Wednesday, Dec. 1, 1999 | 11:07 a.m.
Las Vegas may be best known for its casinos, but it's also the king of entrepreneurial activity in the United States, researchers reported Tuesday.
Cognetics Inc., a research firm in Cambridge, Mass., ranked Las Vegas as the No. 1 "entrepreneurial hot spot" among smaller U.S. metropolitan areas in its 1999 study -- marking Las Vegas's fifth consecutive year at the top. The area's score of 91 out of a possible 100 far surpassed No. 2 Austin, Texas, at 69.
Rounding out the top 10 were Fargo, N.D.; Savannah, Ga.; Sioux Falls, S.D.; Jacksonville, Fla.; Reno; Wilmington, N.C.; Montgomery, Ala.; and Tucson, Ariz. Phoenix was ranked No. 1 among large metro areas, followed by Salt Lake City and Atlanta.
"(Las Vegas) is really doing well," said David Birch, president of Cognetics. "It just doesn't get a hell of a lot better than that.
"It's not a beauty contest, it's actual evidence of past behavior. So it's not a fluke. Every year, we build a new database ... and it shows companies are starting (in Las Vegas) and growing like crazy. And you can't be starting that many casinos."
Las Vegas entrepreneurs say they're seeing the same evidence every day.
"It seems like everyone's rocking and rolling down here," said Michael Archambault, vice president and co-founder of SpecPro, a producer of promotional materials in Las Vegas, founded six years ago in a one-bedroom house. "We've only been on the map six years, and we're being slammed (with new business) every day."
Archambault and his partner, company President Todd Coons, started working on the business full-time in 1996, leaving behind secure jobs. Today, their business employs 15 people, with sales in the millions of dollars. Both partners were in their 20s when they founded the firm.
"I think Las Vegas definitely made it easier (to found the company)," Coons said. "It definitely would've been more difficult to found the company in an economy that wasn't growing as strongly as ours."
But the rest of Nevada was feted in the study as well -- on a state-by-state basis, Nevada was ranked No. 1, beating out Utah and Arizona. Reno's No. 7 showing was up 12 spots from 1998. And rural Nevada was ranked No. 3 among rural areas, an 11-spot jump.
"I hate to say it, but the Wild Wild West can-do attitude is so helpful," said Bob Shriver, executive director of the Nevada Commission on Economic Development. "Entrepreneurs are risk-takers. They have the ability to say, 'I may stub my toee, but in the long-term, I'll succeed."'
One veteran in the Las Vegas entrepreneurial wars is Lisa Hammond, owner of Femail Creations, a mail order catalog company in Las Vegas. She founded the company two and a half years ago, and since then, employment has swelled to 30, and annual sales to $4 million.
Ten years ago, Hammond and her husband founded Hammond Caulking Inc., a construction company. That business now employs 20 people and has seen its growth buoyed by the construction boom on the Strip.
"(The lack of) state taxes is such a huge attraction for companies, so I can see why so many companies would be drawn to the area," Hammond said. "With the airport, it's easier to get in and out of here. A lot of our customers stop by our showroom ... they're not here to visit us, but just visiting Las Vegas. I doubt any other catalog company could pull that off."
M. Frances Sponer, president and chief executive of the AscentrA family of health care companies, moved to Las Vegas from southwest Pennsylvania in 1985, attracted by the strong economy. That economy helped make her company a success after its launch in 1990, as has a boom in the area's senior citizen population.
Today, AscentrA employs more than 200 people in 10 affiliated companies in Nevada and Utah. Sponer estimates this year's sales will reach $24 million.
"I'm just really thrilled with the economy in Las Vegas, just the growth of the area," Sponer said. "In Appalachia, where I lived, there was a 27 percent unemployment rate.
"There's a lot of people with the entrepreneurial spirit in Las Vegas. It's the excitement of being where the economy's doing so well."
The Cognetics study ranked cities by two factors: numbers of "significant starts" and percentages of "young growers" in a given area.
Significant starts are companies that have been founded in the past 10 years that employ at least five people today. The study also accounts for these firms as a percentage of all business starts. Young growers, the second factor, are the percent of firms 10 years old or younger that grew "significantly" over the last four years.
Cognetics lists five factors as the key drivers in that growth -- universities, a skilled labor pool, airports and flight access, quality of life and "positive entrepreneurial climate."
Birch said the area is assisted by unusually heavy flight traffic in and out of McCarran International Airport -- much more than is typical for a city of Las Vegas' size. No state income taxes help as well, but an often-overlooked factor is UNLV, Birch said.
"UNLV is to Las Vegas what Arizona State is to Phoenix," Birch said. "They're very good, very respectable universities, and that produces lots of university graduates. I think it's an enormous asset."
Coons, a UNLV graduate, said his alma mater definitely has left its mark.
"You're seeing a lot better quality of graduates coming out of the university," Coons said. "(The state) has definitely made strides in investing in the universities. If business can continue to support that, there's no reason for graduates to leave."
Everyone agrees on one thing, however -- finding cash to get a company started is not a positive for Las Vegas. Few large banks appear willing to take the risks, small business owners say, and venture capital has been historically non-existent in Nevada.
But smaller regional banks have stepped forward to carry the flag. Hammond said her idea was saved by First Security Bank, which funded her idea after she was rejected by larger lenders.
"Whenever we went to larger banks, they said, 'Whatever,' " Hammond said. "The key for us was finding an (Small Business Administration)-approved bank.
"It is extremely difficult to get capital to start a business."
Though the Las Vegas metropolitan area has surpassed the 1 million mark, it's still categorized among smaller metro areas because the study categories were fixed in 1993. The nation's 50 largest employment markets were placed in "large metro areas," while others went to small metro markets. Birch said that's done to keep consistency among studies, though he said Las Vegas may have to be moved to the large metro category in the future.
"Las Vegas and Austin have grown so phenomenally that we may have to change that," Birch said.
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