This week we asked the question of how Davis is benefiting from entrepreneurs, startups, and tech transfer. It turned out to be a more difficult question than perhaps we anticipated.
This will be a week for a lot of soul searching as SARTA, the Sacramento Regional Technology Alliance, announced it was disbanding. The official explanation is that declining fundraising doomed the group (something we can perhaps understand all too well).
That immediately led to a lot of finger pointing. As the Sacramento Business Journal reported on Wednesday, “Several say the Greater Sacramento Area Economic Council, which launched early this year, is getting most of the corporate dollars available for economic development.”
Of course they deny it, with economic council CEO Barry Broome arguing, “Greater Sacramento tried to help SARTA survive. Moreover, the groups didn’t go after the same funding, he said. While SARTA raised money from events and small donations, ‘We don’t compete for those dollars,’ Broome said.”
The bigger question, of course, is not who is to blame, but what will be the impact. Some worry that this will send a message that will harm investment and cause startups and entrepreneurs to reconsider coming to or staying in the area.
As we noted on Wednesday, we wanted to pull back away from the land use debates in Davis to focus on a much more basic discussion – the basics of economic development and how the community benefits from entrepreneurs, startups and tech transfer.
Economic development in Davis is going to look different from economic development in other communities. We are not going to lay out a bunch of peripheral shopping centers on our farmland and hope to generate tax revenue. Instead, we will rely on our assets – the biggest of which is our proximity to a world-class university and the plethora of highly-educated people who work at the university, attend the university and live in our community.
But perhaps in forging that discussion, we missed a much more basic question – whether the leadership in Davis is committed to economic development.
There was a great piece in CitiesSpeak this week from Josh Russell and Jason Wiens. They highlight “Four Ways City Leaders Can Boost Entrepreneurship and Propel Economic Growth.”
The authors write, “City leaders across America understand that entrepreneurship is key to the success of their economies. That is the message from the 2015 Local Economic Conditions Survey conducted by the National League of Cities.”
The writers ask a fundamental question: “Is entrepreneurship flourishing in cities where leaders viewed it to be an important contributor to economic growth?”
What they found is that the “average startup rates are consistent among cities regardless of their views on new business creation.” They write, “Startup rates converged in 2012 to 6.9 percent for cities that believed startup rates were an impactful economic factor and to 6.8 percent for cities that did not.”
However, they argue, “While there is little difference between startup rates in cities that viewed new business creation as an impactful economic factor, the real story is found when we look at employment in startup firms.”
They find, “The percent of employment in startups has diverged among cities that believe startups are and are not an important economic factor. In those cities that viewed startups’ impact positively, new businesses were adding more jobs than in cities where leaders did not view them to have a positive impact. In 2012, on average, firms in cities that viewed new businesses as having a positive impact started with 15 percent more employees.”
The key to their piece are the four ways that local leaders can “boost entrepreneurship and propel economic growth.”
- Build connections. While capital constraints represent one of the primary challenges to entrepreneurs, research has shown that public venture funds and local incubation centers result in little to no benefit to entrepreneurs. Instead, cities should focus on fostering local connections among entrepreneurs and businesses. These local connections, as opposed to national or global contacts, are vital to an entrepreneur’s success. Focus should be put on events that cause entrepreneurs to think and act together, building a robust local ecosystem. Examples of early-stage entrepreneurship programs that can be implemented in cities include Startup Weekend and 1 Million Cups.
- Welcome Immigrants. Immigrants are twice as likely as native-born Americans to become entrepreneurs. These entrepreneurial gains are not limited to low-skill sectors, but include high-skill and high-tech sectors as well. Immigrants and children of immigrants represented 52 percent of key founders of high tech firms in Silicon Valley and over 40 percent of Fortune 500 founders. While legal barriers to immigrant entrepreneurship result in missed opportunities for U.S. economic growth, cities can capture the benefits by welcoming immigrants and supporting their entrepreneurial ambitions.
- Support Women. Women face many unique challenges to starting a business and are half as likely to start businesses as their male counterparts. Among the top challenges are financial capital, mentorship, and work-life balance. Women are one-third as likely to access equity financing through angel investments or venture capitalists as men and begin companies with nearly half as much capital. Mentorship plays an important role in developing successful entrepreneurs, yet nearly half of female entrepreneurs say a lack of available mentors is a major challenge facing their businesses. Parenting balanced with work also results in lower rates of entrepreneurship among women. Women with STEM Ph.Ds are significantly less likely to engage in entrepreneurship if they have a child under two, while there is no statistical difference in entrepreneurial rates of comparable men. Local policies that support women in entrepreneurship can create positive economic growth in cities.
- Develop Human Capital. Higher levels of education are associated with increased entrepreneurial activity. While a high ratio of college graduates means more entrepreneurial firms, a substantial high school completion rate can further increase a city’s startup activity. Developing a strong school pipeline can help promote human capital and develop a strong, local entrepreneurial ecosystem.
In our discussion on Wednesday, we brought people from across the sector: Jenna Makus from the Child Family Institute for Innovation and Entrepreneurship, Dushyant Pathak, the UC Davis Vice Chancellor for Technology Management & Corporate Relations in the Office of Research at UC Davis; Scott Ragsdale from Davis Roots, Tim Keller who is creating Area 52, and Lonnie Bookbinder who is helping to organize the Davis Angels Network.
The discussion ran the gamut from UC Research to technology transfer, startup incubators, entrepreneurs and, of course, the need for funding sources.
On Wednesday, Chancellor Katehi, who was a key sponsor for the Vanguard’s event, wrote in an op-ed published on LinkedIn, “UC Davis plays a key role in this mosaic, connecting researchers, business leaders, farmers, and policy makers to create innovative products and policies. In fact, we established the Venture Catalyst program in the UC Davis Office of Research in 2012 to assist faculty in development of their research ideas into commercial companies that create jobs and economic activity for our region.”
Dushyant Pathak noted that when he began they were turning about four companies out each year. Chancellor Katehi notes, “We have seen more than 60 startups based on inventions originating at UC Davis and many are already driving the creation of hundreds of high-value technology jobs in our region.”
She highlighted research scientist Paul Feldstein, who was featured last week in the Sacramento Bee. She writes, “DtoR Inc., Feldstein’s fledgling company, is developing a new way of copying DNA to RNA, reducing the time it takes to do so. This has the potential to help drug companies produce their products faster and more efficiently, a potential boon to efforts to reduce health care costs.”
She continues, “UC Davis Associate Vice Chancellor Dushyant Pathak and his Venture Catalyst team have helped Feldstein form his company and file for provisional patents. Venture Catalyst has also helped connect him with key stakeholders in the region as well as find a home for his company at our UC Davis-HM.CLAUSE Life Science Innovation Center. At the Innovation Center, he will have the necessary tools to incubate and develop his company’s products and services.”
“Transforming UC Davis into the university of the 21st Century means thinking beyond the traditional academic model that isolates learning from making and doing. Our corporate partnerships are creating new opportunities for business innovation while our international relationships are helping to bring California’s capital to the forefront of the global economy,” the chancellor adds.
Wednesday’s event brought together bankers, investors, economic development experts, entrepreneurs and others who worry that Davis lacks the space necessary to really become a destination for startups and maturing companies. That will be a policy issue that the community will debate, as projects like Nishi and Mace Ranch Innovation Center come forward.
In the meantime, it was nice on Wednesday to backtrack from the land use debate to hear about some of the work going on in the community.
—David M. Greenwald reporting