Q: Where will the next big app be created?

On our minds

They’re popping up in Nebraska. And Toronto. And Nashville. And Rochester.

What these promising young startups doing in mid-size, often mid-country cities, instead of setting up shop on our nation’s hip-and-happening coasts?

Well, they’re 1) siphoning fresh talent from nearby universities, 2) slashing their real estate costs, and 3) raking in tens (or hundreds) of millions of dollars in venture capital from eager funders.

Any hands going up to ask just how they’re managing all that? Here’s our take.

As entrepreneurial businesses become increasingly important actors on the playing field of global economics, we’ve found that a university presence is a major draw for those selecting a first or new location—especially tech companies and others who value strong links to startup culture. Meanwhile, these comparably small towns offer unique opportunities for work-life balance.

This means that some surprising mid-size cities, thanks to their strong academic presence, are now becoming major hot spots for tech talent: see Omaha and nearby Lincoln (home of the University of Nebraska system and companies like Hudl); Provo, Utah (home of Brigham Young University and companies like Qualtrics); Columbus, Ohio (home of Case Western Reserve University and companies like Jifiti); and Grand Forks, North Dakota (home of the University of North Dakota and companies like SkySkopes). The comparatively low costs of living and retaining talent in these cities make them ideal places for young companies to locate, and to receive comparatively high amounts of venture funding (when controlled for population). Pittsburgh, Pennsylvania and Raleigh, North Carolina have seen tremendous growth as well, due in large part to the multiple universities in and around them.

Some localities can increase their desirability even more by offering benefits to new companies beyond their “college town” status. Toronto, for example, capitalizes on its country’s open immigration policy, while Nashville provides the arts and culture scene that Millennials love. Rochester’s beautiful historic architecture (which includes a bevy of old factory spaces ripe for romanticizing and reclaiming) has helped to draw scores of young organizations to its snowy shores, including our friends and clients Datto.

The lessons here, class?

New organizations want to be in the places that will make it easiest for them to attract and retain a talented workforce—which means access to amenities, transportation, and affordable living. University towns and cities often provide all of these, along with a continuous stream of talented young students and graduates eager to work, plus the myriad resources that come alongside researchers and academics. So, if you want to predict where future growth in knowledge-driven industries is likely to happen, you may not need to look any further than your closest college town.

Or, if you’re really serious about getting your predictions right, you can take a deeper dive. That’s exactly what our client Verizon has been seeking our help with since 2015. We're conducting long-term, in-depth research on the company’s internal and external business drivers and opportunities to help identify the best cities and towns for them to continue expanding their recently minted coworking venture. Our work includes developing a number of metrics and other indicators that rank cities and metro areas by fit and desirability—including extra points for the presence of a research university. Wisely, Verizon is interested in making more connections with students and recent grads to enrich its talent pool, and in making use of the many other resources universities have to offer. It’s been a blast to check out their current spaces in London, UK; Cambridge, Massachusetts; and Washington, DC, as well as their two in NYC. Now we’re looking forward to the opening of their next space in Singapore.

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