The Surprising Secret Behind Small Business Success

I’ve long had an interest in developing a new way of looking at startup communities, based less on the usual government statistics (tax and crime rates, income growth and so forth) than on a cluster effect: that groups of entrepreneurs tend to attract more entrepreneurs. So, several months ago, I turned to Forbes.com contributor Darian Shirazi, founder of Radius, a San Francisco technology company that collects small business data in the U.S. and offers a marketing platform to corporate clients selling to that sector. Radius was the ideal group to generate a list of the best cities to start a business, given its ability to gather scads of information and its novel methodology for sifting the data. The result is a series of guest posts by Lisa Fugere, who manages content strategy and creation at Radius. She has put together the list of best places, along with three other posts on the cluster phenomenon, small businesses shaking up their communities and outlier regions that are mini-hotbeds of entrepreneurship.
More entrepreneurs than ever will open small businesses in 2014. According to a recent report from the Global Entrepreneurship Monitor, early-stage entrepreneurial activity is the highest it’s been since the group began conducting research in 1999. Most won’t survive—one-third will still be around in a decade, according to a 2011 SBA report.
What does it take to survive? Aside from manic drive, moxie, hard work, creativity and luck … maybe a sense of connectedness to a community, local or more global.

A sense of community adds to small business’ likelihood of success.

Green Flash Brewing Co. of San Diego is a small team that creates distinctive beers sold to restaurants and bars all over the country. It’s a bit of a regional oddball. When Radius pulled data for our list of The 12 Best Cities To Launch A Startup in 2014, we looked at the proportion of the small businesses to all businesses, city by city. San Diego ranked dead last on this measure. It’s a place, after all, where you’re more likely to find a bio-med center than a craft brewery. But San Diego is also a spot where entrepreneurs can thrive because the place is so well-connected in other ways—in the prevalence of small businesses with Facebook pages, credit card acceptance, and online peer reviews that make reputations matters of public record. Social media has helped this brewer build a relationship with its customers locally and nationally.
In San Jose, Calif., Blackbird Tavern is a local restaurant, bar, gallery, and hub of creative nightlife in the center of Silicon Valley. It’s thriving—which is odd, considering it’s the latest tenant in a building that’s turned out a string of failed tenants after its original owner was forced to close shop after the tech bubble burst in 2001. Why? A restaurant that sources local coffee and spirits and features work from local artists, Blackbird Tavern aims to be a “third space,” a concept coined by urban sociologist Ray Oldenberg to define our social surroundings separate from home and work.
Both Greenflash Brewing Co. and Blackbird Tavern are outliers, but they each invest in the engagement of their communities–on and offline.
Sometimes success comes from engaging with a different sort of community—an incumbent competitor, ripe for disruption.
In New York City, home of the dwindling book publishing industry, now down to a mighty six houses, comes a startup called Oyster. It borrows the subscription model that has succeeded in online listening (Pandora and Spotify) and online watching (Netflix and Hulu), and makes it available for e-reading. Oyster customers pay monthly fees for unlimited access to over 100,000 books–available anywhere a customer can download the Oyster app. New York, of course, is full of small businesses that bring a technology edge to traditional industries. A delicious irony: Oyster’s model is a throwback to 19th century subscription libraries.
Her Campus Media is competing in one of the most crowded and pre-eminent academic capitals of the world—Boston. An online publication, Her Campus Media is written by women college journalists for “career-minded, distinctly fashionable, socially connected, academically driven, and smartly health-conscious” young women. While most stories read more like Glamour magazine than Great Expectations, the site has a pleasing mix of controversial topics, popular culture and career advice—reaching out to college chapters around the country.
In Austin, Tex., Vital Farms is a clear alternative to the poultry conglomerates and the environmental depredation of fecal-dense coops. A network of 40 small family organic farmers, Vital Farms is the nation’s largest producer of eggs produced by hens raised in pastures, not cages, and counts Whole Foods Market (its Texas neighbor) among its largest customers. Vital Farms started out in 2007 as a local operation with a few dozen hens; now the eggs are available across the country – finding people who care increasingly about the sourcing of their food.
Sometimes a single startup can kick off a mini-community.
It wasn’t that long ago that Seattle’s Ranier Avenue was a series of uninhabited buildings in the crime-ridden neighborhood of Columbia City. Then La Medusa opened in 1997. Serving Sicilian dishes made from locally-sourced ingredients, it was one of the first of a string of small businesses, like Tutta Bella Neapolitan Pizzeria, to move on the block. Today the restaurant rubs elbows with weekend brunch hotspots and artisan bakeries–a transformation that hints at a community-oriented small business’s power to pave the way for more small businesses.
Panic was one of the first tech startups in Portland, Ore. Setting up shop in 1998, with a shareware program called Transmit, Panic has continued to develop apps (including Web editing, usenet, status boards and cryptographic network protocols) for Apple devices. The company survived the dot-com bust, and thrived. But it also helped pave the way for a tech renaissance in Portland—a place, our data at Radius shows, where each technology job creates four additional jobs.