The city as startup


011415 citystartup-thumbBY NISHANT BHAJARIA | OP-ED CONTRIBUTOR

Startups in the growth phase are associated with a fresh infusion of capital — human and financial — a curiosity factor and products to disrupt the market and drive demand. Portland’s economy gives off the same aroma.

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BY NISHANT BHAJARIA | OP-ED CONTRIBUTOR
011415 citystartup

Downtown Portland is replete with startups. These startups personify new investment and growth. They also represent something bigger — Portland’s economy.

Startups in the growth phase are associated with a fresh infusion of capital — human and financial — a curiosity factor and products to disrupt the market and drive demand.

Portland’s economy gives off the same aroma.

United Van Lines says that Oregon was a top destination for the second year in a row. Oregon had the highest percentage of inbound moves among the 48 contiguous states and DC.

Other data also points to a startup-like bonhomie in Portland:

  • In 2013, Oregon passed Washington in venture capital investment for the first time since 1993. Oregon raised $146 million while Washington raised $100 million.
  • According to Bloomberg, Portland’s GDP growth between 2007-11 outpaced other cities like Austin, TX and San Jose, CA.
  • The Portland Seed Fund has been recognized by the Wall Street Journal for nurturing entrepreneurship in Portland. The days when capital headed to sunny California while talent was getting moldy in Oregon may be ending.
  • In a sign that Portland companies are making it to the “cool kids” table, Tripwire was acquired for $710 million and New Relic became a public company.
  • Oregon has now made up ground lost during the great recession in terms of jobs.

Intelligence and equity are vying to get to Portland, and commentators are taking notice.

As with many startups, Portland has 3 key risk factors. Business and political leaders would do well to pay attention to these.

WAGES: Even as we have recovered jobs lost during the recession, incomes are lagging behind much like the rest of the nation. The news is even more sobering for Portland based on other indicators.

Portland’s median household income is still more than $4000 below its pre-recession peak. That number puts Portland below Denver, Minneapolis and Seattle. While Portland’s high minimum wage means the numbers are not as dire at the low end, the middle class does not have enough steak to match the sizzle.

Aspirational employees join startups with the expectation that growth will enrich them, and if that does not happen there is usually an exodus. If there is indeed demand to live in Portland and for the value our companies provide, wages will need to reflect that demand. Otherwise, Portland’s growth could go from being a story of possibility to a missed opportunity at best and a liability at worst.

JOBS: The 2013 Value of Jobs reports further demonstrates the limits of our job base. According to a summary in the Oregonian, lawyers in the Portland metro area make $42,218 a year less than their counterparts in other U.S. metro areas. College graduates in Portland are more likely to work part-time than those in other metro areas. As a result, the Portland metro area ranks 270th out of 284 U.S. metro areas in hours worked by 25-to 39-year-old white, college-educated males – a prime demographic for income growth.

This is symptomatic of a classic startup problem: financial growth does not always translate to job growth. Example: WhatsApp was able to sell for $19 billion, but only had 55 employees. Startups often create wealth without creating a lot of work. For all the good news in Portland’s economy, jobs continue to lag. Construction, for example, employs fewer people than it did before the housing crash.

Portland needs to keep up with native and migratory population growth, as well as the inevitable loss of jobs in specific sectors as our economy evolves. Our new enterprises need to create these jobs as well as lift up traditional sectors like construction and manufacturing. Portland cannot go on being a startup that rides the wave while others barely tread water.   

CULTURE: As startups grow, they face challenges in scaling their processes. There are often cultural issues as employees have to adapt to the sales cycle, changing demands and outside scrutiny. Growing pain become chronic if not corrected early on.

Portland is already at the same crossroads. More than a few of my friends have remarked how they are tired of paying high taxes only to find their cars keyed, the ubiquitous poverty and squalor downtown. Prosperity and privation live side by side in Portland, with more than 30% of Portlanders living in poverty.

Crime has started affecting how people experience Portland when they visit for business. Further, the abysmal quality of our roads, bridges and tunnels represents debt that will soon come due. Much as startups often get mired in financial and technical debt, these problems represent an anchor for Portland’s economic ship.

If Portland does not overcome these challenges, it will resemble startups that faded away in the zone between obscurity and irrelevance.

Nishant Bhajaria is a project manager at Nike.