About all that Sputnik 1 did up in space in 1957 was beep-beep-beep, but down on Earth, it caused a commotion.
Americans became convinced that the Soviets had beaten them not just in space, but in the classroom: Schools moved to increase instruction in math and science. A young Massachusetts senator named John Kennedy began warning that the United States suffered from a “missile gap” with the Soviets. He got elected president, and a generation of American schoolkids were told to pay attention in math class so we could beat the Russians.
Here in Virginia in 2025, we’re now embarked on a governor’s race that, like many campaigns, probably won’t focus much on the key policy questions that the next governor will have to deal with, no matter who she is. Here’s an issue that perhaps ought to merit more conversation than it’s gotten, which so far seems to be precisely zero: Is our state’s main economic engine — Northern Virginia — losing ground relative to other technological capitals?
The recent annual economic report from StartUp Genome, a San Francisco-based nonprofit that tracks business startups (especially those with a technology focus) worldwide, says so. It regularly ranks the planet’s startup ecosystems (that’s the preferred word), and over the past half-decade, we’ve watched the remarkable rise of the Washington, D.C., market as a global economic powerhouse. Washington entered the Top 20 in 2019 at No. 19. The next year, in 2020, Washington jumped all the way up to No. 11 and held that spot for 2021, 2022 and 2023. Last year, it slipped down to 12. This year, though, the latest StartUp Genome report shows Washington dropping down to 17.
Some cities on the list don’t move much year to year, but Washington has, first up, now down.
So why should we in Southwest and Southside care about how the other end of the state ranks in some report that most people have never heard of?
Let’s recap what I laid out in part one of this two-part series of columns: Rural localities get most of their school funding from the state; in Scott County, that share is as high as 66%. So, where does the state get that money? The biggest single amount — about 42% — comes from Northern Virginia. Put another way, your tax rates in rural Virginia are indirectly tied to the economic health of Northern Virginia. If that region does well, that’s more money going into the state coffers, some of which helps pay for your local schools (or anything else that’s funded by the state). Conversely, if Northern Virginia’s economy stalls, that’s less money to Richmond and less going out to rural localities, which means if those places want better schools, they’d have to raise their local taxes. People in red-voting rural Virginia may not like Northern Virginia’s bright blue politics, but it’s still very much in our interest for Northern Virginia to do well economically. While this report deals with the larger Washington market, Northern Virginia is very much part of that. What happens in the Washington area has economic implications for us in Southwest and Southside.
That’s why we ought to pay attention to three things the StartUp Genome report lays out:
1. The Washington market’s standing in the world is dropping relative to other markets, and in a big way. No other city in the Top 20 fell by as many places as Washington did (five); only one other in the Top 40 fell by more places (Vancouver, which dropped from 29th to 36th).
2. The Washington market didn’t just fall because other cities improved; it also fell because the estimated value of its business ecosystem shrank by 28% from 2024 to 2025.
To be fair, the value of most large business ecosystems fell over the past year, the report says. Globally, “ecosystem value” is down 31% over the past year. That’s one of the themes of this year’s report: It warns that funding for entrepreneurial ventures has been shrinking worldwide since 2022, which it attributes to the lingering effects of the pandemic. Business activity “still has not returned to pre-pandemic levels,” the report warns. Pandemic-era inflation has weakened the economy, the report says, while President Donald Trump’s tariffs have spooked some investors and softened it further. Both political parties in the United States will find this report discomforting.
3. While that means the Washington market’s shrinkage isn’t unusual, here’s what is unusual: the size of that shrinkage. Of the 21 largest business ecosystems in the world (two are tied for 20th, hence 21), Washington shrank more than all but four of them. In sports terms, the Washington market appears to be performing much like the Washington Nationals baseball team is right now: still in the majors, but losing a lot more games than fans want to see — and falling in the standings.
Now, it’s entirely possible that this report isn’t as dire as it may seem. Terry Clower, who runs a regional economic think tank at George Mason University, questions whether some of the metrics that StartUp Genome uses are as useful as the report’s authors think they are, primarily, how much money company founders are making when they cash out. See this previous column on how Northern Virginia interacts with the rest of the state for more on that. For now, let’s set aside whether Washington has dropped and how many places. Maybe all that really matters is that the Washington metro (and for our purposes Northern Virginia) is considered a Top 20 tech capital, and the precise ranking doesn’t really make much difference. Instead, let’s look at this list a different way: Let’s look at the cities that have risen the most, particularly the ones that are relatively new to the rankings, and see if there are any lessons we might learn that could be applied here in Virginia, particularly in Southwest and Southside.
Conveniently, one pops out right away, and it’s just up the road on Interstate 95: Philadelphia.
As recently as 2020, Philadelphia wasn’t even in the Top 40.
In 2021, Philadelphia entered the charts at 28 (I realize this sounds like we’re talking about a pop song), so it moved up at least 13 spots to get there.
From 2022 to 2024, Philadelphia edged up to 27 and then 25.
But then this year it jumped 12 places to number 13 on the rankings — and moved ahead of Washington (and lots of other places).
Over the past five years, no city in the world has risen faster than Philadelphia. Within North America, it now ranks behind only Silicon Valley, New York, Boston and Los Angeles — and ahead of other cities with tech reputations such as Seattle and Austin, Texas.
What has powered Philadelphia’s emergence as a global tech city?
The StartUp Genome report says this move has been “driven mainly by the concerted actions of leaders of private organizations such as Ben Franklin Technology Partners, Drexel University, and University City Science Center.”
Let’s work this list backwards: The University City Science Center is a research park, the Philadelphia equivalent of the Virginia Tech Corporate Research Center in Blacksburg. Drexel University is self-explanatory. So far, that list doesn’t tell us anything we didn’t already know: The modern economy is often powered by universities and the startups that spin out of those schools. That brings us to Ben Franklin Technology Partners. What’s that? It’s a state-funded but privately run nonprofit that helps fund promising startups and offers them advice. Since its founding in 1983, the group claims to have helped generate 159,000 new jobs in Pennsylvania (not just Philadelphia). Virginia has something similar: the Virginia Innovation Partnership Corporation.
In the most recent budget, Virginia put up about $42.4 million in funding for our startup fund, while Pennsylvania just passed a budget with at least $65 million for “innovation.” On the other hand, this past year the Virginia budget includes $100 million for life sciences development, with much of that going to four public research universities: Old Dominion University, the University of Virginia, Virginia Commonwealth University and Virginia Tech.
In the end, it’s hard enough to compare two states’ budgets when budget lines might be written a different way. Perhaps a better comparison is buried within that list above. Notice that George Mason University, the only state four-year university in Northern Virginia, wasn’t on that list. Philadelphia has a bigger concentration of university research centers than Northern Virginia, or even the entire Washington metro, does. Besides Drexel, Philadelphia also has the Ivy League University of Pennsylvania, Temple, Villanova and Thomas Jefferson University. In the modern economy, where universities are economic engines, particularly research engines, that’s a lot of power in and around Philadelphia.
How does that manifest itself? Here’s one way: That’s a lot of graduates who can then be persuaded to stay in Philadelphia after graduation. Ultimately, this isn’t so much about state funding as it is talent and workforce.
The tech-focused website Technical.ly produced a special report on Philadelphia. It traced a multidecade effort to turn around Philadelphia’s economy:
“In the 2000s, Philadelphia civic leaders attacked the rotten brain drain problem, where most of its many college students moved elsewhere after graduation.” Now, instead of exporting college graduates, Philadelphia imports them.
“In the 2010s, Philadelphia startup and tech boosters attacked its dim reputation for commercialized invention.” Now, “of the 10 regions that attract the most venture capital in the country, Philadelphia’s share grew the second fastest between 2013 and 2023.”
How did Philadelphia turn around these two metrics? They’re likely related. One way Philadelphia fixed its brain drain is that in 2004, some community leader founded a group called Campus Philly, which bills itself as “the go-to resource for all things Philadelphia.” That would seem to be simply a place for college kids to check out what’s happening in town. In reality, the group’s mission is to make those students think Philadelphia is so cool that they want to stay there after graduation. One report the group issued said the two key factors in students staying after graduation were that they’d had internships that connected them with potential employers and that they’d simply gotten to know the city so well it felt like home.
With more college graduates staying in Philadelphia, the city’s economic profile changed. “It’s smarter,” Technical.ly found, and in the modern economy, there’s a strong correlation between education and the economy. “Between 2000 and 2017, Philadelphia city’s population of bachelor’s degree-holding 25-to-34-year-olds surged by 115%, eclipsed only by Washington D.C. — and beating places like Seattle, Boston, Los Angeles, New York and San Francisco,” the report says.
So what does all this mean for Northern Virginia? That’s less clear. The region already has high educational attainment rates. However, the Philadelphia lessons do apply more broadly to all of Virginia. The Virginia Higher Education Business Council, a group of business leaders who see the connection between higher ed and the economy, has been pushing for more internships — and state funding to help make that happen. Census Bureau statistics show that 44% of Virginia’s college graduates leave the state within five years of graduation. That means a lot of Virginia schools are busy educating some other state’s workforce. That’s a statistic the state could stand to improve, and the Philadelphia example suggests that the Virginia Higher Education Business Council is right: Internships are a key.
I’ll throw out another idea, one with particular application for rural Virginia. I recently spoke at the summer meeting of the Virginia Local Government Management Association. One county administrator from a rural county asked me what his county could do to keep more college graduates in his county — as with many rural areas, he found that kids graduated from high school, went off to college, then never came back. His county was having trouble finding teachers and other professionals.
I didn’t have a particularly good answer for him then, but now I might have a better one: Maybe his county needs whatever the local equivalent of Campus Philly would look like. For instance, I still get mailings from my alma mater decades after I graduated. They know where to find me — and ask me for money. Is there some way that local governments could do the same with the high school seniors every year? Figure out a way to keep in touch with them — not to hit them up for money but to persuade them to come back home when the time is right? There are some legal issues involved — getting access to email addresses, for instance — but this is a concept, not a detailed plan.
Whatever is done, we also need to keep in mind another powerful lesson from Philadelphia: That effort took about two decades to pay off, but it has paid off. Is that really so different from investing in an industrial park that might take decades to fill up?
Want more politics? Sign up for West of the Capital, our weekly political newsletter that goes out on Friday afternoons.
