NLC’s Brooks Rainwater examines federalism in the context of innovation and explains why the Small Business Administration is of critical importance to cities.
In the first installment of this series, we looked at the basics of federalism and why it matters to cities. Part two focused on how affordable housing assistance has changed with the interpretation of federalism, and what that means for cities today, while part three examined federalism in the context of the American educational system. Today we’ll look at how local-federal partnerships support innovation and entrepreneurship.
Cities are laboratories for innovation. It’s no secret that it is in cities where local leaders are continuously seeking out innovative solutions for tough problems. We have seen this exhibited particularly well in the small business and startup space. Local leaders are accelerating the unique ideas that make all cities thrive through the development of innovation districts, business incubators and shared working spaces.
The entrepreneurial ecosystems that have sprung up across the country enable cities to leverage existing business and draw in new companies that help foster creativity and technological breakthroughs in our nation’s urban places.
This type of innovation is exhibited in not only the largest metropolitan regions of the country, but also in places like Chattanooga, Tennnessee; Coralville, Iowa; and Kansas City, Missouri. Whether one examines the industry-leading app development in Coralville or the way Chattanooga and Kansas City are leveraging the power of gigabit speed internet as a backbone, these cities show that specialization and nurturing creative home-grown ecosystems works quite well.
In our own recent work on Chattanooga’s innovation district, we found that one of the critical factors for success was clear goals and close coordination between the city, the business community, the university, and the nonprofit sector in order to catalyze success and develop a critical path forward. Utilizing and reimagining the downtown of the city was just one key factor here, with another being the mayoral leadership of Andy Berke tied together with long-standing civic engagement in the community.
The fact that top-selling education apps are coming out of Coralville, Iowa, is not an accident – it took deliberate planning and partnerships. This community is just outside the area referred to as the creative corridor and is thus able to leverage the talent and resources needed to grow. In Kansas City, the Kansas City Startup Village is a great example of an entrepreneurial community that supports the city’s startup ecosystem. With the city’s rollout of Google Fiber tied together with its smart city initiative, there are a number of critical components in place. Thanks to the leadership of Mayor Sly James on these issues and many more, the city is doing the right things to promote entrepreneurialism and grow startup businesses.
This innovation that we observe in cities has a great deal to do with local partnerships. We also need strong partnerships at the state and federal level because they play such an important role in helping innovation and economic development thrive. One key example of this is found in the innovative companies in every corner of the country that are part of the U.S. Small Business Administration’s Growth Accelerator Fund Competition, which helps grow amazing companies nationwide.
History of Federal Funding for Small Businesses
The Small Business Administration (SBA) was established in 1953 by President Dwight D. Eisenhower as an independent agency with the signing of the Small Business Act. Since then, the agency has been responsible for delivering millions of loans, contracts, counseling sessions and other forms of direct assistance to small businesses. Throughout its history, the SBA has at times been somewhat of a pawn in political chess, with levels of support waxing and waning depending on the administration in power.
Most recently, Linda McMahon, co-founder of World Wrestling Entertainment, was confirmed as the SBA administrator. During her Senate confirmation hearing, Administrator McMahon walked back statements regarding folding the SBA into the Commerce Department, saying her priority in the first few months would be disaster relief programs. With the strong role the SBA plays in supporting entrepreneurialism in cities, the hope is that ongoing partnerships can be maintained and grown in the coming years.
Why the SBA Matters to Cities
The SBA matters to cities for a multitude of reasons. Connecting small businesses with the SBA and SBA-approved lenders is a critical role of many local economic development officials. The SBA has recently been supportive of entrepreneurs in cities by encouraging cities to sign on to Startup in a Day, an effort built in partnership between the SBA and the National League of Cities (NLC) to streamline city permitting and licensing procedures.
The SBA also serves a rebuilding role in cities. It has frequently been called on to revitalize cities struck by riots and unrest, from the Long, Hot Summer of 1967 to Los Angeles in 1992 and Baltimore in 2015. While the amount of support the SBA provides to cities is critical for a number of reasons, at the end of the day the economy of the country is reliant on cities. This is why the federal relationship is so important. The SBA has a loan portfolio of $124 billion, and these dollars are directly related to the nation’s growth. The SBA provides important counseling, educational and technical assistance to cities as well.
A Path Forward for Startups & Innovation in Cities
In thinking about a path forward for startups and growing innovation in cities, it is necessary to reiterate the importance of maintaining and strengthening the federal relationship. If instead of growing this support decisions are made to diminish it, the decreased federal funding available to small businesses will ultimately hurt cities and, therefore, national economic growth.
It is necessary to create a strong plan focused on increasing entrepreneurialism in our country. Statistics show entrepreneurialism is nearing a 40-year low and the pace of IPOs has slowed. However, the nation is in a good position to turn that around – according to a new survey from JPMorgan, the leaders of small- and medium-sized businesses are saying they are more enthusiastic about the U.S. economy in 2017. That survey found that 68 percent of respondents were encouraged about the outlook for local economic conditions, representing an 18-point increase from 2016.
Let’s leverage that potential for growth with startups and others in the entrepreneurial community. Innovation will continue to percolate from the ground up – but in order to truly grow this opportunity, cities need a partner in the White House and in statehouses nationwide to unleash economic dynamism and continue innovating.
To learn more about what NLC is doing in this policy arena – and make your voice heard at the federal level – join us at the Congressional City Conference in Washington, D.C., March 11-15.