GovTech is one of the more exciting, and underreported, business opportunities today. There is a ton of very interesting and innovative work underway in areas where government programs, big data, and other new information technologies are intersecting. Lots of investment is also flowing into this space, from new players like the DC-based 1776 accelerator and from large corporate players like Motorola and IBM. According to the Govtech Fund, the potential market for productions and technologies to improve government performance could be worth as much as $400 billion. The latest July/August 2016 issue of Government Technology offers a great introduction to the current state of play in the govtech sector, and it’s well worth your time. The issue profiles lots of cool projects and ideas. I was particularly intrigued with the ongoing Northern California Startup in Residence Program (STIR) which seeks to embed startups in key government agencies to help them deal with pressing problems like connecting homeless people to needed services, managing community volunteers, speeding up foster parent certification processes, or helping police report and analyze crime data in real time. STIR is run by San Francisco’s Office of Civic Innovation and has received federal funds from the Economic Development Administration. It’s a very exciting concept that takes the basic idea of the Small Business Innovation Research (SBIR) program—fund small business R&D to solve government challenges—and updates it for the needs of today. Instead of providing hands-off R&D dollars ala SBIR, STIR is hands-on and brings entrepreneurial thinking (and money too) into the day-to-day work of government agencies. This kind of idea can and should be replicated elsewhere across the country.
There have been a number of hard-nosed looks at the field of economic development lately, asking about the return on investment from traditional approaches like business incentives and other industry attraction strategies. I’m particularly impressed with the Center for Budget and Policy Priorities’ February 2016 report on state job creation policies. These reports present facts that sadly still represent new news to many elected officials, but that many of us toiling in the field have long taken for granted. Most US jobs are not very mobile, and only a small number of corporations and jobs—1% or less—make major relocations in a given year. Yet, until recently, the vast majority of economic development resources have been invested in tax incentives, infrastructure, and real estate efforts that are all designed to support business attraction and relocation. Now, a new study from Ball State University puts a new hard number on the business recruitment prospects for most US communities. It projects that a random US county has the capacity to attract a 500 employee factory once every 35 years. As these studies note, we need to rethink how we do economic development. Some well-endowed regions can continue to play the business attraction game, but most places need to think differently. They need to embrace strategies that nurture local entrepreneurs, attract and grow talent, and build healthy and prosperous communities. While it’s not as sexy as winning the next Mercedes or Tesla plant, it’s a smarter and more effective strategy for the long haul.
As friends and colleagues know, Maine is one of my favorite places to both work and play. But, like many largely rural places, Maine faces a number of economic challenges. Its population is aging, and it needs to grow. But, its relatively remote location and other factors make it challenging to attract major large corporations to locate in Maine. Maine does a good job of building on its assets, especially in areas like food, tourism, recreation, and in many technology sectors as well. Yet, the state still needs new ideas and initiatives to keep the economic momentum going. That’s why I’m so excited about today’s launch of Work in Place, a new group that is encouraging independent workers (the 1099 Economy) to consider locating in Maine. This is certainly not a new idea—I’ve been supporting similar concepts for years. But, the idea goes back even further to the Lone Eagle strategies of the 1980s and the 1990s, where lone eagles were successful high fliers who could operate their companies out of amenity-rich rural places. Nonetheless, I’m very excited to see this new effort underway. I believe that few places are as well situated as Maine to capitalize on the growth of independent workers. Maine is already home to a large independent workforce, and it has great amenities for others who hope to join in. Hopefully, a group like Work in Place can change the statewide conversations about economic development and help stimulate new economic opportunities in Maine. Even better, I hope that similar networks spring up in other states and regions. BTW, the Work in Place launch coincides with Maine Startup and Create Week, an excellent venue to learn about what’s happening across Maine. The events run through June 26.
Last night, I was able to attend the semifinals of the 1776 Challenge Cup. 1776 is a local business accelerator in the Washington DC area that is getting a lot of attention and building a bigger national and global footprint. Their Challenge Cup is a big part of this expansion—it’s a pitch competition that attracts a worldwide audience. I go to a lot of business plan competitions and I thoroughly enjoy them, but they can start to feel the same after I’ve heard my 101st pitch for a new app. But, this one is different and more exciting—mainly because of the diversity of the business teams. In just one hour, we heard pitches from Colombia, Great Britain, India, Kenya, Morocco, Pakistan, Poland, Thailand, and of course, the US. And, not surprisingly, there was a diverse set of cool business ideas—in this case, they were focused on opportunities in education, energy, food, health and transportation. The finals are tonight and finalists include My Peegu, an India–based technology firm that maps student behaviors, Oregon’s Noappfee, a lead generation tool for property management companies, and Brazil’s Shippify, a new platform for on-demand logistics. Efforts like the Challenge Cup make new start-ups think globally from the start. Consider participating in next year’s Challenge Cup or set up a global competition of your own! Good luck to all of the finalists who present their final pitches tonight.
Like many professions, economic development has its factions and schools of thought. Folks interested in innovation policy tend to love technology but don’t put too much stock into the aesthetics of place making. If you’ve ever been to a 1980s-era research park, you’ll know what I’m talking about. They will be beautifully landscaped, but pretty devoid of any human activity or buzz. Meanwhile, placemakers sometimes neglect the importance of technology and innovation. I like a coffee shop and independent bookstore as much as the next person, but many cool places would be more vibrant and prosperous with a dose of innovation too.
That’s why I’m excited about a new partnership between the Brookings Institution and the Partnership for Public Spaces: the Bass Initiative on Innovation Districts and Placemaking. This new effort builds on Brookings’ well-known research on innovation districts, but looks to inject a new focus on placemaking, equity and vibrant public space into the conversation. I’m looking forward to the work of this new collaborative. For the time being, they’ve done some initial work and PPS has published “8 Placemaking Principles for Innovation Districts” which is a very good start on making innovation districts more vibrant and creative and perhaps making cool creative places more innovative too.
The news media—and this blog too—spend a lot of time talking about the ongoing economic transition challenges in the America’s coal regions. But, sadly, coal regions are not alone in facing such challenges. The northern border regions of New England are also facing major dislocation as the wood and paper industries continue their steady decline. Small towns across Maine and elsewhere have been rocked by the shutdown of paper mills that long served as town symbols and the primary providers of good jobs and local tax revenue. The impacts are profound—nearly every county in the northern regions of Maine, New Hampshire, New York, and Vermont can now be classified as “distressed,” with high rates of poverty, unemployment and outmigration. The ripple effects are profound, hurting related industries and professional opportunities as well. Some great efforts to rebound are underway, and I’d recommend the work of the Orton Foundation and the Northern Forest Center, among others. As we rightly pay more attention to economic dislocation in coal country, let’s not forget other regions as well.
A new study on business startup growth by the Economic Innovation Group is getting a lot of media hype this week. It’s an interesting assessment so the media attention is warranted. The study looks at US business startup rates between 2010 and 2014 and finds many worrying signs. Overall, business startup rates are down and the concentration of business activities are growing. In fact, they find that twenty US counties account for ½ of new business establishments and that 50% of total US job growth is concentrated in only 2% of US counties. These worrisome trends on business startups aren’t necessarily new news—we’ve discussed this topic many times in the past. And, we should remain worried. But, let me throw out a few provisos to this study. The analysis uses data from the Census County Business Patterns program which measures formally licensed business establishments. They thus miss the dynamic activity underway in the 1099 Economy of free lancers, self-employed and other gig economy workers. This is a complex situation and the data are somewhat murky, but we do know that many parts of the 1099 Economy are growing. For example, the latest Census data show that the number of self-employed in the US jumped 3.6 percent between 2013 and 2014. This group totals 23.8 million people, so they are a sizable chunk of our economy. Meanwhile, other data show some declines in the gig economy, especially in rural areas. In addition, we know that the rise of Walmart, Dollar General and other such large players are having a huge impact on small business activity in rural areas. The concentration of retail activity in these larger firms is also having a big impact on startup rates in rural America and elsewhere.
So where does this leave us? While I have a few wonky minor quibbles with the EIG data, we can’t avoid the sobering message found this report. We’ve got some challenges in terms of getting more regions and more people fully engaged in our ongoing economic recovery.
Yesterday, I attended an interesting Aspen Network for Development Entrepreneurs discussion on the topic of “What’s Working in Startup Acceleration.” The event unveiled a new ANDE report that assess the performance of business accelerators in both developed and developing economies. The report has lots of interesting findings. Perhaps the most important result is that accelerators appear to work in that client firms outperform those that don’t participate in acceleration programs. This may sound like a no-brainer, but it’s important. Despite the massive growth of business accelerators, we actually have very little rigorous studies of whether and how they work. This study helps on that front—–in addition to offering some other useful tips on smart practices for business accelerators.
This report is part of a larger and very exciting research project: the Global Accelerator Learning Initiative. GALI is seeking to develop a global assessment system of business accelerator performance—a way to assess the quality of accelerators and to benchmark their performance with their peers. The GALI effort is just getting started and this new ANDE report is one of its first publications. But, it has great potential if more accelerators opt to use the performance measure and evaluation systems being promoted by the GALI team. It also affords us a chance to better under the most effective ways to support acceleration in different countries, with different groups of entrepreneurs, and in different industry sectors. If you run a business accelerator or work with them, encourage their leadership to consider participating in the GALI research project. It’s a great opportunity to build a more professional and effective set of programs.
The latest edition of our quarterly e-newsletter, EntreWorks Insights, is now available. This issue shares some perspectives on the ongoing economic transition issues facing America’s coal-reliant communities. You can learn more and subscribe here.
The 2017 Farm Bureau Rural Entrepreneurship Challenge has just been announced and they’re looking for cool rural business ideas. The Challenge is the first and only business competition that focuses exclusively on rural businesses, and some cool companies won awards in 2015 and 2016. This year’s challenge is a little different as it is focused on companies working in the food and agriculture sectors. Also, firms can be located anywhere (not just in rural America), but must show how they have a positive impact on rural communities. And, the prize money is bigger—with $145,000 and other benefits available to this year’s winners. If you want to apply or encourage others to do so, you can apply and get more information here. The application deadline is June 30, 2016.