The Importance of Density for Entrepreneurship and What Houston is Doing About It

HTX Tech Rodeo Entrepreneurship Meetup in Houston, Texas 2020

Sometimes all it takes is a spark. Everyone seems to know a story where one small meeting, idea, or circumstance eventually led to a huge company being born. Take 23andMe, for example. It is the largest consumer-facing DNA testing company in the world. As a tech company, you wouldn’t be surprised to find out that they started in Silicon Valley. Anne Wojcicki founded the company in 2006. Google was one of the initial investors, putting in $3.9MM to accelerate the company. What is interesting is not the numbers, but the people involved. Sergey Brin, the founder of Google, was married to the founder of 23andMe at the time. They met because Brin had rented the garage of Susan Wojcicki, the sister of Anne Wojcicki. Yes, that famous garage in 1998 where Google was born! It wouldn’t be farfetched to say that the stars aligned perfectly for Anne Wojcicki. Simply by being in California and related to her sister, she was able to meet the future founder of Google, fall in love, and utilize that connection to found her own multi-million dollar company.

Can these sparks happen anywhere? Sure. However, there is much research that shows that these sparks, or collisions, occur more often in dense cities. When people are working closely together, that leads to opportunities. Not only because of a diverse mix of ideas but because of potential connections between people of means to people with no means. There is also inertia and energy in dense cities that lead to more ideas coming to life. Those are the reasons why Silicon Valley, New York, Chicago, and LA are considered hotbeds for startups and VC investments. Cities that are large but not as dense, such as Houston, as unable to get the advantages of collision and innovation as easily. Chicago has a similar population to Houston, but VCs invest more than double the amount. That’s why Houston started the Houston Exponential program. By using technology to close the physical divide between people, they aim to initiate more collisions and hopefully lead to more successful startups.

The research is there. The higher the collision density of a city, the more financing there is for startups. Does that mean that Houston is doomed to be a follower and not a leader in innovation? Not necessarily. With technology improving every day, it is possible to lessen the physical gap between people. The coronavirus epidemic has made working from home the new norm, and it’s not impossible to imagine a future where people can innovate virtually. Firms like KPMG and Accenture have built innovation hubs in Houston because of the enormous potential the city has. VCs are increasing (or at least they were before coronavirus) investments in Texas. 

I believe that dense cities like San Francisco and New York will continue to be the leaders of creating high-value startups. However, Houston can still be a real player if the city continues to focus on supporting innovators.

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