Compared to similar cities, Charlotte is behind the curve on innovation, entrepreneurship and investments in startup companies.
That’s the conclusion of the first Charlotte Entrepreneur Growth Report, a new study released Monday by a group of local business leaders and entrepreneurs. The study found the Charlotte region has a thriving core of high-growth companies with billions in revenue. But it lags behind similar cities in the amount spent on research and development and new business formation.
One example: If people in Charlotte started companies at the same rate as people in Austin do, Charlotte would see an additional 700 new businesses a year founded in the region.
Part of that is because Charlotte’s decades-long growth surge has largely been built on big companies in highly regulated industries: Think Bank of America and Duke Energy. In a city sometimes called “Bank Town,” small, nimble tech companies and other innovators aren’t what come to mind when people think of the business community.
“We were the Rodney Dangerfield of the business community in Charlotte. Got no respect,” said Dave Jones, founder and CEO of Peak 10, a Charlotte-based information technology infrastructure company. He is presenting the results of the report Monday to Charlotte City Council. “But the reality was, we never beat our chests. We never communicated anything.”
The report is the second in two weeks to highlight Charlotte’s deficiencies in entrepreneurship. A Brookings Institution study released last week by Central Piedmont Community College also found Charlotte is lagging on key measures such as patents and R&D spending, compared with peer cities.
Among the key findings of the Charlotte Entrepreneur Growth Report:
– The 248 “young, innovative” companies that responded to the group’s survey reported total revenue of $1.3 billion in 2015, on par with major Charlotte firms such as Coca-Cola Bottling. (That’s important to highlight the combined size of a sector that might otherwise look small and fragmented, advocates said.)
– Charlotte is far behind other cities in academic funding for research and development. The $40 million of academic R&D funding in Charlotte in fiscal 2013 was by far the lowest among benchmark cities. At $17 per capita, that’s a fraction of second-lowest Kansas City ($137 per capita) and third-lowest Tampa ($163 per capita). Research Triangle Park has $1,174 per capita in academic R&D funding, while Atlanta has $269.
One major reason: Charlotte lacks a medical school, which would be a magnet for federal grants, the largest source of R&D funding.
– The average number of patents issued each year from 2011 to 2013 in Charlotte was 388. That’s ahead of Nashville (220 patents) but well behind the other benchmark cities such as Atlanta (1,919 patents) and Kansas City (821 patents). There were 1,870 patents issued each year on average in Research Triangle Park and 2,600 in Austin.
– Charlotte ranked 25th among the top 40 metro areas in the U.S. for new business formation, similar to Kansas City. The city’s share of new businesses is lower than would be expected, based on population.
Advocates say the latest report points to the need to invest more in Charlotte’s universities and attract entrepreneurs who will start the next generation of fast-growing companies. They caution that Charlotte can’t rely on its traditional big businesses to succeed forever, especially as disruptive technologies continue to reshape the economy.
The study concludes: “In the short-term, Charlotte needs more startups and higher-potential innovation-based startups.”
In response to the report, Charlotte city staffers plan to facilitate a one-day “Solution Design Sprint” in April to design a strategy to address needs raised in the report, which was created by Ventureprise, the Business Innovation and Growth Council and UNC Charlotte’s Urban Institute.
Photos: David T. Foster III/Charlotte Observer; Diedra Laird/Charlotte Observer; Charlotte Observer file.