PhishMe is the type of job-creating start-up that many communities wish they could attract. Launched in Leesburg, Virginia, from the home of co-founder and chief technology officer Aaron Higbee in 2011, PhishMe has grown to 378 employees and a projected $70 million in revenue for 2017. The company raised $42.5 million in funding in a Series C round led by Paladin Capital in July 2016.
Higbee briefly considered moving PhishMe to a nearby tech hub like Reston or Tysons Corner as it grew. But ultimately, the entrepreneur saw more advantages to doing business from Leesburg — a tourist destination where, on balmy summer nights, the sound of live musicians playing on the street corners fills the air.
For one thing, staffers really like the quality of life in Leesburg, a historic town of just under 53,000 people. Established in 1758, the town is known for historic sites like Ball's Bluff Battlefield and National Cemetery, its annual air show, and a downtown brimming with vibrant restaurants and quaint shops. "Leesburg has been focusing more on a town-center vibe where everything is walkable," Higbee says. Plus, office space was much cheaper than in the other cities he considered. It was only $21 to $30 per square foot versus $55 to $60 per square foot.
It's not an accident that companies like PhishMe are choosing to put down roots in cities best known as tourist destinations and finding them to be a good place to scale up. More of these popular vacation spots — from Niagara Falls, Canada, to Tampa, Florida, are actively trying to nurture start-ups.
There's a powerful incentive for leaders in tourist meccas to diversify beyond the hospitality industry. It can help to insulate their residents from economic downturns like the Great Recession, still fresh in many of their minds.
"Tourism is quite a volatile industry," says Rachel Crane, a professor in the school of business and management at Niagara College in Southern Ontario. "When the economy is poor, tourism and hospitality sectors are the first thing to get cut out of folks' budgets. We want to make sure we have a sustainable economy that can weather that."
A side benefit is that as start-ups become scale-ups, they bring the type of well-paying jobs that keep college graduates from leaving tourist hubs for bigger cities. To spark new business creation and growth, many of these cities are launching formal economic development programs, partnering with universities and leveraging existing resources, such as federally funded Small Business Development Centers.
Leesburg, for instance, is part of Loudon County, where, in an effort to spur new business creation and growth, the Department of Economic Development hired Vanessa Wagner six years ago for the new position of small business and entrepreneurship manager.