infrastructure development that the 2025 Report highlights is The Domain, in Austin, emerging as the bio and health district. The University of Texas has opened 10,000 square feet of Innovation wet labs there, and the $2.5 billion UT Medical and MD Anderson campus has pivoted from its originally planned downtown location to The Domain, with new zoning unlocking future development. This is precisely the kind of purpose-built, density-creating infrastructure that bioscience startups need; not another coworking space with a microscope on the shelf, but actual wet lab facilities near research talent with room to grow.

But here’s the problem, and it maps precisely to Consideration #1 the 10 Considerations of why startup ecosystems fail: silos destroy throughput. Universities run their commercialization programs, Chambers run theirs, Incubators build cohorts in isolation, and Government agencies maintain parallel databases. Everyone “supports entrepreneurship,” yet founders navigate a maze where every door leads to a different map. In the biosciences, this fragmentation is even more damaging because the cost of entry is higher, the timelines are longer, and the regulatory complexity means that a founder getting the wrong advice at the wrong time doesn’t just waste six months; they can waste years and millions of dollars pursuing a regulatory strategy that was never viable.

The 10 Considerations Applied to Texas Biosciences

Let me walk through the 10 Considerations framework as it applies specifically to the Texas bioscience startup economy, because this is the operating manual for what Texas needs to address if it wants the startup layer to match the institutional layer that Graham and others rightly celebrate.

1. Overcoming Silos. Texas biosciences suffers from the same fragmentation problem every ecosystem does, except the stakes are higher. CPRIT operates in one lane, BioAustinCTX operates in another, and TMC Innovation runs its accelerators without enough structural connection to what Austin or Dallas are doing for early-stage founders. The ARPA-H hub in Dallas should, theoretically, create connective tissue across all four cities, but that depends entirely on whether anyone architects that connection deliberately. Graham’s “co-opetition” framing is wonderful; it needs to become operational through shared CRMs, unified mentorship standards, and consistent deal-flow pipelines that move founders to the right resources regardless of which city they started in.

2. The Missing Middle. This is Texas biosciences’ biggest vulnerability. The state has excellent resources for nascent researchers (CPRIT grants, university tech transfer offices, incubator space) and excellent resources for established companies (ARPA-H partnerships, TMC infrastructure, state incentive programs). Between those poles sits a canyon. The high-growth, pre-scale biotech startup that has initial data but needs mentorship, capital-readiness preparation, B2B customer access, and regulatory strategy support; that company dies in the gap more often than it survives it. The missing middle is where Series A funding should live, where fractional CSOs and regulatory affairs executives should be available, and where applied R&D partnerships with pharma companies should be actively brokered. Most of that doesn’t exist at scale in Texas; it needs to.

3. Funding the Actors. Every bioscience ecosystem in Texas relies on a handful of people who are doing the connecting, mentoring, and advising work that makes the system function: Most are underfunded. Many burn out. Cities pour millions into ARPA-H bids and corporate recruitment incentives while asking the people who actually run the startup programs to survive on sponsorship revenue and ticket sales. Stable, multi-year operational funding for ecosystem builders is not a nice-to-have, it’s infrastructure. Treat THEM like infrastructure or watch the infrastructure collapse.

4. Measuring Outcomes, Not Activity. Texas loves a summit and it loves a ribbon-cutting but let’s be fair, I can say the same of everywhere. Who doesn’t love a press release about a new innovation district? (Never mind the fact that press releases never reach anyone anymore). These aren’t outcomes. Outcomes are funding per capita in biosciences. Or number of biotech startups reaching $1M, $5M, and $10M in revenue. Look to new angel investors activated per year in life sciences or to exits and liquidity events. Measure local corporate procurement awarded to local biotech startups. If your bioscience ecosystem metrics look like event attendance and media impressions, you are measuring the wrong things, and your policy decisions will reflect that. This is explained extensively in why startup cities need to measure outcomes, not activity and in my book Startup Ecosystems.

5. Collaboration as Culture. Graham’s article celebrates collaboration at the state level for big institutional wins and Texas should be celebrated for that exceptional accomplishment. Collaboration at the startup level, where individual organizations share mentor pools, cross-refer founders, and integrate communications channels, that’s where the work gets hard and where most ecosystems fail. Stanford’s research on ecosystem performance shows that trust and informal collaboration networks are strong predictors of early-stage innovation output. Texas biosciences needs standing ecosystem roundtables that include startups, not just institutions.

6. Include the Invisible Talent. The OECD warns that untapped entrepreneurial potential disproportionately exists among people outside established networks. In Texas biosciences, this means the clinical researchers, the post-docs, the nurses and healthcare administrators with deep domain knowledge who have never been told they could be founders. What I saw in Phoenix, Arizona, is that they’re recognizing and fixing this. It means immigrant scientists on visas that make starting a company structurally difficult. It means the majority of people who never get invited to the summit in Austin (which reminds me, read about civic storytelling because a massive problem in most ecosystems is that no one even knows that such things are going on; please, everyone, learn how marketing works now and fix how you promote things). The stage cannot keep featuring the same handful of executives. More as to talent, use founder-assessment tools rather than resume filters. The best bioscience startups will come from people who don’t look like founders yet.

7. Architect Environments for Performance. Biotech startups need wet labs, BSL-2 facilities, prototyping resources, and access to clinical trial infrastructure. They need these things at startup-friendly price points, not at rates designed for Pfizer. The ACC Bioscience Incubator in Austin is doing this and TMC Innovation in Houston is doing this, but the gap between what exists and what’s needed is enormous, particularly outside of Houston. Workspace design, mentorship availability, early customers, and even psychological safety (biotech founding is isolating and grueling) determine whether founders move fast or stall.

8. Align Government, Academia, and the Private Sector. This is where Graham’s ARPA-H coalition model is genuinely instructive. The bow tie analogy I’ve used extensively applies perfectly here (applied a little differently): Texas invests heavily in on-ramps (programs, grants, accelerators) but often fails to tighten the knot where founders transition into revenue, customers, and capital. Universities produce research without commercialization pathways that actually work at speed. Government offers incentives but not deal flow. Investors wait for traction that can’t materialize without the infrastructure investors are waiting to see. Breaking this cycle requires shared KPIs across all partners and ecosystem stewards with actual authority to coordinate across institutions. Texas did this in ARPA-H and needs to do it for startups.

9. Accelerate Innovation by Unlocking Local Competitiveness. Texas biosciences has real comparative advantages.

• Houston owns clinical infrastructure and patient diversity

• Dallas owns diagnostics, medical devices, and now ARPA-H

• Austin owns the convergence of health tech and the “bio innovation tech stack,” as Scharf calls it

• San Antonio owns longevity science, military medicine, and infectious disease research

These are defensible regional strengths. If each city doubles down on its strengths rather than generically chasing “biotech” as a category, the state will develop the kind of focused ecosystem that outperforms generic ones. Saying “we do biotech” is like saying “we do tech.” It means nothing meaningful to the fact that people who work bio (or tech) don’t do the same things. Saying “we are the national leader in neurotech” (Austin’s case) or “we own cell and gene therapy manufacturing” (Dallas-Houston’s case) means everything.

10. Adapt, Don’t Copy. Texas should not try to be Phoenix or Boston, it’s not, I’m just stating it because it’s one of the 10 considerations and when ecosystems try to model what works elsewhere, they tend to fail. Do not try to replicate the Bay Area biotech model, which was built on decades of NIH proximity, Genentech’s founding mythology, and a real estate market that has since priced out most of the founders who would start the next generation of companies. Texas’ model should be built on Texas’ strengths: no state income tax, lower cost of living, massive patient populations for clinical trials, CPRIT’s non-dilutive funding model, the state’s economic development plan, and the cultural willingness to take risks that Graham described in his article. Adapt global best practices; don’t copy them. The regions that rise are not the ones that copy, but the ones that translate.

The Policy Gap That Nobody Wants to Talk About

Startups Are Not Small Businesses (here is a Texas Startup Policy Blueprint for Unlocking Capital) explored in Startup Economic Policy That Matters for Entrepreneurs, bears repeating here because biosciences magnify the problem. Texas does not formally distinguish startups from new businesses in its policy architecture. Fewer than roughly 10 to 15 percent of governments worldwide do this in law, policy, or administrative design. The Organisation for Economic Co-operation and Development has been explicit for more than a decade that high-growth, innovation-driven firms behave differently from small and medium enterprises and require different policy instruments, capital structures, and timelines.

In biotech, this distinction is even more critical because the timelines are longer, the capital requirements are higher, and the regulatory complexity means that a founder cannot “lean startup” their way through an FDA approval process. A biotech startup is not a small business with a microscope; it is an experimental venture operating under conditions of extreme uncertainty with capital needs that dwarf most startups by an order of magnitude. Treating it the same as a new restaurant opening in a Texas strip mall is not just unhelpful; it’s negligent. Texas’ overall policy trajectory is favorable (no state income tax, a business-friendly regulatory environment, growing research investment), but the lack of startup-specific policy instruments means the state is leaving enormous potential on the table.

Scharf noted in an interview with the Austin Monitor that policies like HB 1709, which sought to regulate business uses of artificial intelligence, could dampen enthusiasm for companies who see AI as critical to identifying health trends and creating new treatments. That’s the granular, sector-specific policy attention that bioscience startups need and rarely get. When your state legislature is debating AI regulation without understanding that 40 percent of your health tech startups depend on machine learning for their core product, we have a policy literacy problem.

Next for Texas Biosciences

Graham concluded the news of ARPA-H by saying, “The opportunity now is to make that the rule, not the exception.” He was talking about, I think, statewide alignment. I vehemently agree with his conclusion, and I’d extend it further: the ARPA-H coalition model worked because it had leadership, specificity, shared goals, and accountability. Apply that same model to the startup ecosystem itself and Texas biosciences goes from being a state with great institutions that happens to have some startups, to being a state where great institutions exist because the startup pipeline feeds them.

Concretely, that means establishing a bioscience-specific startup development organization (or empowering an existing one) with a mandate to coordinate across all four major cities. It means CPRIT explicitly partnering with startup accelerators and incubators to create warm handoffs from grant recipients to founder development programs. It means building a functioning bow tie where the knot connects university research, regulatory strategy support, clinical trial access, and early-stage capital into a single navigable pathway for founders. It means treating ecosystem builders like infrastructure, not volunteers. It means measuring whether startups are actually surviving, growing, and generating returns; not whether an annual summit had good attendance.

Thomas Graham wrote that “the future of biosciences in Texas is not just promising. It is already here.” The 2025 data says he’s righter than even he may have anticipated. Garheng Kong, Founder and Managing Partner of HealthQuest Capital, captured it well in the 2025 Report: “Austin brings together a rare mix of strengths that make healthcare innovation possible at scale. You have leading technology talent, a growing device, diagnostics, life sciences ecosystem, forward-looking health systems, and access to capital, all in one market. What excites me most is the entrepreneurial mindset here.” And Claudia Lucchinetti, Dean of Dell Medical School, framed the broader ambition: “What’s happening in Austin isn’t just the growth of individual companies. It’s the creation of a new model for how a region advances human health. We’re aligning research, clinical care, education, and innovation in ways that rarely happen in the same place at the same time.”

On the institutional side, Texas is demonstrably a national leader; on the startup side, the trajectory just crossed its own inflection point. A $77 billion ecosystem that grew 45 percent in a single year is not a state still figuring things out; it is a state where the flywheel is turning and the question has shifted from “will this work?” to “how do we make sure the infrastructure keeps pace with the momentum?” The materials are not just on-site; they are being assembled at speed. The blueprint is being drawn by people who actually understand what they’re building. Whether it becomes the definitive model for bioscience entrepreneurship outside the coasts depends on whether the ecosystem builders, the policymakers, and the capital allocators treat this moment with the seriousness it deserves. But for the first time, the data says the bet is working.

If you’re a founder in Texas biosciences trying to figure out why the ecosystem simultaneously looks amazing on paper and feels like it could serve you better in practice, you’re paying attention, and you’re right to expect more, because more is coming. You’re paying attention and I want to celebrate you for that, encourage you get more involved, comment, and raise your expectations even higher. If you’re an investor wondering why the deal flow doesn’t yet fully match the institutional momentum, the answer tends to be, and is here, in the infrastructure between the lab and the cap table. And if you’re an economic development professional reading this and nodding, stop nodding: let’s start filling in the gaps. The playbook exists.

Ninety percent of startups fail, and the standard response from the startup industry encouragement because we “learn from failure.” The work I do in legislative affairs and ecosystem development is oriented precisely to improving that number, and a recent trip to Phoenix reminded me that the cities doing interesting things are not the ones trying to replicate the Bay Area playbook, they’re the ones that know better.

I was in Phoenix last week for a fireside conversation with Brian Ellerman at Phoenix Bioscience Core, a 30-acre life sciences innovation district in downtown Phoenix. Ellerman is Executive Director of XLR8 (pronounced “Accelerate”), a scale-ready startup program housed at PBC, the vice chair of Desert Angels (ranked number one in the Southwest and fifth nationally among angel groups), and a doctoral candidate at Arizona State University researching entrepreneurship education and entrepreneurial ecosystems. His career spans founding companies in the ’90s healthcare space, a successful exit, 15 years in pharmaceutical executive leadership (including a global role in technology scouting that put him across the table from VCs, accelerators, and startups worldwide), and now a deeply intentional effort to fix what doesn’t work in how Arizona builds companies.

If his personal mission sounds like me, I appreciate that you’ve been getting to know my motivations.

90% of startups failing isn’t a benchmark of encouragement, it’s the baseline of mediocrity. Unchanged since 1995, we must focus on what doesn’t work.

Our conversation was part of a broader circuit during Arizona Tech Week, but what made it notable was where it led; not into the usual “how do we attract more VCs” fantasy that plagues most ecosystem conversations, but into something far more diagnostic the likes of which I want to be having in every city.

Arizona Ranks Fifth in Policy. So Why Isn’t It Winning in Venture Capital?

I published The Best and Potential States for Startups: A Policy-First Look at Who’s Helping Founders not long before this event, ranking all 50 U.S. states on policy conditions for entrepreneurship using the Tax Foundation’s State Business Tax Climate Index, the ALEC-Laffer State Economic Competitiveness Index, and the Mercatus Center’s RegData. Arizona landed fifth! Not California (no surprise), not New York (which wasn’t far behind California), not even Texas (which, despite its mythology, has meaningful regulatory friction of its own). Arizona. Idaho. Tennessee. Utah. These are the states where founders face the least structural resistance from their own government.

That raises a question that should make us uncomfortable: if Arizona’s policy environment is among the best in the country for founders, why isn’t Arizona leading in venture capital? Why isn’t it leading in startup-driven job creation? Why are New York and California still dominant when their regulatory and tax environments are, by the numbers, terrible for entrepreneurs?

Brian’s answer was appropriately blunt, “We might be a city of five and a half million, give or take, in the whole area,” he said during our conversation, “Even then I don’t think there’s sufficient density to be able to put too many bets on the table.” He paused. “The key is not to try to be all things to all verticals and industries, but rather to try to figure out exactly where those strengths are and to try to devote as much of our time and attention to those as we can.”

This is an observation that cities everywhere need tattooed on their plans. Every mid-tier metro in America has declared itself a “tech ecosystem;” Austin has done it, McKinsey encourages it, Washington wants it, and the UN pushes for more. The regions that actually succeed are the ones that stop doing it and pick a lane. Phoenix’s lane, sitting inside the bioscience core surrounded by three state university programs, a genomics pioneer in TGen (Translational Genomics Research Institute), Banner Health, Phoenix Children’s Hospital, and a growing cluster of emerging life science companies, is healthcare: Health tech / Life sciences / Precision medicine. The physical presence is on the ground.

Years ago, I wrote Work, Live, and Play in a Futuristic Phoenix, back when ASU’s collaboration with the Herberger Institute was exploring how life in the Valley might look decades into the future. That vision is materializing, and it’s materializing not because anyone waved a wand but because the PBC represents what many of us keep telling cities to do: build density in a specific sector, not a generic “innovation district” that’s really just a coworking space with nicer furniture and a cafeteria.

Optionality, Which Sounds Like a Buzzword, is Better Workforce Development

One of the concepts I brought into the Phoenix conversation is something I call optionality, and I should clarify what it means because I introduced it in Startup Ecosystems, and frequently use the word, but it’s not common parlance in the economy.

Optionality is perhaps the most underappreciated factor in why Silicon Valley works and most other places don’t.

If you’re a startup founder in Silicon Valley working on consumer social media and your company fails (as 90% of them do), what happens? You go get a job at another social media company. You join another startup. You consult. You angel invest with the money you made from the last exit. The entire ecosystem is structured so that when one thing fails, there are other things to fall back on, other rungs on the ladder, other opportunities within the same sector. That’s optionality.

It’s important that you don’t think of it as a startup or Silicon Valley thing though. Consider working in Banking in New York. When laid off, do you have to hope for a sales gig in a fashion company or can you shift into the hundreds of other banks, into a parallel career in accounting, or pivot to work in a hedge fund?

Now move our founder to Tucson or Boise or Little Rock – Company fails… What do they do? Social media at corporate scale isn’t there. There are no other startups hiring in that space. A founder either leaves the city or leaves the industry. The venture capitalist looking at that deal from San Francisco sees exactly this risk and passes. Not because the founder is bad and not because the idea is bad but because if the company fails, the ecosystem has no safety net to catch the human being, which means the risk is structurally higher than it would be in a market with optionality.

You don’t work in “marketing” and I don’t work in “tech” – those are roles. The work we do is in a sector relevant our skill, experience, and personal interest.

This is what the VCs were actually saying when they told cities they “couldn’t find deal flow.” They weren’t saying the founders were incompetent; they were saying, “We can’t find sectors where, when the entrepreneurs fail, they have other opportunities. They don’t have jobs to fall back on. They can’t start another startup because they can’t afford to. They can’t find local capital in that sector.” The VCs, by and large, were saying, we invest in Commerce SaaS and aren’t paying attention to many other sectors because yes, they should come to Silicon Valley, where we have options for the entrepreneurs to take these risks.”

If you work in healthcare, you’re not going to pivot into video games because there is a job there.

Downtown Phoenix is, from my point of view, addressing that more accurately, more meaningfully, than most cities. You have three universities with health sciences programs feeding talent in and around PBC. You have hospital systems providing both employment and potential customers. You have research institutions like TGen creating IP that could (with the right commercialization pathway, which is a separate headache we’ll get to) spin into companies. You have AZBio reporting that Arizona’s bioscience industry employed over 40,000 people across more than 3,600 establishments in 2023, with average wages 53% above the private sector average, and attracted $281.8 million in venture capital. That’s an actual labor market in a specific vertical where a failed founder can find another job, start another company, or pivot without leaving town.

Brian agreed, “We are really saying the same thing,” he said, “in the sense that if something doesn’t work out, are there other things for you to go to? And in a dense sector, they are. That optionality exists.”

A Capital Gap Is a Misdiagnosis (Stop Repeating It)

Almost every city that calls me says the same thing, “We need more capital.” It took me maybe half a dozen of those conversations to realize that cities were doing what bad founders do: They weren’t listening. What they were hearing is that founders were saying they can’t raise capital. “I can’t raise capital. I’m struggling to raise capital. There’s no money here.” The city hears that and says, “Got it. That’s the problem. We’re going to focus on helping raise money, attracting investors.” And then they host a demo day, invite some VCs to sit in the audience, and nothing happens because that is not how capital works.

Josh Lerner and Ramana Nanda’s landmark study, “Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn” published in the Journal of Economic Perspectives, demonstrated what those of us on the ground already knew: venture capital concentrates in places that have already demonstrated high-quality deal flow, human capital, and infrastructure. Capital follows. It does not lead. Cities that try to attract VCs before building the underlying ecosystem are doing it backwards, like installing traffic lights and hoping cars materialize.

Brian zeroed in on a related problem: the failure to distinguish between risk capital and development capital. “We need better definitions and clarity when funding is going to something,” he said. “If it’s meant as risk capital, okay, that means it’s at risk. It could go away. Well, that tends not to be a very popular choice when it’s coming out of the tax base.” His point is critical and underappreciated in policy discussions around startup funding. Public money labeled as “startup investment” is almost never structured like actual venture investment; it comes with political constraints, committee approvals, and an expectation of safety that is antithetical to the entire premise of risk capital. The result is that public funds get deployed as development capital (money to build stuff, support programs, fund research) while being marketed as risk capital (money to bet on startups that might fail). The confusion matters because it leads cities to believe they’re funding entrepreneurship when they need to stay in their lane of infrastructure or cultural impact; those are different jobs with different return profiles and different accountability structures.

The challenge for Phoenix, or anywhere, is not a lack of capital (Scottsdale is right over there). There’s wealth in this metro area. Entrepreneurship is driven by access to opportunity, not access to money per se. The question is why the money isn’t moving into startup investment, and the answer is almost always that the ecosystem is missing something: experienced mentors who know what failure looks like, startup development organizations that serve founders instead of collecting rent, sector-specific networks that give VCs confidence in the deal flow, and optionality for the humans involved. Fix those things and the capital shows up. I’ve watched it happen in Austin, where the city has gone from basically zero venture presence when I arrived in 2008 to overtaking Boston in seed-stage capital.

Why Letting People Leave Is Not Losing

One of the more refreshing things Brian shared during the event was his “boomerang philosophy.” Most cities panic when they see talent leaving; they treat it as a crisis. They try to chain people in place with tax incentives and hip neighborhoods and promises that “the scene is growing.” Brian’s take: let them go.

“We don’t need to look for reasons to chain people to this place and say you cannot leave, you must stay here,” he said. “Let them go. That’s cool by me because actually it’s sort of like a finishing school. You can go to one of those other places, whether San Francisco, right? Their density is like a nuclear weapon. They use density as a tool to be able to impact and succeed in ways that we don’t have; that density doesn’t exist here. And I’m cool with that.”

The boomerang part is what makes this work: create an intentional landing pad so that when those people realize their Bay Area apartment costs more than a Phoenix mortgage, when they’ve built their network and sharpened their skills, they have something worth coming back to. This is, incidentally, not a new idea. Ecosystems with returning diaspora members outperform those trying to build everything from scratch.

The distinction Brian draws between Tucson and Phoenix is instructive here. “Tucson’s fantastic to start,” he said. “And then as soon as those same people who started the company come to me and say, ‘All right, we’re starting. I think we need to grow.’ I’m like, ‘Get out. You need to go to Phoenix.’” Not because Tucson is bad. Because Tucson doesn’t have the density of customers, partners, investors, and co-workers in the sectors that matter for scaling. And Phoenix, specifically the PBC corridor, is building that density in life sciences in a way that most cities only talk about.

University Tech Transfer Is Broken (And Everyone Knows It)

We got into university tech transfer during the conversation, and as I wrote in Universities Aren’t Commercializing Innovation, They’re Taxing It, this is the topic where people in the room always look at everyone else sideways like we’re saying something we’re not supposed to talk about. Everyone knows the model is busted; almost nobody says so when the university administration is within earshot.

Brian separated the problem into two pieces, which I found helpful. The first piece is tech transfer as it applies to university employees: faculty, staff, graduate students whose inventions belong to the institution. The second piece, which Arizona handles better than most states through specific legislation entitling students to their own inventions, is student entrepreneurship, which the tech transfer office cannot assist with unless the student assigns rights to the university.

On the employee side, Brian’s had a vehicle analogy. “The invention is the paper,” referring to it being merely the idea (more or less). He added, “You’ve got to construct the right vehicle to carry the right payload. Universities create such a fragile wrapper around that payload, around invention, that it breaks the moment it hits contact with market forces, with investors.” And he explained why: the incentive inside the university is to do more research, get more grants, attract more graduate students. Not to build companies, not to create jobs, and not to generate venture-scale returns; the machine optimizes for inputs (research funding) rather than outputs (commercialized innovation).

AUTM’s own data confirms this which I absolutely love because I know I pissed them off a little when said that university patent development was broken. I ran an analysis of startup economic policy and found that universities disclose tens of thousands of inventions annually, but only about 3 to 5% result in the formation of a startup; the share that become viable, venture-scale companies is necessarily much smaller.

“I would be willing to concede that university tech transfer offices are building a bunch of small businesses, not startups,” Brian said, and he drew the same distinction I’ve been pushing for years between startups and small businesses, two fundamentally different economic animals that governments and universities insist on treating as the same thing. “When I put my investor hat on and I look back at how many companies we’ve invested as a group in Arizona-based spinouts from the universities,” he continued, “it is a very small number compared to, let’s see, 65 companies that Desert Angels has invested in in the past five, six years. So, they’re not making investable companies. They’re making small businesses that maybe someday they figure out how to deliver that payload, build it with the right chassis.”

My question of whether founders should try to work around tech transfer offices or try to reform them from within got an interesting response. Brian’s advice: don’t avoid it. “I’ve watched that game play out,” he said. “And in the end, the university is still going to be able to make some claims to how that came to be. And now you’ve got this really ugly situation where you have a university wanting to claw back.” His point is that the best tech transfer offices are the ones that make themselves useful enough that founders go through the process willingly, rather than running from it. That’s a higher bar than most TTOs currently clear, but it’s the correct framing.

The deeper issue, which I raised and which I think the public should be angrier about, is that this is taxpayer money. Research funding flows up through state and federal channels, gets passed to university systems, and results in roughly 1% of the research being commercialized in some meaningful way. The economics show a net loss at most institutions. The offices fund the research, fund the professors, fund the school. And the actual job creation, company formation, and economic impact that the public was presumably paying for? Mostly missing.

Remember my frustration that 90% of startups fail? Read those percentages differently… that’s roughly 98% of funded research that fails to do anything more than sit on shelves.

Team vs. Environment: The 60/40 Split That Should Embarrass Us

Our conversation turned to consider a more provocative question given the policy research placing Arizona 5th in the country. If a great team drops into a terrible policy state and a weak team drops into Arizona, who wins?

The answer is still the team. Research on startup success factors consistently shows that cofounder characteristics (complementary skills, tenacity, adaptability, domain expertise) outweigh environmental factors. The team is the 60 to 70% of the equation.

What should make ecosystem builders furious is the fact that the team still wins in a bad environment means that most environments are still failing to add meaningful value.

If Arizona’s policy ranking is fifth in the nation and yet a great team in a policy-hostile state can still outperform an average team in Arizona, what does that tell you? It tells you that the operational layer, the accelerators, the mentorship networks, the startup development organizations, the culture, is still not pulling its weight.

That’s why 90% still failing pisses me off.

Since Brad Feld’s book catalyzed a wave of startup ecosystem building roughly 15 years ago, cities have been pouring resources into programs, spaces, and events. And what we’ve found, which I cover extensively in Startup Ecosystems, is that most cities still run these things very poorly.

• Mentorship is not discerning (we let anyone who’s ever built a website be a “tech advisor” to a startup).

• Accelerators are nothing more than coworking spaces with a curriculum stapled on.

• Angel groups operate as social clubs where a community decides to invest in something, and everybody goes along with it.

This should anger you because the answer should be that strong policy states like Tennessee, Idaho, and Arizona are leading in venture capital and startup-driven job creation. They aren’t. And the reason is that the operational infrastructure between a good policy environment and a funded, scaling company is still broken in most places.

“I want to see a culture of radical candor,” Ellerman said. “If you don’t have almost a spirit of just being honest about ‘that’s a bad idea, stop what you’re doing and go do anything different,’ then what you end up with is enablement. And two, three years go by before finally someone is honest.” He referenced his own LinkedIn profile, which reads “calling babies ugly since 1999.” The culture of niceness in startup communities, particularly in the South and Southwest, is itself a structural liability. People won’t tell founders the truth because it feels impolite. The result is that founders waste years on ideas that anyone with pattern-matching experience could have flagged in the first meeting.

Anybody who tells you what you should do is probably wrong. These are startups, if we knew what worked, I’d go be a billionaire and stop standing on stage talking to people. But we very often know what doesn’t work. We know certain marketing approaches are dead on arrival. We know certain tech stacks won’t scale for what you’re doing. We know when a business model has been tried and failed a dozen times. The people who are meaningful in your ecosystem are the ones who point that out. Stop wasting your time on X. We know X doesn’t work. That’s the value. Not “here’s the answer,” but “here’s everything that isn’t the answer, so stop burning cash on it.”

What Phoenix Gets Right (and What’s Still Missing)

Phoenix’s Phoenix Bioscience Core is doing several things that align with what the research and evidence suggest about effective startup ecosystem development. First, it’s sector-specialized. Healthcare, life sciences, precision medicine. Not “tech.” Not “innovation.” A specific sector with specific employers, specific investors, specific customer bases, and specific talent pipelines. Second, it’s physically co-located. Three state universities with relevant programs, hospital systems, research institutions, and emerging companies are sharing a 30-acre campus, density by design. Third, with Brian’s XLR8 program, it’s addressing the scale gap. He built the program after systematically checking existing programs in the state against a readiness spectrum and finding that nobody was serving companies at stage six (post-product-market-fit, pre-Series A scale). “Everybody said we don’t know of anything out there that fills that particular need,” he said. “So that’s where we targeted.”

The missing pieces, and Brian was honest about these in such a refreshing way, I didn’t want our talk to end. If you’re not honest about the challenges, you can’t work to overcome them. One here? The exit pipeline is thin. “Are we going to see a whole bunch of Phoenix-based companies IPO in the near future? I don’t think so,” Brian said. The conversion of university research into venture-scale companies is still hampered by the same tech transfer dysfunction that plagues universities nationally. And the storytelling, the narrative infrastructure that makes an ecosystem credible to outside capital, is still underdeveloped.

That last point came up right at the end; storytelling is a critical piece of the puzzle that every city, almost every founder, and most investors actually stinks at. No one cares about the press release. No one cares about the events calendar. No one cares about the founder who raised a bunch of money (raising money is not a success metric, and Brian made this point forcefully: “I was an investor in that company. I didn’t get a dime back. So as far as I’m concerned, I’ll never invest in that person again. But that’s the person that gets held up because they successfully raised. Wrong metric.”). What people care about, what resonates and gets retold, are meaningful stories. Who exited? How? What did they build that mattered? Celebrate outcomes, not activity. Curate the heroes who actually delivered returns, created jobs, solved problems, not the ones who were best at raising rounds.

The question now is operational. Can Phoenix build the mid-stage support systems (B2B customer access, fractional executives, applied R&D partnerships, capital-readiness preparation) that bridge the gap between a promising company spinning out of a lab and a company that a Series A investor will back? Can it build a culture where radical candor is the norm and not the exception? Can it attract and retain the experienced operators who serve as the mentorship backbone of every ecosystem that actually works?

• Brian’s XLR8 program is specifically for scale-ready companies in the PBC’s life sciences corridor

• The policy environment is favorable

• The physical infrastructure is real and growing

• The institutional alignment between three universities and the state’s healthcare industry is structurally better than what most metros can claim

We got together to unpack Startup Ecosystems and get to know Arizona. What we walked away with was clarity about execution, not more programs, not more events, not more press releases about innovation, but the hard, unglamorous work of connecting founders to buyers, connecting research to market demand, and connecting capital to companies that have earned it.

If you’re building or advising an ecosystem and you haven’t audited your city against the considerations that actually matter for startup economic development, you’re guessing. If you’re a founder in Phoenix working in health tech and you haven’t connected with what’s happening at PBC, you’re leaving structural advantage on the table. And if you’re an investor who still thinks “deal flow” means waiting for a warm intro from your Stanford roommate, you’re missing what’s being built in places like Phoenix while you're asking about valuations in San Francisco.

Samuel Morse’s first telegraph message, sent from Washington to Baltimore’s Mount Clare Station in 1844, asked, “What hath God wrought?” Nearly two centuries later, Baltimore is still wroughting. The city gave us the first commercial railroad, the first dental school, the bottle cap, the Linotype machine, rubber surgical gloves, and the national anthem has now spent the last decade assembling something that most outside the I-95 corridor haven’t yet noticed: a startup ecosystem with structural advantages, serious institutional backing, and a cultural DNA rooted in a distinctly Baltimore brand of grit, invention, and refusal to be ignored.

I want to talk about my look at Baltimore startups because it sits in the region of the United States where ecosystem builders have been putting a lot of consideration into the Research and IP heavy orientation of the northeast while economic development attention on innovation and entrepreneurship can’t ignore the proximity of cities here.

Baltimore Startups’ Ecosystem

Baltimore is wedged between Washington, D.C. and New York but as I wrote about Bellevue near Seattle, if you’re still benchmarking your city against Austin or Silicon Valley, you might be missing the point that proximity matters. With what Baltimore has going on with its Equitech framework, its federal tech hub designation, and its growing density of startup development organizations, we have here a startup ecosystem building a knowledge economy that doesn’t just produce companies but actually aligns with the people who live there.

Too many cities are building things that look like startup ecosystems while the underlying throughput resembles a two-lane frontage road at rush hour. Baltimore is not immune to that failure mode. But it’s also further along in confronting it honestly than most, and the raw materials it has to work with (world-class research institutions, proximity to two of the largest metro economies on Earth, federal R&D spending that leads the nation, and a cultural identity forged in invention) give it a foundation that plenty of self-proclaimed “innovation cities” would kill for.

A City That Has Always Built Things First

Baltimore’s relationship with innovation is geological. Understanding why the startup ecosystem exists requires understanding that the city has been producing firsts since before anyone thought to use the word “ecosystem” in an economic context.

The Baltimore and Ohio Railroad, launched in 1830, was the first operational passenger and freight railway in the United States which historian Herbert Harwood Jr. called, “the moonshot of the 19th century.” Baltimore’s merchants and bankers, terrified that the Erie Canal would divert trade to New York, did what entrepreneurs do: they built infrastructure nobody had built before, at a scale nobody had attempted, and in doing so laid down the first link in what would become the national railroad network. The B&O didn’t just move goods; it moved the U.S. mail for the first time (1838), it partnered with telegraph companies to string the first communication wires alongside rail lines, and it played a pivotal role in the Union’s Civil War logistics. We’ve frequently noted the implication of a startup community being the communication platform, the supply chain, or the pipeline, and it might be said that Baltimore proved it first.

The Ellicott brothers invented the dredging machine in 1783 to deepen Baltimore’s port channels. Ottmar Mergenthaler invented the Linotype machine in 1886, which didn’t just change printing; it caused American newspaper readership to explode from 3.6 million to over 33 million in its first decade. William Painter invented the bottle cap in 1891 (Crown Cork and Seal Company, still headquartered in the region). Horace Hayden and Chapin Harris founded the Baltimore College of Dental Surgery in 1840, the first dental school anywhere, while at Johns Hopkins Hospital, William Halsted’s development of rubber surgical gloves in 1889 (initially to protect a nurse’s chapped hands; sometimes the best inventions start with solving the wrong problem) revolutionized surgical sterility. The Ouija board was patented in Baltimore in 1890 (cool!). Jacob Fussell opened the first commercial ice cream factory in 1850.

• The electric streetcar

• The submarine

• Duckpin bowling

• Old Bay seasoning (invented by Gustav Brunn, a German-Jewish refugee, around 1940).

Robert D. Morrow designed the first home video tape recorder in the 1960s.

The list goes on, but the principle is consistent: Baltimore doesn’t wait for someone else to prove a concept before it builds. It is a city of first movers, not fast followers. Ecosystems that produce first movers attract attention, talent, and capital in ways that copycat cultures never do.

The city’s artistic and cultural lineage reinforces this in ways that hopefully also remind you that startup communities do NOT thrive because of tech, they thrive because of the creative class. Baltimore produced Billie Holiday, Eubie Blake, Thurgood Marshall, Edgar Allan Poe, and the Afro-American Newspaper (the first Black-owned newspaper chain). The Baltimore Symphony Orchestra, established in 1916, was the first publicly funded municipal orchestra in the country. Oriole Park at Camden Yards, opened in 1992, launched the “retro ballpark” revolution that reshaped professional sports architecture nationwide. This is a city that sets trends.

The city’s jazz scene is a renaissance, anchored by organizations like the Baltimore Jazz Alliance; a living example of how cultural infrastructure and entrepreneurial energy feed each other. When a city produces art, music, and invention simultaneously, it’s doing something right about the relationship between risk-taking and community. A city’s creative culture and its startup culture are not different things wearing different hats; they are the same muscle expressed through different instruments. Jazz, by the way, is the most entrepreneurial art form ever invented: improvisation within structure, real-time collaboration, relentless iteration, and the absolute requirement that you show up and perform without a safety net. Sounds like a startup to me.

Baltimore’s Economic Foundation: Geography, Institutions, and Federal Gravity

Unlike anything else on the East Coast, Baltimore’s macroeconomic position is the reason the startup ecosystem has structural potential that most mid-size cities simply cannot replicate. The city sits at the center of the Baltimore-Washington corridor, giving it functional proximity to two of the largest and most influential metro economies in the world. Washington, D.C. provides unmatched access to federal agencies (the National Security Agency at Fort Meade, the National Institutes of Health in Bethesda, the Social Security Administration headquartered in Woodlawn, and the Centers for Medicare & Medicaid Services), defense contractors, and policy infrastructure. New York provides capital markets, media, and the density of commercial networks that turn products into categories.

Baltimore sits between them with lower costs, a deep talent pipeline, and a chip on its shoulder.

The Greater Baltimore Committee reports that the region has over 450 tech startups and more than 50 capital providers, with more than $780 million in venture capital raised throughout 85 deals in a recent year. That doesn’t put Baltimore in the top tier of U.S. venture markets, but it puts it firmly in the category of cities where the capital infrastructure exists and is growing, not just aspirational. The Brookings Institution ranked the Baltimore metro area as one of the world’s “knowledge capitals,” alongside San Jose, Seattle, and Zurich, based on productivity of innovation centers, talented workforces, and elite research universities.

Baltimore’s economy surpassed $50 billion in economic output in 2023. The Johns Hopkins institutions alone account for nearly 94,000 jobs and $15 billion in economic output in Maryland. The University of Maryland, Baltimore’s nearly 1,200 faculty received $692 million in extramural funding in areas including cancer, genomics, vaccines, neuroscience, and regenerative medicine. Maryland leads the nation in federal R&D spending per capita. If you’re a life sciences or biotech founder, there is no better corridor in which to build than the one that runs from Baltimore to Bethesda; though, I’m going to keep watching Phoenix and Raleigh Durham.

Notable companies headquartered in the region include Under Armour, T. Rowe Price, McCormick & Company, Sinclair Broadcast Group, Brown Advisory, CareFirst BlueCross BlueShield, and Legg Mason. The presence of these anchor employers matters because, as I’ve argued in my work on how startup cities attract talent, entrepreneurs need the safety net of being able to fall back on employment when ventures fail. A city with deep employer infrastructure creates the conditions for risk-taking; a city without it produces founders who leave at the first sign of difficulty. In the book you should be reading, Startup Ecosystems, we explain this as optionality.

In 2023, the Baltimore region was designated as a federal Regional Innovation and Technology Hub under the CHIPS and Science Act, one of 31 such hubs nationally. The Baltimore Tech Hub’s focus is on predictive healthcare technologies at the intersection of artificial intelligence and biotechnology.

Maryland Governor Wes Moore has been vocal about positioning the state as a leader in tech-driven economic growth; at Techstars’ Equitech Demo Day, Moore remarked, “At the center of that mission is tech entrepreneurship. When you create a new tech platform; you don’t just create wealth for yourself, you help others solve problems.”

The government’s role here is not to create entrepreneurship (it can’t; that’s a misconception I’ve dismantled repeatedly in startup ecosystem policy work), but to create the policy infrastructure that allows entrepreneurship to scale. Maryland does this better than many states through TEDCO, the Maryland Innovation Initiative, the Pava LaPere Innovation Acceleration Grant Program, and direct investment through the State Small Business Credit Initiative.

“The Baltimore Uprising and The Wire are part of the city’s story, but they do not define Baltimore’s future or its potential. Baltimore is a city of builders, innovators, and first movers,” Charmaine Nokuri, arts activist and owner of Allegiance Branding shared with me, “a place where creativity, resilience, and economic possibility have always existed beneath the headlines. We’re rewriting the narrative with grit, genius, and global impact!”

The Startup Development Organizations Here: Putting in the Work

Baltimore’s cast of characters is unusually deep for a city its size, which is a strength, but depth without coordination can be crowding. Here is the landscape, as much as I can find.

UpSurge Baltimore is the most consequential ecosystem builder in the region. Founded as a Public Benefit Corporation to propel Baltimore into the top tier of innovation cities, UpSurge coined the term “Equitech” to describe its framework: an industry-agnostic approach focused on building an innovation economy where all belong. Equitech is a structural thesis that diverse teams, leaders, and perspectives are force multipliers in company growth. UpSurge brought Techstars to Baltimore, operates the weekly Equitech Tuesday networking event, publishes ecosystem data through its partnership with EcoMap Technologies on BMore Tech Connect, and recently integrated with the Greater Baltimore Committee under CEO Kory Bailey’s leadership. That integration is strategically important because it ties the startup ecosystem directly to the region’s most influential private-sector advocacy organization, giving startups a voice in policy conversations that would otherwise be dominated by established corporate interests.

TEDCO (Maryland Technology Development Corporation) is an independent instrumentality of the State of Maryland and it is one of the most comprehensive state-level startup investment engines in the country. TEDCO provides pre-seed funding through its Builder Fund and Social Impact Funds, venture-stage investment through its Venture Funds ($500K to $1.5M), the Maryland Innovation Initiative (technology transfer from qualifying universities), the Cybersecurity Investment Fund, the Technology Commercialization Fund, and the Concept Capital program for underrepresented entrepreneurs. In late 2025, TEDCO CEO Troy LeMaile-Stovall announced a $50 million international partnership with Taiwanese investment organizations to open global markets for Maryland startups, including plans for International Startup Exchange Centers in both Taiwan and Maryland.

Emerging Technology Centers (ETC) Baltimore which, under Executive Director Dr. Arti Santhanam, ETC has empowered over 700 startups and recently launched the ETC Venture Hub at Connect Labs Baltimore for early-stage life science companies. ETC’s recent co-investment in JuneBrain, a wearable AI-powered retinal imaging platform, is the kind of targeted, domain-specific investment that connects Baltimore’s biotech strengths with AI capabilities.

Impact Hub Baltimore, led by Executive Director Dana Cole, is a nonprofit social enterprise that serves as a coworking space, innovation lab, and civic forum for social entrepreneurs, small businesses, and community builders. They run a co-leadership model that reflects a values-driven organizational structure that mirrors the collaborative ethos they cultivate in the community where their Grow Program is designed for individuals dedicated to advancing progress and innovation.

Cole is, by multiple accounts from the Baltimore community, leading a piece of the renaissance happening in the city. She represents a class of ecosystem builder that doesn’t get enough credit nationally: the operator who shows up consistently, makes space for founders who don’t have a Rolodex, and does the connective work that venture-stage organizations depend on but rarely fund.

Johns Hopkins Technology Ventures (JHTV) supports the university’s researchers and inventors in licensing, patenting, and commercializing their creations. FastForward U, the university’s student entrepreneurship hub, was renamed the Pava Marie LaPere Center for Entrepreneurship in 2024 in honor of the EcoMap Technologies co-founder whose life and tragic death became a defining moment for Baltimore’s tech community. More on that shortly.

bwtech@UMBC is a research and technology park at the University of Maryland, Baltimore County, offering incubation and accelerator programs with particular strength in cybersecurity and IT. The SCALEUP Maryland program, presented by bwtech@UMBC in partnership with Impact Principals, helps Maryland-based businesses grow beyond $500K in annual revenue.

StarTUp Accelerator at Towson University provides an eight-week cohort-based fellowship with mentorship, a $10,000 equity-free stipend, and access to university resources.

Conscious Venture Lab has supported nearly 30 companies across various fields, and Healthworx, the innovation and investment arm of CareFirst of Maryland, operates at the intersection of healthcare and innovation, creating, co-creating, and investing in companies improving healthcare quality, accessibility, and affordability.

Betamore (now pivoted), Digital Harbor Foundation, Coppin State University’s new material fabrication facilities, Morgan State University’s role in the Maryland Innovation Initiative, and Loyola University Maryland’s Simon Center for Innovation and Entrepreneurship round out a landscape that is remarkably dense for a city of Baltimore’s size. The challenge we look to find in startup ecosystems is usually not a lack of organizations but whether they operate as a network or as independent fiefdoms; we’ll look, in our assessment forthcoming.

Capital: From Angels to Venture Funds

The funding landscape in Baltimore and the broader Maryland corridor is more developed than outsiders assume, though it still has critical gaps.

Angel Investors and Networks. Baltimore Angels is the region’s primary organized angel group, focused on profitable investment in the regional entrepreneurial ecosystem and advancing early-stage innovators. The Abell Foundation, operating since 1954, has a venture capital fund specifically targeted at Baltimore startups and broader community improvement. Dingman Angels (associated with the University of Maryland), the Mid-Atlantic Angel Group, Chesapeake Emerging Opportunities Club, and Mountain Maryland Angel Investors expand the angel footprint regionally. Individual angels including Ron Gula (Gula Tech Adventures, focused on cybersecurity), Dave Troy (20+ startup investments), and Jason Palmer (managing partner at DreamIt Ventures) bring domain expertise and mentorship alongside capital.

Venture Capital. The roster of active VC firms is substantial. ABS Capital Partners is likely the region’s anchor growth-stage firm. JMI Equity has raised over $7.5 billion since 1992. New Enterprise Associates (NEA), headquartered in the D.C. area, is one of the world’s largest VC firms managing around $25 billion in committed capital, with deep Maryland ties. TCP Venture Capital operates the Propel Baltimore Fund for early-stage technology companies willing to locate in Baltimore City. TDF Ventures manages a $200 million permanent pool of capital focused on enterprise infrastructure, software, and services. QuestMark Capital is an expansion-stage firm with four funds and 60+ investments. Inner Loop Capital focuses on pre-seed and seed at the intersection of infrastructure software and AI. Early Charm Ventures, Russell Street Ventures, W Ventures, RareBreed Ventures (pre-seed fund investing in overlooked markets), and Epidarex Capital (early-stage life science ventures) fill various stages and sectors.

Institutional and Government Capital. TEDCO’s multiple funds, the Healthworx Accelerator (over 20 investments), and Lockheed Martin Ventures (a $200 million evergreen fund plus a $100 million early-stage fund) provide capital that bridges commercial and strategic investment. The Maryland Equitech Growth Fund, legislated in 2023, creates a state-backed fund aligned with the diversity-as-competitive-advantage thesis that UpSurge pioneered.

The capital gap, as Technical.ly reported and as anyone working in the ecosystem will tell you, is in the Series A to Series B transition (an entire chapter about this gap is explained in Startup Ecosystems). The Baltimore-Towson area saw $122 million in venture capital fundraising activity in one recent year, compared to $2.98 billion in nearby Washington, D.C.. That gap is lack of capital; it’s about the number of investors who can lead rounds at the $5 million to $20 million range. Baltimore can start companies. It can, increasingly, seed companies. But the missing middle (getting companies from seed to growth) is where the most economic value leaks out of the region. This is a structural problem I’ve analyzed in every ecosystem I study.

Pava LaPere: A Legacy That Redefined What Baltimore Means

You cannot write honestly about the Baltimore startup ecosystem without writing about Pava LaPere. The 26-year-old co-founder and CEO of EcoMap Technologies was murdered in September 2023, devastating the community she had done more to build than almost anyone her age in any U.S. city.

LaPere founded EcoMap Technologies while still an undergraduate at Johns Hopkins. The company builds AI-powered platforms that enable organizations to create central digital hubs for their ecosystems, making information accessible to people who historically didn’t have access. At the time of her death, EcoMap employed over 30 people, mapped over 70 unique ecosystems, and had raised over $7 million in venture funding. She was a Forbes 30 Under 30 honoree. She had founded TCO Labs as an undergraduate to spur entrepreneurship on campus, created Innov8MD to connect university ecosystems across Maryland, and helped build the grassroots student movement that eventually became FastForward U at Johns Hopkins.

Sherrod Davis, LaPere’s co-founder who stepped up as CEO, wrote in his letter to the community: “I grew up in northeast Baltimore witnessing a world where economic elevation was rare for even the hardest working people.” His commitment to carrying forward LaPere’s vision is entrepreneur DNA being preserved and amplified.

Governor Moore signed the Pava LaPere Legacy of Innovation Act, creating new programs to provide grants to student startups in Baltimore and connect technology startups from Baltimore-area universities with capital and resources. Johns Hopkins renamed its student entrepreneurship center the Pava Marie LaPere Center for Entrepreneurship. EcoMap launched the PLACE (Pava LaPere Award for Cultivating Ecosystems) Builders fellowship program with Forward Cities to empower changemakers building equitable entrepreneurial ecosystems nationally. Josh Ambrose, director of student ventures at Johns Hopkins, said of LaPere: “We would be hard-pressed to find another student in the history of this university who did so much to create resources for student entrepreneurs.”

Pava LaPere was fearless in the way that Baltimore, at its best, has always been fearless. The fact that her company, EcoMap, now powers BMore Tech Connect in partnership with UpSurge and Fearless Solutions is proof that ecosystems are, ultimately, built by specific people who refuse to accept that things have to stay the way they are. Every startup city has a few of these people, the question is whether an ecosystem is structured to produce more of them, or whether it depends on the heroism of individuals who eventually burn out, move, or (in the worst case) are taken from us.

Where Baltimore Leads and Where It Can Improve

I use a framework of ten considerations for startup ecosystem capacity building when I audit ecosystems. I applied this framework to New York City recently, and I want to apply it here to Baltimore. This is not a report card, it’s a diagnostic. Every consideration comes with what Baltimore does well and where it needs to push harder.

1. Overcoming Silos: Shared Infrastructure and Community

Baltimore has made significant progress here. The integration of UpSurge Baltimore with the Greater Baltimore Committee is a structural move toward coordination that most cities never make. BMore Tech Connect, powered by EcoMap Technologies, provides a single digital platform for startup resource navigation. The Techstars Equitech Accelerator, Equitech Tuesday, and the GBC consortium’s 38-member coalition for the tech hub application all demonstrate that Baltimore organizations can collaborate when the stakes are high enough.

Where Baltimore does well: institutional willingness to merge and coordinate (the UpSurge-GBC integration is rare nationally), a shared “Equitech” brand that gives disparate organizations a common vocabulary, and physical gathering points like Impact Hub Baltimore that create organic cross-pollination.

Where Baltimore needs improvement: too many organizations still operate their own mentor pools, their own demo days, their own investor networks, and their own CRMs without sharing data or pipelines. What happens is that a founder at one program may not know about another opportunity or event happening relevant. The ecosystem needs a single intake funnel, not just a directory. Every startup development organization should be obligated to promote the others and share mentors freely, or they’re contributing to the silos they claim to be breaking.

2. The Missing Middle: Widening the Gap Between Early Startup and Established Company

This is Baltimore’s most critical structural problem and it’s the same problem I identified in New York (though for different reasons). Baltimore can start companies and it increasingly attracts seed capital, but the transition from seed to Series A to growth is where companies either leave the region or die. The $122 million in local VC fundraising activity compared to D.C.’s nearly $3 billion tells you exactly where the gap is.

The increasing number of Baltimore companies participating in national accelerators create some bridge capital, we can do more here. The Healthworx model of a corporate innovation arm co-investing alongside institutional capital is smart because it pairs money with market access. Baltimore needs more structured commercialization pathways (not more pitch events), more Series A-capable local lead investors, and a deliberate strategy to keep companies in the region after they raise growth capital.

3. Secure Long-Term Funding and Incentives for Ecosystem Builders

Sustainable entrepreneurial ecosystems depend on sustained investment in intermediary organizations and local leaders. Baltimore’s ecosystem builders are, like ecosystem builders everywhere, underfunded relative to the corporate recruitment incentives that cities routinely deploy. Impact Hub Baltimore earns 50% of its revenue through market operations, which is admirable but also means it has to hustle constantly for the other 50%. TEDCO’s state funding is substantial but political cycles create uncertainty. UpSurge’s integration with GBC provides more financial stability but ties the organization to a larger corporate agenda.

Baltimore’s ecosystem builders need multi-year operational funding, not annual grant cycles. Events are not outcomes. These people are infrastructure, not event planners; fund them like infrastructure. Cities pour millions into corporate recruitment incentives while asking ecosystem builders to charge $25 tickets to a startup event just to keep the lights on. Baltimore is not exempt from this misallocation.

4. Measuring Outcomes, Not Activity

Cities love to count things that are easy to count: events, meetups, demo days. If activity were the same thing as value creation, every city with a monthly pitch night would be a company building machine. Baltimore tracks some of the right metrics (UpSurge reports tracking 486 technology startups, venture capital raised, and startup distribution by sector), but the ecosystem still tends to celebrate launches rather than survivals, headcounts rather than revenue growth, and demo days rather than follow-on capital.

I’d love to see more see published, founder retention rates (three+ years in region), follow-on capital raised (especially Series A+), revenue growth of supported companies, percent of rounds including local investors, and job creation specifically by startups (not small businesses broadly, because conflating them distorts policy). If public dollars are allocated to accelerators and innovation districts, public leadership has a fiduciary responsibility to demand return on investment that isn’t in the form of “we hosted something.”

5. Culture and Behaviors That Make Collaboration Natural, Not Forced

This is where Baltimore has a genuine, organic advantage that no amount of programming can manufacture. Inc. Magazine reported that Baltimore entrepreneurs “fight to make it a better startup city, and city in general.” Elizabeth Burger of Johns Hopkins Technology Ventures told Inc.: “If someone they know asks [for] a meeting, they will clear their schedule.”

The Equitech framework is a choice. When UpSurge’s Jamie McDonald says “equitech is about building an innovation economy where all belong,” and when Governor Moore shows up at demo days, and when Pava LaPere’s legacy gets institutionalized through legislation and a renamed center, those are cultural acts. They signal to founders what kind of city this is.

The pay-it-forward culture is real and repeatedly documented. The density of social-impact-oriented startups (EcoMap, Fearless Solutions, many Techstars Equitech cohort companies) reflects a community where commercial success and community benefit are not seen as trade-offs. The Baltimore Jazz Alliance, the arts community, the cultural institutions; they create a city where creative risk-taking is normal, not exceptional.

6. Including the Full Spectrum of Talent

Baltimore’s Equitech thesis is explicitly about this, and it’s the city’s most distinctive strategic position nationally. Sherrod Davis at EcoMap co-founded Baltimore Tracks, a coalition of Baltimore-based technology and tech-enabled company leaders committed to increasing opportunities for people of color in technology. TEDCO’s Concept Capital program provides convertible notes ($25K-$50K) specifically for socially and economically disadvantaged and rural-based founders.

The real test is inclusion at the cap table, the board seat, and the exit. If underrepresented founders raise pre-seed but can’t access Series A, the ecosystem has created a leaky pipeline with equity at the entrance and attrition at the middle. More of the data on follow-on capital by founder demographic to explore.

7. Architecting Environments That Enable Peak Performance

This is about physical infrastructure AND digital infrastructure.

Baltimore has an increasingly strong physical footprint. Where the city does well is in the diversity of physical spaces (lab space, coworking, maker space, university facilities), meaning founders at different stages and in different sectors can find appropriate environments.

Where every city needs improvement: innovation is not a real estate play. The physical spaces need to be connected by programming so that a founder in a BioPark lab can seamlessly access mentors from Impact Hub’s network or capital from TEDCO’s pipeline without navigating five different intake processes. Solvable.

8. Aligning Government, Academia, and the Private Sector Around Shared Outcomes

The federal tech hub consortium (38 members) demonstrated that Baltimore can align these sectors when pursuing a specific goal. TEDCO is an independent state instrumentality that bridges government funding and private-sector execution while the Maryland Innovation Initiative is a legislated partnership between the state and five universities (Johns Hopkins, Morgan State, UMD College Park, UMD Baltimore, and UMBC).

Governor Moore’s policy engagement with the tech ecosystem is active and visible, far more than most ecosystems.

9. Accelerating Innovation and Reducing Risk by Unlocking Local Competitiveness

Baltimore’s competitive advantages are clear: life sciences (84 of 486 tracked startups), cybersecurity (25 startups, drawing from NSA proximity and defense talent), advanced manufacturing (22 startups), aerospace and defense, and an emerging position in quantum technology through the University of Maryland’s National Quantum Laboratory at Maryland (QLab). The UpSurge Ecosystem Report provides detailed sector breakdowns that reveal a region with genuine depth in anchor sectors and emerging opportunity in adjacent areas.

That’s how you do it everyone. You’re not a startup city. You’re not a tech hub. You’re life sciences, advanced manufacturing, cybersecurity, and aerospace (or whatever it is that you are and are not in your region)

What to work on? Specialization needs commercial infrastructure, not just research infrastructure. This is the northeast challenge and opportunity I mentioned at the start. Invention and innovation create the spark and draw attention; specialization multiplies attention by attracting the exact experience, networks, and buyers who turn a spark into a compounding flywheel. Baltimore has the research spark, it needs more structured paths from lab to market, including proofs of concept with buyers, pilot programs with hospital systems, and procurement pathways that don’t require founders to sell into federal contracting bureaucracies to get their first customer.

10. Adapting Global Best Practices for Local Realities

Baltimore coined its own framework (Equitech) and built a movement around a distinctly local thesis. The Techstars partnership was adaptation, not replication. TEDCO’s $50 million international partnership with Taiwan is an attempt to adapt global market access for a Maryland-specific context. Impact Hub Baltimore is part of the global Impact Hub network but operates autonomously with programming rooted in Baltimore’s specific needs.

This is intellectually honest in a way that most ecosystem branding is not. This is narrative design.

I’d advise Baltimore study which practices from peer ecosystems (Pittsburgh’s robotics cluster, Nashville’s healthcare ecosystem, Austin’s density model) can be transplanted and which can’t (or shouldn’t). Baltimore should be sending operators, not just leaders, to the convenings where people like me find ourselves.

Excellence in Operations: Mentors, Success Stories, and Founder Recruiting

Across all ten considerations, one theme emerges: the quality of the ecosystem depends on the quality of the people operating it and the mentors and success stories they can deploy. An accelerator with mediocre mentors is just a room with a schedule. A pitch event without investors who write checks is theater. A co-working space without programming designed to create collisions between founders and the people who can actually help them is just a shared office with better furniture.

Baltimore’s mentorship infrastructure benefits from institutional depth (Johns Hopkins faculty, TEDCO advisors, Healthworx industry connections, defense and cybersecurity domain experts from the Fort Meade corridor) but suffers from the same problem every mid-size ecosystem faces: mentor fatigue. The same 20 people get asked to mentor in every program. The pool needs to be actively expanded through deliberate recruitment of operators from anchor employers (Under Armour alumni, T. Rowe Price alumni, Johns Hopkins Health System alumni), returning diaspora (Baltimore natives who built careers in New York or D.C. and might be coaxed back), and national-caliber mentors who can be attracted through the Techstars network or TEDCO’s international partnerships.

Success stories need to be told loudly and repeatedly. Pava LaPere’s story is powerful but incomplete if the Baltimore founder the national press names is someone lost to us all. Isaac Kinde’s $2.15 billion exit, for example, with Thrive Earlier Detection (a cancer diagnostics company born out of Johns Hopkins and UMBC’s Meyerhoff Scholars Program) is the kind of success that should be on billboards.

Baltimore’s greatest pitch is livability and cost relative to the D.C. and New York markets, combined with institutional access that would cost millions in other corridors. A biotech founder can work with Johns Hopkins researchers, access NIH-funded labs in Bethesda, hire cybersecurity talent trained in the NSA corridor, and live in a city where the cost of living doesn’t require a Series B just to pay rent.

At an inflection point, Baltimore has the institutional infrastructure in place, a cultural thesis to study as a best practice, and anchor sectors (life sciences, cybersecurity, predictive health) aligned with federal investment priorities and global market demand. The gaps are real: missing-middle capital, mentor pool depth, outcome measurement, and the operational coordination needed to turn a collection of strong organizations into a true network. But these are design problems, and design problems have design solutions. They are boring, technical, structural, and effective.

Which is exactly what Baltimore has always been good at building: things that work. The last time Baltimore sent a message that changed the world, it traveled by telegraph. The next one should travel by startup when, unlike Morse’s message, it won’t be a question, it will be proof.

I have a lot of conversations about the economy. In conference rooms, in government offices, at accelerator demo days, at city halls from Austin to Zagreb.

Most of them end the same way: everyone in the room nods, someone says, “this is exactly what we needed to hear,” and then little changes. We need to ask why. As I considered who to talk to about Startup Ecosystems with first, of course the mind turns to the press or perhaps a notable startup influencer, one thinks of book sales and reach, but that’s not why I wrote and published; I wrote for me, from my experience, and for my community. So, when I ran into Thom Singer, CEO of the Austin Technology Council as we supported friends during SXSW, the answer was obvious, I want to talk to my home, I want the first questions to come from a leading voice of the Austin tech community, and I want my experience here to resonate first. The host of the Austin Tech Connect podcast sat down with me to talk about the book on Startup Ecosystems: Understanding Why Startups Thrive and Ecosystems Fail, he didn’t let me get away with easy answers, and I didn’t offer any.

Press play here, listen, and read on about why this matters.

Why Fix Startup Ecosystems

The Austin Technology Council has been holding Austin’s tech community together since 1992. ATC began as the Austin Software Council, founded by Dr. George Kozmetsky and the Austin Technology Incubator, as a grassroots effort to bring together entrepreneurs, engineers, investors, and civic leaders to support software startups and grow the tech community. Kozmetsky, for those who don’t know him, was one of the co-founders of Teledyne and the dean of UT Austin’s business school, not exactly a hobbyist. The ATC that now leads is the institutional successor to that original deliberate act of community design, and it’s part of a continental network: TECNA — the Technology Councils of North America, a federation of more than 60 highly collaborative technology councils and trade associations in the US and Canada that, in turn, represent more than 22,000 technology-related companies in North America.

This is for whom the book was written, regional leaders steering tech policy such as Philadelphia Alliance for Capital and Technologies‘ Dean Miller, Christina Fox from TechAlliance of Southwestern Ontario, and Technology Association of Iowa‘s Brian Waller. It was written for people like Sara Fraim, Deon Gordon, Kara Lowe, Chris Berry, Yvonne Pilon, Kelly Schulz, Larry Williams, Jennifer Young, and Michael Schutzler; yes, that’s a list dropping names but it’s intentional, these are the people who, alongside Thom Singer, are helping shape policy affecting the economy through technology, and I published to optimize that for entrepreneurs. These are the people I want you to connect with and support while they support us.

I raise this because the central argument of Startup Ecosystems is that ecosystem success is almost never accidental and almost always structural. The problem is never effort, and the problem is rarely intention; the problem is design. ATC got the design right early. Most cities are struggling to figure it out, and yet, we know what to do; we’ve learned what to do.

Thom opened our conversation by asking me what prompted the book: why now, why this, why put my years of this work into print. The answer is in what I wrote when the book launched: every city I’ve walked into with a whiteboard and a room full of earnest people asking the wrong questions, every founder I watched optimize for applause instead of customers, every policy meeting where the metrics were designed to avoid the truth rather than reveal it; all of that found its way into Startup Ecosystems. The book I wrote is the book I needed twenty years ago when I was the person in those rooms trying to figure out why the stated goal and the actual outcome kept diverging so dramatically.

This is not the kind of startup book that tells you to hustle harder or believe in yourself until the market cooperates because when we’re honest about the fact that almost all founders will fail, we need to set aside encouragement and address the causes of that. What I wrote is closer to what one early reader described as “an operating manual,” specifically: an architectural examination of why startup ecosystems fail structurally along with what to do differently.

I get in trouble in some rooms and standing ovations in others. Both reactions confirmed the thesis.

One of the threads Thom and I pulled on in the interview is something that connects the book to two others that have landed recently, and that I think belong in the same conversation. The first is ’s Grit: The Power of Passion and Perseverance. Duckworth is a University of Pennsylvania psychologist whose research established, empirically, what most people in entrepreneurship claim to already know but consistently fail to practice. As she put it in her TED Talk (which has been viewed tens of millions of times and is worth rewatching if you haven’t revisited it recently), “one characteristic emerged as a significant predictor of success. And it wasn’t social intelligence. It wasn’t good looks, physical health, and it wasn’t IQ. It was grit. Grit is passion and perseverance for very long-term goals. Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years.”

The startup world applies Duckworth to founders, and reasonably so. What almost nobody applies it to is the ecosystem itself. The organizations that build durable innovation infrastructure (tech councils, accelerators, incubators, economic development bodies) are not gritty. Most of them are optimized for annual funding cycles, press releases, and metrics that can be achieved without fundamentally changing whether startups thrive. The ATC, having operated since 1992, we find exceptions to that. The organizations that are not still around in three years, five years, ten years after their launch press release was written? Those were enthusiasm dressed up as grit. Duckworth’s research is blunt about the distinction: “enthusiasm is common; endurance is rare.”

The second book is Runnin’ Down a Dream: How to Thrive in a Career You Actually Love by , which I have to disclose I have a personal appreciation for; Gurley is Texan, UT Austin MBA, Benchmark general partner, and a person whose thinking I’ve followed for years. I’ve written about him and his intellectual influence on how I think about venture markets isn’t something I’m shy about. Gurley’s research shows that 6 in 10 people are likely to regret their career choice years down the road. Family pressure and a broken education system push too many young people onto a conveyor belt where the destination is a small subset of idealized “safe” jobs.

The culmination of Gurley’s decade-long project to unpack the components of success, Runnin’ Down a Dream identifies six principles to flourish in your chosen career: the antidotes to career regret – Chase your curiosity, Hone your craft, Develop mentors in your field, Embrace your peers, Go where the action is, and Always give back. Go where the action is resonates differently when you’ve spent two decades watching founders try to build companies in ecosystems that were not designed for them to succeed in. The best founders eventually leave those places. They move to Austin, or New York, or to wherever the density of capital, talent, mentorship, and peer networks is high enough to actually compound their effort. Too many founders stay and wonder why it’s so hard, so we’re here to answer that.

Gurley and Duckworth, read together, make the same argument from two directions: the individual who succeeds is the one who finds the thing they are genuinely obsessive about, commits to it with marathon-length stamina, goes to where the best peers and mentors are, and builds the relational infrastructure to make that commitment sustainable. Substitute “startup ecosystem” for “individual” and the argument doesn’t change. What Thom Singer has built at the ATC, and what TECNA represents across 60-plus member organizations, is exactly that peer infrastructure; the ecosystem equivalent of Gurley’s principle that embracing your peers is one of the six non-negotiable foundations of sustained success.

I’ve been asked before what I think most people get wrong about Austin specifically. I’ll give you the same answer that drove the book: Austin’s success is frequently cited as inspiration for other cities and almost never correctly diagnosed as a model. People see the outcome and try to replicate the surface, the coworking spaces, the startup week, and the announcement about being the next Silicon Valley (a phrase that should be retired by ordinance at this point), without understanding the decades of accumulation of deliberate design decisions that made Austin’s ecosystem structurally different. Austin’s innovation economy today is the result of collaboration between organizations like ATC, S3 Ventures, the Chamber, Austin Technology Incubator, Triton Ventures, LiveOak Venture Partners, Founder Institute, AngelouEconomics, IC2, Silverton Partners, Opportunity Austin, The University of Texas, and thousands of visionary contributors. You can’t replicate that in three years. You can, however, understand what it is and start building the right thing with the right time horizon; which is precisely what Startup Ecosystems is designed to help with.

The book doesn’t tell Austin it has nothing to learn (that’d be both comfortable lie and a ridiculous assertion of any city). It tells every ecosystem, including Austin, that complacency is the mechanism by which successful economies stall. If we’re being frank, some of Austin’s messages have been a little disjointed from reality; the brand of “Austin” can exceed the realities on the ground. I’ve said that before, intentionally provocatively, because that’s the kind of conversation that makes an ecosystem actually function rather than merely perform. A community that can’t have that conversation is a community on its way to becoming a case study in my second edition.

The Thom Singer I spoke with on Austin Tech Connect has been writing books about relationships and networking, running ATC, and hosting a podcast that has put him in conversation with an enormous range of people who are building Texas; he came to the interview with genuinely curious questions and that’s what I wanted first. Singer has had a long career promoting community, collaboration, and conversations, and his podcast has featured interviews with over a thousand business leaders, focused on discovering how the most successful people get farther across the gap between potential and results. That framing, the gap between potential and results, is essentially the same problem Startup Ecosystems is trying to solve at a regional level. Potential is not the scarcity. Design is.

If you are a founder anywhere, trying to understand why your ecosystem does or doesn’t work for you, go listen to the episode. If you are an investor who has ever sat in an economic development meeting wondering whether any of this activity actually produces better outcomes for the companies you’re backing, you too, it’s right here. If you are a policymaker or economic development professional who is still measuring success in jobs announced rather than companies that survived their fifth year, definitely go listen to the episode, and then maybe sit with the discomfort of what that implies about the metrics you’re currently using.

The book is on Amazon. The episode is on Austin Tech Connect. There are rooms full of nodding heads still out there. The question is whether you want to be in it, or whether you want to understand why it keeps producing the same outcome.

If you work in economic development, run a government affairs office, manage a legislative portfolio, or sit in any room where startup policy gets discussed, tune in. The people with the most structural power to change whether entrepreneurship succeeds or fails in a given city, state, or country are rarely the people in the conversation when that conversations happen. This is a design flaw; and the cost of it is measurable, in jobs not created, companies not formed, capital that moved somewhere else.

Government doesn’t just enable entrepreneurship. It defines whether entrepreneurship is really even possible. Which is to say, of course it is, entrepreneurs will make it work, let’s explore if you’re actually helping.

Before a founder incorporates, they need contract law. Before they issue equity, securities regulation weighs in. Before they protect an invention, we need to understand IP frameworks and support. Before they open a bank account, access credit, or hire their first employee, your government has already shaped every one of those transactions through the rules it wrote, the licenses required, and the friction it either removed or embedded into the process. The idea that government only matters once startups reach become companies is a fiction that lets policymakers off the hook for the ventures that never made it to scale in the first place. Government is involved from day one; the question is whether that involvement makes formation easier or harder.

Right now, by most measures, it makes it harder than it needs to be. 92% of U.S. voters say it’s difficult to start a business today, and 94% of voters, across party lines, agree that it’s vital to America’s future that everyone has a fair chance to start and grow a business, according to the Government Leader Playbook by America the Entrepreneurial. Cross-partisan agreement at 94% on any economic question in American politics is statistically implausible under normal circumstances. That it exists here, and that the policy environment for startups remains as friction-laden as it does, tells you everything about the gap between political rhetoric on entrepreneurship and what legislators actually put into statute.

That gap is what policy professionals exist to close and if you’re not already doing that work, this week in Austin is a moment to start.

The case for why this work matters starts with a number most economic developers can recite; young firms account for about 20% of overall employment but create almost half of new jobs on average throughout the world. Innovation by young firms significantly contributes to aggregate productivity growth, accounting for half of it in the United States. That’s the OECD’s own analysis, not a think tank press release or a venture capitalist’s pitch. A category of firm (startups) representing one-fifth of employment is generating nearly half of all net new jobs. This was known over a decade ago, the data hasn’t changed, but most policy hasn’t either.

The mechanism connecting government action to startup outcomes is more direct than policymakers typically acknowledge. Countries with the lowest economic freedom scores had just slightly more than one new private entrepreneurial venture per 1,000 people, while countries with the highest economic freedom scores achieved a rate of new venture formation of more than six per 1,000 people, according to Russell Sobel’s research from the Center for Growth and Opportunity. Six times the rate of new venture formation. The difference isn’t culture, it isn’t geography, it isn’t access to talent in the abstract, it’s the policy environment: the structure of taxes, the volume of regulatory restrictions, the friction embedded in business formation, the rules governing capital access. These are things governments control directly. Which means policymakers who claim to support entrepreneurship while leaving those variables unexamined are not actually supporting entrepreneurship; they’re celebrating it, which is considerably less useful (trust me, we have enough celebration)

The stifling effect of regulatory burden, complexity, and uncertainty is particularly challenging for fragile startups, which lack the resources and scale of larger firms over which to absorb and amortize the costs of compliance. From the Center for American Entrepreneurship, whose proposal for a “regulatory on-ramp,” a reduced compliance framework applied to new businesses for their first five years, is one of the few policy innovations in this space that actually maps to how startups operate. U.S. regulatory agencies issued nearly 35,000 final rules over the past decade, 1,961 of which were economically significant, with annual costs exceeding $200 million. Regulations designed to govern companies with legal departments, compliance teams, and predictable revenue streams apply exactly the same burden to three-person seed-stage startups generating no revenue at all. That’s not policy failure through malice; it’s policy failure through category error (startups are not new businesses).

California had 403,774 regulatory restrictions on the books in 2022, roughly eleven times the number in Idaho, the least regulated state. Volume doesn’t automatically mean bad outcomes, specificity can protect founders as well as constrain them, but as a proxy for compliance burden on early-stage companies, restriction count is a reasonable starting point for any policy review oriented toward startup formation. Texas, worth noting with so many in Austin this week, is simultaneously tax-competitive and among the five most heavily regulated states by total restriction count. The gap between Texas’s reputation and Texas’s regulatory reality is a conversation happening at the Capitol right now.

The capital access challenge is where government’s role is most frequently misunderstood, usually in two directions simultaneously. Governments that invest directly in startups are doing the work of venture capitalists, which they are neither equipped nor positioned to do well.

The better-documented and more replicable role is structural: designing accredited investor rules that don’t exclude qualified local investors through arbitrary net-worth thresholds; creating tax incentives that make angel investment economically rational in smaller markets; establishing SBIR and similar mechanisms that reduce the risk profile of early-stage technical research; funding infrastructure such as spaces and platforms explicitly for founders; and ensuring that securities regulations enable the regional fund formation that emerging ecosystems actually need to develop their own capital base. Lower business regulatory, tax and bureaucracy burdens; better access to commercial infrastructure; ease of entry to markets and government programs are essential for developing entrepreneurship, according to Research Policy analysis from David Audretsch, Alessandra Colombelli, Luca Grilli, Tommaso Minola, and Einar Rasmussen, of 43 countries over nearly two decades.

That’s the list. It doesn’t include more pitch competitions, more coworking spaces, or more innovation districts with free Wi-Fi and no measurable outcomes. It includes structural policy choices that governments make or don’t make and that produce observable, measurable results.

Distinction in Clarity

The distinction between startups and small businesses deserves its own conversation, because the conflation of those two categories is responsible for a large share of why entrepreneurship programs underperform. As I’ve written extensively here, the OECD has been explicit for more than a decade that high-growth, innovation-driven firms require different policy instruments, different capital structures, and different timelines to impact than small and medium enterprises. Of the total jobs created by new companies, approximately 50% are created by high-growth startups with high scaling potential, which represent only about 1 to 5% of all new firms by count. If you are allocating policy resources proportionally to firm count rather than firm impact, you are systematically underinvesting in the companies responsible for half of all net new job creation while spreading your budget across the vast majority of firms that, however valuable locally, do not drive the economic transformation you are reporting to elected officials that you’re pursuing.

Defining startups in statute, separately from traditional small businesses in all tax, grant, and investment language, is the minimum viable policy intervention for any jurisdiction serious about this distinction.

A brief I put together with TexCap Policy Institute in 2025, makes three foundational recommendations that any state or city could operationalize regardless of its current ecosystem maturity: define startups in statute; coordinate regional venture development by connecting incubators, accelerators, venture studios, universities, and corporate labs with economic development offices; and establish startup-focused curriculum distinct from small business programming for both founders and potential investors. This is a minimum infrastructure for a government that actually wants to compete for the next generation of high-growth companies, and they require legislative action rather than administrative goodwill.

The public affairs dimension of this, meaning the direct engagement between startup ecosystems and legislative and regulatory processes, is where the policy professional’s role becomes most consequential. Startups are getting crushed by politics, not product, startups like Plaid and Chime grew not just by building better banking interfaces, but by navigating federal regulation like Dodd-Frank and the CFPB. In ClimateTech, breakthroughs are constrained by permitting, tax incentives, and carbon credits, policy bottlenecks, not product problems.

The sectors generating the highest-value startups right now, AI, climate tech, fintech, biotech, are also the sectors with the highest regulatory uncertainty. Founders in those sectors are spending time and capital on compliance before they’ve generated revenue, which is a structural policy failure that has a structural policy solution. It requires someone in the room with legislators when those rules get written. Startup Development Organizations have a responsibility to shape policy, to influence university curriculum that still thinks a business plan is a final project, to show up when cities make zoning, broadband, or workforce decisions that will either unleash the next Canva or kill it before it begins, and to get in the room with legislators when they debate tax structures that disincentivize growth.

None of that happens without the people whose professional mandate is this kind of coordination. Economic development professionals, government affairs specialists, legislative staff, and city and state officials who work on competitiveness and investment attraction are the only people with simultaneous access to both the policy levers and the ecosystem context needed to do this well.

Founders don’t have time to lobby while building their companies. Investors are focused on portfolio, not statute. The policy professional is the connective tissue between the entrepreneurial ecosystem and the legislative environment it operates inside, and the work of that connection, done consistently and with empirical grounding rather than political theater, is what actually produces the kind of startup-friendly environment that attracts capital, retains talent, and drives the job growth that economic development was supposed to produce in the first place.

American House at the Texas State Capitol (Thursday, March 12, 2:00 PM – 6:00 PM) puts policy professionals and ecosystem builders in the same physical space as legislators to bring the conversation about startup policy into the halls of government where it belongs. This is not a pitch event; it’s a policy event. It is WAITLISTED now but register in case you make it in. I’ll be there.

This Sunday, March 15th, we’re hosting an informal meetup specifically for policy professionals, economic development leaders, and ecosystem builders who are in Austin, at 2 pm. No agenda, no panels, no keynotes. Just the people who do this work finding each other in the same room and starting the collaborations that usually don’t happen because nobody created the context for them. If that’s you, register here and reach out to me on LinkedIn.

The question isn’t whether government should be involved in entrepreneurship, it already is, at every stage, in every market, through every rule it writes and every friction it either removes or leaves in place. The question is whether the people with the power to shape that involvement are in the right rooms, talking to the right people, with enough empirical grounding to push past the ribbon-cutting instinct and toward the structural reforms that actually produce outcomes.

If you ask most people which states are best for startups, they’ll rattle off California and New York because that’s where the money has historically pooled, understandably now too, Texas. That’s a bit like saying Las Vegas is a great place to build wealth because rich people go there. The concentration of capital in a place doesn’t tell you whether that place is structurally designed to let you keep what you build; in fact, I just published a popular set of steps every ecosystem needs to take, particularly those without much wealth and with few resources available (take a look here). Let’s talk about startup ecosystem development policy…

100,000 people are arriving in Austin, Texas this week, for SXSW, and with dozens of countries sending delegates, running “Houses,” and learning, my primary focus is policy discussion as it pertains to entrepreneurship. With that in mind, welcome, everyone, not only to Austin or even Texas, welcome to the United States.

92% of U.S. voters say it’s difficult to start a business today. At the same time, 94% of voters, across party lines, agree that it’s vital to America’s future that everyone has a fair chance to start and grow a business. That, from the Government Leader Playbook by America the Entrepreneurial, led by Kim Lane, Victor W. Hwang, and John Bridgeland, with Right to Start rt, exposes that despite the United States being incredibly efficient and effective in startups, maintains both concern and optimism about the future.

“Innovation thrives when entrepreneurs have clear pathways, strong support systems, and access to the right resources,” shared Melissa Saavedra, one of the founding states, in her capacity as director of the Nevada Governor’s Office of Economic Development (GOED). “As a Founding State, Nevada is reinforcing the right to start a business by investing in policies and programs focused on removing barriers, expanding opportunity, and empowering entrepreneurs in every corner of the state to turn ideas into lasting economic impact.”

For leaders throughout the world, I wanted to take a closer look at the question of IF California, New York, and Texas are best, that other states have advantages, and how policy shapes how states proceed, so that you might better discern where to focus your attention on the U.S. What follows is a policy-first breakdown of which states are actually structured to support entrepreneurship and which sort of treat startups like a revenue source. We’re going to draw from three distinct empirical data sources, each measuring a different dimension of how governments either enable or impede the people trying to build something. Understanding what those sources actually measure (and where each fall short) is as important as the rankings themselves.

The Three Data Sources Behind Rankings States in Entrepreneurship

The first source I pulled is the Tax Foundation’s 2026 State Tax Competitiveness Index, which has been published since 2003. The Index evaluates how well states structure their tax systems by comparing each state across more than 150 variables in five major areas of taxation: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. The Index does not purport to measure economic opportunity or freedom, or even the broad business climate, but rather tax competitiveness. A well-structured code doesn’t guarantee a thriving economy; it removes one category of headwind. Note, there is a reasonable counter-argument to using this, from the Institute on Taxation and Economic Policy, which notes that on nearly every economic measure, New Jersey outperforms Wyoming (by a long shot) because New Jersey has top-notch public schools, robust transportation infrastructure and other public goods because of revenues raised by the very taxes that land it in the bottom spot here. Structure matters, but it doesn’t make up the entire picture of what a founder needs.

The second source is Rich States, Poor States: the ALEC-Laffer State Economic Competitiveness Index, now in its 18th edition. Co-authored by Reagan economist Dr. Arthur B. Laffer, economic policy expert Stephen Moore, and ALEC Chief Economist Jonathan Williams, the index uses 15 equally weighted economic policy variables to rank states’ economic outlooks. Those variables include, essentially, the full stack of policy choices that determine operating friction for employers. Granted, I want to consider startups, not established employers, but startups endeavor to become companies so, future challenges weigh in. The critique of this index, by the Economic Opportunity Institute, finds that Laffer’s rankings have zero positive correlation to economic indicators such as state GDP growth but that’s a lagging indicator of startups, and our work here is enabling entrepreneurs; the ALEC-Laffer index is useful for understanding which states have actively chosen low-friction policy positions.

The third source is Mercatus Center’s State RegData project at QuantGov. Researchers at the Mercatus Center at George Mason University developed QuantGov, an open-source machine learning and text analysis platform for analyzing regulatory text, which can process large quantities of regulatory documents and allowed researchers to create State RegData, a dataset that includes various dimensions of state regulation such as volume, applicability, and complexity. They fed every state’s regulatory code into a machine learning pipeline and counted actual regulatory restrictions; instances of words like “shall,” “must,” “may not,” “required,” and “prohibited.” There were 403,774 regulatory restrictions on the books in California in 2022, which is roughly eleven times greater than the number of restrictions in Idaho, the least regulated state. This is measuring volume, not rule quality, which is an important distinction. More restrictions does not automatically mean worse outcomes, sometimes specificity protects founders too. But in aggregate, rule volume is a proxy for compliance burden, and compliance burden is a credible proxy for the cost and time drain on early-stage companies that have neither money nor legal staff to spare.

As a sanity check, the Institute for Justice’s License to Work study, which maps occupational licensing burdens by state. The legal requirement to get government permission to practice a trade or profession before you can legally charge anyone for your work, is one of the most egregious friction points for new business formation. It’s not a startup issue in the venture-backed sense (let’s be honest, entrepreneurial people tend not to care), but it matters enormously for the broader entrepreneurial ecosystem, including the freelancers, service providers, and small business owners who form the economic foundation that eventually produces the talent pools and customers that startups need.

The Ten Best States in Startup Ecosystem Development Policy

This will be fun, because I expect (and in fact hope), this will surprise most

Utah sits at the top of the ALEC-Laffer Economic Outlook rankings and has done so for years. That reflects deliberate and sustained policy choices. Utah’s leaders have consistently championed pro-taxpayer reforms, from enacting flat personal and corporate income taxes to eliminating estate and death taxes, with forward-thinking property reform further cementing the state’s reputation as a national model for economic competitiveness. For founders, this policy matters because progressive structures create marginal-rate cliffs that punish exactly the success you’re working toward (i.e. see what California and Washington are considering). The challenge for Utah’s ecosystem is talent density; the state still struggles to attract and retain the senior engineering and marketing talent that coastal hubs have in abundance, and it doesn’t yet have the density of domain-specific investors that specialized startup communities need. Fixing that requires a coordinated culture-industry pipeline strategy and, I think, an aggressive diaspora recruitment: bring back the Utah natives who went to build in San Francisco and give them a reason to come home.

Tennessee is perhaps the most interesting case on the best list precisely because its improvement is so recent and so sharp. Tennessee ranked 38th in the Tax Foundation’s tax competitiveness index in 2020 and now ranks 8th; after reducing the rates of its corporate gross receipts tax, improving its treatment of business expensing, and fully phasing out tax on individual interest and dividends income, it is one of eight states to have no individual income tax. That’s a dramatic structural transformation in five years. Nashville has been building real ecosystem momentum, and policy changes like this are what enable that momentum to compound rather than stall out as companies grow. What Tennessee needs now is more risk capital depth; the angel and early-stage VC community is still thin relative to what the deal flow will require as the ecosystem matures, and the state should be actively working to attract fund managers and family offices that are willing to deploy in the local market.

By the way, when I refer to the gaps, a fair question is how I know. My work here is assessing ecosystems throughout the world; you can get a brief of how I do that here and I’ll explaining it in detail in my forthcoming book, Startup Ecosystems.

Learn More About the Book Here

Indiana ranks third and consistently lands in the top ten for competitiveness. Indiana has done the blocking-and-tackling work of maintaining a low, stable corporate tax rate and a regulatory environment that doesn’t make hiring feel like a liability exercise. The Midwest gets condescended to in startup discourse, which is a mistake (visit Midwest House at SXSW and talk about it); Indianapolis has genuine industry clusters in life sciences and agtech that can support real venture activity. The gap is ecosystem density: not enough accelerators, not enough specialized advisors, and not enough late-stage capital to keep companies from having to relocate to close a Series B. Indiana’s most actionable lever is building anchor institutions that prevent brain drain by giving talent a reason to stay post-exit.

North Carolina ranks fourth and is one of the more compelling cases for ecosystem growth because it already has the talent infrastructure that other high-outlook states lack. The Research Triangle (Raleigh, Durham, Chapel Hill) sits adjacent to three research universities that produce both technical graduates and faculty-led spinouts; this is rare and most universities in the U.S. are struggling with tech transfer. North Carolina’s policy posture has improved materially over the past decade. The ecosystem gap is risk capital density in the state-specific sense; a lot of Triangle-area companies find that to raise a meaningful Series A or B, they still have to pitch in Boston or New York. Seeding a state-level fund-of-funds structure to attract emerging VC managers to the market would accelerate what is already a strong trajectory.

Arizona has been working hard on the policy stack, and the Phoenix metro in particular has become a legitimate second-tier startup market driven by migration from California and a deliberate city-level effort to build density around fintech, healthcare, and semiconductor manufacturing. The state’s ranking reflects a consistently low-friction environment. The under-exploited asset here is Arizona State University, which is arguably the most entrepreneurially active public research university in the country by volume (Go Devils!). The ecosystem gap is converting that activity into real company formation: too many ASU spinouts never get past the SBIR-grant stage because they don’t encounter the right venture operators early enough – we’re going to explore the adverse implication of grants in my book. Building more structured founder-in-residence and EIR programs at the university commercialization arms would change that.

Idaho is an unusual case because it represents one of the most dramatic deregulatory efforts in recent American history. Governor Brad Little, who was sworn in at the beginning of 2019, issued two executive orders (the Red Tape Reduction Act and the Licensing Freedom Act) which helped the state cut or simplify 75% of regulations, and in 2020 he followed up with executive orders that forced an annual review of regulations and consolidated 11 separate agencies into a new Division of Occupational and Professional Licenses. I’ve explored Idaho in depth before so you can read that and see how we do that, here. That’s a governor using administrative machinery to reduce compliance burden systematically. The Boise ecosystem has grown meaningfully as a result, attracting tech workers priced out of Seattle and San Francisco. The challenge is converting those transplants into founders rather than remote employees. Boise needs a stronger Series A ecosystem and more founder communities that give transplants a reason to start something local.

South Dakota and Wyoming are interesting edge cases because they top the tax competitiveness rankings primarily on the strength of what they don’t tax. Both lack income taxes, and both are among the least regulated states by Mercatus’s restriction count. Honestly, neither has a meaningful startup ecosystem yet, which is itself a signal: policy is necessary but not sufficient. What they have is a blank canvas, and the playbook for both is similar: build connected innovation cultures, attract a handful of sector relevant anchor companies with significant impact on entrepreneurs, and foster funds of first dollars that gives local founders a reason not to flee to Denver or Minneapolis. The foundations are in place; the ingredients on which to focus are density and intentionality.

Florida has been absorbing an enormous inflow of capital, founders, and fund managers since roughly 2020. Miami in particular has become a legitimate node in the venture capital network rather than just a lifestyle destination for tech workers who like warm weather. The policy environment supports this. The challenge for Florida’s ecosystem is that a lot of what’s moved there is financial capital and fintech rather than deep technology, and the state’s research university system, while large, hasn’t historically been a major source of commercializable IP. Deepening the startup pipeline by adding existing programs that develop founders (not small businesses and not entrepreneurship studies) would help Florida’s startup activity mature from “capital-friendly” to “innovation-driven.”

Texas is simultaneously tax-competitive and actually among the five most heavily regulated states in the country by total restriction count. Interesting, that you might be able to see my motivations since I live in Austin; still, it makes the list of better states. If you’re building a construction-tech company in Texas, you will encounter a regulatory environment that is absolutely not as light as the state’s marketing suggests. If you’re building a software company, the tax and labor environment is genuinely competitive. The ecosystem is by now well-documented since so many of us have been actively doing so (which should be an example of what to do where you live: map, expose, and promote); Texas has the capital, the talent, and the deal flow to function as a legitimate tier-one market. The state still needs to address what we call the “missing-middle” (fund formation ideal post seed and still risk tolerant before Private Equity), power grid reliability issues, which is a material business continuity risk that affects all the data center growth, and manufacturing-adjacent startups in ways that get papered over in the boosterism.

The Ten States with the Most Upside in Startup Policy

Before we explore, I could just as easily have gone with what that headline implies, The Ten Worst States for Startup Policy, but the thrust of entrepreneurship and the culture in which we work, making it so distinct from business and corporate development, is that we fix the problems. In policy matters, for startups, challenges mean opportunity.

This list, in several cases, is a story of states that have mistaken the presence of innovation for the presence of a supportive policy environment, and which are now discovering the difference as capital and talent begin to relocate.

New York is dead last in tax competitiveness rankings for structural reasons: a complex, multi-bracket income tax structure, high corporate rates, and a compliance burden that functions as a permanent operating overhead for any company that scales there. New York City remains a genuine innovation hub in fintech, media, and fashion-tech, supported by talent density and network effects that policy cannot easily replicate. But that explains why companies start in New York, not why they stay, and the data on headquarters relocation tells its own story about where companies go when they’re large enough that the bill becomes material. The fix is politically difficult because New York’s fiscal structure is built on the assumption of taxing concentrated wealth but structural reform of the kind Tennessee accomplished is possible and would improve the ecosystem’s long-term substantially.

New Jersey is interesting as I referred to it as we began; driven by high income, corporate, property, and unemployment insurance taxes, New Jersey’s proximity to New York means it functions partly as an overspill market, but the policy environment makes it hard for companies to scale there independently. The most actionable reform for New Jersey would be addressing its corporate tax structure, which is punitive at exactly the point (profitability and growth) where you want companies to be investing back into headcount and R&D (which you do) rather than paying rates that rank among the highest in the nation.

California is where you should be both shocked that it’s here on our list, and at the same time not surprised if you’re paying attention to all the talk of migration from California. The most regulated state in the country, with 403,774 regulatory restrictions (roughly eleven times greater than the number of restrictions in Idaho). It’s genuinely true that California has produced the majority of the most valuable technology companies in history while ranking near the bottom of every business-friendly index. The explanation isn’t that the indices are meaningless, it’s that California’s ecosystem has historically operated on network effects, talent density, and risk capital concentration that are strong enough to overcome structural policy disadvantages. The question is whether those advantages are durable, or whether they’re eroding as capital and talent become mobile in ways they weren’t in 1995. Outflow suggests the latter. California’s most important ecosystem intervention is not tax reform (though that would help) but addressing the housing cost crisis that makes it impossible for early-stage founders without inherited wealth to survive the pre-revenue stage of company building. Founders, you don’t get funding to start.

I want to pause here as we start to get repetitive in the assessments. From the top three, let’s be brief about the rest.

Connecticut ranks 47th on tax competitiveness and scores among the highest-burden states for occupational licensing, hitting founders on both ends simultaneously. The proximity to Yale is an underexploited asset; targeted licensing reform and a more competitive corporate rate would close the gap between institutional potential and actual company formation.

Maryland is actively making things worse; there really isn’t a different way to put it if we’re being honest. The state adopted what the Tax Foundation called the most aggressive package of tax increases in the nation during 2025, including a new top marginal individual income rate of 6.5%, a 2% surtax on high earners’ capital gains, and a 3% sales tax on B2B digital services. Taxing B2B digital services in a state trying to attract tech companies is the policy equivalent of putting a toll booth on your driveway. Maryland’s DC-corridor location gives it a natural govtech and defense-adjacent advantage that its own legislature keeps undermining.

Washington at surprises people because of Seattle’s genuine tech density, but the structural explanation is that Washington implemented a new 9.9% capital gains rate and increased its estate tax from 20 to 35 percent, tied for the nation’s highest. A capital gains tax is a direct burden on the outcome founders are working toward, and a high estate tax discourages the intergenerational wealth transfer that funds angel rounds. Seattle needs more angels, not fewer.

Minnesota, Massachusetts, Vermont, and Hawaii round out the list with high burdens and significant licensing friction. Massachusetts warrants a specific note: Boston’s biotech cluster is elite, driven by the MIT-Harvard-Longwood concentration that has no real peer. Policy environments are nearly hostile and yet ecosystems thrive anyway, because we all try despite circumstances; this is why this list of opportunities is so important, you can interpret this (me) as negatively criticizing or you can look at these states as where there is tremendous potential.

For Startup Ecosystem Builders…

The most important point here is that policy is infrastructure, not atmosphere. When a state ranks poorly, it isn’t just a score on a spreadsheet, it represents real friction that falls hardest on founders with the least capital to absorb it. A $500,000 seed-stage company dealing with high costs, complex multi-bracket compliance, and licensing friction, let alone regulations that handicap upstarts and disruptors, is operating with a structural disadvantage relative to a comparable company in a state that has eliminated those headwinds. Jared Walczak wrote about wins-above-replacement framing: a well-structured code won’t make Wyoming a metropolis, nor will poor structure make Manhattan a ghost town, but policy structure does play a role in a state’s economic successes or failures, and often a substantial one.

For economic development professionals specifically, the playbook that emerges from this data is not simply “cut taxes,” so don’t infer that from much of my emphasis on that here. The states showing the most improvement (such as Tennessee and Florida) did it through structural reform: simplifying the code, eliminating bracket complexity, moving toward flat rates, and addressing specific friction points that burden founders. You can disagree with the intentions politically or even socially, but we’re here to talk about what drives entrepreneurship.

The best states still have meaningful ecosystem gaps that policy alone can’t fill: talent pipelines, risk capital density, anchor institutions, and founder communities, while the challenged states have real ecosystem assets that policy is actively undermining. Both situations are fixable with the right combination of political will and strategic coherence which, admittedly, is why I’m publishing a deeper dive in Startup Ecosystems.

If you’re a founder evaluating where to build or an investor looking at where the next generation of underpriced ecosystems will emerge, the combination of improving policy trajectory and existing institutional assets is signal worth tracking. Tennessee’s trajectory over five years is a more useful data point than California’s current rankings. Idaho’s deregulatory momentum matters more for the next decade than its current startup density. The best investment in an emerging ecosystem isn’t always the one with the best score today, it’s the one where the policy vector is pointing in the right direction and the gap between structural potential and current performance is widest.

That gap is where the real opportunity lives.

I was asked this past week, by someone in a very economically challenged city, how they can start something without the resources so many others have when starting out.

Data on this is more encouraging than the startup world wants to admit so the question drove me to want to help make sure everyone knows that financial circumstances aren’t actually much of a challenge. A 2020 study published in Business Horizons found that poverty is a circumstance, not an endemic characteristic, and that “although they confront more imposing obstacles, those in poverty are otherwise as capable as anyone else of starting a business.” The Goldwater Institute found that found that for every one percentage point increase in the number of entrepreneurs in a state, the poverty rate drops two percent. Follow that? Increase the number of entrepreneurs a measly 10% and poverty drops by 20%. Then we have research by Neil Lee and Andrés Rodríguez-Pose which confirmed that entrepreneurship is accessible everywhere and success brings measurable income increases for everyone; startups can sell beyond their immediate geography, which in a digital economy means virtually any software or services venture, generating income increases for the broader community, not just the founder.

But what I found in most of the research, notice, is really about how entrepreneurship in rural and underserved communities helps lift a community out of poverty. That’s not quite the same as the question asked of me, “how, when we don’t have the money?”

None of that research was conducted in Palo Alto. It was conducted in places that look a lot more like Arkansas, Mississippi, Louisiana, West Virginia, and Alabama. Like rural Appalachia and inner-city Detroit. Like Lagos, rural India, peripheral cities in Mexico, and the overlooked edges of Romania and Bulgaria. These are the places where these facts are most urgent, but having proven it matters, how?

Might it be true that there, counterintuitively, the conditions for building something new may be more favorable than they appear?

The Cost of Building Has Effectively Hit Zero

Building a startup today requires a laptop and internet access. At minimum, both are available at most public libraries and many civic centers. AI is accelerating the cost drop dramatically; vibe coding, coined by describes the practice of describing what you want in plain language and letting AI handle the technical implementation, the reality is that accessible, low-cost or free building tools have already existed for decades. Let’s clarify something here, that doesn’t have to mean coding software or web services. We’re also talking about building newsletters, websites, and tools to help grow. Those tools have reached a point where the gap between “I have an idea” or “I don’t know how” and “here is a working product” has collapsed from months to hours, and the cost has collapsed toward free.

Friends with zero software development experience are building in a weekend, at essentially no cost, what used to take teams and weeks. And doing that isn’t exceptional anymore. Sites like Bolt.new, Lovable, and Replit now generate entire applications (with databases, user authentication, payment integrations, and deployment), from a plain English description. , CEO of Replit, has noted that “75% of Replit customers never write a single line of code.” Founders still get quotes from development agencies for half a million dollars to build something and that’s misleading everyone because no founder should ever be paying to get started! Moreso now, using AI tools, they validate the concept and get something to market that they can market and sell. That gap, between what building used to cost and what it costs now, disproportionately benefits people who never had access to expensive technical resources in the first place. Hire later, pay later, when proven. As a community, show it’s possible and let everyone try, because inspiring that it’s accessible overcomes that frustration that it isn’t.

A useful frame for understanding technology is that it is, at its core, the process of making things better, more affordable, and more accessible. What happens over time to every technology is commoditization; supply increases so much that the price falls through the floor. A 10-year-old laptop is worth almost nothing monetarily, yet it runs every tool described above. Smartphones a generation behind the current model are months from landfills despite being fully functional. WordPress, which is how this site was built roughly 25 years ago without any coding knowledge, was free then and remains free now. The negativity is what holds communities back, “Oh, that doesn’t really work,” or “that tech isn’t that capable,” is a mindset disregarding the fact that even if not now, it will be in 6 months; that, even if not perfect, people can accomplish more now than ever before. The trajectory of building costs has been pointing toward zero since the 1970s. For founders in places that couldn’t access expensive infrastructure before, that trajectory is not a problem, it’s becoming an advantage.

Isn’t the Absence of an Ecosystem a Problem?

The places that developed startup infrastructure early (the coworking spaces, the accelerators, the angel networks, the demo days) developed that because it was necessary at the time.

The cost of building was high, coordination was difficult, and distribution required physical proximity to customers and press. None of those constraints apply the same way anymore, and in some respects the communities that built heavy infrastructure around those old constraints are now dragging that infrastructure behind them like an anchor (the number of large space “startup hubs” that end up cannibalizing founders because they themselves can’t pay rent, is astounding); spending resources maintaining institutions that solved problems that no longer exist at the same scale.

A community in rural West Virginia or Lagos that hasn’t built that infrastructure yet isn’t behind, it’s unencumbered. The question isn’t how to replicate what Austin or Berlin did a decade ago; it’s how to build for the current cost structure, which looks radically different from the one that produced those ecosystems.

The SBA has documented that low-income areas are home to 2 out of every 9 workers but only 2 out of every 30 businesses with employees. That gap is not a capability gap, the research is clear that it isn’t, it is an information gap, a permission gap, and an ecosystem gap; the communities around those potential founders have not yet built the support structures that make the difference between a fragile early venture and one that survives long enough to scale. That is fixable, and it doesn’t require replicating Silicon Valley, it requires understanding what support structures actually matter now, not what mattered fifteen years ago.

The Capital Question Is the Wrong Question

Every conversation about startups in underserved communities eventually arrives at the capital question. “We can’t find investors. There’s no VC here. We need a seed fund.” This is the wrong frame, and it consistently leads communities toward the wrong solutions. Heck, speaking with every city, they tell me they are “struggling with attracting capital” but what they’re really saying is, “our founders here are saying they can’t raise capital, so we’re deciding that the issue is a lack of capital.”

No one is pointing out that they’re wrong.

Both the founders and the local leaders are wrong. Founders saying they can’t find funding generally fall in the camp of thinking they need funding because they don’t know what to do, evident in the fact that they aren’t attracting it. Cities saying they need to attract funding are merely saying that because it’s what they hear from those very founders. Both are wrong.

Capital arrives where opportunity creates value, it doesn’t arrive in this regard as an act of charity toward places that need it. Venture capital operates like a wholesaler in a two-sided market: it curates startups and delivers them to institutional investors seeking returns. If the startups in a given region aren’t yet compelling enough (fundable, scalable, and defensible) capital has no rational incentive to show up regardless of how much the community needs it. Trying to attract investment before building genuinely investable companies is the startup ecosystem equivalent of trying to attract Walmart to a community that has no need for one.

The reason capital seems inaccessible in most underserved communities comes down to one of two things: either the startups haven’t been developed sufficiently to warrant it, or challenges remain that make investment riskier than it needs to be. Neither of those problems is solved by recruiting angel investors or hosting pitch competitions, they’re solved by building the community structures that produce better startups: experienced mentors who can be found, potential team members who can be connected, and founders who understand the difference between a startup and a small business (not the same thing and shouldn’t be given the same advice).

What cities, community builders, and economic development offices in these regions need to be doing is fixing the gaps in the ecosystem, not throwing money at the problem. The gaps are almost always the same: conflating startups with businesses and giving both bad advice, failing to connect founders with mentors and peers, and (most pervasively) enabling wrong assumptions about what building actually requires. It doesn’t require a degree. It doesn’t require a tech hub. It doesn’t require existing capital. It requires the marketing discipline to understand a market well enough to build what it actually wants, and the community infrastructure to support founders while they’re figuring that out.

What Scaling Actually Requires

Scaling a startup (and ecosystem), which is the part that most founders in underserved communities feel is out of reach, is a matter of understanding and executing on marketing, which is not the same as advertising or promotion. Marketing is the work of the market: understanding what customers want, at what price, in what form, through which channels, and why they would choose this over anything else available to them. Most founders in any community, well-funded or not, skip this work. They build what they want, what they think customers need, or what they’re technically capable of, which produces products that solve problems no one was urgently trying to solve. This failure mode is not correlated with income or geography; it happens everywhere, funded heavily and unfunded entirely.

Most cities, fail to actually understand what their “customers” want and need in this regard, because as I’ve noted, founders say it’s “capital” so city customer discovery in developing startup ecosystems invariably concludes, “we need to work on capital.” This is misleading feedback that marketers can suss out with a little first principles thinking (essentially, asking further, “why do you need that?”)

The mechanics of scaling, once a marketing foundation is in place, are largely free. An audience of 500,000 is achievable without spending a dollar on paid distribution, through content, through social media groups and newsletters, through platforms like Medium, Substack, Reddit, and LinkedIn that provide distribution infrastructure at no cost. Distribution is free. Even a target market being in another region or another country, is irrelevant. The founders in Lagos and rural Romania who are building scalable software ventures are not distributing locally, they are distributing globally, using the same free tools available to anyone with internet access.

Building scale into the solutions is an important part usually neglected, things like referral mechanisms, community features, mobile-first design, and retention hooks, the structures through which users drive growth without requiring paid acquisition. One more piece is building with a genuine competitive advantage, and that advantage rarely lives in the solution itself; it lives in the team, the go-to-market strategy, relationships with partners or policymakers, or early mover positioning in a market that doesn’t yet have a clear leader. None of these require capital to design. Can you see how a founder and a startup ecosystem can determine and go at those? They require thinking, market research, and iteration, all of which are available to a founder in West Virginia at exactly the same cost as a founder in any city that considers itself a startup hub.

The Places That Seem Left Out Are Not Behind

In the 1990s and early 2000s, most startup knowledge, experience, and mentorship was geographically concentrated. Other places simply didn’t have it yet. Around the 2010s, as people, knowledge, and experience migrated and as distribution of information became effectively universal, some cities caught up; Austin, Nashville, Chicago, and others emerged as legitimate ecosystems not because they received capital injections but because the knowledge and community infrastructure developed. The places still feeling left out are not behind because building there is impossible, they’re behind because the wrong assumptions: that it requires capital, that it requires a tech hub, that it requires credentials and connections. This has been allowed to persist without challenge, and because the local institutions that could correct those assumptions have instead reinforced them by focusing on the wrong solutions, many cities are stuck.

The founders most likely to build something durable from a disadvantaged starting point are not the ones waiting for resources. They are the ones paying close enough attention to their own context to see opportunities that better-resourced founders in more established ecosystems simply cannot see, because they don’t live there. That contextual knowledge, that proximity to underserved markets, that firsthand understanding of what’s missing in a community… these are not handicaps! They are advantages, and the founders who recognize them as such are the ones who tend to build something worth building.

The startup infrastructure your region doesn’t have, likely isn’t what you actually need. What you need is what has always built scalable companies: a real understanding of a real market, the discipline to build what that market wants rather than what you wish it wanted, and enough community around you to keep going when the inevitable hard parts arrive. Two of those three things are entirely within reach right now, in any community, with the tools currently available at effectively zero cost.

Ten Things Your Community Can Do Right Now

Okay, so that’s a lot of bluster. And in complete fairness, I’m not in such circumstances, but I’m pissed off that founders struggle and that when we know (KNOW) that entrepreneurship and startups lift a community out of poverty, shame on us all for not doing more, effectively. Drawn from the playbook for building effective startup ecosystems, do this, right now…

1. Create one shared space and one shared calendar. Start a free Facebook Group or WhatsApp group for every entrepreneur, support program, SBDC, and local business owner in the region. Put everything in one place. Stop letting five organizations run five separate email lists that never talk to each other. One list. One place. Free.

2. Run a weekly open “office hours” session at the library or a local diner. The founders stuck between idea and first revenue need someone to talk to who has built something. Let me be clear though, no consulting and no providers of service! This is mentorship and if anyone helping is seeking clients, they need to be held out. Find three people locally who have run any kind of business and put them in a room every week. No curriculum, no agenda, just questions and answers. Free.

3. Start a peer group, not a program. Find six to ten founders at a similar stage and put them in a room monthly to share what’s working and what isn’t: no speakers, no presentations, no guest experts. Peer accountability consistently outperforms formal programming for early-stage founders and costs nothing to run.

4. Ask your SBDC, chamber, and any local support program one question: is anyone making money yet? Add that single question to every check-in and meeting. Not how many workshops people attended. Whether the businesses are producing income. Track it and share it publicly. What gets measured gets managed; right now, most communities are measuring the wrong things entirely.

5. Bring founder education to your city. Not an accelerator! Not a small business development program! Not marketing classes! Not coding classes! We have learned how to teach people to be founders, that’s what you need; the methodology works, the curriculum is established, and you can more or less just launch it.

6. Go to where people already are. Church halls, community centers, barbershops, the parking lot of the hardware store on Saturday morning; don’t wait for founders to find your program (because odds are you’re not promoting it well!). Show up where the community gathers and ask what people are trying to build. The talent that never shows up to events or registration pages is there.

7. Use your public library as a coworking space. Most public libraries have free meeting rooms, free internet, free printing, and free access to all the tools online. Designate one afternoon a week as an open working session for anyone building something. Ask the library director (they will almost certainly say yes, because no one ever asks).

8. Email your state economic development office, your nearest university extension program, and your local government economic development contact on the same day. Ask each one the same question: what resources exist for early-stage startup entrepreneurs in this zip code? You will get three different answers pointing to programs that don’t know each other exist. Connect them. That coordination role is almost always vacant and costs nothing to fill.

9. Find the one thing your region does that nowhere else does as well. Timber, agriculture, healthcare, a specific immigrant community with global trade ties, proximity to a military base, a particular manufacturing legacy; every region has something. Identify the one industry where local founders have knowledge and relationships an outsider couldn’t replicate and focus all startup conversations there first. A generalist tech hub takes a decade to build from nothing while serving generically. Building on existing local competence produces solutions in weeks.

10. Partner with an existing global model rather than inventing your own. Contact Founder Institute, Startup Grind, or explore a venture studio model with 9point8 Collective as we did for Abilene, Texas. These organizations have frameworks, curricula, networks, and credibility already built. Bringing an existing model to your community is faster, cheaper, and more effective than building a local program from scratch with no track record and no network to draw from.

The startup infrastructure your region doesn’t have, likely isn’t what you actually need

I was asked this past week, by someone in a very economically challenged city, how they can start something without the resources so many others have when starting out. The answer is that perceiving that entrepreneurship requires resources is wrong.

Synonymous with space, Texas is far more than Houston being informed of a problem, and after an incredible tour of Firefly Aerospace’s rocket facilities in Briggs, Texas, with Space Force Association, I needed to dig in.

Texas got into aerospace the way Texas gets into anything: by building a messy, expensive, politically complicated machine that becomes unavoidable.

If you want a simple story, go watch Apollo 13 and call it a day. The real story is that Texas has been stacking aerospace capability for generations, across Houston’s human spaceflight brain trust, North Texas’ industrial-scale defense and aviation manufacturing, the Gulf Coast’s petrochemical-grade heavy engineering, Austin’s hardware-plus-software startup metabolism, and West Texas’ wide-open test ranges where you can light rockets without immediately annoying millions of neighbors. That geographic diversity is the structural reason Texas keeps winning aerospace and space activity even when the headlines bounce between “Space City” and “Starbase.”

Yes, I’m going to use the phrase “Texas Aerospace Space,” because the sector is now one fused ecosystem: airlines, MRO (maintenance/repair/overhaul), avionics, rotorcraft, drones, eVTOL, satellites, lunar missions, propulsion testing, spaceports, workforce pipelines, defense procurement, and venture financing. Trying to separate “space” from “aerospace” in Texas is like separating barbecue from brisket; technically possible but meaningfully lying.

Space City Launches a State-sized Flight Stack

Houston became “Space City” because NASA put the nation’s human spaceflight nerve center there.

Johnson Space Center (originally the Manned Spacecraft Center) opened in the 1960s, and it’s been designing, developing, and testing spacecraft, training crews, and running Mission Control ever since. NASA - National Aeronautics and Space Administration’s history page defines the role: JSC has overseen NASA’s human spaceflight missions at the Mission Control Center.

That matters culturally (Houston’s identity) and economically (a durable cluster of contractors, engineers, and adjacent industries). But if you stop at NASA, you miss the shift: Texas went from being a government space state to being a commercial space state, without losing the government base. That’s the barbecue sauce. Where Florida has rockets, California has talent, Colorado has space business, and Alabama has NASA heritage, Texas has all of those ingredients in one state, spread across multiple metros, plus a regulatory posture that tends to say “build” more often than “submit a 43-page environmental narrative before you’re allowed to buy a wrench.”

The commercial shift shows up as physical infrastructure, policy, and new institutional players.

Houston Spaceport at Ellington, for example, is a federally licensed commercial spaceport on 400 acres at Ellington Airport, built as a hub for aerospace and aviation companies and for R&D and fabrication. Space “ecosystems” collapse when they can’t test, integrate, assemble, and iterate locally – that’s your summary; your, “Why Texas.” A lot like health innovation, you don’t build this stuff a coworking space.

And then there’s South Texas: SpaceX’s Boca Chica / Starbase complex turned a once-quiet tip of the state into a manufacturing-and-launch reality show, except the props are stainless steel rockets and the audience is the global aerospace supply chain. The cultural point isn’t whether you love Elon Musk. The economic point is that a rapid-iteration launch-and-manufacturing site creates gravitational pull for suppliers, machinists, welders, avionics talent, software, and mission operations. Even the debates around Starbase’s growth underline that this is a real industrial footprint with real benefits (and consequences).

So: Houston gave Texas the institutional brain. South Texas gave it a commercial launch factory. North Texas gave it manufacturing scale. Austin adds startup tempo. West Texas gives it test space.

That’s a state-sized flight stack.

The Origin Story: Aerospace Before Space

Texas aerospace didn’t begin with rockets. It began with aviation (military, commercial, and industrial) because Texas sits at the intersection of geography (big skies, big distances), defense (bases and procurement), and manufacturing logistics.

North Texas is the simplest example, where Fort Worth is one of the country’s most consequential defense aerospace manufacturing nodes, anchored by Lockheed Martin Aeronautics and its fighter production footprint. Lockheed Martin itself highlights the North Texas manufacturing line producing the F-35.

That legacy does two underappreciated things for the space economy.

First, it normalizes complex manufacturing at scale; space hardware isn’t just innovation, it’s process control, QA, supplier qualification, and people who don’t panic when a tolerance issue ruins the week.

Second, it builds the middle of the labor market: technicians, machinists, inspectors, electricians, program managers; exactly the jobs space startups need but most innovation ecosystems forget exist because they’re too busy building panels about AI in the metaverse taking our jobs.

SWIFT (Space Workforce Incubator for Texas) is explicitly trying to solve that workforce reality with a statewide pipeline across educational institutions and industry, aimed at space talent development. And the reason SWIFT is necessary is also the reason Texas has an advantage: the space economy is not mainly PhDs. It’s a lot of skilled technical work; SWIFT’s own analysis emphasizes the need for welders, machinists, and certifications, not just rocket scientists.

Similar, or really, the same, industrial competencies power both.

The Modern Engine: NASA + commercial space + defense + advanced air

Texas now has multiple, overlapping “centers of gravity,” each pulling a different part of the aerospace-space stack into the state.

Houston remains a human-spaceflight and mission-operations epicenter through NASA JSC but Houston is also now a commercial space HQ town.

Axiom Space, founded in Houston, is building commercial space infrastructure and planning a commercial space station, while also running human spaceflight services. Axiom’s own announcement of its Houston HQ and mission makes the ambition explicit.

Intuitive Machines (Houston) is a different kind of proof: a commercial lunar program with missions under NASA’s Commercial Lunar Payload Services (CLPS) framework. NASA’s release on Firefly’s Blue Ghost landing underscores how NASA is using commercial partners to deliver payloads and science; and Intuitive Machines’ mission pages and NASA releases show the cadence of lunar activity and the seriousness of the payload work.

Austin and the Austin metro area are building a parallel story: space hardware and propulsion capability on one side (Firefly Aerospace in Cedar Park is the obvious anchor), and advanced air mobility on the other (eVTOL, drones, autonomy).

Firefly’s Blue Ghost program is not a startup pitch deck, it’s a lunar lander that successfully delivered NASA science and ran surface operations: real mission execution, not cosplay.

And Austin’s “air” side matters because the aerospace future is not only orbit; it’s also low-altitude mobility, logistics, autonomy, and distributed electric propulsion. LIFT Aircraft’s HEXA and the broader eVTOL movement sit right in that seam between aviation and “space-grade” systems engineering.

Even Uber’s activity is a signal of the platform economy colliding with aviation (you did know Uber is working on drone transportation here, yes?). Uber’s partnership with Flytrex is explicit about integrating drone delivery into Uber Eats pilot markets.

Meanwhile, West Texas is and will always be a place where you can test loud things while they pump oil. Blue Origin’s test facility near Van Horn has been part of its engine testing narrative for years, including public statements about operations at that site.

Of course, South Texas is the manufacturing-and-launch end of the spectrum with SpaceX’s Starship testing and launch posture.

The point is not that any one company makes Texas space, it’s that Texas has the full ladder (space elevator would have been a cooler metaphor but it doesn’t work as well as ladder): workforce > manufacturing > test > launch > mission operations > commercialization pathways > defense adjacency > capital.

Most regions have one or two of those. Texas has most of them, and increasingly all of them.

The Institutional Layer: state policy, funding, and “grown-up” coordination

Texas is not NASA heritage; it built the policy direction and funding instruments.

The Texas Space Commission and its Space Exploration & Aeronautics Research Fund (SEARF) are the result of the Texas Legislature establishing the fund in 2023 and appropriating $150 million for grants across multiple priority areas. The Commission also publishes award information and specific grant releases (including awards to aerospace companies), which is how you know the state isn’t just a press conference machine in this sector.

The Commission frames SEARF as providing grants to entities “involved in space exploration, research or aeronautics” (Shoot… aeronautics… Okay, so this is The Texas Aerospace Aeronautics Space). Aerospace clusters don’t grow sustainably on one-time competitions, logo-stuffed summits, or “innovation districts” that are really just rezoned real estate. Aerospace grows when there is stable, multi-year infrastructure and workforce investment, aligned with the actual needs of manufacturers and mission operators.

SWIFT is the workforce pipeline player, building partnerships across Texas educational institutions to train space talent.

The Space Force Association’s Texas Chapter is part of the national-security connective tissue, explicitly focused on connecting military, industry, and academia across Texas.

And Houston Spaceport is itself an institution: it’s a city-operated, federally licensed facility designed as a hub for commercial aerospace and aviation R&D and fabrication.

Those three alone form a triangle that most places would kill for: workforce + definitive association + physical spaceport infrastructure. Add NASA JSC and you’ve got a fourth vertex: human spaceflight expertise.

If Texas screws this up, it won’t be because it lacked assets, it will be because it failed to operate the machine with excellence.

Talent Pipeline: the part everyone pretends just spits out from STEM

Texas has major research universities with deep aerospace and space engagement, but the more important trend is that institutions are being pulled into a more operational, workforce-and-commercialization posture.

UT Austin’s Center for Space Research, for example, has been directly tied into SEARF-related funding pathways (including education and outreach efforts). Rice University’s Space Institute is building partnerships and even accelerator-style programming tied to Houston and the Houston Spaceport, explicitly connecting global aerospace partnerships and commercialization pathways.

University space programs often die in the gap between research and industry adoption but here the move ties university efforts into statewide grants and into physical hubs, avoiding the classic problem: brilliant labs producing papers while industry imports talent from somewhere else.

Venture Capital and Startup Development in Texas space

Space startups are not like SaaS startups, and pretending they are, is how you get ecosystems full of pitch nights and zero flight hardware.

Capital in space behaves differently because timelines are longer, capex is real, the customer set is concentrated (government + primes + a few large commercial buyers), and technical risk is non-trivial. That means the space funding stack in Texas tends to look like a mix of specialist funds, defense-adjacent investors, and a growing set of generalist firms that have decided aerospace is now venture-backable again.

SpaceFund is one of the clearest Texas-based specialist examples, explicitly positioning itself as an early-stage venture fund dedicated to space startups.

On the startup development side, the most meaningful Texas space accelerators are the ones that connect founders to facilities, manufacturing partners, and procurement pathways; not just mentors who give advice from a podcast microphone. Rice Space Institute’s programming and Houston Spaceport’s positioning are signals of that kind of infrastructure-first approach. Let me frank for a moment though, this is where Texas has a gap to close; which is really a tremendous opportunity we should fix.

As for major events relevant to the space economy, the biggest ones Texas founders and ecosystem builders should obsess over are the events that reliably attract government buyers, primes, and technical partners. Most of those are national (SpaceCom is in Orlando), but Texas also has its own spaceport and industry programming such as the Texas Space Summit in San Antonio or Texas Space Commission events, and increasingly a statewide grant-and-workforce narrative that attracts convenings.

Texas has specialist capital (like SpaceFund), state capital (SEARF grants), federal mission pathways (NASA CLPS and others), and multiple physical hubs (Houston Spaceport, Starbase region, West Texas testing). Those four together are why space founders scale here.

For Now, It’s The Aerospace Employers That Make the Startup Layer Possible

Startups don’t float above reality, they feed on supply chains, labor pools, and anchor customers such as Boeing, which has a substantial footprint in San Antonio through Port San Antonio’s aerospace cluster and maintenance/modification operations.

That’s why North Texas’ defense manufacturing footprint matters. This is why the West Texas engine-test story matters.

And that’s why the advanced air layer matters too: LIFT Aircraft and Uber’s drone-delivery integration are not spaceflight, but they are part of the same aerospace future: autonomy, flight safety, certification, operations, and new mobility business models.

Texas is one of the few places where a founder can plausibly build across those layers without leaving the state.

What Texas is Really Building

Texas is building an aerospace economy that looks less like a single cluster and more like an integrated production system. Think of it as a portfolio:

• Houston is mission operations, human spaceflight, training, and an expanding commercial space HQ base.

• Austin is the hardware-plus-software startup engine, with lunar missions (Firefly) and advanced air mobility experimentation (LIFT).

• DFW is manufacturing scale, defense aerospace supply chain density, and a pipeline of industrial talent that space companies actually need.

• South Texas is manufacturing + launch iteration at a pace that changes what “cycle time” means in rocketry.

• West Texas is test space for engines, vehicles, and high-risk experimentation where geography is an asset.

Then the state overlays funding and coordination through the Texas Space Commission and SEARF.

Texas assembled the full production system.

Capacity Building in the Texas Aerospace Space

I’ve written frequently in my ecosystem development work that capacity building is not a calendar of events; it’s the deliberate construction of conditions that make venture outcomes repeatable (see my broader framing on ecosystem capacity building and why most regions mistake activity for progress). With that lens, here’s how Texas stacks up in aerospace and space, where it’s strong, and where it might stop congratulating itself to get sharper.

1) Overcoming silos through shared infrastructure and community. Texas does well when the “shared infrastructure” is physical: Houston Spaceport exists; Starbase exists; university labs exist; defense manufacturing exists. Where Texas still struggles is the social layer: founders in Austin, mission operators in Houston, defense suppliers in DFW, and test operators in West Texas can still operate like separate countries. The fix is shared programs with shared KPIs: supplier matchmaking tied to actual procurement, workforce credentials recognized statewide, and a consistent cross-city calendar of technical demo days that are operational, not performative.

2) The missing middle: widening the gap between early startup and established company. Texas is good at early-stage formation (Austin’s startup machine) and it’s obviously good at large industrial anchors. The missing middle is the scale-up layer for hard tech: the expensive transition from prototype to certified production, from one mission to repeatable missions, from clever engineering to manufacturable reliability. SEARF helps here because it’s explicitly funding aerospace and space projects, not just ideation theater. But Texas needs more “industrial scale-up operators” who can sit inside startups and drag them through qualification, certification, and supply chain hell without romanticizing it.

3) Secure long-term funding and incentives for the actors building ecosystems. Texas is finally doing what most states refuse to do: putting real money behind the sector through an explicit commission and fund. The vulnerability is continuity. Aerospace timelines don’t care about election cycles. Texas should lock multi-year operating support not only for companies, but for the unsexy actors: workforce intermediaries like SWIFT, facility operators, and the program teams who recruit founders and mentors. If that funding becomes episodic, the pipeline breaks.

4) Measuring outcomes, not activity, and promoting success so progress is visible and repeatable. Texas has plenty of headline moments (lunar landings, rocket tests), but ecosystems improve when you measure the boring stuff: supplier contracts won, cycle-time reductions, certification milestones, job placement rates into aerospace roles, follow-on capital attracted, and repeat founders staying in-state. NASA’s CLPS outcomes are measurable; so are Firefly’s lunar mission deliverables. Texas should publish a quarterly, statewide aerospace-space scorecard that ties SEARF awards to downstream milestones, not just press releases.

5) The culture and behaviors that make collaboration natural, not forced. Texas has a builder culture, and the space sector rewards builders. But collaboration in aerospace is not “networking.” It’s trust, quality standards, and reliable execution. The Space Force Association’s Texas chapter exists specifically to connect military, industry, and academia. The improvement Texas needs is to operationalize that into procurement pathways for startups and into mentor networks where mentors are selected for relevance and execution history.

6) Including the full spectrum of talent, not just the visible and well-connected. Space jobs include welders, machinists, and technicians, and many roles do not require advanced degrees. Texas is strong here because community colleges and workforce programs can scale quickly if the incentives are aligned. The gap is prestige bias: too many “space initiatives” talk like every kid needs to be an astronaut. No, the state needs thousands of “space cowboys” who can build hardware reliably.

7) Architecting environments that enable peak performance. The physical environment matters more in aerospace than in software. Texas is doing the right thing by investing in facilities (spaceport infrastructure, test sites, rocket labs). The improvement is to design program environments with operational excellence: clean governance, clear safety culture, predictable access to equipment, and program managers who know how to run cohorts like mission operations: tight feedback loops, clear deliverables, no nonsense.

8) Aligning government, academia, and the private sector around shared outcomes. Texas is closer than most states because it has a formal commission and fund, and because universities are participating in funded workforce and education initiatives. The gap is alignment around what counts as success. If academia wants publications, government wants job counts, and industry wants qualified technicians next quarter, you get confusion. The fix is explicit shared outcomes: placements, certifications, supplier readiness, and mission milestones.

9) Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness. Texas is already doing this through density: you can prototype in Austin, test in West Texas, integrate through Houston Spaceport, and sell into defense-adjacent networks in DFW. The improvement is to formalize “fast paths” for startups: pre-negotiated test access, shared compliance resources, and procurement coaching that actually understands federal contracting and aerospace certification.

10) Adapting global best practices, not copying them, for local realities—especially excellence in program operation, mentor recruiting, and promotion of success stories. Aerospace founders don’t need more demo days; they need operator mentors, manufacturing partners, and customer-introduction pathways that end in contracts. SpaceCom-style programming is useful as a marketplace, but Texas should be running its own operator-grade convenings tied to in-state assets. The biggest improvement Texas can make here is ruthless program quality: fewer programs, better run; fewer generic mentor rosters, more domain-expert mentors; fewer “startup weekends,” more mission-readiness sprints.

If you want a practical reference point for how I think about this beyond aerospace, my broader playbook on capacity building is here.

Texas is Ahead, and Not Finished

Texas has the ingredients that most regions spend decades trying to buy: mission heritage (NASA JSC), commercial lunar execution (Firefly and Intuitive Machines), launch-scale iteration (SpaceX), test geography (West Texas), industrial manufacturing density (DFW), and now state-level funding structure (Texas Space Commission + SEARF).

The remaining work is less glamorous, which is exactly why it’s decisive: running programs with excellence, building a statewide workforce pipeline that respects skilled trades as much as engineering, and tightening the connective tissue between metros so suppliers, talent, and founders aren’t trapped in city silos.

If you’re building in Texas aerospace or space, are you spending more time chasing attention, or more time shortening cycle time? Want to argue about all of this (politely, or not)? Share where you think Texas is strongest (Houston, Austin/Cedar Park, DFW, South Texas, or West Texas) and where you think the biggest execution gap actually is. Heck, take me on from your part of the world and share with me how and what you’re doing there in the clouds and vacuum beyond the atmosphere is better suited to innovation.

Before you go, this March in Austin

SXSW March 14 -15, Space House will be a sanctuary for visionaries, pioneers and storytellers. Open to festival badge holders, 10 a.m. to 10 p.m. each day. – REGISTER HERE

I’m also officially involved with SXSW as a mentor so if you want to come talk formally (or informally), message me here and we’ll make it happen.

Miami, known for its beaches and nightlife, is far more than the art deco and the party destination rightfully earned wherein you’ll find something that feels like a real startup ecosystem: vibrant, international, and increasingly respected on global rankings. This is the story of how Miami and Florida evolved from a tourism-centric economy into a dynamic platform for invention, investment, and entrepreneurship, and what it still must do to mature into a world-class innovation hub.

I recently spoke with Innovation Maestro, , and Miami’s Melissa Medina, CEO of eMerge Americas, prompting in my policy and economic development work with cities, the following deeper dive on the city, with Founder Institute‘s local leaders Ryan Martin and Grace (. Spindel. Tune in here:

It’s tempting to start with hype, “Miami is the next Silicon Valley,” and for a stint, Miami leaned too far into being a cryptocurrency hub as it sought some attention from the buzz that surrounds innovation. Both are lazy and if you’ve read enough of my work, you know it’s also ignorant and misleading. So here we’re going to dig into why with the real narrative which is far more interesting and more useful for founders, investors, and policymakers: Miami is a crossroads city. That positioning (cultural, economic, and geopolitical) shapes both its strengths and its limitations as a startup ecosystem.

Miami’s DNA: Gateway, Maverick, Culture Creator

Miami has always been a narrative of connection and risk-taking. From early 20th-century land booms to its role as the economic bridge between North and South America, Miami has been a city built on the idea that borders are not the end of opportunity. That ethos, an openness to other cultures and markets, underpins why venture dollars now look at Miami differently. In the 2025 Global Startup Ecosystem Report, Miami ranked No. 22 globally and No. 10 among U.S. metros, reflecting not just raw growth but international reach and funding traction.

A couple patterns there deserve attention. First, unlike older, insular ecosystems, Miami’s appeal is intrinsically global. This isn’t accidental: its connections to Latin America and Europe make it attractive for founders looking beyond the U.S. market. Second, Miami’s rise isn’t solely about the usual suspects like fintech or web3; sectors like healthtech are gaining real traction, with startups like OneImaging (which raised $38 million) leveraging AI to solve practical problems in medical workflows.

There’s also a geopolitical dimension often overlooked: Miami isn’t just building consumer apps. It’s positioning itself as part of Florida’s national security tech ecosystem; combining defense, AI, autonomy, and logistics technologies. The state’s military infrastructure, aerospace activity, and research institutions feed into this “dual-use” startup layer where government, enterprise, and academic research converge.

That’s layered onto the basic economic incentives: Florida has no state personal income tax, no local corporate income tax, and policies that make it easier to capture capital and talent relocating from higher-cost markets.

From Gatorade to Advanced Genome Research: Florida’s Innovation Legacy

Florida’s contribution to invention is real, deep, and often misunderstood. Yes, Gatorade, invented at the University of Florida in 1965 to help athletes replace electrolytes, became a global sports drink phenomenon. But that’s just a start to align your focus around potential here in a way that I often encourage: alignment with unique strengths (or weaknesses) of a region of the world. Florida was home to early breakthroughs in mechanical refrigeration and air conditioning, technologies that made modern life (and modern industry) possible. Sunscreen was popularized here, concentrated orange juice was commercialized, and even major cultural industries like NASCAR have roots in Florida ingenuity.

Today, that legacy continues in places like the Cade Museum for Creativity & Invention, named after the Gatorade inventor, which is purpose-built to inspire current and future inventors. In 2020 alone, Florida produced more than 5,500 patents; a testament to a persistent innovation engine tied to universities, federal labs, and private R&D (one which I’d like to see and help evolve).

Even in more esoteric spaces, inventors from Florida find ways to add value: from consumer products to applied tech celebrated in the Florida Inventors Hall of Fame.

Every ecosystem needs its first believers, and in Florida, those weren’t VCs in hoodies - they were engineers & builders who chose Miami over Silicon Valley, and proved that you could build world-class products under palm trees.” - Ryan Martin; Managing Partner of Five Spheres Capital and Founder Institute Director

How the Economy Actually Works for Startups

Economically, Florida doesn’t have the entrenched corporate hierarchies of older tech hubs. That’s a double-edged sword. On one hand, new firms don’t have to battle decades of turf battles or cultural inertia. On the other, there isn’t the same density of seasoned entrepreneurial talent or legacy industry to absorb and scale early-stage innovation. The state’s growth, reflected in rising startup applications, shows demand for entrepreneurship is high.

Government plays a mixed role. Organizations like Space Florida have acted as de facto economic developers for specific sectors such as aerospace and manufacturing by consolidating authorities and financing mechanisms to accelerate investment. Local governments, from Miami-Dade to Tampa, have leaned into innovation strategy as a core economic development tool, not just an afterthought to tourism or real estate; this is, though, why we’re going to dig into the strengths and gaps in the region’s economy for entrepreneurs.

Notably, Florida’s policy environment is more laissez-faire than strategic. It’s designed to attract businesses through tax policy and regulatory simplicity, not to coordinate innovation around shared outcomes. You feel this in ecosystem gaps: funding spigots turn on for attractive seed and growth stages, or to chase an innovation bubble (as was evident with crypto) and so there’s less focus on pre-seed support or systematic capital bridge mechanisms.

Florida Companies and Founder Stories that Lay a Foundation

Florida’s startup landscape may not yet churn unicorns at Silicon Valley pace, but it is producing meaningful exits. In Tampa Bay, ConnectWise, technology management firm, sold for $1.5 billion and catalyzed a cybersecurity ecosystem cluster. Its founder, Arnie Bellini, reinvested returns into workforce development and AI/cyber education initiatives.

In Miami, founders like Matthew Vega-Sanz, co-founder of insurance infrastructure platform Lula, which raised tens of millions from premier Silicon Valley funds from which he moved on to launch Gail, show that Florida can breed and export globally competitive founders.

Miami has also become a magnet for international startups. Lluís Faus, co-founder of Barcelona-founded legaltech vLex, has Miami as his home base, enabling global scale for vLex, which landed a landmark $1 billion acquisition by Clio, underscoring Miami’s growing role as a hub for globally significant exits.” - Founder Institute Director, Grace Spindel

Added Ryan, “When Chewy‘s founders built a pet supply empire from Miami before their $3.35 billion acquisition by PetSmart, they created a blueprint: Florida could produce not just exits, but unicorns.”

Venture capital is real too. Florida Funders, a hybrid VC and crowd-funding platform, has catalyzed early-stage deals and syndicates statewide, partnering with angel networks to scale capital access. And in 2025, Florida startups raised more than $2.8 billion across hundreds of deals, with Miami anchored as the dominant regional center.

Startup Development Organizations and Capital Sources

Florida’s network of startup development organizations is expanding. In Miami, eMerge Americas functions not just as a conference but as a connective tissue between founders, investors, and global partners. It’s increasingly a place where defense, AI, and deep tech conversations intersect, showing that ecosystem identity is developing more than social media hype.

Other accelerators and coworking hubs (often organically grown, which should change) provide community and mentorship; but that means a critical shortage of world-class operator-mentors with multiple successful exits, and that gap limits founder learning loops.

Two critical co-working hubs anchor Miami’s founder ecosystem - not as desk providers, but as platform builders with real programming, capital access, and pathways to scale. Mana Tech operates programs like scale2miami, designed to support MVP-stage startups expanding into the U.S., while The LAB runs a very selective Miami Founder Residency program with focal.vc, serving as a launchpad for technical AI founders. “These builders have access to mentorship from focal vc and Miami-based unicorn founders,” noted Grace Spindel.

On capital, the state leans on a combination of angel networks, hybrid funds, and regional VC outfits. While big national funds will write Florida checks, a disproportionately high share of early capital still comes from local angel groups and syndicates. That’s healthy, but without larger funds anchoring later rounds, many ventures struggle to scale without leaving the region.

What I’ve highlighted, I hope, paints a picture of clear capability, some success supporting opportunity, and yet some challenges that I mentioned we’d cover in exploring gaps (and strengths).

Florida’s Hard Conversations: Ten Capacity Building Imperatives

The internal plumbing of ecosystem success starts with the fact that Miami’s ecosystem is undeniably dynamic, but “dynamic” isn’t the same as “mature.” Changing this is about infrastructure, incentives, and outcomes, and to do that, we look to 10 considerations of entrepreneurial capacity building:

1. Overcoming Siloes: Miami’s community feels vibrant, but founders still report fragmentation between sectors: health, aerospace, and defense operate in their bubbles where there could be overlapping alignment. Shared infrastructure and communication platforms are essential, not just meetups.

2. The Missing Middle: Seed capital exists and late-stage interest is rising, but the gap between early product-market validation and meaningful scale remains wide. That’s where Florida needs intentional impact: funds designed for that middle stretch.

3. Long-Term Funding and Incentives: Yearly boosts in VC raises are good news, but entrepreneurial strategy requires predictable support over decades, not boom-and-bust, and not leaning in on hype cycles. Florida’s incentive ecosystem should align with long-term capital commitments.

4. Measuring Outcomes, Not Activity: Ecosystems often count events, accelerators, and pitch competitions, but not exits, jobs created, or follow-on funding. Leaders need to shift toward metrics that matter.

5. Culture and Collaboration: Miami’s cultural diversity is one of its strengths, but collaboration doesn’t happen automatically. Incentives need to reward shared problem-solving, not just individual wins.

6. Inclusive Talent: Miami attracts high-profile founders and remote tech workers, but full inclusion (across socio-economic, cultural, and educational backgrounds) remains uneven. This isn’t an ethical goal; diverse talent equals stronger innovation. Particularly evident in how we’re seeing academic work increasingly dependent on creative and entrepreneurial people.

7. Environment for Peak Performance: Hot climates and traffic congestion matter. Founders need real 24/7 environments such as labs, venture studios, prototyping spaces, incubators, and reliable infrastructure, not just coworking spaces (nor coworking spaces masquerading as startup development organizations).

8. Aligning Government, Academia, and Industry: The more effective ecosystems (think Boston or Silicon Valley) have alignment across sectors. Speaking from my experience in Texas, this is something that lacking can seriously handicap an economy while frustratingly is also easily overcome (we’re working on it!). Florida is more like Texas, with pockets of collaboration, but alignment lacks strategic cohesion with measurable targets.

9. Reducing Risk Through Local Competitiveness: Startups succeed where markets are accessible. Florida needs to improve procurement pathways for local startups into government and enterprise clients.

10. Adapting Global Best Practices: Copy-pasting Silicon Valley doesn’t work. But treating proven frameworks as inspiration (not blueprints) will help build a unique Florida model. Starting with Founder Institute’s ecosystem canvas, for example, is an easy framework to apply.

Miami Excels and Can Improve

Miami’s biggest success is its ability to attract capital and attention. Investors increasingly write checks here because the city’s global story resonates: international reach, zero state income tax, and cultural magnetism. But excitement alone doesn’t build sustainable growth. To operationalize excellence, programs need rigorous recruitment of mentors who’ve built and exited companies, not just hosted events. They must spotlight success stories in ways that make real, repeatable recipes visible, not just social media fodder.

What you might appreciate is that Miami has the ventilator but it’s still building the heart. When founders can regularly find capital that stays in Florida for multiple rounds; when serial founders mentor the next wave; when government, research institutions, and funders align behind specific measurable goals, that’s when “ecosystem” turns into a lasting innovation engine.

Miami is not a newcomer to invention and risk-taking. Its culture has always been about connection and reinvention. But a culture of excellence, where the next billion-dollar company comes from and stays in Miami, requires the kind of gritty, strategic investment most ecosystems take decades to build.

Founder Institute, launching soon with early enrollment here, ending March 1st, for programming live in April, addresses many of these gaps head on, bringing those experienced mentors, opening collaboration and competition, and putting in place the frameworks, methodologies, and systems wherein startups thrive.

A challenge for founders: what’s your part in shaping that future? Entrepreneurs don’t just benefit from ecosystems, they build them. Miami’s next decade depends on founders who think that way.

In advance of enrollment, or if you’re not a startup founder, on February 19th, join here, Anna Ratala, 2x Founder & CEO, Zvook, Adam Garfield, Exited Founder & CEO of SpeedETab, Lauren Pencek , COO, Graphika and Nimbus Co-founder, Satadru Sengupta, for Miami Startup Office Hours - a focused, group session with people who’ve actually built companies and made (and fixed) hard mistakes across fundraising, hiring, scaling and pivots.

Here for Office Hours with Miami

I’ve found that one of the strengths and distinctions of New York City, from which we might all learn for our own local economy, is that it doesn’t have an ecosystem the way people say it at conferences, like it’s a single organism. A couple weeks ago, we explored here that New York is what I called in the prior piece “a rotating set of sector-specific machines that manufacture startups the way the Garment District used to manufacture clothing.” That framing explains why NYC keeps producing venture-scale companies in specific categories (fintech, insurtech, regtech, adtech, martech, legal ops) even when the broader market mood swings between euphoria and hibernation.

Promised then was a deeper look at the startup ecosystem in New York so let’s get into it.

This is a follow-up to that “Sector Machines” argument (read it first, here, if you haven’t). The punchline is simple: invention and innovation create the spark and draw attention; specialization multiplies attention by attracting the exact experience, networks, and buyers who turn a spark into a compounding flywheel. New York is not the best place in the world to invent in a vacuum; it is one of the best places in the world to commercialize under pressure: under population density, under institutional risk, under regulatory scrutiny, and under “show me the audit trail.”

We’re going to use the “10 Considerations of Startup Economic Development” to audit NYC, because if you’re going to talk about ecosystems we should be using some model for analysis.

New York’s culture was built for transaction, risk, and reinvention

New York’s startup advantage wasn’t born in coworking spaces. It came out of centuries of being a trust-and-logistics metropolis: shipping and insurance, finance and credit, media and advertising, real estate and law; industries where strangers transact at scale, where mistakes are expensive, and where the winners are the people who can reduce friction without increasing risk.

That’s why New York’s macroeconomic size is not just intriguing. NYCEDC describes the metro economy as about $2 trillion, roughly 9% of U.S. GDP. Big economies can absolutely produce bureaucracy; New York does that too, the difference is that New York’s bureaucracy sits adjacent to unusually dense clusters of buyers with budgets, compliance requirements, and internal ops teams. That adjacency is the soil where enterprise workflow startups grow. When your customer is a department, the product is never “an app.” The product is a measurable reduction in cycle time, leakage, or exposure.

New York also has a long cultural habit of pulling talent in, smashing backgrounds together, and then charging them rent until they do something useful. Immigration isn’t a vibe nor controversy; it’s an engine. This is a city where ambitious people arrive broke, then learn to talk their way into rooms they don’t deserve, until they do. It’s a training ground for sales, grit, marketing, and coalition-building, which is most of entrepreneurship once you stop romanticizing it.

New York’s inventions are largely “urban operating system” upgrades

The myth of innovation is the lone genius in a barn. Rather, that’s not fair, that’s a very accurate history of Silicon Valley. New York’s history is closer to: someone got tired of the world being inefficient and decided to fix the bottleneck that was blocking scale.

Start with vertical transportation. Elisha Otis publicly demonstrated the safety elevator concept in New York (the famous Crystal Palace demonstration “safe vertical space” believable), and that shift made skyscrapers commercially viable instead of just architectural bravado. You can’t have modern Manhattan (finance, law, media, dense headquarters) without monetizing height.

Then air conditioning: Willis Carrier’s “first modern” system traces directly to a Brooklyn printing problem (humidity wrecking print quality) so the invention wasn’t “comfort,” it was industrial reliability in a dense city. Carrier’s own materials still tie the origin to a Brooklyn printing plant and that humidity-control requirement. Solve a practical constraint, then scale the solution into infrastructure.

Then credit rails in, perhaps, the origin of FinTech. Diners Club’s story is literally a New York dinner problem: forgotten wallet embarrassment turned into generalized consumer charge-card infrastructure. “Trust at scale” is one of New York’s recurring inventions, and fintech is basically the modern continuation of that.

Then communications. Edwin Howard Armstrong’s work is deeply tied to Columbia and New York’s engineering culture; Columbia itself frames his contributions across regenerative circuits, superheterodyne, and FM. Again: dense cities demand systems that work reliably, loudly, and repeatably.

Notice the pattern: New York repeatedly produces inventions and companies that make dense economic life possible - transportation, climate control, credit, communications - and modern “New York categories” are software versions of the same thing: reduce friction, increase visibility, create auditability, and keep the machine running.

The economy: huge, yes but more important, it’s buyer-dense and risk-priced

A $2T metro economy is impressive, but it doesn’t automatically manufacture startups, it manufactures meetings. New York’s difference is the composition of its demand: finance and insurance (risk pricing), media and advertising (attention markets), real estate (capital stacking), law and compliance (rules and enforcement). Those sectors create a permanent appetite for software that makes decisions explainable and operations measurable.

Government matters here, but not the way people play politics. Government doesn’t “create wealth,” it decides whether entrepreneurs can, and New York is a great case study in both directions (enabling and constraining). Policy’s core role is to defend rights and establish rules that allow markets to allocate capital toward value.

In New York, you can see the enabling side in intentional “applied sciences” and commercialization initiatives. Cornell Tech came out of the Bloomberg-era Applied Sciences push (Cornell and Technion won the bid to build a major applied-science campus on Roosevelt Island). That’s government behaving like a competent allocator of conditions: land, capital, convening power, and a mandate to build an institution that produces talent and commercialization pathways.

At the state level, START-UP NY is another example of government trying to pull levers around university adjacency, offering tax benefits for approved businesses located on or near participating campuses. Whether such programs are perfectly executed is a separate debate; the point is that New York (state and city) has repeatedly tried to connect academia, incentives, and economic outcomes, instead of just cutting ribbons for another “innovation center.”

NYCEDC’s more direct interventions are also instructive: LifeSci NYC is framed as a $1B initiative intended to grow life sciences R&D and jobs. That’s New York acknowledging a truth most cities avoid: you don’t get a category by wishing; you get a category by building the institutions, capital pathways, and real estate that make it feasible.

By the way, readers in policy, economic development, or in office, we’re here to advise you on this. Connect with our work for governments here.

Why NYC is already a fintech and insurtech hub, and why legaltech is “up for grabs”

When you want proof that New York is structurally advantaged in fintech, start with the state’s own framing: Empire State Development explicitly positions New York as a fintech powerhouse and reports billions in VC activity and a large base of fintech startups. Appreciate if you’re elsewhere, this framing is one of the most important things you must do to help your entrepreneurs - you’re not a tech hub, you’re not a startup hotspot, you are something specific that matters.

Then look at the infrastructure that exists when buyers are nearby. The FinTech Innovation Lab (run by Accenture and the Partnership Fund for New York City) is clear about the model: it pairs selected startups with senior-level executives at major financial institutions and VCs, and it publishes program outcomes like proofs of concept and capital raised. That’s customer development institutionalized; most ecosystems say they want “more pilots.” New York operationalizes pilots as a repeatable machine.

Insurtech is the same logic with some paranoia; insurance is finance’s more anxious sibling: underwriting, claims, fraud, catastrophe modeling, compliance (paperwork and probabilistic risk sitting on legacy systems). That’s the kind of environment where software and now AI thrive, and the Lab itself explicitly runs insurtech alongside fintech in New York. The key advantage isn’t “talent” in the abstract; it’s that you can hire people who’ve actually done the job inside carriers, brokers, MGAs, and compliance functions. Sector experience turns “we automate insurance” into “we cut FNOL triage time and leakage” - only one of those sentences gets procurement to move (take note founders).

Legaltech is where this gets fun, because it’s not “behind,” it’s cautious by design. The legaltech wave that matters now isn’t marketplaces or templates; it’s operational infrastructure for in-house teams and AI-native compliance workflows. That’s why Checkbox’s framing is so on: the company positions itself as an “AI Legal Front Door,” capturing requests where business users already work and converting messy intake into structured, measurable workflow. Legaltech is “up for grabs” because there still isn’t a universally adopted operating system for legal work. Finance has ERPs, CRMs, and well-worn implementation playbooks. Legal departments often have a Frankenstein stack: email, intake forms, CLM, e-billing, knowledge bases, outside counsel portals, and whatever got purchased after the last conference. The winners will be the platforms that turn legal work into auditable operations.

If you’re hunting for incubators and accelerators in New York, you quickly notice the same sector-machine reality: they’re clustered around buyer bases, universities, and industry-specific pathways.

NYU Tandon Future Labs are a great example because they’re explicit about being a public-private partnership focused on incubation and economic impact. That matters because it’s not just “space,” it’s a commercialization mechanism connected to the city’s priorities.

Techstars NYC is one of the accelerator models plugged into the city’s category mix; Techstars is transparent about its standard accelerator structure and investment terms, and it continues to recruit cohorts that reflect NYC’s strengths (AI infrastructure, fintech, government tech, compliance, and more).

ERA (Entrepreneurs Roundtable Accelerator) is another anchor: an accelerator plus seed capital plus a network, and it publishes its own scale claims (hundreds of startups, billions raised).

Then you have “buyer-integrated” programs like the FinTech Innovation Lab, which is basically the opposite of demo day theater because it’s structured access to senior decision-makers and proofs-of-concept pathways because the institutions themselves are involved.

Founder Institute’s impact in New York, with Kenneth Parker, Lara Hejtmanek, and Reid Hamilton, is likely the best place for everyone to get involved if only because the mentor network in New York is immense. Programs are starting again soon so check it out as a founder, mentor, or potential partner.

On the funding side, New York has the full ladder, from angels to mega-funds. The most important point isn’t that there are many firms; it’s that New York’s investing base includes people who understand procurement cycles, regulation, and enterprise ops. Long ago as I moved to Texas, I gave a talk about how Silicon Valley investors seek scale, Texas’ seek revenue analogous to putting a hole in the ground and drawing oil, and New York’s are understandably drawn from their finance roots.

Angels: New York Angels is one of the most established organized groups; it frames itself as a long-running angel organization and points to early investments in notable companies.

Venture: the city has iconic firms and a deep bench across stages: Union Square Ventures, Insight Partners, Thrive Capital, Greycroft, FirstMark, Primary, Lerer Hippeau, IA Ventures, RRE, and more. Different lists exist and vary in quality, but even mainstream ecosystem roundups emphasize NYC’s density of VC shops.

And then there’s the “institutional adjacency” capital that makes New York different: corporate venture arms, private equity, hedge-fund talent migrating into venture, and sector specialists who treat regulated enterprise as a home turf rather than a scary place full of sales cycles.

This is also where the “Sector Machine” framing should shake economic developers awake: the most valuable capital isn’t money. It’s expert capital - operators, compliance leaders, risk managers, procurement veterans - because they are the ones who turn an innovation into something an institution can actually buy.

Ten considerations of startup economic development in New York, scored like an adult

Now let’s run the 10 Considerations and be honest about what New York does well and where it’s still stepping on rakes. This is work I do for cities throughout the world, here in a brief assessment, so if you’re interested in exploring your own strengths and weaknesses, so you can address the gaps and reinforce the distinctions, let me know.

1) Overcoming silos through shared infrastructure and community. New York is simultaneously excellent and terrible here, which is very on-brand. Inside sectors, collaboration is natural because proximity to buyers and peers forces it: fintech people run into fintech people; legal ops people find each other because the city is dense and the career pathways overlap. Cross-sector, New York fractures into tribes. NYC’s advantage is that sector machines are strong enough that founders can still progress without a unified “community.” The improvement opportunity is citywide shared infrastructure: interoperable calendars, shared mentorship CRM, cross-sector founder services that don’t require joining the “right” clique. NYCEDC’s Venture Access NYC explicitly exists to build a more inclusive pipeline and address inequities; great signal, but the broader “shared rails” problem remains. Frankly, easily addressed, I’d put this infrastructure under the ecosystem and onboard entrepreneurs with assessments while connecting mentors throughout programs.

2) The missing middle. New York can start companies and it can scale companies, but it still has a widening gap between “seed-stage darlings” and “established institution.” Part of that is structural: enterprise sales cycles are naturally slow, and regulated verticals hinder premature scaling. The missing middle shows up when founders can raise a seed on narrative, then discover that procurement doesn’t care about narrative. New York’s fix is not more pitch events; it’s more structured commercialization pathways like the FinTech Innovation Lab model: proofs of concept, buyer access, and measurable outcomes. This might be one place in particular where startups should lean in more on public affairs and policy professionals so as to work the system.

3) Long-term funding and incentives for the ecosystem builders. New York is good at funding big initiatives (Cornell Tech; LifeSci NYC) because it can marshal public and philanthropic capital, but it also churns programs when political priorities change. The city’s strength is that major institutions are permanent, and they can underwrite long-term efforts. Cornell Tech’s origin story shows deliberate public-private planning, and LifeSci NYC shows scale. The improvement is consistency at the “middle” layer: sustained funding for the operators running programs that move founders from prototype to repeatable revenue. This is something EVERYWHERE needs to explore doing because it’s the under-appreciated community builders doing the heavy lift of turning institutional startup programs into part of your culture.

4) Measuring outcomes, not activity; promoting success so progress is visible and repeatable. New York has pockets of strong measurement because regulated industries demand measurement. The gap is ecosystem reporting: too much is still framed as “jobs created” (good) and “events held” (noise) when it should also include more pilots executed, procurement cycles shortened, follow-on revenue, retention of scale-stage firms, and category leadership. NYCEDC’s economy reports are helpful at the macro level, but founders need micro-level signals.

5) Culture and behaviors that make collaboration natural, not forced. New York’s culture makes certain types of collaboration effortless: dealmaking, sales, partnerships, and talent poaching (yes, that’s collaboration in New York’s dialect, it’s not a bad thing; it grows talent and transfers experience to where best allocated). The improvement seems to be making collaboration less dependent on social status and more dependent on shared outcomes: buyer-driven cohorts, operator-led working groups, and compliance playbook exchanges.

6) Including the full spectrum of talent. New York has enormous talent diversity; it also has some gatekeeping. Venture Access NYC exists precisely because inequities persist in who gets funded and who gets connected. The improvement moving forward from panels about diversity to building more on-ramps where under-networked founders can get buyer conversations, not just “mentorship.” The city can do this better than almost anywhere because the buyers are local.

7) Architecting environments that enable peak performance. New York’s environment is simultaneously a performance enhancer and a tax. The density creates serendipity and urgency; the cost and stress create burnout and short-term thinking. The best “peak performance” environments in NYC are not generic coworking spaces; they’re sector-specific hubs where founders can move fast because the right expertise is physically and socially nearby.

8) Aligning government, academia, and private sector around shared outcomes. New York has some of the strongest examples in the country and since I’ve covered this a bit already, let’s just jump into being better: too many cities (including New York, sometimes) try to be “everything tech.” The winning approach is to pick a few compounding categories and align research, talent, procurement, and capital around them. New York City does this, as we’ve explored; double down.

9) Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness. This is where New York is elite; the city’s startups tend to reduce risk and compress cycle time inside institutions, because the institutions are right there.

10) Global best practices adapted, not copied. New York’s best practice is not “be New York.” It’s: build sector machines by concentrating buyers, talent, regulation fluency, and capital into tight loops. That’s what other regions can adapt without pretending they’re Manhattan.

Where New York still needs to improve (yes, even New York)

New York’s biggest weakness is the same thing that makes it powerful: it’s so dense and so successful in certain categories that it can tolerate fragmentation and still win. That’s a dangerous complacency because it means too many founders fall through cracks that shouldn’t in a city with this much capital and expertise.

The second weakness is affordability and operational drag. When the cost of “existing while building” is extreme, founders bias toward faster narratives and earlier fundraising rather than slower, more durable customer development. That’s not a morality issue; it’s a survival response. Interestingly, it actually works both ways since more expensive cities tend to orient founders to the high bar of accomplishment, the need for resources, and the demands of focus on acquiring both. The fix isn’t rent control for startups, it’s more buyer-integrated pilots, more sector accelerators with real procurement pathways, and more shared infrastructure that reduces the time wasted on networking games.

In both cases, expertise exists, so I’d advise getting in touch with Ken, Lara, and Reid, or with government-oriented startup development organizations such as what we’re doing in Founder Institute.

Invention gets attention; specialization compounds it

New York’s story isn’t “a lot of startups.” It’s that the city repeatedly upgrades the operating system of dense economic life, and then it builds sector machines that turn those upgrades into companies. Appreciate in an assessment of your city, that Silicon Valley will always be the casino for technological upside; New York will always be the risk desk with an aggressive bonus structure. Neither replicable, nor should you be trying to copy either... In a world where AI is turning workflows into software faster than org charts can update, the cities that win won’t be the ones with the loudest brand, they’ll be the ones with the tightest loops between innovation, buyers, and specialization - figure that out.

With such a substantial and dense population, it’s difficult to say that New York City has a startup ecosystem as though a monolithic slice of the economy and yet, it’s precisely because of New York’s urban density that it’s a leading example of an advanced startup community. New York is a rotating set of sector-specific machines that manufacture startups the way the Garment District used to manufacture clothing: it concentrates buyers, trains relevant talent, organizes pertinent regulation, promotes itself for what it is, and aligns money into a square mile or so until the outcome becomes inevitable.

The easiest way to see that this is how New York really works is to stop staring at “NYC raises a lot of venture capital” (true, but boring) and look at what just got funded and why. Checkbox’s $23M Series A was announced out of New York this week, led by Touring Capital, with participation from Peak XV Partners (formerly Sequoia Capital India), Conductive Ventures, Tidal Ventures, Five V Capital, and angels including Jerry Ting. That is not a random pile of logos, that’s a signal that investors are leaning harder into legal operations as an enterprise workflow category, and that they believe the “front door” problem (intake, triage, measurement, automation) is now big enough (and AI-ready enough) to be a venture-scale wedge.

I write and talk a lot about how cities need to think beyond their borders while specializing after understanding regional strengths and weaknesses. Many try to be like Silicon Valley while neglecting that it’s a region, not a city, making it all but impossible for a city to replicate what happens thanks to 4 (cities), while revealing that it’s the culture and experiences there that many certain kinds of startups, with fundable outcomes, work well. It can be hard to grasp that reality without spending time there, so let’s instead look at this other extreme of a city so populated that while you can’t replicate that either, it shows the importance of specialization and focus in civic and economic development.

Checkbox literally frames itself as the “AI Legal Front Door,” capturing requests where business users already work (email, Slack, Teams, Salesforce, intranet), turning the messy human ask into structured work. That’s New York energy in a sentence: convert chaos into an instrument panel, then sell the dashboard to institutions.

In Checkbox as news pertinent to us all, the story isn’t “LegalTech raised money,” the story is ‘sector specialization is what turns innovation into compounding attention.” Innovation and invention create the sparks. Specialization is how a city turns the spark into a steady burn that attracts the exact people who matter: operators, risk managers, compliance veterans, buyers with budget, and investors who already know how procurement works in that vertical.

Why New York was always set up to win at startups (whether anyone called them that or not)

New York’s startup scene didn’t start with coworking. It started with the fact that New York is a logistics-and-trust city. For centuries it has been the place where strangers transact at scale: ships, commodities, insurance, credit, media, fashion, real estate, and law. The city’s comparative advantage has never been invention in a vacuum. It’s commercialization under the pressure of exposure (population), immigration, and demand.

You can see it in the big picture; New York City Economic Development Corporation describes the New York metro economy as the largest in the nation, generating about $2 trillion in GDP (roughly 9% of U.S. GDP). Big economies don’t automatically create startups; they create bureaucracy. But New York’s specific mix (finance, insurance, and media) creates something different (something every city should invest in creating): a permanent demand for tools that reduce risk, compress cycle time, and make decisions auditable.

That’s why New York keeps producing high-frequency categories like FinTech, InsurTech, RegTech, AdTech, MarTech, and now legal ops automation. In New York, the customer isn’t “a customer.” The customer is “a department,” and departments buy outcomes (reduced fraud, faster underwriting, fewer outside counsel bills, better compliance). Checkbox’s pitch is basically stop losing work in Slack threads and email chains; route it, measure it, automate it. New York is one of the few cities where that sentence is both a product spec and a moral philosophy - hence my framing this as an extreme example from which to learn about developing your ecosystem distinct from Silicon Valley: you can’t achieve being either, but you can learn from and replicate parts of what each do well.

If you want the simple way to think of that: Silicon Valley is a casino for technological upside while New York is a risk desk with a very aggressive bonus structure. Both can mint giants, different kinds of giants, as long as you know the “rules” of what’s being done.

Innovation and invention: New York’s long habit of making the future practical

New York has a long history of inventions that are less romantic genius in a barn and more someone got tired of the world being inefficient.

Take the elevator. The safe elevator (the thing that made skyscrapers commercially viable instead of just architectural bravado) is tied to Elisha Otis, who developed the safety mechanism in Yonkers and demonstrated it publicly in New York; it’s impossible to overstate how much that changed urban economics. New York didn’t just build up; it monetized vertical space.

Take air conditioning. Willis Carrier designed the first modern air-conditioning system in 1902, tied directly to a New York printing problem (humidity messing with paper and color registration). Not an invention to make summers tolerable, it unlocked modern office density and, later, entire regional economic shifts, because the Media Department needed a solution to runny ink.

Take generalized consumer credit cards. In what you probably perceive to be a finance sector play; Diners Club’s origin story is New York where charging meals across multiple merchants required scaling trust into infrastructure.

Edwin Armstrong’s work is deeply tied to Columbia and New York’s early electronics culture, and FM’s development is part of the city’s broader history of communications infrastructure given the demands of tremendous population underserved by AM.

This is the narrative of an entrepreneurial city. New York repeatedly invents or scales the tools that make dense economic life possible: vertical transportation, climate control, credit rails, communications. And dense economic life is exactly what modern startup categories like FinTech, InsurTech, and LegalTech serve.

Hopefully Evident: New York is a FinTech hub

Empire State Development points out that New York is ranked #2 in FinTech investment, citing more than $4.6B in VC across 377 deals in 2023, and saying New York is home to 1,500+ active FinTech startups (with 115 unicorns). Even if you want to argue about rankings (people love arguing about rankings so please, join the fray and debate), the underlying reality that the city is stacked with financial institutions, market infrastructure players, and buyers who can deploy FinTech inside real operations.

The thing to appreciate for founders and the development of your ecosystem is that FinTech in New York isn’t a theme, it’s the implication of the adjacency. You have the exchanges, the banks, the asset managers, the payments networks, the compliance apparatus, the auditors, and the armies of analysts who know exactly where money leaks out of a system. That means founders don’t have to guess what matters, they can walk into the problem. When mentoring throughout the world, finding sufficient customers to talk to so as to validate an idea, remains one of founders greatest hurdles; hopefully you can see why I want your city to A) focus on what it does well and B) promotes itself for what it is, founders fail to a great extent because of both sides of this coin - a coin cities can fund.

You see this in the way New York FinTech companies scale: expense management, fraud, compliance, payments orchestration, lending infrastructure, wealth tech, risk analytics. Ramp (a New York-based FinTech) has a $500M late-stage round valuing it at $22.5B and explicitly ties growth to product expansion including autonomous AI agents for finance workflow. That’s not a cool app; that’s software serving the finance department from the inside from explicitly where it makes sense that would be the case.

Crucially, New York has sector accelerators that exist because the buyers are there. The FinTech Innovation Lab (run by the Partnership Fund for New York City and Accenture) is explicit about its model: put startups in a 12-week sprint with access to senior leadership at dozens of financial institutions; it tracks alumni scale (hundreds of alumni, hundreds of proofs of concept, billions raised) and runs both FinTech and InsurTech tracks. That’s customer development as a sport; exactly what we should expect of accelerators and precisely why Founder Institute has been on the ground here for years, getting founders to the stage appropriate to scale.

Evan Wong, Co-founder & CEO of Checkbox, put it in a way founders share after they’ve survived the first few years, “I had the most incredible learning experience. I would definitely not be the founder I am today without the Founder Institute being my backbone.”

New York is also an InsurTech hub (because insurance is finance’s more paranoid sibling)

Insurance is one of those sectors everyone uses and almost no one understands, which is why it keeps producing venture-scale opportunities: underwriting, claims, fraud, distribution, reinsurance, compliance, catastrophe modeling, cyber, and now AI-driven pricing and risk selection.

The city’s advantage here is also structural; New York has major insurance carriers, brokers, and professional services density, plus the regulatory environment that forces discipline. The FinTech Innovation Lab runs that InsurTech track in New York in parallel with FinTech. So, zoom out for a moment and download this paper from Milken Institute because it’s study like this, into trends, that everyone should be doing to work out how to advance your own ecosystem, lean into New York, or to figure out where to launch or invest in a venture of your own.

Whether the market is hot or cold in a given year, underlying drivers persist. In this case, just as is the case with finance here, insurance is paperwork + probabilistic risk + legacy systems = three things software (and now AI) loves to attack and which will always be opportunity here.

New York’s secret weapon in InsurTech is the same as in FinTech: you can hire someone who has actually done the job inside a carrier, broker, MGA, or compliance function. It’s frequently pointed out that the average age of a successful founder is 44 because of inside experience and connections; well, you can put those in place with cofounders or an experienced team, what you can’t do is pretend and make it up as you go. Sector experience is the difference between “we automate insurance” and “we reduce cycle time for FNOL claims triage and cut leakage by X%;” One is a pitch and the other is revenue.

LegalTech is up for grabs and New York is one of the few places that can actually win it

First, a reality for LegalTech founders: law is not “behind,” law is cautious by design. The solutions are in risk allocation with consequences. I was in Croatia not long ago and one of the more intriguing startups was working on LegalTech for Europe; to which I impressed, “how do you scale to the other countries while handling the never-ending changes in local law?”

The LegalTech wave that matters now isn’t a marketplace for lawyers or another contract template, it’s operational infrastructure for in-house teams, and increasingly, AI-native compliance and regulatory workflow. Not easy, which is why Checkbox is a bellwether both a case study and opportunity.

This Series A announcement from Checkbox is basically a manifesto about legal teams drowning in ad hoc intake channels and lacking visibility; the product is positioned as orchestration plus automation plus measurement; exactly the kind of work New York institutions will pay for, because legal spend is enormous, scrutiny is constant, and outside counsel bills are the tax you pay for having no internal system.

Another recent signal is even more New York-coded: Legal AI startup Norm Ai secured a $50M investment from Blackstone and announced the creation of an independent law firm, Norm Law LLP, headquartered in New York, explicitly aimed at “AI-native” legal services for financial services clients. Read that again: an AI company plus a major financial institution investor plus a New York-based law firm wrapper. That’s a bet that the boundary between software and legal service delivery is getting redrawn, and it’s getting redrawn where finance and regulation collide hardest.

Meanwhile, the biggest legal AI platforms are racing to integrate authoritative legal content, not just generate plausible text. For example, LexisNexis partnered with Harvey (AI in contract analysis, due diligence, compliance), letting Harvey users access LexisNexis content directly inside the workflow, an explicit move to solve the “your AI can’t cite the law reliably” problem. Granted, not based in New York, but we won’t hold that against them.

That being the case is kind of why LegalTech is “up for grabs.” There is no universally adopted operating system for legal work the way finance has ERPs and CRMs. Legal departments are a Frankenstein stack of email, intake forms, CLMs, e-billing, knowledge bases, outside counsel portals, and whatever someone bought after a conference three years ago. In the incredible accomplishment of companies like Harvey and Checkbox, we see the culture, economy, and experience of Silicon Valley (Harvey) while also witnessing the impact of New York (Checkbox); both more than capable in their own right but for very different reasons as hubs of innovation and the future of our economy.

New York is one of the few places with enough density of (1) legal buyers, (2) regulated industry clients, (3) legal ops talent, (4) enterprise budgets, and (5) investors who understand compliance cycles to turn that wedge into specific categories and they provide us all with some of the best examples of why your city should be doing the same.

From the freezing tundra of Austin, Texas, this weekend I was asked, “Is it true that the U.S. became a leading industrial power through entrepreneurship, innovation, and mass production, creating immense wealth?” and it struck me that this city being quiet on a Monday when the northern part of the United States is at work, is a perfect reflection of if, how, policy and entrepreneurship work in concert to create opportunity.

We’re going to talk about America here so for my readers elsewhere, put yourself in the shoes of policymakers in your part of the world, and consider the role local and national government plays in helping or hindering the work that you’re doing to make the world a better place.

America didn’t become an industrial superpower because a Senate subcommittee “managed innovation,” it happened because a ridiculous number of people with sleepless night habits kept figuring out how to make things cheaper, faster, and more reliable… and then scaled those improvements through mass production and national markets. The United States is a great petri dish in the creation or limitation of wealth through which, for most of its history, created unparalleled wealth throughout the world. The U.S. didn’t “discover” prosperity; it manufactured it.

And yes: entrepreneurship, innovation, and mass production are the core reasons the U.S. became a leading industrial power and then a leading global economic power.

The cleanest way to see it is to track what changed over time: not that Americans were uniquely virtuous, but that the U.S. built a system where (1) people could take risks and keep the upside, (2) ideas could be turned into repeatable processes, and (3) large markets could be reached cheaply enough that scale mattered. When those three show up together, “immense wealth” develops naturally.

Entrepreneurship + innovation + mass production: the American flywheel

Long before “startup culture” became a buzzword even I use too much, Americans were doing the same basic thing: spotting unmet demand, applying a new method or technology, and then scaling distribution. The “American System of Manufactures,” interchangeable parts plus specialized machinery plus organized assembly, is one of the earliest forms of modern scale economics. Michael Goodfriend’s work with Carnegie Mellon University, put together with University of South Carolina’s John McDermott, describes it as using interchangeable parts to reduce reliance on craft fitting, paired with the invention and diffusion of specialized machines.

That’s the bridge from “invent something” to “produce a lot of it without losing your mind (or your margins).” Interchangeability isn’t sexy, but it’s basically the reason you can buy an affordable anything.

When I look at the modern economy and see something like WordPress being used for most of the websites on the internet, or even ChatGPT interchanging all that’s available there, we see how humanity’s history with machines and scalability, applies even today.

Early versions of that system emerged in U.S. military armories and industrial manufacturing experiments, the benefits of which spilled out into public life as we uncovered the process of scale creating an increase of supply driving affordability: a breakthrough in process and standardization, followed by a flood of entrepreneurs who build businesses around it.

Then the U.S. did the very American thing: it scales that flywheel across a continent.

How? Think of transportation and logistics as silent partners and you’ll appreciate why the internet was coined the Information Superhighway. When moving goods costs too much, local artisans win. When moving goods gets cheap, scalable producers win. The Erie Canal is an early “oh wow” moment which slashed transport costs and time, effectively enlarging markets and enabling specialization and consumer trade. Railroads follow, then highways, ports, and air freight; the U.S. industrial story is also a logistics story uncovered in how Detroit and Chicago became the major cities that dominated the early 20th century economy.

Converting hand labor into seemingly limitless supply, mass production is where the wealth literally makes noise. Henry Ford is the cliché example because his impact was so evident: the assembly line and standardized parts turned automobiles from luxury items into mass consumer goods, which then created entire supply chains, cities, and labor markets around that scale.

And when the U.S. needed to prove it could out-produce enemies, World War II wasn’t so much the catalyst of American production, as it’s known, it was more like the venture capital investment in what already existed in nascent (“startup”) form. Faster than AI took all our jobs, U.S. aircraft production became the largest sector of the wartime economy (h/t Christopher Tassava), spilling out into public life in the form of the American airline industry and demise of the country being connected by rail (a sore spot for us still).

Hundreds of thousands of aircraft produced not because the Wright Brothers flew but demand, policy, and will, created the circumstances that organize capital, labor, and process at scale. That is how wealth is created: productivity – more output per unit of input.

Government doesn’t create wealth, but it can absolutely make it possible

A little aggravation of mine is hearing the trumpet from the White House celebrating how many jobs the President’s economic policy created. To be blunt and a little harsh, the two dumbest takes in American politics are (a) “government has no role” and (b) “government creates the wealth.’

Those assertions do a discredit to entrepreneurs while misleading people in ways that enable governments to get involved in the wrong ways, hindering value. Entrepreneurs convert uncertainty into products and services people pay for. Innovation creates new value by improving capabilities or reducing costs. Marketing and distribution decide whether the value becomes a business or stays a lab demo. Government doesn’t do that loop well because it can’t reliably price risk, it doesn’t face competitive discipline, and it rarely gets punished for wasting capital.

But government does matter, because markets require rules, enforcement, and shared infrastructure. Economists have been direct about this for decades, hoping the right role and responsibility sinks in. Douglass North’s work on institutions argues in Journal of Economic Perspectives, that institutions shape incentives and thereby the direction of economic change. North followed that research with what is called the “credible commitment,” a warning label: for investment and growth, the state has to credibly commit not to expropriate returns after the fact

“Institutions are the humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange,” North in the simply named paper, ‘Institutions.’ “Institutions provide the incentive structure of an economy; as that structure evolves, it shapes the direction of economic change towards growth, stagnation, or decline.”

I’ve bolded stagnation and decline in quoting him because we’re all too easy to overlook the fact that the institution of government causes stagnation and decline just as much as it can foster the creation of wealth. Institutions have been devised by human beings to create order and reduce uncertainty in exchange, and they can just as easily enable restrictions, costs, or monopoly controls, that make things worse.

Still yes, government can help, when it does three things well.

1) Defending rights: property, contracts, speech, and the freedom to trade

If you want a society where people invest, invent, and build, you need them to believe the upside won’t be stolen by a monarch, a mob, or a bureaucrat with a pen and a crusade.

By the way, it’s no surprise to me that this is why Intellectual Property incumbents got a little pissed off at me when I said they’re taxing innovation

The Boston Tea Party era is often reduced to a children’s book about taxes, but it’s also about the legitimacy of extraction and monopoly privileges; every summary of the Tea Act consequences emphasizes the monopoly power and taxation legitimacy as triggers of revolution. The point isn’t “taxes bad;” the point is that arbitrary extraction and monopoly favoritism poison investment incentives.

We can (and should) look further back in American history. Most Pilgrims certainly weren’t libertarian saints; yet the early American experiment is saturated with fights over conscience, belief, and autonomy. Study of those who emigrated to the New World largely reflect religious nonconformity and persecution as key drivers of migration decisions (interesting, that the same thing could be said of a lot of migration today). The long arc of those foundational values eventually shows up legal commitments to speech and belief in the United States, two core issues which you might not fully appreciate the implication of in entrepreneurship… Speech is how markets coordinate whereas when you clamp down on expression, you don’t just hurt culture; you cripple discovery, persuasion, and trade.

Then, in the 20th century, “defending rights” grew to include those protections beyond U.S. borders with defense of trade routes and the ability to move goods globally. The Council on Foreign Relations’ Sea Power: The U.S. Navy and Foreign Policy is explicit about the U.S. Navy’s dominance being a guarantor of global trade. We can argue about the politics of it, but economically it’s straightforward: secure sea lanes reduce the risk premium on trade, lower risk premiums increase investment and commerce. Such protections are the foundation of global capitalism.

Here is where I hope, you can again see the implications to the Information Superhighway and how that forum of speech and medium of trade is subject to the exact same considerations, well beyond the interchangeability of WordPress. The U.S. became rich in part because it kept widening the “market for ideas,” not shrinking it. If we treat modern communication networks like controlled utilities where permission is required to speak, ship, or build, we’re not “saving democracy,” we’re kneecapping entrepreneurship while pretending it’s a moral victory. Rather, that’s not quite right, it isn’t pretending a moral victory, it’s propaganda that it needs to be controlled instead of protected, to “keep us safe.”

2) Investing tax dollars in infrastructure: the boring stuff that makes scale possible

Infrastructure is the underrated enabler of mass production. You can’t do national markets without roads, ports, rail, power, and communications. Entrepreneurs can build factories; they can’t sensibly build the interstate system.

The Erie Canal example is the principle: reduce transport friction and markets expand. The interstate highway system is the 20th-century version: restructure logistics, commuting, distribution, and regional specialization. The Federal Reserve Bank of Richmond published that the relationship of that with growth. Academic work keeps finding the same general direction: infrastructure investment can raise productivity and income growth under certain conditions, even as the details vary by place and design.

Electrification is another clear example which we should weave in here as we lead back to the internet and AI. Rural electrification changed productivity and enabled new economic activity in areas the private sector under-served because the payback period was too long or too uncertain. Without electrification, rural productivity lagged, widening the gap with urban standards of living; we can replace “electrification” with the modern era’s internet access or high-speed bandwidth.

The internet is not a folk tale where either “government built it” or “government did nothing.” The historically accurate version is that early networking and backbone efforts were government-funded (Defense Advanced Research Projects Agency (DARPA)/ARPANET; NSFNET), for a time protected from infringement like our trade routes, enabling entrepreneurs and innovation to turn capability into the modern economy.

Government funds or coordinates certain kinds of infrastructure because the payoff is diffuse and long-term; entrepreneurs then build competitive products and markets on top of it.

Consistent with my point is history: the enabling layer matters but that’s not the same thing as creating wealth. Governments mistakenly try to fund startups when what we need from policymakers is focus on neutral infrastructure that founders can’t (and shouldn’t) allocate resources to fund.

3) Preventing corruption: not just crime but also market power, capture, and rigged access to knowledge

Corruption is broader than bribes handed out on park bench along the National Mall. We need to talk about monopoly power used to block entrants, regulatory capture used to cartelize a sector, and political self-dealing that turns public office into a trading desk.

A competitive market is an anti-corruption tool. When markets stay contestable, the next entrepreneur will challenge incumbents; when they don’t, you get rent extraction (wealth transfer dressed up as efficiency).

This is where antitrust shows up as pro-market, not anti-business. The Standard Oil case of 1911 is a defining example of government acting (however imperfectly) to stop monopoly behavior that restrained trade where The Supreme Court’s opinion framed the conduct as an “unreasonable and undue restraint of trade,” and the remedy dissolved the trust. Whether you like the “rule of reason” doctrine or not, the intent was to preserve competitive conditions rather than let private power become a parallel government.

One can argue we’re slipping a bit on this front because the same logic applies to internet platform monopolies and permissioned digital markets (Think, net neutrality or the causes of torrenting). If a handful of gatekeepers can decide who gets distribution, we don’t have a free market, we have an approval process. In many respects, Google, and increasingly AI, sort of decide what we know so appreciate the risks of controlling that, limiting it, or allowing politicians to be influenced by it.

The U.S. Constitution explicitly empowers Congress to secure exclusive rights for inventors “for limited Times” to promote progress while economists studying innovation history note that early U.S. patent institutions likely encouraged development by lowering the costs of adopting and copying foreign inventions (“IP maximalism” is not the same thing as “innovation” which requires mainstream adoption). Now, who makes the rules?

Thus, my anti-corruption / pro-competition posture on IP is not “abolish patents” and certainly isn’t “lock everything down,” it’s: keep IP rights limited, enforceable, and not easily weaponized by incumbents to block entrants. That includes cleaning up patent trolling, abusive injunction strategies, and regulatory games where compliance becomes a moat. When knowledge is in the market, which includes other countries making it available, it should become free use because to do otherwise enables foreign competition while handicapping domestic innovation.

If you really want to take preventing corruption seriously, we can’t ignore political self-dealing. Insider trading by public officials is a trust-destroying tax on the entire economy because it signals that rules are for civilians, not insiders. Even when it’s not prosecuted, the perception alone raises the “why bother?” factor for entrepreneurs who don’t have access.

Marketing is the wealth multiplier everyone pretends is beneath them

Most American industrial greatness wasn’t invention, it was commercialization. The U.S. repeatedly turned technical capability into scalable markets by pairing production with distribution, branding, and sales. You can invent interchangeable parts, but if you can’t sell the product at scale, you’ve created a neat museum exhibit, not wealth. A thought which again makes me reflect on University Tech Transfer offices (most of which are struggling with commercialization).

Marketing is not “ads.” Marketing is the discipline of understanding demand, positioning value, and building channels. It’s how innovation becomes adoption. That’s why American firms, across eras, created immense wealth even when other countries had comparable science: they were often better at commercialization (which is MARKETING, not licensing IP): turning new capability into solutions people would actually buy, and then building a system to keep selling it.

This is also why it’s a category error to claim government creates wealth. Government can create conditions, it can sometimes fund enabling infrastructure, but it does not do the iterative loop of customer discovery, pricing, persuasion, distribution, and competitive adaptation that turns novelty into market value, entrepreneurs do.

So yes, it’s true, and it’s also a warning label for 2026

The U.S. became a leading industrial power through entrepreneurship, innovation, and mass production

Immense wealth followed because productivity rose and markets expanded. Government helped most when it defended rights, invested in infrastructure, and prevented corruption (especially monopoly and capture) without pretending it was the producer.

The modern risk is that we forget which parts are the canals and who makes the ships. If we throttle speech and digital exchange, treat AI as permissioned knowledge, let incumbents cartelize distribution, or allow political self-dealing to become normal, we don’t get “safety,” we get stagnation.

If you want a pointed way to test whether a policy is pro-wealth or just pro-control, ask yourself one thing: does it make it easier for a new entrant to compete or does it make permission mandatory or participation expensive?

Quite simply, it’s freezing in Austin, Texas right now, uncharacteristically, and we don’t have the same infrastructure in place to get everyone working. Economic policy takes entrepreneurship one way or the other.

Governments around the world love the word entrepreneurship. They put it in press releases, name departments after it, fund “innovation hubs,” and cut ribbons in front of coworking spaces that end up being networking clubs for service providers seeking customers. What almost none of them do (at least not formally, structurally, or coherently) is distinguish startups from new businesses. Fewer than roughly 10–15 countries worldwide do this in law, policy, or administrative design. That’s under ten percent of governments operating as if the two are economically different things. They are! Radically.

This isn’t a semantic quibble (though I know some of you will argue with me about it). It’s a policy failure with measurable consequences.

The Organisation for Economic Co-operation and Development has been explicit for more than a decade that high-growth, innovation-driven firms behave differently from small and medium enterprises and require different policy instruments, capital structures, and timelines. The World Bank draws a clear line between subsistence or lifestyle entrepreneurship and innovation-led firm formation tied to productivity growth. Yet most governments still govern as if opening a dry cleaner or building a software development company are the equivalent of a new AI driven AdTech venture or being the first to market with gluten-free pie crust finding its way to grocery stores.

They aren’t even cousins, they’re different species.

What most states and countries do have are entrepreneurship programs, usually actually designed around job creation, self-employment, and local services. Those programs blend startups into the same category as sole proprietorships and franchises because it’s administratively easy and politically safe. The result is that startup founders are taught how to write business plans, manage cash flow, and apply for grants that were never designed for companies expected to fail fast, scale aggressively, or exit through acquisition.

Most countries also have innovation programs, which sound promising until you look closely at the reality that innovation policy typically focuses on research outputs, patents, or technology demonstrations. Innovation is part of startups, but innovation alone does not create companies. A patent without a market is a résumé line, not an enterprise. , Professor in the Economics of Innovation and Public Value, UCL (University College London), has written extensively about the limits of innovation policy that stops short of firm creation and market formation - such as in her work with Henry Lishi Li, Research Fellow in Health Innovation and Policy Engagement, UCL Institute of Innovation and Public Purpose, “The Entrepreneurial State and public options: Socialising risks and rewards.”

Then there’s commercialization and tech transfer, especially in university settings. Governments invest heavily here and then act surprised when the results disappoint. Technology transfer offices optimize for licensing revenue and risk avoidance, not for building venture-backed firms. According to AUTM’s U.S. Licensing Activity Survey, universities disclose tens of thousands of inventions annually, but only about 3–5% result in the formation of a startup, and AUTM does not track whether those startups survive, scale, or attract venture capital (meaning the share that become viable, venture-scale companies is necessarily much smaller (if private sector patterns are consistent that 90% of those will fail). Commercialization is a transaction. Startups are an organizational, behavioral, and market-driven process. Confusing the two guarantees mediocrity in both.

Governments also invest billions in R&D, often pointing to this as proof of startup support. But R&D is just one input. Startups are not R&D projects; or rather, they actually are, but not in the sense meant herein, they are experiments in market creation under extreme uncertainty. Paul Graham has been explicit that startups are “companies designed to grow fast,” not labs with payroll.

Finally, there’s a question to appreciate in finance. Almost every government regulates venture capital. Some allocate capital into funds. Very few treat venture capital as a distinct economic function; the mechanism by which high-risk, non-bankable firms are created and disciplined by markets. Public capital is often deployed as grants because grants are politically palatable. Venture capital is not a grant system; it is a governance system for uncertainty. The National Venture Capital Association has been clear that venture-backed firms account for a disproportionate share of innovation, IPOs, and productivity growth in the U.S.

And did you know? Only around 50–75 universities, almost all elite or research institutions, even teach Venture Capital. Community Colleges round to zero. This means the investor class funding startups likely isn’t even exposed to how startups work unless they’ve been in one; if we’re lucky, drawing from finance degrees which are designed around traditional economics and business models.

Most governments regulate that system without understanding it.

The consequence of all this blending is predictable. Startup founders find themselves in programs optimized for stability instead of the methodology, systems, and culture of what makes startups, distinctly, work -> Universities measure patents instead of companies; public capital substitutes for private discipline; policymakers declare success because activity happened, not because firms scaled... And then everyone wonders why ecosystems stagnate.

Countries that do distinguish startups from new businesses (Israel, Estonia, France, Finland, Singapore, South Korea, the UK, Germany, Chile, Canada, Australia, Japan) govern differently. France’s La French Tech explicitly separated startups from SMEs across labor law, taxation, and capital access. Israel’s entire innovation policy framework was designed more with venture formation in mind, not small-business support. The outcomes are obvious.

If governments actually want startups (not press releases about them) some policy shifts are unavoidable

A few thoughts...

First, economics and marketing must be core curriculum everywhere, not electives and not optional. Marketing is not promotion; it is value is discovered and created. Peter Drucker was unambiguous: “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Startups fail because they misunderstand incentives, demand, and behavior, not because they can’t code. Teaching STEM without economics is how you get elegant solutions to nonexistent problems.

Second, startup-specific committees should exist in every legislative body and major department. Not “small business.” Not “innovation.” Startups. Policy design requires fluency. You wouldn’t ask an agriculture committee to regulate aerospace; treating startups as generic businesses is the same category error.

Third, governments should fund startup infrastructure (physical and platform). Free or heavily subsidized spaces for coworking, events, and founder collisions outperform almost every curriculum-driven intervention. Density matters. MIT’s research on innovation districts shows proximity and interaction (not subsidies) drive entrepreneurial output. Spaces should be neutral, open, and boring in governance. Along with that, the platform on which to run startup development programs, the CRM of investors, and the community networking software - who is going to pay for that when startups can’t (and founders shouldn’t)? Or rather, why make everyone reinvent the wheel when the wheels are in motion and available??

Fourth, grant programs, such as the United States’ SBIR and STTR, must be explicitly startup-oriented, not research-oriented. Not in NAME, in practice, which is to say, clear carve out of what is available, how, and why, for startups rather than everything else bundled together. In the U.S., these programs are still evaluated as science projects despite repeated evidence that commercialization outcomes improve when startups (not institutions) are the unit of analysis. If a grant isn’t structured to lead toward a venture-scale company, it shouldn’t be counted as startup policy.

Fifth, healthcare (especially mental health coverage) must be accessible to startup founders independent of employment status (hint, they’re not employees when a temporary venture is neither funded nor making money). The data on founder stress, depression, and anxiety is no longer anecdotal. Michael Freeman’s widely cited study found founders are significantly more likely to experience mental health challenges than the general population. Treating that as a personal failing instead of a systemic risk is negligent.

Three more changes come immediately to mind...

Governments need procurement pathways designed for startups, with faster timelines and smaller contracts. The U.S. Department of Defense has shown this is possible through programs like AFWERX and Defense Innovation Unit (DIU), which explicitly target startups rather than incumbents.

They need immigration policies that treat founders as economic infrastructure, not labor market anomalies. Canada’s Startup Visa and Estonia’s Startup Visa exist because those governments understand that founders import future firms, not just talent. What caused Silicon Valley to boom? Migration into Northern California just as would happen to Austin, TX a couple decades later. Immigration brings culture, different opinions, other experiences, and networks, into the ecosystem.

And they need data systems that track startups separately from small businesses, measuring formation, failure, follow-on capital, and exits. You cannot manage what you refuse to define. Kauffman Foundation research has repeatedly shown that high-growth firms drive net job creation, yet most state dashboards still lump them into SMB metrics.

None of this is radical. What’s radical is continuing to pretend that startups are just enthusiastic small businesses with hoodies.

If you’re a policymaker, economic developer, or university administrator reading this and feeling defensive, that reaction is the point. Ask yourself a simple question: where, exactly, in your statutes, budgets, or org charts does “startup” appear as a distinct category? Not a buzzword meaning new businesses but rather a distinction of your plans and policies different from new business creation. If the answer is nowhere, you’re not supporting startups, you’re crowding them out with good intentions.

And if you’re a founder operating inside that system, the better question is which of these absences is slowing you down right now (and why you’re expected to absorb that cost while governments celebrate “entrepreneurship,” and the jobs created that are a result of your hand).

California is flirting with a policy idea so aggressively stupid it reads like parody, except it isn’t. It’s drafted law; it’s real. And even if it never passes, the damage is already done.

The proposed “Billionaire Wealth Tax” ballot measure is not merely a tax and it’s far more than California’s tech tax; it is an explicit declaration that the state no longer understands property rights, incentive structures, or how modern innovation emerges. Hopefully, there mere proposal of it signals to every founder, investor, and operator that California views their ownership, control, and upside not as earned value, but as a public resource to be harvested when politically convenient.

, CMO of Founders Fund, shared in , a post-it note to every economic development office in America:

“The architects of California’s ‘Billionaire Wealth Tax’ ballot proposition quietly amended language in their proposal which, if successful, would permanently end the concept of founder-controlled startups in the state — a technology industry kill switch.”

This is not hyperbole; the amendment targets concentrated ownership itself – not consumption. not income, and not even capital gains at the moment of liquidity; it targets retained ownership, the very mechanism that allows founders to take long-term risk, resist short-term extraction, and build category-defining companies instead of financialized husks.

You don’t get Google, DoorDash, Stripe, Airbnb, or SpaceX by forcing founders to sell control early to satisfy tax liabilities on unrealized wealth. You get mediocrity. You get consultants. You get rent-seekers. You get Delaware C-corps with Cayman Island wrappers and operational headquarters anywhere but California.

The most important point gets lost in the ongoing debate of the merit or stage seemingly set to enable Gavin Newsome to swoop in as a savior as he readies a White House run: whether the tax passes is almost irrelevant. Drafting it at all tells founders everything they need to know about the governing philosophy of the state.

The trillion-dollar exit nobody wants to talk about

The predictable response is denial, “They won’t really leave,” “They need California,” or “This is just about billionaires.”

That fantasy collapses under data.

has documented that the total wealth that has already left California now exceeds $1 trillion. That’s migration data, tax filings, and asset relocation aggregated over the last several years.

This didn’t start with the so-called billionaire tax. It started with hostility to ownership, casual contempt for capital formation, and a belief that innovation is a static resource rather than a fragile, compounding process. The tax proposal simply confirms the trend and accelerates it.

California legislators appear genuinely surprised that people respond to incentives. This is remarkable given that incentive response is the core operating principle of venture-backed innovation. Founders don’t take asymmetric risk for applause. They do it because ownership of upside compensates for the overwhelming probability of failure.

That is why the tax doesn’t “just hit the rich.” It annihilates the risk premium that justifies entrepreneurship in the first place. If the state claims your upside while leaving you fully exposed to downside, the rational response is exit – Not protest. Not negotiation. Exit.

caught my attention:

“You all use Uber, DoorDash and every other tech innovation made here but now you want the creators of these services to go bankrupt doing it??

That last parenthetical matters because this isn’t figurative bankruptcy and it should reveal ignorance in office that concerns everyone. If you’re asset-rich, cash-poor, and forced to pay annual wealth taxes on illiquid equity, insolvency becomes a math problem, not a moral one. Hell, it is a moral one, because people are proposing doing these things and Americans keep electing them.

California has even been here before! It ignored the warning.

California has been broadcasting this attitude for decades.

Back in 2009, long before Uber, long before the modern tech backlash, Travis Kalanick wrote:

“CA has some of the highest tax rates in the country. With those high tax rates you’d think there would be fairly high quality services provided by the state. Unfortunately, those huge taxes provide services that have the lowest levels of quality in the country.”

That post aged like wine because high taxes were defensible when paired with some competent governance, improving infrastructure, and the predictability tech brought to California. Now it’s a fine wine, what founders face now is high extraction paired with regulatory chaos, ideological hostility, and performative politics.

At some point, founders stop asking how much they owe and start asking why they’re still there.

When innovators refuse to govern, fools do it for them

This brings us to the most uncomfortable part of the conversation I want to have; the most important.

makes the case plainly in his plea for Silicon Valley to enter politics, “Silicon Valley figures have historically avoided politics… They have instead stuck to donating and delegated the thick-skinned job to representatives like Ro Khanna, who have unfortunately shown that they cannot be trusted to represent these constituents… we cannot pay someone else to do the job, but we must do it ourselves.”

He goes further, and this is the line every founder should have to sit with:

“It is an unthinkable sin that the work of the greatest innovators and savviest capital allocators of our time is given as tribute, placed on the high altar of government, only to be frittered away on waste and fraud.”

This is not a partisan argument; it’s a governance argument. When the people who actually understand systems, incentives, scale, and tradeoffs refuse to engage in power, power gets exercised by people who see the economy as a spreadsheet to be raided for votes (or wealth).

I’ve been making the same plea from a startup economics perspective for years. Startups are not getting crushed by competitors. They’re getting crushed by politics, regulation, and policy written by people who have never built anything fragile. Entrepreneurs need to treat government engagement as a core function, not a charitable afterthought, to ensure that ignorance in policy won’t result in preventing the very solution you’re trying to bring to market. It’s also why I’ve warned repeatedly that intellectual property under government or university (publicly funded) control needs to be reframed as public goods to be used rather than private property to be controlled. Governments are often upside-down in understanding this sector of the economy and that bass-ackwards approach to the slice of humanity that creates jobs and wealth, actively destroys both.

The California wealth tax proposal isn’t an anomaly; it’s the logical outcome of a system where innovators abdicated governance and hoped donations would substitute for representation.

Exit, Stage Texas: Structurally Better Positioned to Lead

Please tell me you’re not buying the narrative that people are moving into Texas because it’s more affordable. If we’re being honest about it, Texas still struggles with a lack of experienced startup mentors, a venture capital gap, and difficulty hiring people who exhibit the personality and cultural tendencies of entrepreneurs; these are real problems some of us are working to overcome. Still, let’s shift from California’s latest glaring violation and reflect on Texas’s opportunity.

A state such as Texas offers legal clarity, respect for ownership, and a political culture that (for now, granted) still understands that wealth creation precedes wealth redistribution. That matters more than any incentive package.

Texas already dominates on population growth, employment growth, business formation, and net domestic migration. According to U.S. Census Bureau and IRS migration data, Texas has been the largest net gainer of both people and adjusted gross income for multiple consecutive years.

Founders are voting with feet and balance sheets.

More importantly, Texas has begun aligning government, universities, investors, and founders around a shared understanding: innovation is a strategic asset, not a taxable windfall. When those actors coordinate, the state compounds advantages instead of eroding them.

This is precisely what Loeber is arguing for California to rediscover, and what Texas is already positioned to execute. Texas entrepreneurs: enter politics! A tech economy governed by people who respect property rights, understand incentives, and view founders as partners (the catalyst of jobs and wealth), rather than targets will win by default.

Texas doesn’t need to “steal” Silicon Valley and as I and many others have repeatedly reinforced, you don’t want to replicate Silicon Valley either! Hell, California is pushing it out… if you don’t buy into the concern about tax policy, at least take note of the fact that what they’re doing isn’t working as it did when unique circumstances created a temporary monopoly on the internet.

California is Choosing

Chamath bears repeating, “This proposed ‘Billionaire Tax’ will blow a massive hole in the California deficit and ruin the tech economy in California. The middle class will then be forced to pay for it if this passes because all the rich people are leaving! It’s mathematical at this point. Newsom needs to find a way to balance the budget and shelve this wealth tax from ever making it to the ballot.”

Mathematics doesn’t negotiate and capital doesn’t protest, it relocates.

The real question isn’t whether the state even stops this California tech tax. It’s whether founders elsewhere will recognize the warning early enough to avoid being next.

Do you want to build it under a government that sees ownership as a liability? California just answered it in draft legislation. The rest of the country should be paying attention.

Riyadh didn’t become a startup ecosystem overnight. It’s rooted in a long history of adaptation and reinvention; a story about shifting from desert trade routes and tribal politics to oil wealth and now trying to crack the code on innovation-led diversification. To understand why Saudi Arabia, and Riyadh in particular, is increasingly attractive to founders, investors, and global innovators, we have to start with that arc.

Long before Vision 2030 existed, the country’s plan for an ambitious nation, a thriving economy, and a vibrant society, what we now call Saudi Arabia was a set of tribal regions connected by pilgrimage routes and seasonal markets like Souk Okaz, historically, one of the largest annual fairs in that drew traders and poets from across Arabia. Marketplaces weren’t just commerce; they were early forms of knowledge exchange and creative problem-solving

When the modern state was unified in 1932 under King Abdulaziz (at the end of a century of conflict and reconsolidation) the country’s future was monetized on a single resource: oil. The discovery of commercial oil at Dammam No.7 in the Eastern Province in 1938 ushered in an era where raw capital trumped innovation culture. For decades, economic returns were mostly about extraction and export, not idea creation.

Fast-forward to the 21st century and that old model starts to look like a trap: economies rooted in a single commodity rarely develop the resilience or creative risk-taking culture that vibrant ecosystems need. Much like my experience in Texas, the culture that emerges from the wealth of natural resources tends to mature into a creative class of artists, innovators, and entrepreneurs. Saudi Arabia’s leadership recognized that, and Vision 2030 is the Kingdom’s playbook for rewriting its future. It’s an ambitious economic diversification strategy built around three pillars.

More than three pillars in Vision 2030, three challenges, identified by the Saudi government, drove appreciation of it being time for economic and regulatory change:

1. Lack of good deal flow - Investors struggling to find good startups to invest in at pre-seed, seed, series A.

2. Cost of building is high - Due to oil and government industries, we have a risk aversion driven by the comfort of great jobs.

3. PR without real results - Much of what I refer to as startup theater in this, events to make announcements, announcements to promote events.

Part of that transformation has been cultural, not just structural. Saudi society has been opening up to modern creative industries while still preserving tradition. The rapid expansion of arts, music, and cultural sectors is not superficial feel-good policy, it’s part of a broader attempt to shift social norms toward creativity and experimentation. It feels familiar.

Saudi Arabia Isn’t Starting from Zero with Innovation; It’s Reclaiming a Deeper Intellectual Tradition

If you step back into early Islamic history, the Arabian Peninsula wasn’t devoid of innovation. It was part of a broader intellectual ecosystem that produced monumental advances in algebra, optics, and astronomy. Scholars transmitted Arabic numerals and algebra to medieval Europe, deeply influencing the Renaissance.

Modern Saudi Arabia doesn’t directly inherit those medieval scientific institutions, but there’s symbolic value in reclaiming that history. It signals that the Kingdom’s leaders view innovation not as a Western import, but as compatible with local identity. That’s why statements about turning Riyadh into a global hub for AI and innovation resonate with deeper cultural lineage rather than being superficial slogans. It’s a reframing.

Riyadh’s Startup DNA: Infrastructure, Capital, and Policy All Moving Together

Riyadh isn’t just emerging, it’s exploding. According to the 2025 Global Startup Ecosystem Report, Riyadh jumped 60 places to rank 23rd globally as a startup ecosystem, now third in the Middle East and North Africa for startup funding. Over $2.6 billion in venture capital has flowed into Saudi startups since 2018, with Riyadh serving as the primary node of this growth.

You need capital, regulation, and market demand moving in the same direction for startup ecosystems to take off, and that rarely happens. Saudi Arabia has done that. VC activity has ballooned; Saudi Arabia captured nearly half of all Middle East and North Africa (MENA) venture capital funding in 2023, up from less than 15% five years earlier.

Part of this shift comes from systematic ecosystem building, not just capital infusions, but structures that actually support risk-taking. The Saudi Venture Capital Investment Company functions as a fund-of-funds, seeding VC and PE funds and backing hundreds of startups alongside private investors. Jada, another Public Investment Fund of Saudi Arabia (PIF) entity, manages around $1 billion in VC/PE capital, and Saudi Fintech initiatives are designing regulatory sandboxes and frameworks to catalyze innovation.

As you well know, capital alone doesn’t make an ecosystem, in fact it follows. Saudi Arabia has also built physical and institutional infrastructure like Digital City in Riyadh; a tech park that hosts multinational tech operations alongside local innovators and connects talent with resources.

Native Innovation: Companies That Show What’s Possible

The narrative that Saudi Arabia is merely a capital engines market is collapsing under real examples of Saudi-led innovation. Humain, established in 2025 by the Public Investment Fund with ambitious AI infrastructure goals, is a Saudi-born AI company partnering with Nvidia and others to build a major data center and AI stack.

Startups like Reachware, a Riyadh-based automation and systems integration company, have raised seed rounds and secured market traction in automation and cloud services.

Saudi-based VC players like Nama Ventures are backing early-stage startups across fintech, proptech, and tech sectors, and these aren’t vanity plays; they are real, revenue-oriented portfolios investing across MENA.

Add in the emerging SME brands going national, from bakeries scaling across regions to digital-native businesses benefiting from improved logistics and digital infrastructure, and you see an ecosystem spreading beyond Riyadh. That’s real organic growth, not just headline chasing.

Economics, the Saudi Government, and the Macro Narrative

Saudi Arabia’s narrative right now is: diversify or stagnate. Oil still dominates GDP, but Vision 2030 explicitly ties entrepreneurship to economic sustainability, job creation, and global competitiveness.

At the macro level, the government plays a dual role: regulator and seed investor. It’s not just about laws on paper; foreign entrepreneurs can now own 100% of their companies and there’s a concerted effort to simplify licensing and reduce bureaucracy.

That’s a major departure from decades when local sponsorship laws and opaque regulatory models were barriers to entry. That reform alone changes risk profiles and attracts international founders, as well as capital. And Saudi Arabia isn’t shy about using its sovereign wealth footprint to catalyze ecosystems: the Public Investment Fund alone manages hundreds of billions with a strategic objective to invest domestically and globally.

Saudi Startup Development Organizations and Funding Sources

Tour the Saudi ecosystem - Here are the actors actually shaping it:

• Saudi Venture Capital Investment Company SVC): Government-linked fund-of-funds seeding VCs and co-investing in startups and funds.

• Jada: PIF’s VC/PE arm with ~$1B under management to boost the ecosystem.

• Fintech Saudi: Regulatory and ecosystem builder for financial innovation.

• Angel networks and accelerators: Often co-backed by SVC and private partners (e.g., Sanabil 500).

• Digital City and specialized tech hubs: Physical infrastructure that attracts multinational and local innovators.

• Private VCs like Nama Ventures: Providing genuine early-stage capital across sectors. International partners and global funds: Including Google backing STV’s AI investment efforts, and AWS’s AI zones under construction.

This blend of sovereign funds, domestic VC, angel capital, and global partnerships is unusual for a place that historically had almost no VC infrastructure just a decade ago.

Ten Strategic Ecosystem Building Considerations; What Riyadh Gets Right and Where It Still Struggles

1. Overcoming Silos and Shared Infrastructure. Riyadh has made big investments in shared tech parks and events, but the community still feels curated by large institutions. Organic grassroots tech communities are growing, but they’re younger and less networked than in Silicon Valley or Berlin.

2. The Missing Middle. Saudi Arabia has strong seed and late-stage interest, but mid-stage Series A/B funding is still thin, meaning many companies stall between proof of concept and scaling.

3. Long-Term Funding and Incentives. PIF and government vehicles provide patient capital, but private LP confidence is still developing; more pension funds and corporate LPs need to buy into early-stage risk.

4. Outcome Measurement Versus Activity. Riyadh loves numbers: events, registrations, funds announced, but measuring economic impact (jobs created, revenue generated, global reach) still needs better public data.

5. Culture and Natural Collaboration. Saudi culture values hospitality and relationship building, but the innovation community is still learning how to collaborate across sectors without top-down mandates.

6. Including the Full Talent Spectrum. Vision 2030’s social reforms have expanded opportunity, but real inclusion will require persistent structural change (which, gratefully, is in progress).

7. Architecting High-Performance Environments. Investment in coworking spaces and innovation districts is strong, but integration with research universities and deep tech labs is still emerging. This is, frankly, something everyone needs to do because university commercialization is not moving forward from traditional business models that have left research languishing.

8. Aligning Government, Academia, and Private Sector. Vision 2030’s frameworks exist, but institutional silos remain; aligning incentives across these sectors is an ongoing challenge which means it’s also an opportunity.

9. Accelerating Innovation and Reducing Risk. Programs, like regulatory sandboxes are promising, but the real test is whether founders can fail fast and iterate; cultural tolerance for failure is still maturing.

10. Adapting Global Best Practices to Local Realities. Saudi Arabia has been smart importing frameworks (e.g., sandbox regulation, VC fund models) but sincerely adapting them to local norms rather than copying them is an active process, not yet a solved one.

Riyadh Startups’ Strengths and Gaps

Riyadh’s strength is that capital, policy, and ambition are moving in the same direction. That alignment is rare and historically why ecosystems in Africa, Latin America, and Asia often stagnate. Riyadh looks like a mature ecosystem on day one because it has sovereign wealth backing and top-down coordination. But that’s also its Achilles’ heel: ecosystems that feel built from the top can struggle to create bottom-up cultural norms of risk taking and iterative learning that make true startup cultures resilient.

Riyadh is proving it can attract founders and capital. What it now needs is to let the ecosystem breathe, let founders fail without stigma, let mid-tier capital form without state guarantees, and let universities spin out startups without bureaucratic friction.

Saudi Arabia is no longer a dark horse. It’s a contender. But it’s still learning how to run the race, not just fund it. The next decade will tell if Riyadh can sustain innovation in a way that isn’t dependent on sovereign backstops but driven by market-led, risk-tolerant entrepreneurial energy.

If you’ve been watching Riyadh from the outside, the provocative question now is: does Vision 2030 end up creating an ecosystem people live in, or just an ecosystem they invest in? That’s the test every founder and investor should be watching.

December 21-23rd at the King Abdulaziz Convention Center in Riyadh, Founder Institute’s Jonathan Greechan and Ayhan K. Isaacs join some incredible speakers including, Secretary-General of UN Trade and Development Rebeca Grynspan, VP of Strategy and Innovation at Social Development Bank (SDB), Muaid Al-Bishi, CEO of National Technology Development Program, Ibrahim Neyaz, and Futurist, Ian Kahn, as SDB hosts Deve Go Forum to open new horizons for entrepreneurship in the region.

If you’re in Riyadh, working the region, or would like to learn more about advancing entrepreneurship, get in touch with us here.

This is a city that burned to the ground and responded by inventing the skyscraper. It turned its geography into the nation’s freight yard, its politics into a machine, and its universities into research engines. It engineered futures markets, modern cellular telephony, and now wants to industrialize quantum computing.

If you’re trying to understand how investment in invention translates into entrepreneurship and attention, Chicago startups are a case study in what happens when a region treats innovation as infrastructure, not theater.

The Chicago setting: risk, resilience, and a culture built for commerce

Chicago’s story starts with geography and risk.

The city grew up where railroads, canals, and the Great Lakes converged; perfectly placed between East and West, North and South. By the late 19th century, it had become “the great internal gateway” of the U.S., a logistics and industrial choke point where grain, livestock, lumber, and manufactured goods all passed through and were priced.

Then it burned down.

The Great Chicago Fire of 1871 wiped out roughly a third of the city and displaced 100,000 people. Rather than rebuild what it had, Chicago re-invented how a city could be built; experimenting with fireproof materials, steel-frame construction, and new building codes that paved the way for the world’s first true skyscrapers.

That combination (catastrophic risk, followed by aggressive reinvention) is still baked into the culture. You see it in:

• Its history as the nation’s meatpacking plant and distribution hub.

• The rise of the Chicago Board of Trade and CME Group, where futures and options markets turned commodities risk into tradable, hedgeable contracts.

• A political and labor history that forces constant negotiation between capital, workers, and government—messy, but deeply pragmatic.

Today, the Chicago metro economy is one of the most diversified in the United States. No single industry accounts for more than 13% of total employment, according to World Business Chicago and the Bureau of Labor Statistics. That matters for startups because it means:

• Tons of legacy industries to disrupt (logistics, manufacturing, food, finance, insurance).

• A big, stable regional market not dependent on one boom-and-bust sector.

• And a deep bench of corporate buyers, partners, and acquirers.

This is not a “one-story” economy like a tourism town or a single-industry boom region. It’s a dense, layered operating system.

Inventions from Chicago: a narrative of creativity and applied ingenuity

Chicago is not just a place where things get traded. It’s where a lot of modern life was invented.

• The skyscraper. Chicago architects and engineers (including William Le Baron Jenney and later firms like Burnham & Root) pioneered steel-frame construction and elevator integration, enabling the world’s first skyscrapers in the 1880s and 1890s.

• The Ferris wheel. George Ferris’s giant rotating wheel debuted at the 1893 World’s Columbian Exposition in Chicago as an audacious response to the Eiffel Tower; a literal engineering flex to prove American industrial prowess.

• Mail-order retail and catalog commerce. Chicago was home base for Sears, Roebuck and Montgomery Ward, which reshaped consumer markets through catalogs, logistics, and national distribution. That’s the spiritual ancestor of e-commerce and DTC retail.World Business Chicago

• The vacuum cleaner, the zipper, and the grain silo. Illinois and Chicago-area innovators contributed key industrial and everyday inventions, from early vacuum cleaning technologies to the modern zipper and agricultural storage systems that changed global commodities logistics.

• The cell phone. Engineer Martin Cooper, working for Motorola, made the world’s first handheld cellular phone call in 1973. Motorola’s work in and around Chicago was foundational to modern mobile communications. Ben Lalez shares that Paul and Joseph Galvin founded the Galvin Manufacturing Corporation in Chicago in 1928. Within a couple of years, they developed the first mass-produced car radio. The name “Motorola” came from combining the words “motor” and “ola” (from Victrola, those old record players).

• Blood banking and medical advances. Chicago institutions helped pioneer blood bank practices and other medical innovations that underlie modern healthcare systems.

When you trace that arc, from skyscrapers and Ferris wheels to cell phones and futures contracts, you get a recurring pattern: Chicago doesn’t fetishize invention for its own sake. It commercializes.

New building methods become real estate markets. New communication technologies become telecom giants. New financial instruments become global exchanges. That’s the through-line: innovation as something you industrialize and scale, not just celebrate in a museum.

Now, layer on the current wave. Chicago’s next bet is that it can do the same thing with quantum.

• Illinois has four of the top 10 federally funded quantum centers and has attracted startups like Infleqtion and PsiQuantum.

• Governor JB Pritzker’s latest budget proposes allocating roughly $500 million toward quantum technologies, explicitly to make Illinois a global hub for quantum, semiconductors, and AI.

• The Illinois Quantum and Microelectronics Park (IQMP) on Chicago’s South Side is a planned 128-acre campus (part of a 440-acre Quantum Shore district) whose stated goal includes creating the world’s first commercial million-qubit quantum computer.

• PsiQuantum has already broken ground at IQMP after a $1 billion Series E round. The company and the state expect that facility to anchor “a massive quantum ecosystem” and potentially house the first fault-tolerant million-qubit quantum computer in the U.S.

Chicago’s pattern holds: take a frontier technology, build an industrial-scale platform around it, and dare the rest of the world to keep up.

The macro economy of Chicago: diversified, corporate-dense, and structurally important

Macro-economically, Chicago is not a scrappy up-and-coming tech town; it’s already a pillar of the U.S. economy.

The region consistently ranks among the top U.S. metros by GDP and is one of the few global cities whose economy spans manufacturing, finance, logistics, healthcare, professional services, and information technology in roughly balanced proportions. World Business Chicago points out that no single sector dominates; manufacturing, finance and insurance, professional services, healthcare, trade, and transportation all carry substantial but not overwhelming shares of employment and output.

On top of that, Chicago sits near the top nationally for Fortune 500 headquarters. ConnectCRE notes that the Chicago area ranks third in the U.S., with around 15 Fortune 500 companies headquartered in the city or metro. These include:

• United Airlines

• Walgreens

• Exelon

• Abbott and AbbVie (nearby)

• Archer Daniels Midland (ADM)

• Mondelez International

• CME Group

For startups, this matters more than the ego of “we have X unicorns.” Corporate density and sector diversity define the local demand side: enterprise customers, pilots, partnerships, acqui-hires, and exits – even relevant jobs to fall back to when the startup doesn’t work out.

Illinois’ Department of Commerce and Economic Opportunity (DCEO) leans into this. Its “Why Illinois” positioning explicitly emphasizes the state’s central location, logistics advantages, diverse economy, and strong talent pipeline.

In other words, Chicago isn’t a monoculture startup hub in the mold of early-stage Silicon Valley. It’s a diversified, corporate-heavy, globally integrated economy that treats entrepreneurship as an overlay on top of industry, logistics, and finance.

That’s both its advantage and its constraint.

Government as co-architect of the innovation system

Unlike states that treat entrepreneurship as an afterthought, Illinois is explicitly constructing an innovation policy stack.

At the state level, the Office of Entrepreneurship, Innovation & Technology (EIT) within DCEO is set up “to help Illinois’ entrepreneurs, innovators, and small businesses grow by providing funding, expertise, and statewide support networks at every stage of development.”

A few elements of that stack directly matter for startups in Chicago:

• The Illinois Innovation Venture Fund (INVENT) makes direct equity investments in Illinois-based startups to attract private capital and strengthen the venture ecosystem.

• The Angel Investment Credit Program offers state income tax credits of up to 35% for investments in qualified Illinois startups—effectively de-risking early capital for angels.

• SBIR/STTR matching grants, innovation vouchers, and wet-lab capital programs provide non-dilutive funding and shared infrastructure for tech commercialization.

• The Tech Incubator Enhancement Grant Program (TIEG) has deployed millions to strengthen incubators and accelerators statewide, catalyzing more robust Startup Development Organizations (SDOs).

Overlay that with a focus such as their quantum push:

• The Quantum Enterprise Zone program designates quantum campuses and offers tax benefits to resident companies.

• Pritzker’s budget proposal for $500M in quantum infrastructure and incentives is intended to make Illinois “a leading hub for quantum development,” anchored by the Chicago Quantum Exchange and IQMP.

• The state and DARPA signed a memorandum to create a Quantum Proving Ground at Illinois’ quantum campus, linking federal R&D and state infrastructure in a single platform.

At the regional level, World Business Chicago (WBC) serves as the city’s public-private economic development arm. Their 2023 Business Bulletin notes that Chicagoland companies raised approximately $4.73 billion in growth capital in 2023 and highlights that the region ranks among the top U.S. locations for women-founded startups.

This combination, state capital programs, tax incentives, and a public-private business development engine,is unusually sophisticated by U.S. standards. It positions government as an investor, convenor, and infrastructure provider, not just a regulator (which in and of itself is a problem).

The risk, of course, is that policy becomes the story instead of the platform. Chicago’s challenge is whether that stack accelerates founder-led entrepreneurship, or just adds a glossy quantum brochure on top of an already complicated system.

Startup Development Organizations: Chicago’s operating system for founders

If you look past the press releases, what actually touches founders are the Startup Development Organizations: incubators, accelerators, university centers, innovation hubs, and community groups.

Chicago arguably has one of the most dense SDO stacks in the country, especially when you include sector-specific and demographics-focused programs. The Chicago Entrepreneurial Resources guide compiled by GET Cities and the Tech Equity Working Group (TEWG) is 58 pages long and still describes itself as non-exhaustive.

A non-trivial subset of the SDO landscape:

• 1871: The flagship digital-tech incubator, with programs for early-stage startups, corporate innovation, and underrepresented founders. The GET Cities guide highlights 1871’s membership, pitch competitions, and events like BLKtech, LTNtech, and WMNtech focused on Black, Latinx, and women founders.

• MATTER: A global healthcare startup incubator and “community nexus and corporate innovation accelerator” mobilizing entrepreneurs, clinicians, and industry partners to improve health and care.

• mHUB: The nation’s largest independent HardTech and manufacturing innovation center, running accelerators in climate & energy, medtech, and sustainable manufacturing, plus the mPOWER and Landis fellowship programs targeting women and founders of color in physical product innovation.

• Chicago:Blend: A nonprofit focused on DEI in VC and startups, with data, resources, and a Venture Fellows program connecting underrepresented aspiring investors with entrepreneurs.

• P33 / TechChicago: A nonprofit co-founded by Penny Pritzker with the mission to “transform Chicago (and all of Illinois) into a global tech and innovation hub that creates opportunities and economic growth for all.” They lead TechChicago Week, talent programs, and ecosystem marketing.

• World Business Chicago – ChicagoNEXT: WBC’s innovation arm, supporting the tech economy, sector councils, and events like the Chicago Venture Summit.

• GET Cities and TEWG: Focused on building city-wide infrastructure that addresses gender and racial inequities for tech founders, including access to early capital, mentorship, and networks.

• Portal Innovations: A life sciences and deep-tech venture platform combining lab space, funding, and expertise. Portal recently closed a $100 million life sciences fund tied to its Chicago hub and expansion markets.

• TechNexus Venture Collaborative: A long-standing corporate innovation hub that co-builds startups with large enterprises, especially in media, sports, and industrial tech.

• Bunker Labs: A national network with a strong Chicago presence, supporting veteran and military-spouse entrepreneurs.

Then there are the universities:

• University of Chicago’s Polsky Center and Polsky Exchange, the Booth New Venture Challenge, and the Chicago Quantum Exchange (CQE), which UChicago leads as “a catalyst for advancing quantum information science” in the region.

• Northwestern University’s The Garage, which supports student and alumni founders across sectors.

• University of Illinois’ Discovery Partners Institute (DPI) in Chicago, focused on tech talent pipelines and innovation. DPI is being strategically re-aligned to link with IQMP, positioning Chicago as a global center for tech innovation and new-economy jobs.

• Illinois Tech’s Kaplan Institute, which combines engineering talent with startup programs.

And wrapped around all of that: a broad network of SBDCs, sector labs, neighborhood innovation centers, and community organizations cataloged by the GET Cities resource guide.

You can reasonably argue Chicago has solved for “having enough organizations.” The question is whether they function as an operating system or a bunch of overlapping apps.

Capital: from angels to venture and strategic money

The capital side is similarly thick but unevenly distributed.

On the institutional side, Waveup’s 2025 overview notes that “more than $6B in VC funds poured [into Chicago] in 2023 alone” and points to large rounds like Invenergy ($1B+), Fly.io ($95M total), and NanoGraf ($65M+ Series B).

That capital is spread across a mix of classic venture, growth equity, and sector funds, including:

• New Stack Ventures

• ARCH Venture Partners

• Origin Ventures

• Lightbank

• OCA Ventures

• Hyde Park Venture Partners

• Chicago Ventures

• Jump Capital

• Sandbox Industries

• Adams Street Partners

• First Analysis

Many of these funds straddle Chicago and national markets, often investing well beyond the city. ARCH, for example, is a global deep-tech and life-sciences investor; Adams Street is a global PE/VC platform.

On the early-stage and angel side, there’s a history of organized angel networks:

• HPA (formerly Hyde Park Angels), one of the Midwest’s more active angel groups.

• Heartland Angels and other regional groups focusing on seed-stage deals.

The state’s Angel Investment Credit Program sweetens the pot for these investors with tax credits for investments in qualified Illinois startups.

Corporate and strategic capital also loom large. Chicago’s Fortune 500 base turns into:

• Strategic investors (CVC arms and corporate venture initiatives).

• Pilot and procurement relationships (especially in logistics, insurance, and industrials).

• Exit routes that don’t always show up as flashy unicorn valuations but matter for founder liquidity and career recycling.

On the macro numbers, World Business Chicago’s 2023 Business Bulletin pegs Chicagoland’s growth capital at $4.73B for 2023 and notes that the region is among the top U.S. hubs for women-founded startups raising venture capital.

At the same time, Crain’s and other local analyses have pointed out that venture activity has cooled from the 2021 peak, and that Chicago still trails coastal hubs on per-capita early-stage funding, especially for underrepresented founders.

So the capital story is classic Chicago: substantial in absolute terms, diversified, somewhat conservative compared to the coasts, and still leaving a “missing middle” where founders struggle to move from local seed to scale-stage growth.

Sectors: where Chicago actually competes

If you zoom out to sector specialization, Chicago’s startup activity is not random. It grows on top of its industrial roots.

Key areas where innovation and entrepreneurship align with the city’s economic base:

• Fintech and trading tech, built on top of CME, CBOE, and a legacy of quantitative finance and derivatives.

• Logistics, supply chain, and mobility, leveraging Chicago’s position as a rail, air, and trucking hub.

• Food and ag-adjacent innovation, connected to regional agricultural production and global food majors like ADM and Mondelez.

• Healthcare and life sciences, with Northwestern, UChicago Medicine, Rush, MATTER, and Portal Innovations as anchors.

• HardTech, manufacturing, and climate/energy via mHUB and the broader industrial base.

• Quantum, AI, and deep tech through the Chicago Quantum Exchange, IQMP, and ARCH/Portal-style investors. Build this more with the Quantum corridor of the U.S. and it’s pivotal.

Chicago’s unicorn and breakout story reflects that:

• Groupon and Grubhub as earlier-wave consumer/internet successes.

• Braintree/Venmo in fintech.

• Tempus in precision medicine and health-data AI.

• project44 in logistics tech.

• Relativity in insurance and insure-tech.

In other words, this isn’t a city trying to copy “Bay Area SaaS” as a fashion trend. It’s building where it has comparative (and in some cases absolute) advantage.

“Chicago has everything it needs to lead diverse industries, world-class talent, and a history of practical innovation; but it hasn’t yet activated these strengths as a cohesive system. Its global appeal is natural, though under-leveraged, and international founders should see it as a premier landing zone for HardTech, healthcare, logistics, and manufacturing innovation. The city’s next leap won’t come from rebranding, but from structuring collaboration across universities, corporations, government, and investors. Once Chicago embraces this operating model, it will stop being compared to other hubs and start defining a category of its own.” – John Zozzaro, Founder/CEO Innovative EcoSystems

Capacity building: 10 considerations for Chicago’s startup future

Let’s use capacity building as a diagnostic.

1. Overcoming silos: shared infrastructure and community

Chicago’s biggest strength and biggest handicap is the same: there is a lot of everything.

Dozens of SDOs, multiple universities, competing civic coalitions, and overlapping city/state programs create a thick mesh of support, but also fragmentation. The GET Cities TEWG report was explicit that one of its goals was to design “city-wide solutions and collective infrastructure” precisely because founders, especially women and people of color, were bouncing between uncoordinated resources.

The state’s TIEG grants and World Business Chicago’s ecosystem councils are attempts to treat incubators and hubs as shared infrastructure rather than isolated brands.

What Chicago does well:

• It has built specialized physical infrastructure (wet labs, hardtech prototyping, quantum facilities) that most cities can’t even dream of.

Where it needs work:

• Founders still experience the system as a maze. The next frontier is interoperability: common data, shared intake, and outcomes-driven routing rather than “whose membership do you have.”

2. The missing middle: the gap between early startup and established company

This is the structural issue in Chicago.

At the seed stage, local angels, HPA, early-stage VCs (New Stack, Chicago Ventures, Hyde Park Venture Partners, etc.), and university competitions (Booth NVC, Polsky, The Garage) give credible first money and validation.

At the scale stage, big corporates and growth equity funds exist in abundance.

In between (Series A to C, especially for companies without obvious local corporate buyers) founders often end up raising from the coasts or relocating. WBC’s own numbers show solid total capital volume but not a proportionate number of home-grown “breakouts” relative to the city’s population and GDP.

The state’s INVENT fund is designed to pull more early growth capital into Illinois startups; the question is whether it can materially close the gap or just top off existing deals.

3. Long-term funding and incentives for the ecosystem’s builders

One thing Illinois is getting right, especially compared with cities that rely entirely on philanthropy and sporadic corporate sponsorship, is treating SDOs as critical infrastructure.

• TIEG grants explicitly fund incubator enhancement.

• Illinois’ Wet Lab Capital Program has already deployed millions to expand biotech lab capacity.

• Quantum Enterprise Zones and IQMP are multi-decade plays, not one-off ribbon cuttings.

Chicago’s risk, though, is political half-life. Quantum looks brilliant now because you have alignment: Pritzker as a quantum-obsessed governor, Penny Pritzker via P33, strong university leadership, and DARPA partnership.

The real test of capacity building is whether these funding and incentive structures survive leadership changes and cycles. Chicago’s ecosystem builders will need more endowments, revenue-generating models, and multi-year commitments that aren’t just “this governor’s pet project.”

4. Measuring outcomes, not activity

Chicago may be the best city in the world at events (and I’m saying that coming from Austin, Texas, which is flooded with them)

TechChicago Week, Chicago Venture Summit, numerous pitch competitions, and a constant calendar of demo days can easily create the illusion of progress.

But real capacity building demands ruthless outcome measurement:

• Net new high-growth firms created.

• Quality of jobs and wages, not just headcount.

• Follow-on capital raised.

• Repeat founders and return-founder rate.

• Founder demographics and mobility (who is actually being served).

GET Cities’ TEWG report is a step in the right direction, using data to expose inequities in access to early capital.

Where Chicago needs to push further is agreeing on a shared dashboard of ecosystem outcomes and tying public funding, incubator grants, and PR to that, not to vanity metrics like event attendance or social media impressions.

5. Culture and behaviors: collaboration should be natural, not forced

Historically, Chicago has had a reputation for “Midwestern humility” and heads-down execution. That’s a double-edged sword.

On one side, you don’t get the performative startup theater that plagues some other regions. On the other, founders often under-pitch, under-network, and assume that if they build something solid, attention will follow. It doesn’t.

Organizations like Chicago:Blend, GET Cities, and P33 are trying to change the culture by making collaboration and visibility part of the default behavior; tracking diversity data, curating introductions, and incentivizing cross-org work.

Still, you hear a consistent founder refrain: “It’s hard to know who’s doing what, and the big players often stay in their own lane.”

If Chicago wants to unlock its full capacity, it needs to normalize:

• Introductions across competitive lines.

• Shared programming rather than overlapping cohorts.

• A culture where established founders and VCs consider ecosystem service part of the job, not charity.

6. Including the full spectrum of talent

The good news: Chicago is one of the most racially and economically diverse big cities in America, with enormous pools of underutilized talent.

The bad news: like most ecosystems, the visible startup layer is historically typical (demographically) and more Northwestern/Booth-centric than the city itself.

This is precisely why GET Cities, TEWG, 1871’s BLKtech/LTNtech/WMNtech programs, mHUB’s Catalyze initiative, the Landis Fellowships, and Chicago:Blend’s data work exist: to close the gap between who lives in Chicago and who actually gets access to capital and networks.

Capacity building here means treating inclusion as infrastructure:

• Broadband, transit, and childcare that make participation feasible.

• Neighborhood-based innovation hubs tied into the downtown/core ecosystem.

• Stronger bridges from community colleges, bootcamps, and nontraditional talent pipelines into founding and startup roles.

If Chicago gets this right, its diversity becomes a massive strategic advantage over more homogeneous hubs.

7. Architecting environments for peak performance

Chicago’s HardTech and life-sciences infrastructure is too quietly world-class: mHUB for hardware and manufacturing, MATTER and Portal for healthcare and biotech, plus expanding wet-lab capacity funded by the state.

Add IQMP and the quantum campus and you get something rare: founders can literally go from lab to prototype to scale in the same metro, with appropriate facilities at each step.

The weak spot isn’t physical infrastructure, it’s cognitive and emotional infrastructure:

• Systems that help founders navigate burnout, risk, and the long arc from invention to market.

• Management and commercialization training baked into technical programs.

• Board, advisor, and executive-in-residence talent tuned to startup scale, not just corporate governance.

This is where Chicago’s universities and SDOs can lean far harder into founder psychology, entrepreneurial leadership, and scale-up management as distinct disciplines, not afterthought workshops.

8. Aligning government, academia, and the private sector around shared outcomes

If you want a case study in alignment, look at quantum here.

• The state (Pritzker administration) is putting in $500M+ and designing QEZ incentives.

• Universities (UChicago, UIUC, Northwestern) are leading scientific and engineering efforts through the Chicago Quantum Exchange and related centers.

• The private sector is represented by PsiQuantum, Infleqtion, IBM, Nvidia’s venture arm, and others investing and locating at IQMP.

The Chicago Sun-Times summarized it bluntly: Pritzker and local leaders “have a plan to build a quantum manufacturing campus at the former U.S. Steel South Works site,” with the governor calling for $500M in public and private funding to make Illinois a quantum leader.

That’s alignment.

The question is: can Chicago replicate that level of coordination in less sexy but equally important domains like early-stage capital access, neighborhood entrepreneurship, or talent retraining?

Alignment is not everyone agreeing on talking points. It’s:

• Shared metrics.

• Shared infrastructure.

• Clear division of labor between the state, city, universities, corporates, and SDOs.

Quantum shows Chicago can do it. The rest of the ecosystem now needs the same treatment.

9. Ecosystems that accelerate innovation and reduce risk through local competitiveness

Chicago’s diversified economy and corporate density give it a massive ability to de-risk startups if it uses those assets well.

An ecosystem reduces risk when:

• Founders can pilot with local corporates and iterate quickly.

• There’s enough sector expertise to kill bad ideas early and amplify good ones.

• The labor market is deep enough that founders and early employees aren’t betting their entire lives on a single binary outcome.

Chicago is set up for this in logistics, insurance, manufacturing, food, and increasingly healthcare and quantum. WBC underscores that Chicago’s tech sector is one of the nation’s fastest-growing, powered by corporate-startup collaboration and a robust talent pool.

Where the city hasn’t fully cashed in is brand and velocity. Compared to coastal hubs, diligence cycles can be slower, risk appetites more conservative, and narrative-building less aggressive. That’s fixable, and it’s where capital and ecosystem leaders need to act less like a Midwestern chamber of commerce and more like an unapologetic global sales machine.

10. Adapting global best practices to local realities

Finally: Chicago’s great temptation is to copy other ecosystems’ surface features.

• “We need our own South by Southwest.”

• “We should have a ‘Silicon Prairie’ brand.”

• “Let’s import a coastal accelerator playbook.”

The better path is borrowing global models (research hubs, public-private campuses, federal tech-hub designations), then adapt them ruthlessly to Chicago’s assets: Great Lakes logistics, national-lab proximity, existing manufacturing base, and a diverse urban population.

That same logic should apply to:

• How SDOs structure equity and revenue (don’t just copy Y Combinator terms into a deep-tech region with very different time horizons).

• How venture funds structure follow-on and reserves for capital-intensive companies.

• How talent programs are built (not just importing Bay Area “founder fellowships” into a city where many talented people have families, multiple jobs, or community obligations).

Chicago will win not by being the next startup hub but by being the first city that industrializes deep-tech, HardTech, and applied innovation across a truly diversified, real-economy base.

So, what does Chicago actually do well and where does it need to improve?

What Chicago does exceptionally well:

• It treats innovation as infrastructure. From skyscrapers to futures markets to quantum campuses, Chicago builds physical and institutional systems around technology, not just programs.

• It leverages a diversified economy and corporate density to ground startups in real demand.

• It has one of the most mature SDO stacks in the country, spanning sector-specific hubs (MATTER, mHUB), generalist incubators (1871), quantum consortia (CQE), and DEI-focused organizations (GET Cities, Chicago:Blend).

• It is making a serious, globally visible bet on quantum and deep tech, backed by real money, federal alignment, and world-class institutions.

• It has built credible early-stage and growth-stage capital infrastructure, with more than $6B in VC deployed in 2023 and a roster of serious local funds.

Where Chicago still needs to push harder:

• Defragmenting the ecosystem. The sheer number of organizations is a strength only if they function as a coherent operating system; something easily fixed with something like Founder Institute’s platform in place. Right now, too many founders still feel like they’re doing their own routing.

• Closing the missing middle. The region must deliberately build structures (funds, guarantees, co-investment vehicles) that bridge local seed success to serious scale without requiring founders to relocate or fully re-anchor on the coasts.

• Hard-wiring outcome measurement. Public money and ecosystem prestige should be tied to actual startup formation, quality jobs, and successful exits, not event calendars. TEWG’s equity-focused data work is the template; it needs to become the norm.

• Mainstreaming access. Programs for women and underrepresented founders exist and many are excellent. But until the composition of funded founders and fund managers looks materially more like Chicago’s population, inclusion remains a partially-solved problem, not a capacity asset.

• Turning quantum-style alignment into a habit. The quantum push is a proof of concept for deep alignment between state, city, universities, corporates, and capital. The real challenge is to apply that same discipline to “boring” but crucial areas like workforce transformation, neighborhood entrepreneurship, and SME digitalization.

If you zoom out, Chicago is not an underdog hoping to be “discovered” by venture capital. It’s a heavyweight industrial and intellectual hub deciding what it wants to be in the next century.

The question is not whether Chicago can build successful startups, —it already has. The question is whether it can fully align its history of industrial experimentation, its present push into quantum and deep tech, and its sprawling ecosystem of SDOs and capital so that entrepreneurship becomes the natural consequence of living and working there.

If it does, Chicago won’t be competing to be “the next Silicon Valley.” It will be something more interesting: the first region to prove that you can retrofit a mature, diversified economy into an operating system where invention, investment, and entrepreneurship compound by design.

If you still think of New Mexico as a quiet desert between Texas and Arizona, you’re about 80 years behind. This is the state that built the atomic age, test-flew the rockets that defined the Cold War, turned a supposed UFO crash into a tourism engine, and is increasingly the heart of quantum computing.

New Mexico is not “trying to be a startup ecosystem.” It has been an R&D engine for generations. What I want to look at is how well it’s doing finishing the job; turning invention into scalable, visible, compounding entrepreneurship.

As I tend to dig into when exploring a region economically for entrepreneurs, I’ll get into the impact of the history there, the inventions, the money, and the startup development organizations, but this time I want to talk about capacity building because what we have in New Mexico is a region of the world with cities distinct in their own right but an identity uniform in implication; New Mexico startups continue leading in frontier tech begging a question of if that eye to the future becomes a flywheel that accelerates more startups or another set of innovation districts that look great in a brochure while quietly disappointing founders. I’m not suggesting New Mexico is disappointing! We’re here to explore it because you all know what I’m talking about, many regions of the world fall short; I think there is something special happening here from which we might learn.

A Culture Built on Risk, Secrecy, and Strange Ideas

New Mexico’s innovation story didn’t start with startups. It started with weapons, rockets, and an uncomfortable willingness to be the proving ground for things that might blow up.

Los Alamos National Laboratory was founded as Project Y in 1943, the top-secret site designing nuclear weapons for the Manhattan Project. Its scientists assembled the “Trinity gadget” (the world’s first tested atomic device) at a ranch site in the New Mexico desert.

Sandia National Laboratories spun out of that work, beginning as “Z Division” and becoming Sandia Laboratory in 1948; by 1949, it was a major nuclear weapons engineering lab, today a $5.1B operation headquartered at Kirtland Air Force Base in Albuquerque. Since 1949, Sandia scientists and engineers have been doing “breakthrough research in weaponization” (the polite way of saying they build the most sophisticated physical systems on earth.

White Sands Missile Range, established during World War II as a bombing and gunnery range, became a rocket sandbox after the war. From 1946 onward, the U.S. assembled and test-fired 67 captured German V-2 rockets there, and between 1945 and 1954 missile launches went from 14 per year to 656. In 1946, White Sands launched the first American-adapted V-2 high-altitude missile that could be controlled in flight.

So, if we’re asking whether New Mexico’s culture is comfortable with risk and experimentation, we can stop pretending that’s an open question.

That context matters when you look at the cities:

• Los Alamos is effectively a lab town; a place where “almost 80 years of science and innovation to protect the nation” has attracted high-end physicists, engineers, and now quantum scientists.

• Albuquerque sits at the intersection of Sandia, Kirtland AFB, the Air Force Research Lab, and now a growing space and data-science sector. StartupBlink notes ABQ’s ecosystem grew 6.2% in 2025, with nearly 100 startups and over $86M in funding.

• Santa Fe leaned hard into the creative economy. Meow Wolf (the immersive art company) has raised roughly $169M over 8 rounds and is now a globally known experience brand, with the New Mexico Economic Development Department itself listed among investors.

• Las Cruces anchors New Mexico State University and Arrowhead Center, and connects to White Sands and Spaceport America, mixing agriculture, space, and border trade.

• Rio Rancho is literally wired into the global semiconductor supply chain. Intel has invested more than $17B in its New Mexico operations since 1980, with a $3.5B expansion making Rio Rancho its “domestic hub for advanced semiconductor manufacturing,” projected to create 700 new jobs and a $1.2B annual economic impact.

• Roswell is the weird one, a critical feature of a creative and innovative ecosystem. The 1947 “Roswell incident” may have been a crashed military balloon, but the narrative I’m sticking with is that there are little green men squirreled away here thanks to a crash that created the UFO industry; the city’s UFO Festival alone generates over $2M in local spending.

Add Spaceport America, the commercial spaceport used by Virgin Galactic and others, plus NewSpace New Mexico’s co-innovation hub around Kirtland, funded with $11M in federal dollars to “facilitate growth in the emerging space industry” around Albuquerque.

This is not a culture afraid of frontier tech. It’s a culture that normalized it decades ago… but seemingly stopped at the government contract.

Making it a case study in how to start and where to go from there: converting that legacy into a startup economy rather than just a contractor economy; exactly the distinction I’ve hammered on in pieces like “From Texas to Tulsa: How Innovation Shifts to Opportunity.”

A Long Narrative of Invention From Nukes to Quantum Dots

If you draw a straight line from Trinity to quantum computing, New Mexico is what’s under the pencil.

Historically, Los Alamos and Sandia have produced a pipeline of technologies that later become platforms in industry: nuclear engineering methods, materials science, high-performance computing, sensors, and control systems. Los Alamos National Labs explicitly frames its history as “almost 80 years of science and innovation to protect the nation.”

White Sands and the V-2 program provided the early rocketry and telemetry experience that fed the U.S. space program.

Fast-forward to the last decade and you see a pattern: lab-grade invention, spun out into high-growth companies:

• Descartes Labs, founded in 2014 by researchers from Los Alamos National Laboratory, built a “data refinery” turning petabyte-scale satellite imagery into usable analytics. TechCrunch described it as “focused on taking satellite imagery, turning it into something coherent and analyzing it for useful data” after it spun out and raised early capital.

• UbiQD, based in Los Alamos, is a quantum-dot materials company powering greenhouse film and solar applications. Its UbiGro films “use red-shifting quantum dots to optimize sunlight” for crops. A USDA-funded UC Davis study recently showed UbiQD’s quantum-dot glass boosted lettuce yields by nearly 40%. Not a Pinterest mood board, actual peer-reviewed AgTech.

• RS21 in Albuquerque is a data-science company using AI, data engineering, and UX to help organizations make better decisions in health, infrastructure, and security (an Inc. 500 “fastest-growing” company).

• Build With Robots (now Breezy Med) builds disinfecting and automation robots from Albuquerque, selling turn-key systems that “eliminate over 99.9% of pathogens” in public spaces.

• Meow Wolf in Santa Fe took immersive art and story-driven environments, wrapped them in venture and community capital, and built a creative-industries growth engine that has raised at least $169M.

When people are unfamiliar with New Mexico and innovation, they’re just confessing they don’t read beyond Bay Area headlines.

What’s more interesting is that many of these companies look like exactly the kind of “startup studio” infrastructure I’ve argued cities should invest in instead of vanity coworking. Instead of investing in startup ecosystems (places that actually blend infrastructure and innovation) most cities are building overpriced coworking spaces and pretending that counts as ‘innovation.’ New Mexico, by accident, has more of the former than the latter. The question is whether capital and policy have caught up.

The Macro Picture: Oil, Government, Labs… and now Quantum

Macroeconomically, New Mexico is small but leveraged.

Real GDP in 2024 was about $112.8B, growing roughly 2.2% after inflation, with real GDP per capita just under $53K (among the lower tier of U.S. states). Government is the single largest contributor to GDP at about $25.3B.

On the private side, oil and gas quietly bankroll the whole game. New Mexico doubled its oil production from 900K barrels/day in 2019 to 2M by 2024, becoming the second-largest oil producer after Texas and generating $11.3B for state and local governments. Natural gas output also hit record highs, accounting for 8% of U.S. production.

That money is paying for early childhood education and tuition-free college, but it’s also what lets the state create a sovereign wealth-fund-backed venture strategy.

Add the national labs (Los Alamos, Sandia, and the growing nuclear-modernization program) and you have a state whose budget is heavily tied to federal spending and extractive industries. Los Alamos alone is central to a $1.7T modernization push and has added about 2,700 employees in recent years.

This is precisely why the quantum push matters: it’s not a PR flourish, it’s diversification away from a two-legged stool of nukes and oil.

The New Mexico Economic Development Department’s Technology and Innovation Office (TIO) now explicitly supports startups in advanced computing, advanced energy, aerospace, and bioscience, “driving commercialization of innovation” and sector-specific assistance. That office is backing:

• State SBIR/STTR matching grants of up to $100K for local tech companies in sectors like space and climate tech.

• New $5M tech grant rounds for science and technology startups.

New Mexico Startup Development Organizations and the Impactful Infrastructure

This is where things get interesting for founders and investors, because New Mexico quietly has a dense web of Startup Development Organizations (SDOs). It’s not literally every single one but this is the spine.

If you want a map, UNM’s “New Mexico Startup Ecosystem Toolbox” is a decent starting point; it catalogs incubators, accelerators, funds, and support programs statewide. Pull that next to the Founder Institute “Startup Ecosystem Canvas” framework and you can see where New Mexico is strong and where it’s thin.

Some of the core SDOs:

Albuquerque / Central New Mexico

• UNM Rainforest Innovations & InnovateABQ: the tech-transfer and innovation district around UNM; they run SBIR support, licensing, and startup programming tied into the statewide SBIR matching grants.

• CNM Ingenuity & ABQid: Central New Mexico Community College’s engine for applied entrepreneurship. ABQid, once a standalone accelerator, is now under CNM Ingenuity and focuses on early-stage founders with intensive accelerators and investor networks.

• WESST: a statewide small-business and startup support organization with a major hub in Albuquerque, offering training, incubator space, and microloans, notably for women and minority entrepreneurs.

• FatPipe ABQ, The BioScience Center, and similar hubs provide sector-focused coworking and incubation; the Toolbox and local ecosystem maps list them among key innovation centers.

• NewSpace New Mexico: a 501(c)(3) running the Unite & Ignite Space co-innovation hub, providing workspaces, rapid prototyping, and stakeholder coordination across the space industry.

Santa Fe

• Santa Fe Business Incubator (SFBI) is one of the more mature incubators in the state, which has “helped launch and grow over 100 businesses” and continues to diversify the local economy.

• Creative Startups: the “world’s leading accelerator for creative companies,” headquartered in New Mexico but running programs globally, and for over a decade providing creative-industry founders with capital-raising and business-building support.

• Santa Fe’s own business resource map highlights a dense network of mentorship, financing, and incubator programs feeding into these anchors.

Las Cruces / Southern New Mexico

• Arrowhead Center (NMSU): the university’s entrepreneurship engine, “working with students, startups, and communities to create meaningful economic opportunities” statewide.

• Arrowhead SPACE Incubator: supporting startups at the intersection of space, agriculture, and energy.

• Arrowhead RenewTech Accelerator: a clean-energy and water-tech incubator launched with federal EPIC funding, explicitly designed to “support an innovation-centric ecosystem” in New Mexico.

Statewide / Sector-specific

• NewSpace New Mexico (already mentioned) for space.

• NMexus: a new global accelerator in Albuquerque, announced by the Governor at SelectUSA, designed to attract foreign startups. The program aims to support up to 40 companies annually, create 1,500 jobs, and generate roughly $400M in economic impact over five years, and already hosts companies from India and Oman.

On top of that, you’ve got:

• Tribal and Native-focused entrepreneurship programs often run in partnership with Creative Startups and regional partners.

• A variety of local incubators and accelerators cataloged in the Toolbox, from bioscience to rural innovation.

This is not a state lacking in “places to go” as a founder. The opportunity, as usual, is coordination, capital, and narrative; exactly the issues I wrote about in Why Startups and Cities Fail Without a Clear Narrative, “Most cities trying to be ‘the next Austin’ or ‘Silicon Valley’ don’t have a capital problem, they have a belief problem.”

New Mexico’s story is better than its reputation. That’s actually a solvable problem which is why we’re going to turn from my usual economic development assessment of a city to instead explore capacity building here.

New Mexico’s Capital Stack: angels, funds, and sovereign wealth

Now, the money (which is where most regional ecosystem conversations devolve into fantasy).

At the early stage, New Mexico Angels remains the flagship organized angel group; together with vehicles like New Mexico Start-Up Factory and local syndicates, it provides the first checks into lab spin-outs and local founders.

On the institutional side, you have:

• Sun Mountain Capital: a Santa Fe-based firm managing regional private equity and venture funds, often in partnership with the New Mexico State Investment Council (SIC).

• Tramway Venture Partners: an Albuquerque life-science and health-tech VC fund focused on early-stage companies, frequently tied to UNM and lab innovations.

• Cottonwood Technology Fund: historically investing in high-tech startups in the Southwest and Europe, often pulling from lab-related IP in New Mexico.

• Roadrunner Venture Studios: now explicitly part of the quantum strategy, funded to connect scientists with entrepreneurs and turn quantum R&D into companies.

The real accelerant, though, is the state’s sovereign wealth approach.

New Mexico’s new $315M quantum initiative will allocate $185M from the state’s sovereign wealth fund for venture capital firms investing in local quantum businesses, with $60M each from DARPA and the state for Quantum Frontier Project development and commercialization, plus another $25M for Roadrunner’s venture-studio work.

That is not a grant program; that is the state pre-committing to fund the funds that back the companies. It’s the opposite of the “we built a shiny incubator, where are the startups?” model that even Los Alamos Makers has rightly criticized in quoting Allan Wille warning that incubators often focus on real estate and lack focus or experience – the human capital that actually builds companies.

New Mexico’s quantum play is closer to what we have well established as better: invest in studios, infrastructure, and methodology, not furniture.

Why Quantum, and Why Now?

Let’s look at the two key quantum announcements together: the state’s $315M commitment and the DARPA partnership.

Reuters summarized the state’s move succinctly: New Mexico will invest $315M to position itself as a leader in quantum computing, focusing on fabrication facilities, a quantum network based in Albuquerque, and VC support for quantum companies. Governor Michelle Lujan Grisham explicitly tied it to the state’s structural advantages, “a skilled scientific workforce, low-cost land and energy, and the presence of two U.S. National Labs and an Air Force Research Lab.”

On the federal side, DARPA’s Quantum Benchmarking Initiative (QBI) is about figuring out whether quantum computers can reach “utility-scale operation” (where the computational value exceeds cost) by 2033. As part of QBI, DARPA and the state are creating the Quantum Frontier Project, with matching contributions up to $60M each over four years.

DARPA’s Joe Altepeter explained, “World-class national laboratories in New Mexico, such as Sandia and Los Alamos, are already a part of QBI’s independent verification and validation team.”

And Governor Grisham didn’t mince words about stakes:

“Quantum computing may prove to be the most consequential technology of this century — for national security, for breakthrough innovations, and perhaps most importantly, for avoiding strategic surprise.”

This is exactly the kind of future-oriented bet regions should make instead of chasing generic “tech hub” labels. We’re not entering some magical DIY epoch; the reality is that capital still concentrates where the math makes sense: scalable innovation, defensible advantages, and talent density.

New Mexico checks those boxes for quantum:

• National-lab IP and verification capabilities (Sandia, LANL)

• AFRL and defense demand sitting in Albuquerque

• Cheap land and energy relative to coastal peers

• University coordination through efforts like the Quantum New Mexico Institute at UNM and state-level Quantum Moonshot efforts

If Texas has been the poster child for shifting attention from California with its semiconductor incentives, energy grid (such as it is), and startup enthusiasm, New Mexico’s quantum move is the next iteration: go narrower, deeper, and more aligned with your existing R&D base (ironically, something I’ve pushed Texas to do for these very reasons)

Innovation migrates from the coasts to the center, and into communities that rewrite the rules; New Mexico is leaning into being the test range for the next computing paradigm.

So how good is the New Mexico startup ecosystem really?

If you zoom in on Albuquerque, external observers are catching on. A 2025 analysis by EWOR notes that while there’s a growing startup ecosystem, founders still wrestle with regulation and access to funding, but the local focus is often on “building the ecosystem rather than highlighting intense competitive barriers.” StartupBlink’s index has Albuquerque ranked around #215 globally, with just under 100 identifiable startups and ~$86.8M in funding.

This access to funding challenge is something repeated by every EDO (economic development office) in the world and you’re all going at it the wrong way so let’s fix that.

Meanwhile, Intel is pouring billions into Rio Rancho, NewSpace New Mexico is scaling space innovation, and companies like UbiQD, Meow Wolf, RS21, and Build With Robots are concrete proof that deep-tech and creative-tech firms can scale from the state.

What New Mexico is missing is the kind of integrated capacity…

Ten considerations for capacity (where New Mexico is strong, and where it’s not)

1. Overcoming silos: shared infrastructure and community

On paper, New Mexico is unusually rich in shared infrastructure: InnovateABQ, Arrowhead Center, NewSpace New Mexico, SFBI, the state’s SBIR programs, and a Technology and Innovation Office that explicitly serves startups.

The problem is that labs, universities, defense, and private startups often still operate as parallel universes. Lab employees live in one world, Santa Fe creatives in another, Las Cruces ag-tech founders in a third.

New Mexico does better than most on physical infrastructure. It’s still weak on relational infrastructure (the connective tissue of mentors, repeat founders, and capital that easily crosses sectors) the thing I push in “Marketing and Storytelling Manifest a Startup City”

Good: lots of hubs, lot of R&D infrastructure.
Needs work: cross-pollination and a shared, loud, believable story.

2. The missing middle: the gap between early startup and established company

New Mexico does okay on idea-stage: SBIR assistance, pre-accelerators like Creative Startups LABS, Arrowhead Sprints, CNM/ABQid cohorts.

Where it suffers is exactly where most ecosystems suffer: the $1–10M scale-up zone. That’s the space between “we have a cool prototype” and “we can raise a serious Series B from coastal funds without moving.”

Sun Mountain, Cottonwood, Tramway, and a handful of national funds help bridge that but the number of post-revenue, scaling New Mexico startups is still modest.

Good: clear seed and grant programs, early-stage SDO support.
Needs work: more aggressive growth capital, revenue-driven scale programs, and corporate customers willing to take the first risk.

3. Securing long-term funding and incentives for ecosystem actors

Here, New Mexico is quietly excellent. LEDA expansion, Intel’s use of it, and the sovereign-wealth-fund-backed quantum initiative are long-horizon plays. Intel’s own report notes over $17.6B invested in New Mexico operations since 1980 and ~$1.2B annual economic impact.

The Technology and Innovation Office is not a one-off grant program; it’s a standing unit in the Economic Development Department with a clear mandate.

Good: structural funding mechanisms, not just ARPA-era sugar highs.
Needs work: ensuring SDOs aren’t fighting for the same grant scraps and locking in multi-year commitments for incubators and studios that actually work.

4. Measuring outcomes, not activity (and telling the story)

Here New Mexico behaves like most places and I’m not surprised, the digital age has left marketers behind, and storytelling is slowly emerging again as though it’s something we invented in 2020. With a bias toward listing programs and ribbon cuttings instead of tracking: survival rates, scale-up numbers, export revenues, and follow-on capital, organizations take the shortcut out by making announcements that things are going well.

The Santa Fe Business Incubator does a relatively good job reporting that it has helped launch over 100 companies that continue to diversify the economy. NewSpace New Mexico, Arrowhead, and TIO have some outcome-oriented language (jobs, capital raised, energy impact).

But the statewide narrative still sounds like a brochure, not a dashboard. That’s exactly what I mean when I say “Narrative isn’t fluff. It’s infrastructure.”

Good: pockets of metrics and case studies.
Needs work: a unified, public, relentless scoreboard of startup outcomes and exits.

5. Culture and behavior: collaboration as default, not forced

You do see genuine collaboration: DARPA and the state jointly funding QBI’s Quantum Frontier Project; Intel and state/local governments aligning around a hub strategy; NewSpace New Mexico co-creating with AFRL; UNM and the state co-funding SBIR matches.

But labs still dominate. The New Yorker’s coverage of Los Alamos’ nuclear boom points out the real challenge: the region’s dependence on lab jobs can crowd out other forms of risk-taking and economic diversification.

Good: strong lab–state collaboration and a long history of multi-institution work.
Needs work: more founder-centric norms, more repeat-founder leadership, and less default to “get a lab job and call it a day.”

6. Including the full spectrum of talent and not just the usual suspects

On inclusion, New Mexico has some real advantages and some glaring gaps.

Creative Startups has run programs globally and works with creative entrepreneurs often excluded from traditional tech circles. WESST and various Native-focused programs explicitly support underrepresented founders.

Yet the gravitational center of the ecosystem still sits around PhDs at lab towns and engineers at Intel. That’s great for quantum and semiconductors; it’s less great if you want service, consumer, or community-scale entrepreneurship to thrive.

Good: some of the best creative and Native-focused accelerators anywhere.
Needs work: making sure the quantum and deep-tech boom doesn’t become another closed guild.

7. Architecting environments where people perform at their highest potential

New Mexico actually has an advantage most “innovation districts” don’t: the lifestyle is legitimately attractive – outdoors, culture, affordability relative to coasts, and a creative identity that’s not just a marketing slogan.

What’s missing is that innovation is not a real estate play, and an innovation district is likely disappointing entrepreneurs.

Albuquerque and Santa Fe have not gone nearly as far down the “glass box with free Wi-Fi” rabbit hole as some other cities, which is good. But there’s room to be much more intentional about environments that blend lab-grade work, creative energy, and founder-centric services.

Good: authentic quality of life, meaningful physical assets (labs, spaceport, Intel).
Needs work: fewer generic “hubs,” more integrated, studio-style environments tied to outcomes.

8. Aligning government, academia, and private sector around outcomes

The quantum initiative is a textbook case of alignment done right: state government, DARPA, labs, and venture studios all focused on a 2033 target for utility-scale quantum computing.

New Mexico’s creation of the Technology and Innovation Office inside EDD is another signal; it’s not a side project, it’s in the economic engine.

Compare that to states where economic development, universities, and VCs barely speak, and you can see why DARPA chose to partner here after similar QBI agreements with Illinois and Maryland.

Good: above-average alignment on targeted sectors like quantum, space, semiconductors.
Needs work: pushing that same alignment into broader startup sectors (not just the sexy frontier tech).

9. Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness

This is where New Mexico can genuinely lead.

The combination of:

• National labs validating claims (critical for quantum, climate, and security tech).

• A space innovation hub co-located with Air Force research.

• An ag-tech cluster emerging around quantum-dot greenhouse tech like UbiGro.

• Intel’s advanced packaging and manufacturing presence in Rio Rancho.

…means New Mexico can become the place where high-risk technologies get de-risked faster and cheaper than in coastal cities obsessed with valuations.

Good: extraordinary ability to prototype, test, and validate frontier tech.
Needs work: making sure that when the risk is reduced, the company stays in New Mexico instead of relocating to California at Series B.

10. Adapting global best practices to local realities (not copy-pasting Silicon Valley)

In “To Grow Your Local Startup Community, First Map It Out,” Founder Institute argues that most ecosystems misdiagnose their problem as “a lack of capital” instead of fragmentation; the remedy is to map your ecosystem and intentionally fill the gaps.

New Mexico is doing that; with the Toolbox, with targeted sector plays, with TIO’s sector focus, and with international programs like NMexus bringing in Indian and Omani companies to use New Mexico as a North American landing pad.

This is not Austin, not Boulder, not the Bay. It’s a nuclear-and-oil state with world-class labs, a creative capital city, a spaceport, and a sovereign wealth fund willing to gamble on quantum.

Good: genuine adaptation – quantum, space, creative-tech, and manufacturing, not “let’s build our own SOMA.”
Needs work: more explicit articulation of New Mexico’s model – the “why here, why now” story for founders and funds globally.

What Might New Mexico Do Now?

If you step back, New Mexico is ahead of most U.S. states on the things that actually matter for frontier innovation:

• Deep, long-standing R&D capacity (LANL, Sandia, AFRL, White Sands).

• Real industrial anchors (Intel, Meow Wolf, space companies, deep-tech spin-outs).

• A state government willing to put sovereign-wealth money into venture scale quantum bets and tech grants.

• A growing web of SDOs: Arrowhead, Rainforest, CNM/ABQid, SFBI, Creative Startups, WESST, NewSpace, NMexus.

Where it’s behind is exactly where most ecosystems are behind, but with higher stakes:

• Scaling companies from $1–10M to $100M+ without losing them to the coasts.
  Building a capital class that actually understands venture, instead of treating everything like a grant or a real-estate play – the issue I call out directly in “Startup Ecosystems Fail Because of Investors.”

• Owning the narrative, instead of letting the national press reduce the state to “labs, nukes, and UFOs.”

Given this specific history, talent, and capital structure, which of these ten levers are you willing to pull this quarter in a way that founders will feel six months from now?

Is it rewriting how your angels do deals? Is it building a quantum-native startup studio aligned with QBI and Roadrunner? Is it a serious, public outcome dashboard? Might it be alignment of a narrative more accessible to entrepreneurs? Is it step easier than most places think such as finally stitching labs, creatives, and space into one ecosystem instead of three silos?

Because New Mexico has already done the hardest part: the risk. It built the infrastructure. It bet on the future with quantum.

The next phase is less glamorous and more uncomfortable: changing local behavior, capital norms, and expectations so that this doesn’t become yet another story of a place that invented the future… and exported all the value.

Wrestling with that tension – between invention and entrepreneurship, between labs and founders – is what many of us love to do so it’s the conversation worth continuing because we now know how to ensure a place like New Mexico isn’t just frontier tech, it’s frontier startups.