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he “Wild, Wild West” mentality of Nevada may not be kind to your pocketbook if you’re a high-stakes gambler, but it just might be your best friend should you decide to launch and grow a business there.
According to the annual Cognetics ranking of “Entrepreneurial Hot Spots,” Nevada is the No. 1 state in the nation to start and grow a company. In the ranking of Top 25 Small Metro Areas for entrepreneurs, Las Vegas scored No. 1 and Reno scored No. 4.
The annual research report by Cognetics founder David Birch of Waltham, Mass., measures the actual, recorded frequency with which new companies start and young firms grow in different places. Specifically, the report measures firms that started in the last 10 years that employ at least five people today — as a percent of all firms — and the percent of firms 10 years old or younger four years ago that grew significantly during the last four years.In explaining why Nevada topped the charts, followed by Arizona and Utah, Birch says, “There is the Wild West mentality that is very attractive to entrepreneurs. The growth of the dot-coms, for example, tended to be in California and other areas of the West such as Boise and Denver and Salt Lake City. The emergence of this new technology showed that the West was a good place to build the New Economy of the Internet.”
Other factors that place Las Vegas at the top of the rankings, according to Birch, include access to a major university (University of Nevada-Las Vegas), the location of a major international airport and the presence of a pro-business government that encourages and rewards entrepreneurial risk-takers.
Richard Fitzpatrick, who heads the Nevada Internet Business Alliance, a statewide non-profit business consortium of some 700 high-tech companies, says that more than 78,000 Web site domain names are now registered in Nevada — more per capita than any other state.
“The Internet is a substantial, growing business in Las Vegas and throughout Nevada,” says Fitzpatrick. “A lot of these companies are completely unrelated to the gaming business. Amazon.com, for example, came here because we have no inventory tax. That’s why they built a warehouse on our side of the border. Also, you can buy really good office space for US$1.25 a square foot and warehouse space for $1 a square foot.”
Fitzpatrick says that he began to notice the sudden wave of high-tech entrepreneurs throughout Nevada about two to three years ago. “This sudden growth wave actually paralleled the modernization that was taking place at the resort, hotel and casino properties. As a result, people saw an opportunity to provide local Internet designers and local Web expertise,” he adds.
“Now, this whole industry is growing very quickly to build the infrastructure it needs to thrive. We really didn’t have very good fiber optic lines or wireless service two years ago. Now, those service providers are coming into the area and providing them. We are really growing in the infrastructure area.”
Part of the growing infrastructure is the new fiber optic line being built from Sacramento to Salt Lake City. High-tech firms in Reno and Carson City will be direct beneficiaries of this line, Fitzpatrick notes.
“We are also working with some fiber carriers to get a direct fiber line from Reno to Las Vegas. Some small towns could connect to that line and run their businesses from anywhere on that route. Utah has done a tremendous job of bringing bandwidth to their rural communities.”
Fargo: More Than a Movie
Ranking second among the nation’s Top 25 Small Metros for entrepreneurs is Fargo. No, not the movie, but the new high-tech hotbed in North Dakota.
“The people of Fargo have long been entrepreneurial in spirit,” says Don Berg, who heads the Fargo Economic Development Council. “History shows that many farmsteads and local businesses were started only a generation or two ago. Therefore, many of today’s local business leaders were raised with the initiative and desire to be their own boss. I believe that our work ethic is unmatched.”
Today, the Fargo success story includes such firms as Great Plains Software, recently acquired by Microsoft. A manufacturer of accounting software for medium-sized businesses, Great Plains was founded in the mid-1980s and has since grown to more than 2,000 employees.
Another such business is Sundog Interactive, which began about four years ago as a designer of Web sites for businesses. Sundog has since grown into an incubator for local start-ups and has expanded into application service providing for regionwide businesses.
Why Fargo? In addition to the work ethic, Berg states, entrepreneurs find an educated work force in the local population. “Well over the national average graduate from high school and attend a four- or two-year college or trade school. The basic education skills to succeed are ingrained throughout our entire high school and college educational system. In other words, the basic skill sets required to successfully start, manage and grow a business are not in short supply.”
Serving as an incubator for such start-ups, the local colleges in the Fargo area specialize in engineering and computer sciences. “These fields seem to produce more risk-takers and creative thinkers — outside-the-box sort of people,” Berg says. “The universities promote such thinking and are a main reason why so many students are interested in starting a new business.”
There is also a widespread mindset to financially bolster entrepreneurs. The Bank of North Dakota, the only state-owned bank in the United States, provides low-interest loans to businesses looking to expand and start-up operations. North Dakota also offers the Development Fund, administered through the Bank of North Dakota, specializing in the injection of capital into entrepreneurial businesses.
How to Attract Entrepreneurs
Birch of Cognetics says there is a lot that other communities can learn from Las Vegas and Fargo. “My advice to other economic development groups would be, first, do a very hard assessment of the best research university they have. If they don’t have one, they’re in trouble,” he says.
Other considerations include ensuring direct air service to as many major cities as possible, improving the quality of the local high school graduates and providing more recognition for entrepreneurs in the community.
“When you find entrepreneurs in your community, honor them and reward them,” says Birch. “Make sure the media take notice of them. Former Gov. Michael Dukakis of Massachusetts understood this during his second administration, and it doesn’t cost any money.”
Birch says that “if you do these things, you will own the world.” The reason, he says, is because those are the “ingredients of the new money-value economy. It is no longer about the old factor costs such as cheap labor and electricity. Those factors are totally irrelevant today. It’s all about brainpower and the ability to move brains around quickly.”
For more information on the Cognetics annual rankings, go to www.cogonline.com.
