When Starbucks Cafés Enable Start-ups

Since their inception, coffee houses have fulfilled more than just the task of serving coffee and food. They were the seeds of ideas and revolutions, because one service that coffee houses also offered and some still offer today is collections of current daily newspapers and even encyclopedias. The Café Griensteidl in Vienna, for example, had dozens of newspapers as well as a Brockhaus and a Meyersches Konversationslexikon, where guests could quickly look up details and end controversies.

Newspaper selection at Café Sperl in Vienna

Today, however, the traditional coffee houses have degenerated into places populated by tourists attracted by the stories of legendary gatherings of literary figures and revolutionaries. This makes cafés like Café Central in Vienna or Café de Flore and Les Deux Magots in Paris good places to enjoy a good breakfast and delicious cakes, but tourists do not make a revolution or literature. At best, they make Instagram stories.

A study by Columbia University in New York investigated a different question, namely whether cafés fulfill a different function today and whether the result can also be measured. The question was whether they would promote the founding of start-ups.

To do this, the researchers used public data in which they compared the number of business start-ups in individual US communities before and after the opening of a Starbucks. They also compared the data with existing and newly added cafés.

The results were surprising: neighborhoods where a Starbucks café had opened saw an annual increase of 5% to 11.8% – or 1.1 to 3.5 businesses – established over a seven-year period, compared to neighborhoods where the opening of a Starbucks café had been announced but not realized. The larger the Starbucks was in terms of area, the higher the number of start-ups.

Typical scene in a Starbucks

Where there had already been other cafés, the opening of a Starbucks had no effect on entrepreneurial activity in the neighborhood. However, the increase in business start-ups in poorer neighborhoods was particularly significant.

Cafés are considered a “third place”, i.e. a place to meet outside of homes or businesses. People can meet, network and exchange ideas in places like these. Whereas ideas used to be exchanged and revolutions planned there, today ideas are exchanged and companies are founded there.

As a Viennese and a coffee house writer, I agree with both.

Mario Herger (by Bernd Ertl)
Image created by Bernd Ertl

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