Nurturing the Entrepreneurs Our Inner Cities Need
Capital is important, but so are ecosystems that reward innovation and thrive on diversity.
Job-creating innovation and inner cities can prosper together, and a new approach that's well underway in cities across the country is demonstrating how. It starts with talent and inclusive entrepreneurship rather than a focus on the traditional geographic locations that have so dominated capital for business in the past.
In the United States, venture capital is highly concentrated: California, Massachusetts and New York state drew 75 percent of all American venture capital last year, according to Revolution CEO Steve Case. Just six metro areas in those three states accounted for more than two-thirds of all venture-capital investment, as the urbanist Richard Florida has reported. In addition, the field is overwhelmingly white: None of the 217 venture capital firms with more than 2,500 employees had an African-American investment partner, according to a December 2016 report from the National Venture Capital Association.
Yet for small businesses to flourish -- wherever they are -- they will need access to more venture capital and working-capital loans. That is a pressing challenge for many cities.
It's not surprising that the traditional approach to creating jobs in inner-city areas is to try to attract companies with tax incentives and hope that the resulting jobs will match local skills. Too often they don't, because the company was attracted for other reasons. But in a digital age, there's a better way: start with local resources, including talent, and build inclusive entrepreneurial communities or ecosystems that create companies using that talent. Both the companies and the talent are then home-grown and well-matched.
The key is to start by creating an environment with four core characteristics: The anchor must be inclusive entrepreneurship with a culture that supports it; the place must be mixed-use, so that people can live, work and play there; it must be well served by public transit; and it must be broadly diverse while committed to honoring authentic local culture. Diversity in backgrounds, experience and skills is not just a social goal; it's an economic necessity. Diversity sparks essential creativity.
Such an environment is underway in West Baltimore, a part of the city best known outside its boundaries as the site of the civil unrest that followed the 2015 arrest of Freddie Gray and his death in a police van. It's an area where vacant buildings are common and median income is below $30,000. Yet talent and the resources to develop it are abundant. A 1,300-acre area includes Baltimore City Community College, Coppin State University, the Maryland Institute College of Art and the University of Baltimore.
Within that area, Innovation Village, a nonprofit social enterprise that I chair, is creating Baltimore's first innovation business district, and it is already making significant progress. In October, we launched a new Innovation Campus at Baltimore City Community College with our venture accelerator partner, Conscious Venture Lab, as the main anchor. Conscious Venture Lab focuses on investing in and building purpose-driven companies -- those that are as conscious of their impact on their communities as they are of the bottom line -- and has an initial cohort of seven early-stage entities. And existing companies are coming from other parts of Baltimore and the region to West Baltimore, a move that was previously unimaginable.
Conscious Venture Lab's parent company, SHIFT Ventures, will provide a framework to help companies create a growth plan. Sagamore Ventures, the investment arm of Kevin Plank, the CEO of Baltimore-based Under Armour, is partnering with SHIFT Ventures to provide funding and support to participating companies. Capital amounting to $1.5 million to $2 million is starting to flow through West Baltimore.
What's happening there isn't unique. Entrepreneurial ecosystems are growing all across the country. Last June in Kansas City, the Kauffman Foundation convened the first-ever ESHIP Summit of more than 400 ecosystem builders from 48 states, Puerto Rico, the District of Columbia and nine other countries. A free digital playbook makes ideas, insights and solutions that emerged at the summit available to all.
The Kauffman Foundation also recently sponsored a Smart Cities Summit in West Baltimore that enabled more than 250 local and regional leaders to visit the Conscious Venture Lab space at Baltimore City Community College and to learn how innovation is emerging in this inner-city area. Both the ESHIP and Smart Cities summits were designed from the outset to involve a broad representation of communities of color and women.
At Innovation Village, inclusion has been in the leadership from the start. Innovation Village is different in part because it looks different and in part because we believe that everyone has talent and everyone deserves access to economic prosperity. That can happen by making sure that people have spaces and places where their creativity can flow into the marketplace.