Note: This post originally appeared in The Globe and Mail.

Traditional tales of teenagers inventing gadgets in basements or undergraduates launching companies in dorm rooms are fading into history. The era of the garage startup is waning, for good reason.

First, entrepreneurs are generally a sociable bunch who like interacting while transacting. Gaining access to groups of like-minded entrepreneurs is the biggest reason startups rush to join incubator and seed accelerator programs, according to a recent report by Social Enterprise @ Goizueta. Little wonder incubation and seed accelerators in Canada have mushroomed.

Second, customers and solutions are increasingly sophisticated, which means serious market intelligence is required to unearth new opportunities. Access to capital is key, but fledgling firms also need help navigating regulatory and procurement challenges. Survival of the fittest demands quick market access.

Health IT is the most obvious sector where procurement is key to startup growth. Breakout clusters such as financial technology and education technology also need mentors and advisors to facilitate introductions to government and corporate buyers who can help them validate technologies before they are marketed elsewhere.

Finally, startups of the future will be more sector agnostic. Boundaries between disciplines are blurring as startups become increasingly hybridized. That trend is evident in the wearables field, where health and IT have blended to create new products. For example, headbands that use brain sensors to measure and self-regulate moods, or contact lenses that measure glucose levels in real time and transmit the data to a bracelet worn by the patient.

This leads us to the latest trend that will take the garage startup to near extinction: the rise of urban innovation districts.

Innovation districts are not merely incubators or accelerators. They are wide-ranging innovation research parks or buildings that offer a mix of services and networks. They can include an accelerator, but they can also house proof-of-concept or solutions labs, university or medical institutions, startups, corporate partners and investors, as well as stores, restaurants and public spaces.

Garage startups are fading into history, for good reason. Today’s entrepreneurs are a sociable bunch who like interacting while transacting (ffennema/Getty Images/iStockphoto)
Garage startups are fading into history, for good reason. Today’s entrepreneurs are a sociable bunch who like interacting while transacting
(ffennema/Getty Images/iStockphoto)

The geography of innovation is evolving—and disrupting—startup culture itself. The rise of urban mega-districts and specialized buildings in cities such as Barcelona, London, Seoul, Stockholm and Toronto is changing the way young people look at innovation. The opportunity to co-mingle and collide in corridors and coffee shops will lead to more co-invention and co-productions between entrepreneurs. In a recent report, the Brookings Institution refers to this as “a mixed innovation” model where proof-of-concept labs, technology transfer offices, incubation advisors and corporate partners work alongside entrepreneurs.

These innovation hubs are the next generation accelerator centre. Gone is the generalist approach. These hubs are discriminating and exclusive. They focus on key verticals like financial services technology, health or clean technologies and digital media, and are doubling down on entrepreneurs and companies that have high growth potential. It’s not longer enough just to have a big idea.

Do startups associated with urban innovation hubs perform better than the lonestar startup? The metrics are still being gathered by global institutes that monitor these trends. What we know from our research is that startups participating in accelerator programs are better revenue generators than those that are not. Corporations are also increasingly aligning themselves to innovation districts that have in-house advisors.

As more strategic buyers and investors turn to urban hubs that curate startups, the way they evaluate and finance future entrepreneurs will also change. The era of the garage genius may soon become more of an urban myth.

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Salim Teja

Salim Teja is the President, Venture Services for MaRS, where he leads the overall strategic direction of MaRS’ venture services areas: Energy & Environment (Cleantech), Finance & Commerce (FinTech), Health and Work & Learning. He is an experienced entrepreneur and active early-stage technology investor, with deep industry expertise in software and digital media. See more…