Viewpoint – Start-up star cities
Prompted by a colleague in our Chicago office, I’ve just read a fascinating piece of research identifying the top 10 rising cities for start-ups in the US. With a continued investor fascination in finding the next big thing, this analysis provided some pointers on where we should be looking.
The premise for the research was that while more than three-quarters of all venture capital investment is concentrated in the areas in and around Silicon Valley, New York City and Boston, which are the ‘best of the rest’ cities?
What Forbes observed is that these top league locations are expensive for companies to work in, and so, is the smart money looking elsewhere? From a real estate investment perspective, while Islamic investors have frequently purchased real estate in these hot markets, many are looking for better value, with the level of start-ups being one of several indicators of a city on the ascendancy.
So, after removing the top 10 metropolitan areas for venture capital investment, Forbes looked at the next 30, applying 13 quantitative measures to determine their rising stars. Such metrics included costs of business and living, education levels, working-age population growth and volume of venture capital investment.
The number one city that emerged was Columbus, the state capital of Ohio. Not sure many would have guessed that one in advance, but Forbes identified that the city had “done a better job of retaining post-graduation talent from places like Ohio State University” and that the working-age population had grown 9% over the past five years. Highlighting the practical reasons to be in Columbus, a local tech company shared that it could recruit a software engineer for half the salary cost of recruiting in San Francisco or New York.
Our own experience of Columbus has been the purchase of an Abbott Laboratories headquarters building in 2017 with Kuwaiti investors. We have seen the city go from strength to strength in even this short period — real dynamism.
In fact, I am proud to say that 90 North has invested in half of the top 10 rising cities for start-ups, with both Kuwaiti and Saudi investors; as well as Abbott Laboratories in Columbus (#1), we managed the FBI headquarters in Denver (#4), have made a number of headquarters investments, including GE, in Cincinnati (#6), own a further office investment outside Philadelphia (#8) let to Saint Gobain and bought and sold well outside Charlotte (#10).
Further, Atlanta (#3) has seen significant Islamic investor interest over recent years, Investcorp hit Baltimore (#5) for a significant multifamily home acquisition and Arch Street Capital made an office investment outside Minneapolis–St Paul (#9) two years ago. However, as far as I can tell, none of us in the industry is yet to invest in either St Louis (#2) or Portland (#7). It really is time we recognised what these cities, 2,000 miles apart, have to offer.
This article was first published in Islamic Finance news dated 23rd October 2019.