Learning from city leaders: competing in a dynamic market ecosystem

This piece is part of the #Built4All Listening series. Read our other pieces on digital and data and building public infrastructure, and check out our comprehensive overview.

The story of COVID-19’s effects on the economy has been yet another tale of our persistent and growing inequality. Those with the resources, educations, and connections overall managed to recover and adapt to this new, socially-distanced world of remote work and Zoom calls, while those without suffered the brunt of the economic effects. 

While this story is usually applied to individuals, what often goes overlooked is that it is just as applicable to businesses themselves, and make no mistake - the COVID-19 recession has disproportionately affected small businesses. In 2020, only 78.1% of startups survived their first year. (Kauffman).  WMDSEs (women, minority, other disadvantaged small enterprises), which were already struggling to gain support from financial institutions, saw their access shrink further: 70% of banks restricted loans to small businesses since the start of the COVID-19 crisis, while large public companies have had much easier access to federal funds and private loans (WSJ). 

COVID-19, however, was the mere acceleration of an already existing trend in the world of entrepreneurship. The proportion of new businesses in the US had been falling since the 1970s (EIG), and although new business applications spiked in 2020, it’s unclear how many will survive the pandemic (WSJ). 

Cities and towns across America need viable pathways to entrepreneurship and business growth to build resilient, inclusive economies. The results of our #Built4All Listening Series supported this, with the outcome of businesses of all sizes and stages of maturity compete in a dynamic market ecosystem being flagged by interviewees as their highest priority for Pillar two: A level playing field for work and competition.

Solutions spotlight: Building dynamic economies for businesses of all sizes

The challenges to building dynamic, competitive local economies that support businesses of all sizes vary for each individual city. Of the city governments who spoke about their efforts to build market ecosystems where all businesses can compete, the experiences of Baltimore, Boise, and Glendale captured challenges that may be shared by other cities across the country. Below, we detail the problems and solutions deployed in each city, which we believe can be adjusted and applied to other city contexts. 

Challenges

Baltimore has long understood that access to financial systems is a barrier for BIPOC entrepreneurs. BIPOC entrepreneurs rarely have access to the “family and friends” network of raising capital that many white entrepreneurs do, and there are few bank products that meet their needs. Credit scores, in particular, are noted as a consistent problem in accessing growth capital from financial institutions. In Baltimore, access to capital is a notable problem - even though the deposits in Baltimore banks more than doubled since 2007 to over $26.5 billion, “total small business lending fell from 17,084 loans totaling $457 million in 2007 to 8,274 loans totaling $307 million in 2016” (JHU). Compounding this issue is the fact that Baltimore is a ‘branch town’ - there are no local, home-grown major bank headquarters that otherwise would be drawn to invest in the community. With no major bank to invest in building a healthy local community, resources flow out of the city.

Solutions

In the face of COVID-19, the Baltimore Together initiative aimed at combating this long-standing problem through a network of 19 nonprofit organizations to serve Black and Brown small businesses in Baltimore.

“Our vision is to build a strong and inclusive economy by recognizing our City’s history of racialized economic disinvestment and the cumulative impact that systemic racism has had on our Black residents” - Baltimore Together

These organizations worked closely with the city government and other CDFIs (Community Development Financial Institutions) to help service BIPOC entrepreneurs throughout Baltimore, and address head-on the inequalities of the past. The program supported local businesses by: 

• Providing grants to 98% of the Black-owned businesses that applied for funding, in comparison to 53% of white-owned businesses that applied, 

• Demonstrating intentionality around supporting Black- and Brown-owned businesses, and

• Centering community needs by positioning local businesses and nonprofits as the leader of the work, with the city government acting as a partner to facilitate the conversation. 

These organizations are already looking beyond the COVID-19 pandemic, advocating for a statewide loan loss reserve pool to reduce risk and encourage CDFIs to increase lending to WMDSEs (women, minority, other disadvantaged small enterprises), similar to what California did after the 2008 recession.

Challenges

Before COVID, Boise’s economy was growing rapidly. There was widespread concern, however, that this growth was unsustainable and exclusionary.Mayor Lauren McLean and the city government sought to invest in shifting the economy to uplift everyone in the community with family wage jobs, supporting homegrown innovation and investing in education, housing, transportation, climate innovation and the arts. The city needed to examine how to attract private investment to advance its economy, move past basic city support for local businesses, and ensure jobs are broadly accessible and beneficial to the existing workforce.

Solutions

In response, Boise is focused on initiatives that support Mayor McLean’s priority areas of an Opportunity for Everyone and a Clean City for Everyone. In doing so, Boise is creating their first Climate Innovation Accelerator and is seeking applications for the first-ever Youth Climate Action Committee to help create community-centered actions around fighting climate change. These initiatives will seek to build the pathway for businesses in the renewable energy and climate economy space to grow and thrive by providing access to capital and physical space. The City of Boise is determined to collaborate with its existing ‘base resources’ such as Boise State University, Venture College (which encourages entrepreneurship), Trailhead(a local business incubator), and the Idaho National Lab, to help drive the initiative forward at the local level. Boise worked heavily with these institutions (particularly Boise State) to coordinate stakeholders and secure funding for new programming. Key goals of the program include:

• Developing a “Ready Team,” including staff from across the city, to provide rapid response and services to attract, retain, and expand businesses in the community,”

• Putting together a task force of high-profile community leaders to provide input and publicly support these priorities, and

• Working to make existing business incubators inclusive for a wider swath of businesses, ultimately encouraging entrepreneurship in underrepresented communities.

Hoping all segments of the community can benefit from these efforts, Boise has created a climate division of the public works department that has already hired 40% of its target staff to build and support green infrastructure.

“We’re creating a plan to intentionally grow local businesses and bring in new ones with different resources - while maintaining the culture, mission, and vision of our city.” - Andrea Fenwick-Cantor, Business Development Project Manager

Through this work, Boise aims to live up to its entrepreneurial, self-reliant culture while achieving a vision that supports small businesses and spearheads a robust, green economy.

Challenges

On the outskirts of LA, the city of Glendale faced the challenge of diversifying the local economy, including helping minority and women-owned businesses enter the tech sector, which has traditionally been dominated by white men. Glendale was long considered a “sun-down town,” and this reflects in the city’s demographics - Glendale has a Black population of only 1.9%, as opposed to L.A. county’s 9%. 

The existing institutions that traditionally would help local entrepreneurs weren’t tailored to the community. For example, Glendale has a large Armenian population that has its own thriving network. However, engagement and participation with long-established institutions such as the Chamber of Commerce did not necessarily reflect the diversity of the Armenian business community. Further, the tech industry relied heavily on pre-existing connections, which tended to exclude the WMDSE (women, minority, other disadvantaged small enterprises) start-up community, resulting in entire networks being overlooked. 

Ultimately, Glendale faced a series of key, interrelated challenges: how to help home-based businesses, how to get a better measure on communities that historically flew under the radar (including gig workers and renters), and how to form a relationship with communities that might be mistrustful of the local government.

Solutions

Glendale’s tech strategy has been ongoing for five years, and it’s starting to produce serious results.  The strategy began as an assessment of the entrepreneurial environment of Glendale, but evolved into an effort to support entrepreneurship at all stages, with an emphasis on broadening the tech start-up world beyond its traditional constituencies. Funded by the city, Glendale’s strategy is comprised of 30 different action items, such as developing an accelerator, creating more events that target all start-ups, and improving fiber and access to the internet. Since its implementation, Glendale has moved steadily to achieve its goals by:

• Hosting a Technology Week, focused as a “celebration of community,” that seeks to feature diverse speakers and panels - even including a “Kids’ pitchfest” to expand the technology startup community to include families, 

• Building healthy relationships with the business community, including linking up with the SoCal Alliance for Innovation, which brings connections to start-up experts and angel investors, and 

• Launching two accelerator programs, KIDSX DIGITAL HEALTH ACCELERATOR, the first pediatric-focused digital health accelerator in the world, and the Hero House Accelerator that brings in out-of-state and international tech companies looking to expand their products into Southern California. 

Fundamentally, the force behind Glendale’s technology strategy is the belief that government can be the connector between different kinds of constituents, and play a vital role in eliminating power dynamics between the private sector and underrepresented groups, in order to help residents break down barriers.

“We developed meaningful relationships with the startup community. How do we get our startups with the next great ideas in front of our anchor businesses like Disney? That’s a role government can fill - be that connector” - Jennifer Hiramoto, former Deputy Director of Community - Economic Development

Build inclusive economies in your community

Healthy economies have a mix of businesses that are old and new, big and small. Local governments have an important role in creating a vision for the future based on their unique strengths and ability to connect people, especially underrepresented communities, to the resources and relationships they need to build a vibrant, flourishing local economy. 

The Centre for Public Impact is committed to working with governments and their allies to build healthier local economies. Join us as we build a more equitable and inclusive future marked by human and environmental flourishing.