Monday, March 9, 2015

TECH STARTUPS | Does Location Matter?

Zach Robbins (L) and CEO Stephen
Gill, in Philly.
An article in Forbes by a startup entrepreneur, Zach Robbins, argues that it is not crucial to locate in Silicon Valley or New York City to be successful. (His company is in Philadelphia.)

Correct, although in another article the company expresses  concern that it doesn't have enough "good" applicants for the jobs it needs to fill.

But being in the right place improves your odds. In his case, the company he has co-founded, Leadnomics, describes itself as seeking to improve the market for insurance. "Lead" not as in the heavy metal but as in someone for an insurance agent to try to reach.

Philly is not known as an insurance headquarters (try Hartford, Conn. or Newark, N.J. if you want to avoid Manhattan but stay close to NYC).

But Philadelphia has something else going for it - it is the home of the Wharton School of the University of Pennsylvania, ranked one of the top three business schools in the country (along with Harvard and Stanford).

Robbins refers in general at the end of his article to the value of having a university nearby. But he doesn't just have a university nearby with a top business school. He has a university with a business school program preeminent in the field he is trying to sell to - the Wharton Risk Management and Decision Processes Center. Prof. Howard Kunreuther, for example, is widely known for his studies of imperfections in markets for insurance, such as flood insurance for homeowners.

This program could give his startup some traction. The focus of many economists has shifted to psychology because people don't actually make decisions, for example about insurance, as if they are rational.

A startup that improves the functioning of the insurance marketplace - to begin with, by suggesting the right buyers to the right sellers - would be a great social contribution as well as offering the potential for a good ROI.