I’ve been fortunate enough to develop a relationship with a very pro-active state government. They put out an innovation RFP to help spur innovation in that state. The people working on this are great and I really like them and their passion. The following is my proposal for how to build a unified strategy
A. Location is everything: You can’t force developers to move. Focus on the industries you have already and build niche solutions. If for example, one city has deep corporate ties in banking, focus on building a banking hub for innovation, if another city is focused on development, focus on development. Bring together city/industry leaders and get them to support the program by making it about them and something that will directly benefit local industry. Local is everything when it comes to getting people to develop a company in a certain place. Whatever the area of focus is in that town, develop an innovation hub around that. If you have 3 cities with hotbeds of industries focus on those. Is it possible to create new hotbeds? Yes, of course though its much more different than supporting evolution in a location. Support the evolution of an industry towards entrepreneurship where you can tap into existing ecosystems to start.
B. Get community support. Now that you have chosen a city and niche focus in that city – go and get industry support from that niche. Let’s say banking. Let’s go and get CEO’s of the top 20 banks and top 20 service providers for banks in the state to support the program, agree to show up and mentor. Once the industry is there, venture capitalists will smell it and follow providing much deeper long term capital access.
C. Find a community evangelist. Find someone from the target industry with taste and hustle. Give him resources even if he doesn’t have any. Give him $X to work with for events, education and investment and see what he can develop. Start with small amounts of money. Let’s say the goal is to get 10 innovative companies to start and 1 to move to area. Commit $10MM, give $100,000 seed funding to 10 companies and then have more support money behind it. Take $2.5MM to convince one promising young company that is growing to scale with cheap or free financing in a meaningful amount. Now you have 10 innovative ideas development and 1 scaling growth company, 20 senior executives and enough funding to support all 11 companies. That’s an ecosystem in development for what is a very small amount of money in government terms. It is also very focused around a particular niche where there is critical expertise.
D. PR: Publicize first locally then nationally an internationally that you are starting an innovation hub in that area. Put out a call for companies and talent. Good talent match with good companies. Do as much PR as possible. Support with industry focused PR.
E. Access to investment capital: Outside of seed money, I would focus on education and access more than direct equity investment. Equity investment requires taste. Bringing investors to the table doesn’t. Having the industry focus will make it easy to attract investors from other cities and countries that like the sector. Take your 11 companies and roadshow them to all major investment hubs as well as having a local demo day. Have some industry influencers there that are on the corp dev and acquirer side be part of it and it will give credibility to the overall niche focus in that niche.
F. Forgivable loans. Selectively give forgivable loans to very promising companies – I would have a growth rate requirement where they can tap cheap/free debt in exchange for job creation. A $10MM loan vs. $10MM in venture money is significant equity savings for the founder and has a direct impact in the local environment.
G. Space. Have office space in that area. Anyone who incorporates a company and writes a deck or fills out an application should be able to get 1 free desk for 3 months in a big incubator space. Just give it away as long as the person passes a minimum hurdle. Entrepreneurs like to be around other entrepreneurs. Free space is a great way to build community. After 3 months, then make it cheap like $99/month for a desk and wifi.
H. Education. Lots of education. Put on classes and webinars about all aspects of starting and running a company. General Assembly does great classes, so does Women Innovate Mobile and Tech Stars. Offer tons of classes. Have industry folks teach them as well as a core entrepreneurial content (See idea on Entrepreneurial Certification or Accelerators for Everyone). Education is the lifeblood of growth.
I. Tax Credits. Tax credits are probably the least important for entrepreneurship though very important for getting companies to move. As a founder, I don’t think about tax credits, I think about talent access. I would make tax incentives available (no income tax, 50% back for investment etc…) as support functions to further lubricate entrepreneurship though I would use it as a value add not a focus. Talent first. Ecosystem first. Tax credits help scale though with the ability to then attract big and growing companies to the area when you already have a talent base.
J. Marketing: Venture Tourism. Have people in entrepreneurial hotbed cities that can network locally and tell founders about your cities programs and offer free trips (travel, hotel, food) to entrepreneurs who will come check out your city as well as setup local meetings with investors and strategic partners. Be pro-active. Go where the people are and bring them back home. Tell them about your programs. Selectively sponsor and support other ecosystems for long term awareness building of your ecosystem.
K. Events. Host high profile events to attract people to the system and simpler local events to support its development. Spend selectively on bringing people together and it will create great long term dividends as people get to know each other and learn how to build community on their own.
There are a number of other techniques that can be used for community development though the key to the approach above is basically NICHE your community, focus on where the strategic partners are and support great people with money and resources to develop those niche’s. None of it requires huge amounts of capital – just targeting its usage.