Home Field Advantage
When, I was in Maine recently, an attendee came up to me to tell me how great it was in Nebraska compared to Maine. As a native Nebraskan, many people have described my home town or state as “nice”, but few have ever made it a destination community. Every ecosystem builder has faced the local syndrome of “the grass is greener in other markets”. Moreover, we are bombarded by information that insists Silicon Valley is the only place to succeed.1 Though I believe there is truth in learning and connecting to people from other places, I also believe there exists a genuine tension between moving to a denser ecosystem and being “home”. The purpose of this post is to suggest a more thoughtful, data driven suggestion rather than a reflexive retaliation or a “best places list” that documents where best to locate a resident’s new startup company.
The University of Minnesota Entrepreneurship and Innovation Exchange recently republished a 2013 paper about Danish startups. In the paper, the authors argue that a home field advantage contributes to company success. That is, company’s founded near the home towns of the founders are most likely to produce the best results. According to Dahl and Sorenson in 'Home Field Advantage' Works in Business as well as Baseball, numerous different types of returns were measured. The measures demonstrated that entrepreneurial start-ups succeed at higher rates and with more revenue when they originate near the founders’ home town(s). These authors systemically considered Danish companies and were able to find results across multiple time periods, industries, and other categories that support the notion that entrepreneurs should start their companies in their own back yards. This is an important finding for ecosystem builders because it suggests a compelling argument for founders that are considering re-locating to a new market.
However, as an experienced entrepreneur and funder, I would caution economic developers not to over-state this interpretation. Many companies SHOULD relocate to be close to their best customers or where there is talent. However, the natural advantage to finding local customers often is critical to the success of the company, and this, I think is the point of the article. Companies built in places where the founders have an existing network often benefit from being able to find early adopting customers faster and with less friction, than if they were to move to a market where the founders have a weaker network. In other words, if I personally know my early adopters and beta customers in Omaha, this is more impactful (probably) than knowing that statistically there are more in San Francisco, but these I do not know personally.
I do think the idea of the home field advantage flies in the face of current conventional wisdom – that startups can only succeed in certain hubs. The authors concede that starting a business in established clusters does have some advantages, but posit that the data suggests there is a home town advantage that supersedes some of the external advantages associated with supply chains, talent, etc. in other markets.
This is an interesting article because it reinforces a fundamental truth about people. Many of us feel most comfortable and creative when we have solid support around us. For many of us, family is our strongest support both personally professionally. That may be where the founders were born and raised, but not always. “Home field” is not equivalent to “home town” in all cases.
While presenting a lecture in Maine a few weeks back, I talked to a woman (originally from Iowa) who described the epiphany and deep sense of being at home that she experienced while visiting Maine. She and her family moved to Maine within a few years of that visit, and that is where they live today. I have been reflecting on this story and its implications. One implication is that Santa Barbara and Maine probably can make an easier case for “feeling at home” than Omaha – because they have natural benefits, location benefits, and have illustrated the ability to be a popular summer and tourist destination. But more importantly, home is most often where people and their families feel most welcome – and that may be a different place for different people.
In short, I think it is important to not get too focused on competing with Silicon Valley for startups, but instead understanding that home towns have natural benefits and opportunities. And, that perhaps by making a place more welcoming and establishing less friction in networking with customers, smaller communities can actually build a more compelling ecosystem strategy. In other words, finding a way to be more people’s home town might actually be a better strategy, than trying to be the next Silicon Valley.
Please click on the image below to read the article.