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The truth about Miami’s startup status

Last week, the Kauffman Foundation released its annual survey ranking startup activity. For the first time since the index came out, Miami emerged as the top city for new business creation.

The results of the survey, which used government data, were widely covered, including by Startup.Miami, and also touted within the city’s startup scene.

But that survey revealed much more than just No. 1 status about the state of Miami’s entrepreneurial environment. In addition to overall startup activity Kauffman also measured “growth entrepreneurship”  — that is, how many startups go on to achieve substantial increases in either revenue or employees.

Here, Miami has finished second-to-last in each of the last years.

For Arnobio Morelix, the senior research analyst at Kauffman who put together the survey, the data points show Miami has not been able to get its galaxy of startups to scale up — at least for now.

“Miami has a particularly high number of new entrepreneurs — a large percentage of adults become entrepreneurs and start businesses, with or without revenue,” he said.  “But we don’t know yet if they’re going to be successful.”

Kauffman found that 560 out of 10,000 adults in the Miami metro area are entrepreneurs — top among all metros surveyed. Miami also scored very well on startup density — there are 107.8 startups for every 1,000 firms.

Morelix attributes this in large part to Miami’s high percentage of immigrants, whom data show are more entrepreneurial, by necessity.

“When you look at the percentage of business owners who are immigrants, the second highest is Miami [behind San Jose], and that’s a big reason for their strong performance,” he said.

No growth

But when it comes to scaling up its companies, Miami’s showing is quite poor.

As of 2013, just eight of every 1,000 companies started out as startups or small businesses and then reached a scale of more than 50 employees.

A chart comparison with the Austin metro area, which Miami passed to gain the No. 1 spot on the startup activity list, tells the story.

 

These spider graphs measure how balanced and dynamic a metro’s entrepreneurial environment is. The further out from the center a point is, the stronger that city is in that given category.

As you can see, Miami remains heavily tilted toward startup activity, without a robust market for growth or stability.

Austin, meanwhile, at this point has a much more well-rounded market for entrepreneurship.

“What we see [in Austin] is an environment favorable not only to experiment, but having the access to talent, capital and markets that you need to grow over time,” Morelix said.

Austin is well aware of its advantages — as well as the fact that despite its status, it must continue to make changes to compete for startup growth.

“Austin works as one of America’s best supportive environments for small, high-growth companies,” Drew Scheberle, senior vice president at the Greater Austin Chamber of Commerce, told 512Tech.com when the new rankings were released. “But to continue to work, Austin must constantly identify and refresh capital to support new company creation, transfer our best ideas from our universities and medical research into creating new companies and developing and keeping the risk takers and talent here in Austin.”

For even greater context, Miami has three times the population of Austin.

For now, stability

Miami’s performance on the third Kauffman component, Main Street Entrepreneurship, was about average. The city has a high rate of business ownership, and Kauffman found that 45 percent of businesses that started operating in 2009 were still alive five years later.      

“Miami does well on local small businesses — they’re not going anywhere at all, they’re surviving, they’re not dying right away,” Morelix said. “But they’re not establishing other routes — they’re not reaching high levels of growth later on.”

The one major caveat to all this is that most of the data is not current to 2016 — and it is evident to anyone on the scene how much has changed in the past two years. Things like the launch of CIC Miami, StartUP FIU, and WIN Lab, plus the expansion of The LAB, have all been gamechangers. 

So it may be that it’s still just too early to say whether Miami’s startup scene has successfully broken out. But from what we see now, it hasn’t happened yet.  

By Rob Wile
Rob Wile, the curator for Startup.Miami, is a writer and entrepreneur living in Miami Beach. He’s a former staff writer for Fusion and Business Insider. His work has also appeared in Slate, Newsweek, Money Magazine and The New Tropic. He writes a newsletter on tech, business, and the South Florida economy called The Heatwave.