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Forbes
10 best places to get rich
Want to do business? Move to Madison, Wis. Want to get rich? Move to Palo Alto.
By Betsy Schiffman, Forbes
Madison has been anointed the Best Place For Business in the U.S. in 2004 by Forbes magazine. Its favorable ratings in -- among other things -- income and job growth, low cost of doing business, available labor pool, quality of life and a university that has spawned a lot of biotech companies make it a fine city in which to live and prosper.
One of the truly great things about the United States is that, with enough intelligence and determination, people can get rich almost anywhere. Whether it's from owning chains of dry-cleaners in Queens, car dealerships in Chicago or oil wells in West Texas, for hundreds of years fortunes have been made in every state in the Union. There are some places, however, where the chances of creating wealth are much greater than others.
Go where the money is
That is the reason, after all, why so many people who hope to strike it rich move to places like Manhattan or Palo Alto. It's not because the cost of living is so low or the quality of life as a struggling entrepreneur is so high. Whether they want to start a software or a soft-drink company, entrepreneurs know they have to go where the money is.
So where should they go?
In order to identify the best places to get rich, we looked at five criteria: the number of investments made by local venture capital firms, the number of active venture capital firms in the area, education level of the workforce, proximity to a major university or research center, and, in the belief that like follows like, the number of local billionaires in the area.
First, we followed the money -- which led us to narrow down our list to the 42 places with the most active venture capital firms. Many of the firms that made the most-active list invested in over 25 companies during the course of the year, and one -- New Enterprise Associates -- invested in 73 private companies. In total, about $18.2 billion in venture capital was invested last year, according to PricewaterhouseCoopers' quarterly-venture capital study, the MoneyTree Survey. That money doesn't travel far, either, according to the study's director of research.
Staying in the neighborhood
"In general, venture capitalists tend to invest in companies nearby. If a VC is based in Colorado, he's probably going to invest in companies based in Colorado," says Austin, Tex.-based Kirk Walden, National Director of Venture Capital Research of PricewaterhouseCoopers.
Austin Ventures, for example, was one of the ten most active venture capital firms last year, according to PricewaterhouseCoopers. It invested in 42 companies over the course of 2003, but its portfolio is largely filled with Austin-based companies, including such software businesses as Active Power (ACPW, news, msgs), Motive Communications, Tivoli -- which is a subsidiary of IBM (IBM, news, msgs) -- Vignette (VIGN, news, msgs) and WaveSet Technologies, which was recently acquired by Sun Microsystems (SUNW, news, msgs). Although venture capital is scattered and concentrated in various regions of the country (mainly in Silicon Valley, New England, New York and Texas), each region tends to invest within the region.
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Finding smart people
Getting capital is just the beginning of the story, however. Entrepreneurs also need to have smart people around them to help execute a business plan. In order to determine which of the venture capital hubs have the most educated local workforce, we averaged in the education rankings taken from the Forbes list of the Best Places For Business -- which measures the number of Ph.D.s per 100,000 residence.
We also looked at the proximity of a city to a major university or research center. It was not surprising that the majority of the places we selected were near schools like Harvard, M.I.T. or Stanford, or Massachusetts's famous technology corridor Route 128. These schools and facilities serve as incubators for many of the biggest ideas in areas like software development and biotech. It's no coincidence that Stanford has always been an important part of the Palo Alto business community.
Finally, a quick glance at the annual Forbes list of the 400 Richest Americans reveals that some billionaires live in places like Omaha, Neb. or Bentonville, Ark., the bulk live near places like Boston, Seattle or San Francisco. Some billionaires may not be interested in seeking out new opportunities, but many of them devote considerable energy to detecting new ideas and talented people that they can back financially. There are also many financial advisors and investors who live in these regions that, while not billionaires yet, are looking for the next Microsoft (MSFT, news, msgs) or Google that will one day help them be. (Editor's note: Microsoft publishes MSN Money.)
Swell opportunities -- but high costs
The drawback to places like Palo Alto, however, is that they are expensive, competitive and often send the ambitious billionaire-in-embryo back home with his or her tail between their legs. The cost of starting up in these cut-throat environments where lots of talented people are chasing the same dollars is high. The cost of labor is high. Overhead is high. Taxes are high. Moreover, living expenses, because so many people are willing to pay whatever it takes, are also steep.
The following list looks at only the top 10 places but, unsurprisingly, there are many others where a person can find their fortune. Metro areas such as Seattle, Baltimore, northern Virginia/Washington D.C. and Austin come very close but failed in the end to make the cut -- but only just.
If you're looking to become a millionaire, the many attractions of Madison seem obvious. If you're looking to become a billionaire, however, living in Manhattan or Menlo Park may seem a small price to pay.
Menlo Park/Palo Alto, Calif.
Overall Ranking: 1
Ranking for venture capital activity: 1
Ranking for the number of active venture capital firms: 1
Ranking for the number of Forbes 400 members who live around the area: 2
Education ranking: 1
Located about 30 miles south of San Francisco, and the home to Stanford University, Palo Alto became a hotbed for tech startups before the bubble burst -- but the venture capitalists who lined up on along the now-famous famous Sand Hill Road (actually located in Menlo Park, which borders Palo Alto) haven't packed up and left yet. In fact, most of the large east-coast venture capital firms have larger operations in Menlo Park than they do in their eastern headquarters.
San Francisco
Overall Ranking: 2
Ranking for venture capital activity: 6
Ranking for the number of active venture capital firms: 5
Ranking for the number of Forbes 400 members who live around the area: 2
Education ranking: 1
San Francisco may be the largest city in Northern California, but it's not the best place to become rich. In fact, local residents say there are just as many San Franciscans who commute into the Valley as there are Valley residents who commute to San Francisco. Still, for education, San Francisco ranked first on our Best Places For Business list, which showed the city as having the highest number of PhDs per 100,000 people.
Waltham, Mass.
Overall Ranking: 3
Ranking for venture capital activity: 2
Ranking for the number of active venture capital firms: 3
Ranking for the number of Forbes 400 members who live around the area: 7
Education ranking: 3
A western suburb of Boston -- close to the Route 128 technology corridor as well as downtown Boston -- Waltham, Mass. used to be known as the home to the Waltham Watch Factory. Now it is home to a variety of technology and venture capital firms. Microsoft's Boston Technology Center, for example, is located in Waltham, Mass.
Boston/Cambridge
Overall Ranking: 4
Ranking for venture capital activity: 5
Ranking for the number of active venture capital firms: 6
Ranking for the number of Forbes 400 members who live around the area: 7
Education ranking: 3
Given the fact that Boston is the ultimate college town -- home to countless schools including Boston College, Boston University, Tufts -- it's not surprising that all the research that comes out of both Boston and Cambridge (which is across the river from Boston and is home to Harvard University and Massachusetts Institute of Technology) gets put to good business use. And wherever there is good research being done, there are eager venture capitalists waiting on the sidelines.
Redwood City, Calif.
Overall Ranking: 5
Ranking for venture capital activity: 9
Ranking for the number of active venture capital firms: 11
Ranking for the number of Forbes 400 members who live around the area: 2
Education ranking: 1
Not long ago, Redwood City was little more than a small, drive-through town. Located along the Peninsula in Northern California, the small city (with a population of 75,400) began to balloon during the tech boom since it is conveniently located between San Francisco and San Jose. Today its largest employer is software developer Oracle (ORCL, news, msgs).
New York City
Overall Ranking: 6
Ranking for venture capital activity: 3
Ranking for the number of active venture capital firms: 4
Ranking for the number of Forbes 400 members who live around the area: 1
Education ranking: 15
While there doesn't seem to be a shortage of capital in the New York metro area, the venture capitalists there don't close nearly as many deals as their Silicon Valley counterparts. Still, the city has more Forbes 400 members than any other place on our list, and a thriving entrepreneurial business community.
Lexington, Mass.
Overall Ranking: 7
Ranking for venture capital activity: 21
Ranking for the number of active venture capital firms: 11
Ranking for the number of Forbes 400 members who live around the area: 7
Education ranking: 3
Lexington, located in the Greater Boston Area, is accessible by train from Boston, and by highway (along Route 128). Highland Capital Partners, one of the most active Lexington-based venture capital firms, which invests in health care, technology and communications companies, closed 29 deals last year, according to the PricewaterhouseCoopers MoneyTree Survey.
Cupertino, Calif.
Overall Ranking: 8
Ranking for venture capital activity: 11
Ranking for the number of active venture capital firms: 9
Ranking for the number of Forbes 400 members who live around the area: 2
Education ranking: 11
Located about twenty minutes away from San Jose, Calif., the small town of Cupertino has a population of about 50,000 -- and it is home to two very active venture capital firms, Bay Partners and Novus Ventures. There are also a number of established tech companies in the area--the biggest of which is probably Apple (AAPL, news, msgs).
Princeton, N.J.
Overall Ranking: 9
Ranking for venture capital activity: 14
Ranking for the number of active venture capital firms: 10
Ranking for the number of Forbes 400 members who live around the area: 1
Education ranking: 10
Princeton is known as a charming academic and literary town, but because of its location, it taps into the local academic resources, as well as the New York City metro area, which is a little over an hour away. The two most active venture capital firms in Princeton -- Domain Associates and HealthCare Ventures -- mainly invest in life sciences or biotechnology companies.
Wellesley, Mass.
Overall Ranking: 10
Ranking for venture capital activity: 18
Ranking for the number of active venture capital firms: 8
Ranking for the number of Forbes 400 members who live around the area: 7
Education ranking: 3
A quiet residential community about 15 miles west of Boston, Wellesley is accessible by Route 128/Route 95, and has a thriving academic community -- both Wellesley College and Babson College are located there. The two Wellesley-based venture capital firms that made PricewaterhouseCoopers' radar are Commonwealth Capital Ventures (which invests in communications and software companies) and Battery Ventures (which also invests in technology companies).
Copyright 2004 Forbes.com. All rights reserved.
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