Cities Lead on Entrepreneurialism and Economic Opportunity

By Brooks Rainwater

Brooks Rainwater is the Director of the City Solutions and Applied Research Center at the National League of Cities. The Center strengthens the capacity of municipal leaders to create strong local economies, safe and vibrant neighborhoods, world-class infrastructure, and a sustainable environment. As a strong advocate for vibrant and successful cities, Brooks frequently speaks and writes on the subject, and has published numerous research reports and articles on the creation of innovative, sustainable, and livable communities. Follow Brooks on Twitter @BrooksRainwater.

This blog post is a response to the Meeting of the Minds & Living Cities group blogging event which asks, “How could cities better connect all their residents to economic opportunity?”

America is a country of entrepreneurs, inventors, and idea creators. From this nation’s founding, new ideas have driven our grand democratic experiment with commerce providing the underpinning for a strong and growing body politic. The city has been the unit of government most conducive to experimentation and commercial growth precipitated by those that take risks to form new businesses, grow those businesses, and help whole communities thrive.

Entrepreneurs create jobs, grow the economy, and enhance the well-being of our communities. With twenty-three million small businesses in the U.S. generating 54% of all sales, it is imperative to create an environment that encourages this growth. Additionally, sales tax revenue from small businesses expands local governments’ capacity to provide high-quality city services to all residents. This is what city leaders are doing by working collaboratively with business owners to create the space for small business to prosper.

Mayor Rahm Emanuel of Chicago reinforces this need for a strong partnership between government and business in the foreword of the upcoming NLC Big Ideas for Small Business report, writing “I know that by working together and sharing ideas, we can make all of our cities better homes for entrepreneurs and their businesses.” And, since the end of the recession local leaders have been doing just this, with 63% of all net new jobs created by small businesses.

Economic Opportunity through Incubation and Microlending

Any discussion on how cities connect their residents to economic opportunity must include the role that small businesses play in incubating innovation and helping communities succeed. One of the most successful ways to connect people to economic opportunity is by increasing economic growth. Two specific ways that cities are working to connect residents to opportunities are by creating incubator spaces and supporting microlending.

Harkening back to the innovation of the past, Washington, DC and Chicago have created incubators with the names 1776 and 1871. Just as the incubation of liberty in our nation was cradled and nurtured through hard work, deliberation, and grit, the rebirth of a city after a great fire is reflected in the modern day flame of new ideas.

Mayor Emanuel backed the creation of 1871 with J.B. Pritzker, an entrepreneur and philanthropist, through the Chicagoland Entrepreneurial Center. Early stage digital start-ups with fewer than 10 employees make up the bulk of the tenants with universities and others within the local technology scene on site as well.

Before its creation in 2012, Chicago had the human capital, the financial capital, and the support from government. What it didn’t have though was the physical space for these parties to interact, have conversations, and chance encounters that can only occur with proximity. Now it does and these companies have been taking advantage of all that this space has to offer with more than 1,000 jobs created and 26 companies graduating out of the space.

1776 in Washington, DC opened in 2013 and was built around the concept of connecting people and ideas under one roof. l. Much like in Chicago, Washington, DC’s Mayor Vincent Gray served as a strong advocate for the creation of 1776. The strategy is different than that of Chicago, and reflects the nature of our capital city with a focus on the regulated industries of education, energy, healthcare, and smart cities. Currently, 1776 includes over 200 member companies, with innovative businesses developing exciting new ideas every day.

The space for innovation to grow is necessary for small businesses, but access to funding is even more essential for their survival. Government has a role to play in connecting businesses to a variety of funding opportunities. One such mechanism being used more and more is microlending. This type of lending, as well as crowdfunding and peer lending circles, is growing in popularity in cities nationwide. These loans are typically $50,000 or less and offered through nontraditional lenders such as nonprofits. Philadelphia’s peer lending micro finance model is a particularly valuable model.

The Philadelphia Department of Commerce provides a range of programs to support small businesses to start, stay, and grow in Philadelphia. Recognizing that access to capital is a critical need for small businesses to be successful, the City provides financial support to organizations such as FINANTA and Entrepreneur Works to provide micro-loans to the small business community. We are especially proud that these two agencies have adopted a unique prototype that has garnered national attention as a successful and replicable model.

– Philadelphia Mayor Michael Nutter in the NLC Big Ideas for Small Business report

Small business thrives in a supportive ecosystem. Cities are uniquely able to connect entrepreneurs to mentorship, streamlined regulations, skills training, and funding. Through collaborative networks like NLC’s Big Ideas for Small Business Network, cities are able to share success with one another.

At the same time, city leaders want to celebrate the success of small businesses in their cities and the foundations they build for a resilient local economy by providing jobs to residents, contributing to sales tax revenues, and attracting visitors.

By doing this, small businesses directly contribute to the tax base and employ community residents from all walks of life, while serving as central economic and social drivers in communities nationwide.

My colleague, Heidi Goldberg, in NLC’s Institute for Youth, Education and Families will also be contributing to this conversation on the CitiesSpeak blog, discussing how cities and their community partners play important roles in expanding residents’ access to financial services.

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