Ask any of the major players in Columbus’ startup scene what factors have contributed to the city’s growing ecosystem and you are likely to get an answer not focused on what that specific organization has contributed, but the partnerships and collaborations that have gotten everyone there together.
“We’re all in it together, all with the same goal of building and growing amazing companies right here,” says Tom Walker CEO of Rev1 Ventures. “We all want this to be a city where we can work, play and grow.”
It’s something I’ve seen and felt in my three years behind the keyboard covering Columbus’ startups and entrepreneurs. Year one brought plenty of stories, but a shift over the last year and a half has led to an exponential number of story ideas and an inbox bursting with tips on new businesses to press releases from existing enterprises with exciting news. And, if there is one word I’ve heard more than all the others about ‘Why Columbus?’ ‘What advantages are there to doing business here?’ it’s collaboration.
That collaboration seems to be paying off, as a feeling that many in the startup scene have had – that Columbus is a great place to build a business – is validated by recent indexes from the Kauffman Foundation.
A grant-making organization focused on education and entrepreneurship, The Kauffman Foundation presents a number of in-depth reports measuring startup and entrepreneurial activity across the nation. In addition to its Index of Startup Activity, the foundation has released its first report on the Index of Growth Entrepreneurship.
“Nationally, the 2016 Growth Entrepreneurship Index rose for the third year in a row, indicating that business growth largely has recovered from its Great Recession slump,” the report states. “A principle driver of this year’s uptick in growth is an increase in business employment growth indicators: startups are growing faster in their first five years and more companies are reaching the scale of medium-sized or larger.”
The report notes that while many of the ‘usual suspects’ performed well, some unexpected metro areas, like Columbus, landed near the top of the list.
Columbus ranked #4 Highest in Growth Entrepreneurship Activity 2016, topped only by Washington, D.C., Austin and San Jose. That ranking was determined by three measures:
- Rate of Startup Growth – 51.9 percent
- Share of Scaleups – 2.68 percent
- High-Growth Company Density – 143.8
Columbus’ Rate of Startup Growth was 51.9 percent, meaning that, on average, Columbus businesses turning five years old had grown by that percentage.
The city boasted the highest percentage of share of scaleups of the 40 metro areas measured at 2.68 percent. The measure indicated that out of every 1,000 companies, approximately 27 reached 50 employees or more within 10 years.
Defined as “private businesses with at least $2 million dollars in annual revenue with 20 percent annualized revenue growth over a three-year period,” Columbus’ measure of high-growth company density was 143.8. Of every 100,000 employer businesses in Columbus, nearly 144 fell into the high-growth range.
Columbus also found itself in the top spots in two of the five industries with the highest share of high-growth companies. The city has the #4 Highest density of high-growth companies in the IT services industry and the #1 Highest density of high-growth companies in advertising & marketing industry.
A trio of organizations that have all played their role in building Columbus’ startup ecosystem weighed in on the rankings.
Each cite that collaboration, between a startup and a Fortune 500 company, all the way down to startup-to-startup and everything in between, as a major driver of the ecosystem.
“Our startup ecosystem has come further in just a few short years than many recognized cities have taken decades to achieve,” Walker says. “Our region’s aggressive economic development strategy includes The Columbus Partnership of 52 CEOs from Columbus’ leading businesses and institutions, Columbus 2020, and Rev1 Ventures, with the support from The Ohio Third Frontier and more than 40 corporate and community partners dedicated to growing the startup economy in Central Ohio. This regional alliance allows Columbus to achieve more because we are leveraging all partners involved.”
Building a city for thriving startups also takes the support of the city’s largest employers like Chase, Wendy’s, L Brands, Cardinal Health and more. These large institutions can serve as first customers for startups, and are often supplied by an army of smaller companies themselves.
Nationally known names now, these enterprises started just like all others – out of a garage or with one location.
“We don’t often think of those companies in those terms these days,” says Kenny McDonald, president & CEO of Columbus 2020.
With the Columbus market a strong one for growth as indicated by the findings, McDonald asks, “Who are going to be those companies in the future?”
Chase recognizes the startup potential in Columbus, and continues to foster it by sponsoring events like Columbus Startup Week for the past two years.
The bank employs more than 5,000 technologists in Central Ohio, building connections to the technology community.
“That connection to the tech community resulted in our local leadership taking note of a real groundswell of technology startup activity in Columbus, as well as an interest among the entrepreneurial community to organize a Startup Week here,” says JPMorgan Chase & Co. Managing Partner Jeff Lyttle.
The momentum, continued support of local leaders and successful first year, made a second year of sponsorship a ‘no-brainer’ for Chase.
A free, week-long event featuring over 100 keynotes, panels and interactive sessions, “Aspiring entrepreneurs can learn a ton from – and be inspired by – people who have been through startup successes and failures,” Lyttle says. “Columbus’s most prominent entrepreneurs have been extremely generous with their time and insights.”
Startup Week is a unique opportunity that puts business builders, resources and entrepreneurs together in the same space. It oozes the ‘we,’ collaborative mentality that is a recurring theme for Columbus.
After getting involved with Startup Week, Lyttle says, “I am personally struck by the incredible generosity and collaborative spirit that exists in the Columbus startup scene. There is a sincere willingness to help one another, to give of their time, knowledge and networks to encourage vitality and growth in our entrepreneurial community.”
With Startup Week tracks focused on IT, Columbus’ name as a Smart City, resources like Rev1 with its focus on high-growth businesses’, bootcamps popping up to fill the IT skills gap – it’s unsurprising Columbus is seeing a number of high-growth companies in the IT sector as indicated by the index.
Factors like Columbus’ recent awarding of the Smart Cities grant should only fuel the IT growth in the city.
“I think there is going to be a number of business opportunities for entrepreneurs,’ McDonald says.
Columbus’ willingness to embrace the new and evolve will be an attractor for bright minds, in addition to the talent coming out of institutions like Ohio State.
“It does matter to be a place that is progressive and creative and collaborative enough that we can compete against some of the best cities in the country and come out on top,” McDonald adds.
A growing number of venture dollars coming from organizations like Rev1 means more investments and growth opportunities for businesses.
“Rev1 intentionally focuses on identifying and accelerating the highest-potential startups and connecting them with the services, funding and resources to grow,” Walker says. “We made 29 investments [in 2015], a 60 percent increase over 2014, making Rev1 the #1 Seed Investor in the Great Lakes Region according to Pitchbook, and Columbus the fastest-growing city in the U.S. for startup activity, according the Kauffman Foundation.”
Rev1 is joined by groups like NCT Ventures and Drive Capital, making investments in Companies like CrossChx, Aver and Beam – companies that could be that ‘big exit’ that’s so often talked about in reference to a successful startup ecosystem. VentureOhio recently released a report outlining the improving avenues of venture capital in the state – but more coming on that soon.
As the national recognition of Columbus’ startup scene begins to grow, “It’s just the beginning for Columbus as a startup city,” Walker says. “Now is when we all need to lean in. Take first meetings with founders. Give feedback on products. Become a beta customer. Take a chance. We can’t stop doing what we’re doing. As more startups begin and start growing, they’ll need more services, customers and capital than ever before. ”
Click here to access the full Kauffman Foundation report on Metropolitan Area and City Trends.
Click here to access the full Kauffman Foundation report on State Trends.