Analysis: A Look at the Future of Economic Development in Davis

Dushyant Pathak speaks at the Vanguard Event on Tuesday
Dushyant Pathak speaks at the Vanguard Event on Tuesday

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.”

  1. 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.
  2. 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.
  3. 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.
  4. 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

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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23 Comments

  1. Robb Davis

    I see the concept of what “cities” can do or what “city leaders” can do and wonder how these terms are defined or what and whom they include. Most importantly from where I sit is the question of the role of local government in comparison to local business people, local investors, and other institutions such as schools of higher learning. I would like more conversation about the distinct roles of each. The book “Startup Communities” has some ideas.

    When I meet with local business leaders or UCD reps and ask them what they expect of local government vis-a-vis encouraging startups and business/job development in general I don’t receive anything specific. Vague statements about “support” are common, but I am not sure what that means.

    1. SODA

      Food for thought Robb, I think I understand what you mean. The city can’t ‘make it happen’, but can provide a welcome, helping environment in tangible and intangible ways…so in many ways it is the culture that we are talking about. Without knowing anything about it, the concept of Sophie’s Thai hosting the StartUp social get togethers comes to mind.

      I clicked on the link for the UCD – H.M Clause to find out more and where it is and that comes to mind too.

      What do you think?  Maybe it needs to be more amorphous from the city’s standpoint…..

    2. Anon

      I think the city needs to do more along the lines of what Robb White was doing, with his articles in the Davis Enterprise and Vanguard.  Constantly keep innovation parks in the minds of the public, and the many advantages of innovation parks – significant tax revenue generation, the creation of new jobs, additional sales tax revenue, younger folks moving to town,  the addition of new community resources, etc.  The city has been quiet on that front, and my hope is the new CIO will soon roll out some much needed public outreach.

        1. Michelle Millet

          I had the pleasure of meeting Diane Parro at a chamber function last week, she was also at the most recent council meeting, and the Vanguard event the other night. Maybe you need to get out more Frankly.

        2. Michelle Millet

          Maybe if people in this town showed a little more respect for the people they disagree with, and actually attempted to talk with them, before insulting them in newspapers, blogs, and during public comment at council meetings, we, as a community, would actually function a little more effectively.

  2. Frankly

    This…

    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.

    Then…

    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.

    We are guilty of overthinking the challenges.  I think part of the reason is that our leadership in this city lacks the experience and sophistication in economic development as a result of all that soft money of the university.  We have become experts in farmland preservation, redesigning roads for bikes and banning things in the pursuit of environmental correctness and hypersensitivity.  We have also become good at spending more than we have and then raising tax rates for temporary relief.

    A well functioning economic ecosystem relies on business-idea-focused relationship building.  In Davis we have a lot of political-idea-focused relationship building.  I could fill my calendar with meetings of people working on Davis politics, but I would waste my time trying to do the same for business-focused topics.

    Why?

    One simple to understand reason…

    We lack commercial property for moving forward from idea to business activity.

    All this Davis hand wringing about forging an innovation economy is typical for our Davis DNA.  One where our bent of politics is the type that believes we can and should control every detail of everything.  But the population… especially the population of city leaders… is profoundly void of understanding of economic dynamism.   The setting of the policy that sets the table and provides the primary ingredients and then allow all the “chefs” of innovation to create marvelous business value that then returns tremendous social value.

    There are four primary ingredients:

    Human Capital – Davis has it in spades because of UCD.

    Capital – There is plenty of it out there, but it is not flowing to Davis because The City of Davis has not demonstrated that is will be a good enough business partner.

    Commercial property – Business requires land and facility.  Without it there is no way to leverage the supply of the previous.

    All The City of Davis needs to do is to commit to building more commercial property and the other two ingredients will take off.  And then economic dynamism will happen and we will organically ramp up an innovation economy.

    Instead if we try to control every detail in our typical silly pursuit of utopian perfection, we will fail.

    It is simple…  we have not developed enough commercial property in this town.  We are about 35% of where we should be given our population, or city needs, and our responsibility to UCD, the region, the state, the nation and the world.

    We should be thinking of 1000 acres of business development over the next 20-30 years.

    1. Davis Progressive

      i think you’re largely correct here – i’m sure i’ll go for 1000 acres, but that’s nibbling on the edges – the problem is that you have to bring people along – they aren’t where you are.  i think anon is correct – cutting of rob white from the enterprise and vanguard was a huge mistake if the city is serious about ed.  i’m sure they are.  as i understand it, diane parro and sarah worley were there on wednesday night but not anyone from the city council.  so you have the big wigs from the region in the room, the city is there, but not the council.

      1. Robb Davis

        Keep in mind that CC members receive invitations to speak/attend meetings well in advance of many events. I was with a community group that night but the invitation was made to me well before the VG event was sent out.  We do not coordinate who is going where for the most part.  Despite the fact that I was out every night this week I still was unable to attend everything I wanted to.  Absence from this event should not be construed as a lack of interest is my point.

        1. Michelle Millet

          Robb, don’t you know that you are supposed to be at multiple functions at one time, while also spending time at your job, and with your wife and beautiful grandchildren? Stop being such slacker.

    2. hpierce

      Truly, just curious and to get perspective… 1000 acres on which business development can occur, or 1000 acres (43,560,000 square feet) [1.56 square miles] of floor area for business? (which, on one hand, would have 1/4 the footprint if 4 stories tall, on the other hand, kinda’ remember that the FAR (floor area ratio) is ~ 30% for that use).  For single story business use, with a floor area ratio of 30%, that’s ~ 5.2 square miles of land (divide by the number of floors).  Over a 30 year period, can’t see that ‘absorption’ [assuming the 1000 acres is floor area], unless we paid the business to come, AND waived all taxes and fees for 20 years, happening.

      Or was that meant as a metaphor?

  3. Frankly

    I need to add something here.   While we dither and dather and wring our hands and lament our pursuit of perfection that we cannot even define.  The stock market fall is wiping out CalPERs projections and will result in cities have to increase their contributions to employee benefit costs.

    Unfortunately the speed of progress in Davis is so slow that it is pretty useless to factor economic assumptions because the economy moves much faster than that snail’s pace.

    1. David Greenwald

      I don’t see any way that’s going to change. Davis is not going to suddenly become a fast growth community in the next ten to twenty years. I think we need to make this kind of development be safe and non-threatening to the residents and that might enable things to pick up down the line.

      1. Frankly

        The point is that there is a cost to the pursuit of perfect that tends to ensure imperfection.

        A decision to delay or do nothing is still a decision that has risks.

        A calculable risk includes the failure to leverage opportunities.

        And if you think about it, that is why we are where we are today.  All those no and slow decision chickens have come back to roost, and yet we can’t stop talking about putting out more no and slow decision chickens.

        1. David Greenwald

          I think the issue of perfection cuts both ways here. In this case, I think you would be well advised to think in terms of the politically possible project rather than the perfect one.

          1. Don Shor

            I think the Mace project was on track until the housing issue came up. Nishi is probably proceeding at about the pace you’d expect given the complexities of the site.
            But if you want to see what a city has done to gain a ‘business-friendly’ reputation, here is Vacaville, from their city web site:

            Pro-Business Culture
            Vacaville is pro-business, as evidenced by the Council’s actions to support projects that provide jobs and economic growth. For example, City policy authorizes staff to review and approve major projects that are consistent with predetermined regulations, eliminating uncertainties, time and politics from the process.

        2. Frankly

          Don you are sure funny about Vacaville.  You make it out like East LA.  I know a lot of people that live in Vacaville and have wonderful homes in beautiful neighborhoods with good schools and bike paths and land around the city to enjoy.

          And they have jobs and shopping and tax revenue.   And a cute old downtown that is as much on the way up and Davis’s downtown is on the way down.

          It is a bit of hyperbole to make the case that Davis would turn into Vacaville by shifting to become more business-friendly, but then it really isn’t that bad is it?

          1. Don Shor

            Um, I was using Vacaville as a good example of how the city of Davis might be able to become more business friendly. I have in the past been very critical of their growth policies, but that wasn’t the point I was making here.

    2. hpierce

      http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#{“useLogScale”:true,”range”:”2y”,”allowChartStacking”:true}

      I’m glad you are not MY investment advisor, Frankly.  S&P 500, even with recent events, has gained ~ 15% in past two years… if you correct for the current downward spike (there have been others from time to time – see chart), it’s more like a 27% gain in the last two years.  “The stock market fall is wiping out CalPERs projections…” You go, Chicken Little”… go do some research.  Hope you don’t work in the financial sector.  

  4. Frankly

    Um, I was using Vacaville as a good example of how the city of Davis might be able to become more business friendly. I have in the past been very critical of their growth policies, but that wasn’t the point I was making here.

    Missed that.  I was being hypersensitive.

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