Do the Fittest Cities Build the Fittest Startups?
Exploring the correlation between the fitness level of a city's population and the investment in fitness related startups
Introduction
I recently came across a survey and report co-produced by Elevance Health and the American College of Sports Medicine (ACSM) that attempted to quantify and rank the fittest cities in the United States. Given I’ve been tracking the flow of money into Fitness, Sports Technology, Outdoor Recreation, and Health and Wellness (Active Lifestyle) companies, I wanted to examine if there is any correlation between the development of startup and venture ecosystems in this space and the fitness level of the underlying population. Do the fittest cities build the fittest startups?
Survey Background
You can find a link to the ACSM website and survey itself in the resources section below, and I highly encourage everyone to go check it out, but at a high level, the survey consisted of 34 indicators split across two main categories, the Personal Health score and a Community/Environment score.
The Personal Health score consisted of metrics such as percent of the city’s population with diabetes, percent that met guidelines for aerobic and strength training on a weekly basis, and percent consuming the recommended levels of fruits and vegetables on a regular basis, among others.
The Community/Environment score took into consideration factors that reflect public policy and community support such as the number of parks per 10,000 residents, the percent of the population with food insecurity, and the overall walking score of the city.
These factors were either observed directly or measured through surveys in the 100 largest cities by population in the United States. The higher the score, the higher the implied fitness of an average citizen of that city. The full rankings are in the survey but the top 10 fittest cities, along with their score were:
1.) Arlington, Virginia (85.0)
2.) Madison, Wisconsin (78.2)
3.) Minneapolis, Minnesota (78.0)
4.) Washington DC (77.9)
5.) Seattle, Washington (77.8)
6.) Irvine, California (72.0)
7.) Portland, Oregon (71.4)
8.) St. Paul, Minnesota (71.4)
9.) Denver, Colorado (69.9)
10.) Chicago, Illinois (69.6)
My thoughts on the Survey
Overall, I thought this was a very thoughtful survey done by these two organizations and I really appreciated the work they put into this. Given they started doing this survey 15 years ago, I’m sure their team has developed an unmatched expertise in this area. With that being said I did have a few minor critiques that I wanted to address.
First, in looking at the metrics, I pondered if this survey was actually measuring the healthiest cities rather than the fittest, which in my mind are two separate things. I associate athleticism and physical fitness with the idea of fitness more so than metrics such as the health of a population and green space. My definition of fitness may be next to impossible to measure though at a large scale, but I would be curious to see how the results would change if incorporating metrics such as Crossfit gyms per capita and the percentage of the population who has competed in an endurance race in the last x amount of months. Even more unrealistic but even more ideal would be to have an NFL-like combine for a sample of the population. The point is I think as presented the survey does a great job of measuring physical activity and health but isn’t the purest in terms of measuring fitness.
My second, albeit minor complaint, is that this survey only looks at the 100 largest cities in the country. I would be curious to see how the results would change if they incorporated smaller cities that are well known to produce some of the best athletes in the world. Some of the best endurance athletes come from places such as Boulder, Colorado, Durango, Colorado, and Park City, Utah. There are hotbeds for athletes who play football in the deep south and Florida. The best hockey players come from small towns in Minnesota and the Northeast. There are obvious constraints with surveying an increasing number of towns but it would be an interesting experiment to identify the most athletic and fit towns in our country, regardless of size.
Do the fittest cities build the fittest startups?
Now to the central question of this blog post. As I’ve mentioned in previous posts, I’ve been creating my own database of companies that operate in what I call the Active Lifestyle Industry, along with their financing history. Although it is by no means exhaustive, I believe it does have enough of a sampling to pursue some analytical insight. I used this data in conjunction with the data in the ACSM report to try to address some of my questions.
When initially reading this fittest cities report by ACSM, it got me thinking about the question of whether or not healthy and fit cities create a disproportionately higher number of fitness and health-related companies. My hypothesis, not surprisingly, was that there would be a positive correlation. Fitter people tend to be the entrepreneurs that are creating fitness startups, and fitter people tend to live in cities that have like-minded individuals and that have a local government policy that caters to their lifestyles. In attempting to put some merit behind this, I created a scatter plot with the total ACSM Fitness Score on one axis and the number of Active Lifestyle-related companies that have their headquarters in a given city on the other axis. Below are the results:
I recognize that this visual is a bit noisy so below is another chart with data labels. I also removed the outlier cities, San Francisco, New York, and Los Angeles, which have a disproportionately large amount of startup activity.
Although my dataset is too small to do a full regression analysis to determine statistical significance, observationally I do believe my thesis plays out. We see what appears to be a positive correlation between the Fitness score of the city and the number of Active Lifestyle startups that are headquartered in these locations. As the Fitness score of a city increases, it appears that the city attracts more entrepreneurs and business owners in fitness-related companies to establish their corporate headquarters in that city. Fitter cities are in fact creating more fitness startups.
As a second area of examination, I was also curious to look at how early-stage investing activity has changed over time in the top 5 fittest cities. I pulled in data from Pitchbook on the number of VC deals over the last 10 years in Arlington, Madison, Minneapolis, Washington DC, and Seattle. Active Lifestyle is my own defined industry, so to most closely match my own dataset, I filtered the Pitchbook data to only include companies in the following Verticals and Emerging Spaces: Sports Tech, Digital Health, LOHAS (Lifestyles of Health and Sustainability) and Wellness, Wearables & Quantified Self, Connected Fitness Equipment, Mental Health Tech, and Sleep Tech. Below are the time-series results.
Now just from my experience looking at this data for other industries, I can say a large part of the observed increase in some of these cities is due to financing trends in general that aren’t specific to the Active Lifestyle Industry. Over the last 10 years, there has been increasing interest in investing in early-stage companies and more deal activity overall. Additionally, Pitchbook and other third-party resources have become more comprehensive in recording deal activity data.
In four out of the five cities, there is a relatively small increase in deal activity. Seattle shows the most growth, which is probably attributable to the large number of startups in general that are being spun out of or created by former tech employees at some of the behemoth tech companies with headquarters in Seattle (Amazon, Microsoft, etc).
I wouldn’t expect to see these numbers change drastically year over year. Startup ecosystems take a long time to develop regardless of the industry. Additionally, community health practices and public policy take time to develop and show noticeable effects. Just because a city decides to build some extra basketball courts in the community or improve its access to bike lanes does not mean that fitness companies are going to pop up left and right the next day. But directionally it does appear to me that there is a trend of fitter cities attracting and building these ecosystems, so there should be weight placed on these factors when implementing budgets and long-term planning.
Conclusion
I recognize and have stated multiple times throughout this post that this dataset is too small to be able to make definitive, statistically strong statements, but from my observations, it does appear that there is a positive correlation between the fitness of a city and investing activity into Active Lifestyle companies. So if you are someone looking to work for or invest in companies in the Active Lifestyle industry, it makes sense to seek out geographies and municipal governments that emphasize health and wellness in their communities. And on the flip side, if you are a local government or have a vested interest in developing a strong investment and business ecosystem, it would be worth the effort to look at the health and fitness of those around you and emphasize building a fitter community.
Resources
Pitchbook