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'Top States' Rankings Mean Nothing to Entrepreneurs: Sweeney

Patrick J. Sweeney II, President HKSCKPVIamp; CEO of dwinQCNBC-YPO Chief Executive Network Member
Friday, 13 Jul 2012 | 3:53 PM ET

I’ve started four companies. The latest social media mobile app is a huge hit. It’s headquartered in Cambridge, Mass. Two others were (and are) in Virginia. Why leave the now number three-ranked state to build a new company in the number 28 state?

Takuya Matsunaga | Aflo | Getty Images

The rankings mean nothing to entrepreneurs. These two commonwealths both need big changes if they want to compete with Silicon Valley for long-term high-profile growth — just ask Mark Zuckerberg.

Virginia is ranked the third-best state for businesses in this year’s CNBC “America's Top States for Business” study. The ranking should have been for big business. The ranking is due to pro-business policy from a highly effective governor. However, the start-up environment is feeble — paltry access to capital and a dispassionate workforce. With dwindling Department of Defense budgets, the last bastion of growth niches is about to suck its last breath.

There are people trying to resuscitate the region — from AOL with its free space to Mindshare — but they cannot overcome the attitude of the best developers, engineers and innovators who have been ruined by a sense of entitlement and instant gratification.

I moved dwinQ to Cambridge — now the hottest place for start-ups in the country — because it has nearly twice the per capita venture investment of Silicon Valley. The Cambridge Innovation Center is what people on Sand Hill Road in the middle of California’s VC-land have talked about for years. It’s a Michael Porter-inspired cluster of innovation and entrepreneurship. It is the place to build a high growth exciting company. The CEO Tim Rowe said to me that Massachusetts “is the single region that is really changing the world — from technologies like e-Ink used on the Kindle to the newest form of nuclear fusion.”

Number 28? Hardly.

Virginia is for big companies — Microsoft just put its latest data center there, SAIC moved its headquarters there. It has great tax incentives, cheap power, and a concentration of bandwidth. Not much of this matters to a start-up. Start-ups need access to two things: passionate employees and highly speculative capital.

Virginia’s best talent has been spoiled by long-term government contracts. I’ve offered jobs to dozens of engineers over the last five years, and each time we find someone great, they compare an exciting equity-infused start-up with a $100 an hour, six month, W-2 gig for a defense contractor. They can make $150,000 in six months, then go to Brazil to learn to tango and speak Portuguese. then do it again. They have no passion or drive to build the next greatest company.

Boston is still considered by many second-best in the start-up world to Silicon Valley. My social media mobile company could only be built in the Valley or Cambridge. (Despite the hype, New York is a distant third or fourth choice).

Boston needs capital that is in the game for a big hit. The cluster theory works. No one has it like Massachusetts — Harvard, MIT, Berkley College of Music, Northeastern, Boston University — all within 10 miles of each other.

Boston companies also need to break the conservative, public relations-reticent attitude and embrace celebration of the entrepreneur and the excitement of fast growth.

Here are my top five recommendations for each commonwealth to become even better states for entrepreneurs:

Virginia

• Put a higher tax on contract employees – discourage the W-2 wasteland for the best talent.

• Build serious incentives for venture capital to come to Virginia and bet on wins – not on dividend

• Provide a platform for all the Virginia universities to come together and compete for innovation – A “Virginia University Hackathon”

• Fund capital-intensive shared infrastructure for start-ups around universities

• Compete where you can win – internet, telecom, routing, etc. Location and wireless – areas where there are clusters of education and experience and drop the quest to be Maryland or Massachusetts with a focus on biotech.

America's Top States For Business
America's Top States For Business

Massachusetts

• Fund a shared center of innovation like a biotech version of the Cambridge Innovation Center where expensive lab equipment can be used by many.

• Get the local media off its conservative bent, profiling sure winners or big names like EMC, A123 Systems or Genentech. Get media and PR around consumer-based start-ups – mobile, social and gaming - and cover new and exciting companies

• Sponsor globally recognized conventions that celebrate local entrepreneurs and draw new investors to Massachusetts where they can meet these hot local companies – nevermind TED, call it “Developing Exciting Valuable Assets Locally – DEVAL for short (as in Massachusetts Governor Deval Patrick).

• Don’t let World Series stars run companies, because they steal press (not in a good way)

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Sweeney is President & CEO of dwinQ, a social media marketing company that provides frictionless real world connections to social media and helps brands like Facebook, Vail Resorts, Harley-Davidson, Lexus, and others monetize the moment. Follow him on twitter @PJSweeney or check out his blog at www.glidesocial.com

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America's Top States For Business