Seed companies and anchor companies
when one grows into the other
In my Detroit post I had mentioned contests being an interesting source of perspective on cities, as they involve cities putting themselves forward in competition. For example, Columbus won the Department of Transportation’s Smart City Challenge in 2016, being candid about inequities in health care access. Mobility was put forward as part of the solution, and the DoT awarded Columbus as the winner from 78 entries after an initital down-select to Austin, Columbus, Denver, Kansas City, Pittsburgh, Portland and San Francisco.
Insights abound in all the applications. For example, in the same DoT Smart City Challenge, Austin described itself as facing a “confluence of mobility, equity and opportunity changes that has reached crisis levels”. Pittsburgh described itself as needing further improvements in air quality.
Another interesting source of data are local chambers of commerce. In Austin, this is the Austin Chamber, which puts forward five-year economic development plans referred to as Opportunity Austin. They are now on OA 4.0, which implies a certain continuity of effort! For Pittsburgh, this is the Allegheny Conference.
In reading, I’m looking for targets, KPIs and a sense of what moves the needle. Austin Chamber provides annual reports. The 2021 version provided this scorecard.
How meaningful is a target of 160,000 new jobs over 5 years? On its face, that’s almost 20% of the population of San Francisco. Note, though, that Austin MSA has grown close by close to 500K each decade since 2000. Against that level of growth, 160,000 new jobs (and housing, and infrastructure) are needed to feed the machine. One can imagine that target as a mosaic of tiles, large and small. If the new Samsung fab in Taylor, Texas (Austin/Round Rock area) fab announced in 2021 counts towards the total, that’s 1600-2000 jobs, or 1-1.25% of the target.
Pittsburgh-area data, to this non-local, seems a little more federated. (As Berkeley faculty, I can empathize if this is indeed the case - Berkeley is a hive of activity not all accessible through a single pane of glass.) With that said, in looking at Pittsburgh I have regularly made use of data from the Pennsylvania Economy League of Greater Pittsburgh (thank you!), and then updates published as Pittsburgh Scorecards, like the one below from June 2022.
Here, some context - the city of Pittsburgh is about 300,000 people, in a metro area of around around 2.4M. Unlike Austin MSA, both Pittsburgh city and metro population are not projecting rapid growth. Below is the 11-year trend for Pittsburgh metro.
Some of the wins being celebrated in Pittsburgh’s dashboards seem relatively modest, relative to, say, a Samsung fab. 40 jobs created here, or added to an existing company there. With a knowledge worker multiplier that may correspond to a 200-person employment impact, but it’s still smaller than, say, a fab, or a lab, or a hospital. Here I’m engaging in one fallacy - only chasing big fish! The reality is cities need a portfolio, much as investors do. Venture returns are characterized by a power law distribution, and I suspect a similar dynamic applies with regional job creation.
Which gets to the topic of this post - seed companies, versus anchor companies, and when the former crosses over to become the latter.
In class, I used Fairchild Semiconductor and Intel to make the analogy, and Linkabit and Qualcomm. While Fairchild helped create the category of “venture-backed Silicon Valley semiconductor company”, from an employment impact perspective, Intel would be the anchor for the community - the company mayors and governors would call on and count on, the kind of company that can produce charts like this.
From Intel Oregon RISE Report, 2020-2021
(There’s an important wrinkle to the Linkabit-to-Qualcomm story - Irwin Jacobs electing to set up Qualcomm in San Diego, not LA, where Linkabit had been. Thus the seed was transplanted.)
I asked Jared with Detroit Venture Partners this question. For example, their portfolio company StockX, per Pitchbook, employs 1500 people, many of whom work within the city of Detroit. As Bedrock, (re)developer of the Detroit urban core, does that make StockX an anchor company for the community? Jared noted that Rocket Mortgage employs around 25,000, making Rocket an anchor company for the community. Ally Financial, the former GMAC, employs around 10,000 nearby, making mortgage issuing one of the bigger sectors in urban Detroit.
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Miscellaneous gratitude:
Big thanks to Haas alum Jared Stasik at Detroit Venture Partners for joining Clusters class this week! Thanks for making the trip.
It turns out good things happen when you write a Substack! Posts on Clusters and Tokyo led to a connection with the team at the MIT AgeLab, run by Joseph Coughlin, author of the Longevity Economy. So, feeling grateful about that, especially as someone who incorporates demographics into my classes, not just on Japan. Thanks to them for reaching out, and thanks to Japan Society of Northern California for reposting my Tokyo posts.
Thanks to my student Chad Powers who reminded me that Steve Case’s Rise of the Rest has come out - I have procured a copy and am looking forward to reading.