CREC Project News and Updates

Entrepreneurship: Federal-State Economic Development Collaborations

December 9, 2015
  • Topic Overview

Promoting entrepreneurship is an increasingly visible part of the national innovation strategy for achieving sustainable growth and quality jobs. Not only do startups bring a wealth of transformative innovations to market, they also play a critical role in job creation across the United States, especially among traditionally disadvantaged populations. Entrepreneurs that grow their businesses create a large share of new jobs and offer opportunities for everyone to participate in the American dream. While new and young companies help drive job creation and economic diversification, policymakers are concerned that the rate of business formation has been steadily declining (Citation: The Importance of Young Firms for Economic Growth, Kauffman Foundation, 9/13/2015, http://www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/the-importance-of-young-firms-for-economic-growth).

Not all strategies to promote entrepreneurship are the same however. Some focus on technology start-ups, some focus on business formation without regard to industry, and some focus on entrepreneurs operating small existing (or “second-stage”) firms that have an appetite and aptitude for expansion. Many philanthropic foundations have taken up this cause (Citation: http://www.entre-ed.org/_network/funders.pdf). Whether public or foundation-supported, these efforts approach the promotion of entrepreneurship in a variety of ways, including efforts to provide business plan competitions or technical assistance, angel or venture capital investments, grants or researcher support to create new products, or market intelligence assistance to help with identifying new markets or customers.

  1. Federal Role & Priorities

The federal government has committed to accelerating entrepreneurship through public/private partnerships and providing resources, through both financial and technical assistance, to new businesses. “Startup America” is a White House initiative to celebrate, inspire, and accelerate high-growth entrepreneurship throughout the nation. This coordinated public/private effort brings together an alliance of the country’s most innovative entrepreneurs, corporations, universities, foundations, and other leaders, working in concert with a wide range of federal agencies to dramatically increase the prevalence and success of America’s entrepreneurs.

The initiative unites a range of public and private commitments to:

  • Expand access to capital for high-growth startups throughout the country;
  • Expand entrepreneurship education and mentorship programs that empower more Americans to create jobs, not just to get one;
  • Commercialize more of the nearly $148 billion annual investment in federal R&D;
  • Identify and remove unnecessary barriers to high-growth startups; and
  • Expand collaborations between large companies and startups.

Major Federal Programs & Activities

Expanding access to capital for entrepreneurs

The Small Business Administration (SBA) plans to commit $2 billion as a match to private sector investment over the next five years in promising high-growth companies through the Small Business Investment Company program. Under this program, SBA-guaranteed bonds match private capital to accelerate capital support for startups and high-growth firms.

The U.S. Treasury’s State Small Business Credit Initiative (SSBCI) has made available about $450 million in federal funding through state-sponsored seed and venture funds in 35 states. The states developed programs that reflect their own approach to equity investment. Designed to be “evergreen,” these funds will remain with the states after SSBCI sunsets in 2017.

Connecting mentors to entrepreneurs

The SBA, in partnership with the Department of Energy (DOE) and Advanced Research Projects Agency-Energy (ARPA-E), plans to fund four private business accelerators. These four programs will support 100 clean energy startups across the country. These model accelerators will provide intensive mentorship from seasoned entrepreneurs to a selection of the most promising new companies previously funded by DOE and ARPA-E. This pilot program is a step toward developing a large, distributed network of entrepreneurs, mentors, and startup accelerators.

Making government work for entrepreneurs

The President issued an executive order to federal agencies to take steps to eliminate or reduce processes that are outdated or overly burdensome to entrepreneurs. As part of this effort, the administration is launching online suggestion tools for the public and is seeking input from entrepreneurs through listening sessions planned for several innovation centers (e.g., Research Triangle Park, Austin, Boston, Silicon Valley, Atlanta, Pittsburgh, Minneapolis, and Boulder) to identify ways to streamline or eliminate the biggest barriers to startup growth.

  • State Role

Each state already has a network of Small Business Development Centers (SBDCs) that provide assistance to small businesses and aspiring entrepreneurs. These centers are hosted by leading universities and state economic development agencies, and funded through an SBA- state partnership arrangement. The Centers offer free business consulting and low-cost training services in business plan development, financial packaging and lending assistance, exporting and importing support, disaster recovery assistance, procurement and contracting, market research help, 8(a) program support, and healthcare guidance. SBA/state centers also provide technical assistance for procurement, export promotion, women-owned businesses, and veteran’s business. SCORE chapters in every state provide free business counseling and mentoring through its volunteer network of counselors, advisors and mentors.

Beyond their SBDC network, states increasingly are creating entrepreneurial accelerator programs, developing economic gardening initiatives, and designing entrepreneurial networking initiatives. These are not always connected directly with federal efforts, except on an ad hoc basis.

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About the Client

Appalachian Regional Commission

The Appalachian Regional Commission (ARC) is a regional economic development agency that represents a partnership of federal, state, and local government. Established by an act of Congress in 1965, ARC is composed of the governors of the 13 Appalachian states and a federal co-chair, who is appointed by the president. Local participation is provided through multi-county local development districts.