Connecticut: the least likely innovation hub in the US

Think back to where the US state of Connecticut was 20 years ago. A National Hockey League franchise, Hartford Whalers, had just left the state for North Carolina and rebranded to Carolina Hurricanes, it was one of the only places in the country where incomes were actually falling and we were known more for late-night television host David Letterman’s speeding tickets than anything resembling innovation. On the national economic stage, Connecticut was a punchline.

Yet since then, Connecticut has steadily evolved from a state most investors would bypass to a place that saw exits for two home-grown unicorns – startups valued at more than $1bn – in the past few months. How is Connecticut suddenly one of the most desirable locations for tech startups? It was not easy, requiring those 20 years and just the right combination of ingredients.

Boulder’s startup success does not happen without the University of Colorado, Austin’s does not happen without the University of Texas and the New Haven startup scene does not happen without Yale University. But it is not just a matter of having a major university in town. Plenty of college towns have very smart people and do not have startup ecosystems. The university needs to be engaged in the process as well.

In New Haven, Yale has embraced its role as the city’s biggest economic driver, offering mentoring and funding to seed new companies. This has given Yale graduates new options when they look for fun and innovative places to work, enabling them to stay in town after graduation instead of leaving for nearby cities like New York or Boston.

Startups need passionate forward-thinking talent willing to take lower salaries in riskier business models. Recent college graduates are the ideal candidates to fill those roles. As recent graduates gain experience, they may move on to roles at larger companies in the region. It is a cycle that benefits startups, established companies and universities alike. It can even revitalise entire cities.

But for this type of economy to thrive, universities must be willing to embrace and encourage it. Yale’s leadership in healthcare research has provided a beachhead for the region in the life sciences.

Startup ecosystems need critical mass, and today more than 130 startups are in Stamford alone. Connecticut had to reach a point of startup density where investors and founders would recognise it as a viable location to start innovative businesses. Startups beget more startups and there seems to be a point at which the floodgates open. Connecticut has quietly become home to nearly 1,000 tech startups and we expect that number to grow.

Achieving unicorn status is what every founder and investor dreams of. Yet it is extremely rare. Some 57 startups joined the unicorn club last year – down from the peak two years ago – but two of those companies are based in Connecticut. Data storage technology provider Datto, of Norwalk, was acquired late last year by investment firm Vista Equity Partners after hitting a billion-dollar valuation, and New Haven’s biopharmaceutical developer Biohaven consistently trades near a $1bn market cap following its initial public offering last year.

Success stories like these are attracting new attention to our state, with more investors and founders considering locating here.

It might sound simple, but being a nice place to live matters and in this Connecticut shines. The state offers easy access to several major cities at a fraction of the cost, a waterfront lifestyle and downtown areas that are bustling with activity. The math is easy – New York City home prices average over $1,500 a square foot. But 45 minutes away in Stamford, that price drops to less than $270 a square foot. Startups can spend less and employees can enjoy a higher outdoor quality of life in Connecticut.

As more students stick around and new talent comes to Connecticut’s cities, local economies are also being rejuvenated. Anyone who visited 15 years ago would be surprised to see the number of restaurants, bars and other small businesses that now accompany the influx of tech companies.

We have come a long way, but there is still plenty of work to do in Connecticut’s startup scene. Local government and business leaders recognise that investing in development, whether directly related to startups or not, will keep the momentum going. It takes everyone, from large companies to founders to local-brew pub owners, for a place like Connecticut to turn into a thriving technology hub.

Connecticut will continue to need the guidance and support of all of its leaders, in all spaces, to ensure the state remains an affordable, attractive destination for technology innovators. Will that bring the Hartford Whalers back? We are still working on it.

This is an edited version of an article first published on PE Hub Network