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A homegrown economy starts with entrepreneurs

Betsy Hodges, former mayor of Minneapolis
Betsy Hodges, former mayor of Minneapolis

In a new form of economic development, mayors are putting entrepreneurship at the center of their local economies.

Recognizing the economic and cultural benefits entrepreneurs bring to their hometowns, mayors and other local leaders are looking for practical ways to attract and retain more of these economic heroes. Rather than luring businesses from the outside through costly incentives such as tax breaks and calling it growth, more mayors and their communities are now looking within.

“Growing your own [economy] through investing in entrepreneurs is an economic development imperative for mayors and their cities,” said Betsy Hodges, former mayor of Minneapolis. “Entrepreneurs grow the cities they live in. The money stays in their community. They hire local. This leads to an upward spiral of success for the city.”

Mayor Hodges now serves on the Kauffman Foundation’s Mayors Council, engaging with elected officials at all levels on the importance of entrepreneurship to their constituents and communities. She also provides insights for Kauffman initiatives from the local elected perspective.

As a community’s CEO, mayors galvanize local resources to make this new economic development model a success. They must have a holistic view of the interrelated issues that affect entrepreneurs’ ability to start and grow a business. And as the chief convener, a mayor can facilitate investments in infrastructure and in new businesses to make their city the place where entrepreneurs want to build their companies.

“There’s now a different mentality in communities that focuses on creating environments that entrepreneurs want to live in,” said Scott Resnick, co-founder of StartupBlock Madison, an entrepreneurial hub for founders, investors, advisors, and the community. “Cities and communities that have the right ingredients are getting ahead.”

Oakland, California, is one of those cities – and the results are seen in its job market.

“In Oakland, we have close to 40,000 registered businesses, and the majority of job growth in our city comes from entrepreneurs,” said Jose Corona, director of equity and strategic partnerships in the City of Oakland mayor’s office. “While it’s not either/or – we need both big and small companies – these new and small businesses actually create more jobs.”

And it’s not just jobs. Corona said supporting entrepreneurs can pay dividends to a city’s reputation.

To build a vibrant local economy with entrepreneurship at its heart, city leadership can start by asking entrepreneurs the right questions and listening to the answers. Here are examples of practical, positive actions leaders in Minneapolis, Madison, and Oakland, have taken to support the makers, doers, and dreamers in their communities.

Give entrepreneurs a seat at the policy table

Rather than creating programs from inside city hall or business organizations, have entrepreneurs take the lead, which has proven to reduce or eliminate roadblocks.

“City processes can be more Byzantine than they need to be,” Mayor Hodges said. “Simply ask entrepreneurs how the city is getting in the way of their progress, and then work with them to develop solutions.”

As mayor, Hodges spent a year holding focus groups with entrepreneurs and identified processes and ordinances that were hampering businesses. “We eliminated things like unnecessary license requirements. And we started handing out business license permits at the beginning of the startup process instead of at the end so there are no last-minute surprises.”

Oakland put together the Oakland Small Business Task Force, consisting of more than 100 entrepreneurs and small businesses, and asked what the city could do to support them. What entrepreneurs need might not be what policymakers expect.

“The first answer was to promote their businesses,” Corona said. “They needed help with marketing and branding – not funding. We’ve invested in a strategy to highlight our local businesses. And our mayor now uses her megaphone to ask big businesses to do impact purchasing – buy from local businesses.”

Leverage resources

This is where mayors’ convening superpowers come into play. They can steer institutional knowledge from economic development experts, corporations, and power utilities to help startups. These organizations can provide insight and shortcuts for businesses getting started, and corporations can encourage other business leaders to offer support or give the new company some customers.

“Madison’s corporations rallied behind the vision of StartingBlock Madison,” Resnick said. “We had a financial goal of $10 million. The institutional organizations introduced us to donors and additional business partners and held dinners with peers to talk about why StartingBlock was an exciting venture.”

For cities experiencing a boom in development, Corona suggests they leverage land use. Oakland requires new business developments to include affordable ground-floor retail and office space for small and new businesses; in return, the developers can get a zoning variance to build higher-density buildings.

Cities can commit to myriad entrepreneurship support programs available at low or no cost to cities, and create their own. Examples include 1 Million Cups, Kauffman FastTrac, Startup Financing 101 in Madison, the Oakland Startup Network, and Startup in a Day, a partnership with the Small Business Administration and the National League of Cities.

Invest in underrepresented entrepreneurs

Ecosystems must have diversity to thrive. Women, people of color, and immigrants have long faced systemic barriers in starting and growing businesses, so cities are creating policies and programs to strengthen support for underrepresented entrepreneurs.

“In Madison, we found innovative ways to leverage capital from city resources, such as creating a revolving grant for underrepresented entrepreneurs,” Resnick said. The public fund pools money from city, state, and nonprofit funds to support Madison startups operated by women and people of color.

Oakland also has developed its own unique programs for underserved entrepreneurs. The Oakland Startup Network supports growth and investing in tech companies run by people of color. And working with the Kapor Center, Oakland created First Friday, where businesses founded by entrepreneurs of color are featured.

Innovative funding is also critical to effectively support underserved entrepreneurs. As the first Kiva city, Oakland uses the nonprofit lending platform to partner with several community groups and businesses to democratize investing with 0% interest, becoming the biggest lender to local entrepreneurs since it started in 2015.

Look out for new perspectives

As city leaders continue to look within to support entrepreneurs, Mayor Hodges advises them to engage with their peers outside of their local networks to find what works best – especially with other mayors.

“We need to figure out how mayors can come together to deal with policies collectively,” she said.

That opportunity is created purposefully at Kauffman’s Mayors Conference on Entrepreneurship. May 20 marks the sixth annual event that welcomes mayors and their staff from across the country to learn with and from each other. This year, the conference centers on support for attendees as they choose one program, policy, or practice from a list of several to implement in their communities.