Providence is a Top Startup Market in U.S.

Providence is a Top Startup Market in U.S.

Providence has been ranked as a top market to found a company outside of Silicon Valley and New York -- and leaders in the Rhode Island startup industry are saying that the coming year could present significant opportunities in the market. 

Based on criteria of affordability, availability of capital, success of early-state companies, and a community of entrepreneurs, new research company DataFox placed Providence in its fifteenth - and final -- spot on its "2015's Best City to Found a Startup" list.     

"Though Rhode Island's economy took a hit during the recession, its tech scene remains a bright spot and source of pride. The cost of living is much lower than nearby Boston, and Providence boasts intellectual and cultural capital to spare. The city stands out in our study for the rapid growth of its young startups, as well as its affordability high density of entrepreneurs," wrote DataFox. 

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The top five markets identified were Cambridge, MA; Santa Monica, CA; Fayateville, AR; Boulder, CO; and Wilmington, DE.   

Saul Kaplan, who founded the Business Innovation Factory in Providence in 2005, spoke to the role that startups play in the state. 

"The entrepreneurial spirit is alive and well in Rhode Island. With limited opportunity in large institutions, we are dependent on start ups, small and midsize companies across the state to create jobs as the national and regional economy improves," said Kaplan. "Economic cycles are inevitable. If we can enable more entrepreneurs to create their own jobs we will build more resilience into our local economy and be better able to withstand future economic downturns."

"City and state government officials have realized the importance of supporting the local entrepreneurial community," continued Kaplan. "The most important thing our government leaders can do is to make entrepreneurship and innovation central to our state's economic vision, shine a big storytelling spotlight on the existing startup community and focus on creating the conditions for more entrepreneurs to start more companies. Progress on the ground is encouraging and our current leaders have a unique opportunity to help accelerate it. Let's start more stuff in Rhode Island!" 

Forward Focus

Betaspring's Melissa Withers -- who had been Executive Director of the Business Innovation Factory -- is currently the Managing Director of RevUp, which describes itself as the "first accelerator for 'revenue-first' companies—ventures where growth through revenue is the primary goal. RevUp companies receive $75,000 in cash and immersion in a three-month program focused on increasing customer acquisition and revenue."

Withers, who recently helped promote a number of Providence's startups for a Founders' League holiday gift guide, said that while things are "steady," that new ways of approaching startup financing present major potential for the sector. 

"I think we're at a steady state. We're lucky to be in a region where there's a lot of activity - we're benefiting from that," said Withers. "We think beyond local however. Our best bet is to embrace the regional momentum that's happening, and we're focused on global trends. For 2016 for starts up in general, it's coming to a head in terms of the bubble, and that's good news for places like Rhode Island and New England. We weren't on that bubble, we don't have over-valued companies."

"There's a reason New York's been giving Silicon Valley a run for its money - there's room in this world for more than one model. It's one card in a deck of cards," said Withers. "You see a lot of capital -- and fatigue - tied up in that market. That machine is running out of gas.  There's room in the non-Silicon Valley markets, for people to try new pathways.  We're seeing a growing awareness that a myopic focus on a big exit isn't the only way."

Withers said that both the RevUp model -- and others nationally -- are indicators of what she sees as changing trends in startup financing. 

"There's excitement for alternative models. We're seeing investor fatigue around the equity model. It's coming to roost," said Withers. "There's been lot of announcements this month about non-equity based financing -- that's the RevUp model  There's another way to get money back -- royalties, structured debt. Lighter Capital on the West Coast is an example.  Theres a growing sense that one size fits all venture model doesn't work for most of the country."

"Even in Boston, we need more than just the [VC] model to facilitate the economic growth. In some ways the start-up ecosystem is maturing," said Withers. "There's alternative financing, different expectations around growth."

Anisha Sekar with DataFox -- who is a recent Brown University graduate -- spoke to where Providence scored high by their standards.

"Newly founded startups can't survive on just a good idea - they need to be part of a culture of growth while remaining financially viable. Our study found the cities that meet both of those needs by providing access to funding, remaining affordable, cultivating a strong network of entrepreneurs and having a high density of early-stage startups," said Sekar. "Providence ranks above average in three of those categories: early-stage startups per capita, cost of living and startup growth potential."

"The top cities in our study often build their startup ecosystems on local universities and governments. Providence offers both: RISD and Brown contribute to the city's prominence in design and social entrepreneurship, while state-supported programs like the Venture for America and Wave Maker fellowships help attract new talent," continued Sekar. "Add in the mentorship and access to funding that comes from incubators like Social Enterprise Greenhouse and Betaspring, and Providence becomes an exciting city to found a company."