So you want to start a startup city?
14 min read

So you want to start a startup city?

So you want to start a startup city?

I recently found an interesting article on Miami tech week and about the rise of startup cities, so I figured I'd share a few thoughts. Oddly enough, this is something I've thought about for years and have run small-scale experiments on.

A little bit about me to provide context:

  • I've worked for remote/distributed companies since 2013.
  • I'm the founder of Friday, we're building an async OS for working from anywhere.
  • I've spent years writing, building for, and researching distributed work.
  • I've spent the last five years living in a smaller city (Portland, ME) after moving out of a tech center (Boston). I migrated a little earlier than many others in tech

People that know me well, know that my goal is to build a town. I joke that this is because I played too much SimCity growing up (true), but I've always thought there isn't enough innovation happening at the town/city level. A couple hundred years ago, towns were popping up all the time. Now, we rarely see it. As a result, there's municipal stagnation that has set in.

Why did this happen?

Now that distributed work is more prevalent, the opportunity to innovate at the city/town level is much more possible as we have faster feedback loops. Good communities with good governance can attract people from anywhere.

In the rest of this post I'm going to try to answer the question - "how would you start a startup city/town?" Is it possible for the average person to do?

I'm going to organize my thoughts into two categories - product and distribution.

Product

Successful startups need a compelling product. The same is true if you want to start a startup town. This is not a winner take all scenario, it's likely that there will be different products for people with different preferences. Some people may want easy access to the outdoors, while others may want an urban experience.

1.) Use existing infrastructure or build something from scratch?

The first question you will need to answer to start is, should you try to build something from scratch or partner with an existing community? If your goal is to capture some level of density, my conclusion is that you will need to find an existing community that wants to grow.

Infrastructure costs are high and zoning may be difficult if you are starting from scratch. For example, in Maine (where I live), we have a lot of unorganized territory, but the state is responsible for zoning and permitting, which is a non-starter. The regulations would be far too restrictive.

Look at all that Yellow!

If you have a lot of time and money, you might be able to build something from scratch.

For example, some developers create Master Planned Communities, but this typically happens near a major city (see Mueller in Austin for example) and require significant amounts of investment and know-how.

Mueller MPC in Austin (yes, I visited it)

If someone wanted to start a smaller community from scratch, I see three possible paths forward.

1.) The retreat option

One option is to start a small-scale campus or retreat to minimize infrastructure costs. Kanye West was/is doing this with his Yeezy Campus, but he's also a billionaire.

I anticipate popular instagram influencers at one point will create "secret getaways" hidden in the mountains or in more rural areas to drive their brands, but this will be on a limited scale and scope (at least to start).

2.) The Bitcoin "mining town"

Another option is for a town to form around stranded energy. The idea here is that an energy producer with energy that will go to waste (i.e. - natural gas) could mine bitcoin and then use the proceeds to make investments into infrastructure, like roads and other public goods.

Bitcoin miners have an incentive to seek out stranded energy in rural areas, so it's possible that a thoughtful land owner or community could create some type of revenue-sharing agreement. "You can mine bitcoin here, but we'd like % of the revenue you generate"

Mining Bitcoin from excess flare gas

Alternatively, a forward thinking town with these assets could just mine bitcoin themselves. Perhaps they take out a bond to buy and run mining infrastructure. This is all speculation at this point, but this entire post is speculative too ;)

3.) The Hershey town or Starbase model

Another option is that a business decides to relocate with an incentive to invest aggressively in the community to encourage future hires to move there. For example, see what Elon Musk is doing with Starbase or what Milton Hershey did in Pennsylvania.

Before the pandemic, in theory, this was something that any large company with excess cash could do, like Google or Facebook. Post-pandemic, if employees are given the ability to work from anywhere, the probability of making this happen is much lower, at least with tech workers. Companies like SpaceX or Tesla where work is onsite might be able to make this happen.

My conclusion: the most probable path seems to be finding an existing location over trying to start something from scratch.

2.) Picking a location

For the rest of this post, we're going to assume that the most reasonable path is to find an existing location and migrate to it, like what is happening in Miami right now.

This next step reminds me of value investing. You want to find a location that the market has mis-priced. In order to do this, you need to find a place with intrinsic value. Remember, you are competing with thousands of other cities and towns. This new startup city needs to have a unique advantage vs other potential locations that cannot be easily competed away.

How do you build the short-list? What is the criteria?

The following variables are my best guesses around what will matter most. At the end of the day, each person has different preferences and tastes and we could see several "startup cities" form.

Climate

I'd argue that the first and most important variable for our startup city is the climate. Specifically, what is the weather like most of the time? For example, there's a reason why people love San Diego weather in the US, but the market has priced this in already.

It's also reasonable to expect that the people who can easily move to our town could also easily leave and travel for many months on end, so we need to frame our city as the ideal home-base.

The next question you might ask is - is there another location with a similar climate that is underpriced and undiscovered?

Perhaps we could find a hidden location or city/town with nice weather?

It turns out, there's a handy climate system called the Koppen climate classification that allows us to find other parts of the world with similar weather to our target city.

For example, in the video below you can see other places in the world that have a similar climate to San Francisco.

I strongly recommend WeatherSpark to help in our search. For example, if I'm looking for a similar climate to SF, the best alternatives are Albany, Australia and La Serena, Chile.

Additionally, WeatherSpark will create calculations like a "Tourism score." If you're based here in the United States, Kelly Norton has compiled areas in the country with the most "pleasant" days per year you can use as a frame of reference.

Nature

I'd argue that the next major factor is the environment. Specifically, what part of the environment does this new startup city provide that cannot be found anywhere else? Is there a national park or a series of waterfalls? Is it near a unique mountain range or another unique feature?

The best proxy I have here - is it a place that you'd want to post about on Instagram everyday? I'm not on Instagram, so I don't know what's trending, but the environment should constantly blow you away. It can't be a place that you quickly become bored of - those are just tourist traps that will quickly lose their luster.

Value for money

The next variable to consider is the value you are getting based on what you are paying. This is a broad category, but can be broken into components like:

  • Cost of living (specifically, housing)
  • Tax rate (income tax, sales tax, property tax)
  • Quality of schools (might not be an important variable if you are single 😁)

These are the factors you can easily search for on a website like Niche. Once again, different people have different preferences. If someone was looking to relocate a business, some incentives may sway companies, like access to talent, corporate income tax rate, etc. You can see this in action as many companies from California are relocating to Austin because of the favorable business and personal tax rates.

Zoning

Additionally, we need to think about zoning. Can it scale up if needed or will it take years to accommodate a potential influx of people? If the zoning can't scale, the cost of living will go up quickly as new people settle.

Easy access to airports/travel

Another variable is easy access to an airport for travel. It's unreasonable to expect that new citizens will spend the entire year in one location. This new startup city will function like a home base for adventures to other locations as I mentioned earlier in the post.

Who else lives there?

Cities are networks, so another question we need to ask is - who else lives there? If "interesting" people don't live there now, how difficult would it be to convince them to move? What is the culture like? This factor is tough to pin down because so many communities have interesting people, but these people aren't easily 'discoverable'.

How open is the community to new ideas?

The reality is that many communities (especially smaller ones) don't want to change. We can't establish this new startup city in a place that isn't open to the idea. This resistance can happen on a smaller scale (see example with Starbase) or it can happen on a broader scale, with city officials opposing the change:

I can understand people who don't want their town overrun by new transplants, but it doesn't make sense to pursue this startup city in a community that is openly hostile to you.

Wrapping up (Product)

I'm sure there are other variables I'm missing, but here's my conclusion for the product section - what does your new startup city offer than others can't compete away?

Distribution

Now, let's talk about distribution or go-to-market. How are you going to convince people to move to your new startup city? Specifically, how will people find out about your product and be convinced enough to move?

Your new startup city will have network-effect-like characteristics. It will be very difficult to start in the early days, but as you convince more and more people to move, attracting new residents should become easier.

Let's use the classic marketing framework AIDA (attention, interest, desire, action) to help unpack this section.

Attention

This is where distribution really matters. You need people to drive the top of the funnel. You could pay for the attention or generate earned media. For the average person, you only have one choice. You need to generate free attention by being unique and creative.

1.) PR

To use Miami as an example, there's a vocal group of people (Suarez, Rabois, etc) who are generating tons of press right now.

A similar dynamic happened with Tulsa, Oklahoma when they announced incentives for remote workers back in 2018. As most marketers know, PR only lasts so long, so you will need to parlay this earned media into a longer-lasting strategy over time.

2.) SEO // Content

Another strategy is to do a better job attracting the people who are already searching for your city through content marketing and SEO. This is something ANYONE can do.

You could also go after neighboring area keywords and divert attention to your startup city, like when a competitor bids for your brand keyword.

To illustrate a content strategy in action, a few years ago I was bored on weekend and started a blog on the city where I live that outlined startups, attractions to explore, things to see, and places to eat and drink.

I started the blog from a personal pain I had. I was meeting interesting people who moved, but randomly. I didn't have time to go to meetups (most of them aren't worth the time anyways), but I wanted a way where people would reach out to me instead. I thought creating rankable content via SEO was the best and easiest way to accomplish this.

Example Post from my Blog

In a few years, this blog has generated almost 250,000 visitors, and I publish a new post maybe once every six months.

Traffic from the blog

Interest

As you might imagine, just because someone finds out about your city, doesn't mean they will move. How do you turn attention into interest?

Obviously this is where product quality matters, but there's other things you can do to help. Specifically, how do you showcase your city and the nuance of it online to maximize distribution? How do you make things discoverable?

For example, if there's interesting events, meetups, or communities that would be worth checking out, you will want to showcase them.

Ideally, you want to convince someone to visit IRL for a day or two. I setup a page on my website where I would encourage people to email me with questions about the area, which I've found to be a helpful way to break down barriers to visiting by answering basic questions.

At least 150 people have reached out with questions about the area. At times, I will get multiple requests every day.

You can see a few examples below:

Example #1
The real estate market up here is insanely brutal.

This behavior is why I'm so bullish on startups like NewZip. There's a massive gap between being intrigued about an area and moving to it. After having 50+ conversations with people who are considering moving, the most important factors tend to be:

  • The People - Who else lives there? What is the community like? Will I get connected to them?
  • The Work - Many will bring the remote job with them, but if that doesn't work out, are there fallback options locally?
  • The Value - Can I afford it? Am I getting the most bang for my buck?
  • Things to do - food, drinks, hikes, etc.

Desire

The next step is desire. These are the people who are interested enough to visit your startup city for a day or two and are considering making a move. There's a couple things you can do to help:

1.) Incentivize the visit

The first step is to incentivize people to make the trip. I don't have any personal stories to share here, but you could put together discounts or exclusive opportunities. To use another Miami example, Eight Sleep is doing this with their sleep suite.

2.) Host an event

Another approach is to host a larger event, like Miami Tech Week. The scarcity of the event drives interest to visit IRL. It's also a great opportunity to meet a ton of other people like yourself and bond with the community.

3.) Grab coffee or go on walking tours

Another thing you could do is have a team of people who are willing to grab coffee and chat.  Think of this as the consultative sale. This is precisely what Suarez is doing in Miami.

Over the past few years, I've had dozens of coffee chats and taken people on "walking tours" of where I live after they reach out through my website. It's a fun way to get to know people and answer any questions people have.

While this takes time to do, it doesn't cost anything to meet up with people. This is something anyone can do. In a world where remote work makes it easy to move, smart politicians will adopt this approach.

To date, at least a dozen people I've met with IRL have moved. I'm friends with many people I met with this approach.

Action

The final step is to make it easy for the "prospect" to take action and make the move. You could make it easy to connect with service providers like movers or realtors. You could take a white-glove approach and assign an "account manager" to make sure as many barriers to making the move are removed.

This is where the availability of housing and rentals is so important. Where I live has terrible housing problems, so it's only able to capture a small fraction of the demand. Not going to work.

There are 3 homes for sale under $800k in my CITY

Retention

After someone has made the move, your work is not done. You need to make sure you deliver on the product you sold.

I don't have a ton of ideas here, but the most important factor to optimize for is to connect them with others in the community.

For example, I used to work for a company in Switzerland. While visiting, I learned that the city would mail new residents an invite to attend a monthly dinner with other new residents. This is a clever and simple way to help new residents get to know other new residents!

I'd argue that not finding community might be the #1 reason why people will move out of your startup city, so you need to create a robust community for existing residents. Like a software company, retention is critical. It's why your product needs to be solid and match the hype.

What's the path forward?

I'm not sure what the future holds, but I wrote this post because I really would love to see innovation in this area. A major reason why Miami is seeing a lot of success right now is because they are running their city like a startup. Most of their approaches are simple, yet effective. It's something any forward thinking leader or community could do.

In the future, I expect more forward thinking areas will adopt a similar approach and will drive tremendous improvements for their communities.

There are a few tailwinds that I'm paying attention that should drive new startup cities in the future. A few examples below:

  • Digitization of assets - Allowing future "residents" to pool resources and buy a home or another asset would acceleration adoption. This is something families oftentimes do with vacation homes.
  • Digitization of governance - How robust is governance? How engaged is the community? What assurances do you have that a particular policy will be around for the next decade? Bringing more of this online should increase discoverability and in theory, demand.
  • Digitization of local discovery - there needs to be a way to discover what communities exist in the area you want to move to. Facebook Groups right now is the best thing, but there's a lot more opportunity.
  • Building a network effort before moving - Is there a way to pre-order a startup city into existence? How can you bootstrap a network effect as early as possible? Many builders do this with Master Planned Communities before breaking ground.

This entire post is a massive thought experiment and may seem ridiculous. When I've proposed these ideas in the past, people laugh. Once again, I probably played SimCity too much growing up.

This is something I've been thinking about for many years, so if you have thoughts or feedback, I'd love if you dropped me a note on Twitter. I hope you enjoyed this!