Community First Investment
Everywhere I go, I hear the same thing: investors want to create opportunity in their own backyards.
In geography, we talk about a “love of place,” a powerful feeling and drive that we feel when home, wherever we define home to be. Our community is an extension of this home. It’s where we live and work, and where we want the people we love to reside. We want to make sure opportunities abound in our communities, in the form of jobs for our young leaders to blossom, grow, and perpetuate our way of life. We want taxes that drive urban renewal of our downtowns, and local merchants who reap the rewards of economic prosperity. We want a main street that is fun to visit, and spaces where our children can also grow up, find jobs and share their lives with us.
Unfortunately, that is simply not the economic reality for many cities, towns and neighborhoods. Economic development was once focused on recruiting large manufacturers to a given community: mills, factories, and production lines. When these industries left the continent in the 90’s with the signing of NAFTA, the jobs that once spurred North America’s growth followed. The same has been true post-information age, with the mass outsourcing of digital roles overseas. We find ourselves in a new era, not as laborers, but entrepreneurs. No longer are we able to rely on specialized manufacturing to create a sustainable economy, instead we need to invest in intellectual property and create value through this new “American Way.”
It’s time to start from scratch.
Sustainable communities are those in which the environment, economics and culture are equally balanced. Unless there is a sustainable economic opportunity, though, the task of forming a sustainable community is impossible. We all would love to live in a utopian society where broad-leafed trees shade litter-free parks, are filled with intelligent, well-cared-for children, and where every cultural group is recognized, celebrated and safe. The reality of our world is different: there is always a struggle between the environment and economics, and culture is often the casualty or mitigating force.
In business, we talk of the “cold start” dilemma. If you are creating a marketplace, you need both customers and product to be in sufficient supply to serve the market and be successful. Where should you put your focus first? Customer base? Inventory? These elements can feel a little chicken-and-egg to startup ventures. The same is true with communities. The equation is straightforward (not easy): if you have capital, you create companies, or vice versa. In truth, creating capital is easier and faster with a community of visionary leaders.
How do we do that?
Banking has changed, and the current market offers little to no credit for startups. Venture capital has moved out of the early stage investing space. Competition has changed: it’s easier to start a company than ever, but harder to be noticed in the ebb and flow of a global marketplace. These same changes have brought additional freedoms. The internet has liberated people to work where they want to live, and we have never been as attuned to the need for a work-life balance. Innovation is occurring in our own backyards, but we need to cultivate it!
The Great American Community
I believe we are witnessing the resurgence of the Great American Community. America was great when the middle class lived across the nation within sustainable communities: agriculture, banking, manufacturing, service and lifestyle industries all located in the same area and serving the needs of the population. Since the 1980s, we’ve seen a shrinking of the middle class and a growing disparity between the wealthy and struggling. The answer to this problem is not some draconian or socialistic realignment of wealth, but it IS investing in the startups within our own communities. This is the next great realization in the practice of economic development—the Great American Community now includes technology-based jobs to replace the manufacturing ones lost.
Build the Community You Deserve
To create the community we all deserve, we must start with strong, visionary leadership. The rest is a matter of vision and execution. If it’s not already present, we need to create it, but the benefits are clear:
Stop brain drain (the exodus of educated members of our community to other areas).
Create new tech and new-age manufacturing jobs.
Create a new echelon of young and motivated leadership.
Create with local and regional economic impact in mind.
Create growth industries and enterprises.
Generate wealth.
Capital is the key first step. If startups form and can’t find local capital, they die or move. It is that simple. Capital creates gravity for entrepreneurs and businesses: tangible capital options that will keep them here rather than send them elsewhere. A committed capital fund is a promise to the community to identify, foster and reward the best and brightest—a statement on the culture of the community itself. Community leaders who invest in local and regional deals are making a powerful statement to entrepreneurs looking to make a leap.
The second step? Engaging a broad-based angel syndicate to access great minds and greater capital. This provides the community with access to broad talent and expertise to grow. This continuum of capital is critical and key to creating great investors who continue to mentor startups in a community. It is difficult for one angel group to satisfy the needs of a company from start to exit, but by working with peers around the region, we can invest in and cultivate change, lifting all proverbial ships.
The third step is community engagement. Embrace creatives, who want culture and environment to be in balance. Create code schools and learning opportunities for young leaders and entrepreneurs. Host “Shark Tank” style events to highlight great ideas and give them experience at pitching and presenting. Leverage college and university programs to create entrepreneurial courses and colloquia options. Seek intellectual property that can be commercialized. Encourage students to create businesses their communities will need and support. Build accelerators and expand co-working spaces with the expectation that they will be filled and create space to spawn innovative ideas. Be a mentor tolerant of failure, patient in the process, and invested in the future of your community.
It can take 5-7 years to see monetary returns on this type of investment, but the benefits along the way are more than financially rewarding. This is why we talk about creating economically resilient communities: your investments pay dividends for years to come. It only takes a few visionary leaders in a community to turn the tide.