Good news, bad news: Miami is exploding with startups, but they are not scaling up.
That was again the conclusion of an annual Kauffman Foundation study released Thursday that showed that the Miami-Fort Lauderdale metro area ranked near the bottom of the pack for the entrepreneurial growth of so-called scale-ups, or fast-growing companies.
Still, ranking 36th out of 40 metropolitan areas nationwide for entrepreneurial growth is an improvement over 2016, when the metro area ranked 39th.
News of the index ranking comes in the same year that Miami ranked No. 1 in the nation in Kauffman’s 2017 Index of Startup Activity, a separate measure of new business creation that was released in May. Some years it ranks No. 2 or 3, but South Florida has always been in the top five of this national ranking for a decade.
The 2017 Kauffman Index of Growth Entrepreneurship used 2016 data on employment and revenues to rank states and metro areas in three areas: the rate of startup growth in the first five years; the percentage share of scale-ups that have reached at least 50 employees by year 10; and high-growth company density, or the number of private businesses with at least $2 million in annual revenue and three consecutive years of 20 percent annual revenue growth.
Miami ranked at the bottom of the pack for share of scale-ups, and in the bottom quartile for the other two categories. In Florida, Tampa (No. 26) and Orlando (No. 29) ranked higher than Miami. Only Jacksonville ranked lower, coming in at No. 40.
The top 10, in order: Washington, DC; Austin; Columbus; Nashville; Atlanta; San Jose; San Francisco; Boston; Minneapolis; and Indianapolis.
The sobering ranking reflects the reality that the Miami area has historically had far more micro-businesses — those under four employees — than most other metro areas, and it still does. But it comes amid Miami’s ongoing efforts to address this issue and develop a robust entrepreneurial ecosystem, a process that takes time. In the past five years, the Knight Foundation has committed more than $28 million to more than 200 entrepreneurship projects and organizations in the city. Several organizations focused on scaling up companies have expanded to Miami in the past few years, including Goldman Sachs 10,000 Small Businesses, Endeavor and the Babson WIN Lab for women-led companies and are already showing progress.
Endeavor Miami’s impact report, released last week, shows that its 16 Endeavor companies have generated 1,600 jobs and are booking $130 million in 2017 revenue. Other South Florida tech companies, too, that started in the past five to 10 years are now booking tens of millions in revenue and employing hundreds of employees, including Modernizing Medicine, CareCloud, MDLive, Chewy and Nearpod, to name a few, and a number of other startups are on their way. And it’s not only tech: Food and beverage startups have been particularly active, including Pincho Factory, already generating about $14 million in revenue.
On a national level, the Kauffman index showed, entrepreneurial growth continued to rebound from the Great Recession slump, across different industries and geographies.
“What this shows us is that, while Silicon Valley, Boston and New York City tend to grab national headlines, other areas of the country have been flying below the radar, quietly growing their ecosystems and nurturing entrepreneurial activity in their back yards,” Bobby Franklin, president and CEO of the National Venture Capital Association, wrote in the report.
The report also found that startups are growing more rapidly and reaching scale at higher rates than in the years following the Great Recession. Yet, fewer companies are growing to become medium-sized or larger in terms of employment when compared to the levels in the 1980s and 90s.
“These findings are cautiously promising. We are seeing a new model of economic development emerge — one that infuses entrepreneurship into the economy and removes barriers to starting and growing businesses,” said Victor Hwang, vice president of Entrepreneurship at the Kauffman Foundation, in a news release. “Our research indicates that high-growth firms, particularly of young firms, are important to job, output and productivity growth. However, because businesses are creating fewer jobs, it’s more important than ever to empower people to control their own economic destinies.”
Among the 25 largest states, the five posting the highest entrepreneurial growth activity were Virginia, Georgia, Maryland, Massachusetts and Texas. Florida ranked 24th, the same ranking as in last year’s report.
Find the report at www.kauffmanindex.org.
Nancy Dahlberg: @ndahlberg