Tech Hubs: Sure Thing Or Empty Promise?

Danielle Beurteaux

HubSpot_Offices2The concept of tech hubs is a relatively recent invention, but already it’s become something of a synecdoche for innovation, entrepreneurs, incubators, and money.

Tech hubs have also become the darling of urban centers looking for a means to invigorate ailing economies. With all the buzz, you’d think tech hubs are a sure-thing proposition.

Maybe not so much.

Tech hubs need more than a co-work space and 3 startups

A 2013 paper from the Kauffman Foundation notes that tech hubs aren’t built overnight. In fact, today’s strongest hubs were yesterday’s hubs—20 years ago. And these locations became tech centers not because of a “build it and they will come” philosophy, but because of years of entrepreneurship and infrastructure building.

The report found that more than the presence of institutions like universities, large local companies were the biggest builders of startups, due to the “spin-off” factor.

As urbanist Richard Florida wrote in The Atlantic, the report provides “a much-needed corrective to faddish magic bullet policies and initiatives” like tax breaks and incentives, putting to bed the notion that you can throw enough money in the right direction and —hey presto! — you have yourself a tech hub.

Is the tech hub the shopping mall of today?

If you’re of a certain age, you might have spent a fair amount of your youth hanging out at the local shopping mall. Believe it or not, malls were originally meant as an antidote to suburban sprawl and a means to bring urban centers back to life. And we know what happened with that.

Large shopping malls, built with tax breaks, sprung up everywhere, many on old industrial sites. Now, America’s malls are on the decline (although they make for some interesting photos), bringing to mind that cliché about putting all your eggs into one basket.

Apart from the short-term view, there are other issues with the tech hub model. One, as anyone living in the San Francisco Bay area will probably tell you, is cost of living increases. There are a lot of challenges with urban tech centers, and there’s not much policy in place to soften the brunt of their impact.

Another issue, as reported in this Reuters article, is when foreign investors buy up companies and patents and move them away, or integrate them into their existing operations as local research and development centers, often with fewer employees. Not such a good payoff for all those tax cuts and incentives.

But at least one developer is attempting to address both challenges: A mall in Pittsburgh is being redeveloped as a tech hub.

Up-and-coming hubs—internationally fabulous and less expensive

Looking for a home for your next startup? The cost of square footage, crowding, and competition in established hubs are making smaller or less-established areas magnets for new companies.

How about Bogotá, Colombia? It’s got investment incentives, many universities, and lots of direct flights.

There’s Jerusalem, which has grants, grants, and grants for techies. Oh, and a few thousand recorded years of history.

Utah: A recent report found Provo, Salt Lake City, and Ogden are three of those state’s cities where tech rules. Novell, Adobe, and Qualtrics are all there. And let’s not forget the skiing.

Luxembourg has the infrastructure, security, and access, not to mention low taxes. It just hasn’t hit the cool quotient yet.

Or eschew tech hubs for maker hubs—bringing creativity and DIY to everything from food to biohacking. The CEO of Intel is a fan.

Here’s an idea: Instead of trying to cut-and-paste the established tech hub model onto wannabe hubs, suggests Paul Orlando in this TNW piece, a better idea is to develop a model that’s responsive to an area’s existing advantages, and build something unique and new. Maybe the tech hubs of the future will end up looking nothing like the tech hubs of today.

Want more insight on the innovation economy? See What Happens When an Idea Becomes the Product?

Danielle Beurteaux

About Danielle Beurteaux

Danielle Beurteaux is a New York–based writer who covers business, technology, and philanthropy. Her work has appeared in The New York Times and on Popular Mechanics, CNN, and Institutional Investor's Alpha, among other outlets.