GRAND RAPIDS — A proposed contract between Start Garden Inc. and the Grand Rapids SmartZone would put in place new goals for fostering local tech startups.
Rather than focusing on certain activities, the proposed contract establishes outcomes such as adding 10 new tech startups annually to the SmartZone service area, with six of those companies over two years owned by minorities or women, and providing service to 15 startups a year through its business incubator on Pearl Street in downtown.
“It’s evolving as the work evolves of Start Garden,” said Kara Wood, economic development director for the city of Grand Rapids. “As an organization, they are serving companies in different ways and some of their programming has evolved. The new contract will reflect that.”
The board of the Grand Rapids Local Development Finance Authority, which oversees the SmartZone, is expected to vote this week on the contract, which also includes specific reporting requirements.
If approved at the LDFA’s board meeting scheduled for Feb. 22, the contract would run through the end of 2019. The SmartZone historically has operated with one-year contracts, Wood said.
Since April 2016, the nonprofit Start Garden has contracted with the city to administer the Grand Rapids SmartZone, which uses tax-increment financing to support entrepreneurial activity. Start Garden has continued to manage the SmartZone under one-month extensions since the previous contract expired in July 2018. The most recent extension expires at the end of February.
The deal comes about after a lengthy six-hour meeting last month between Start Garden and an LDFA ad-hoc committee to align their thinking.
Start Garden Co-director Paul Moore credits the LDFA board and the Michigan Economic Development Corp. with “really hashing out what (the SmartZone) meant to do and what can be adjusted and what can’t be adjusted in order to get to where we need to go.”
The proposed contract gives Start Garden greater flexibility to adapt to what’s needed to foster startup creation, support startups and meet emerging market dynamics, he said.
“Probably the biggest win of this contract is the process we undertook to get to the contract,” Moore said. “The SmartZone contract aligning with where we see the rest of the community going, and especially with what entrepreneurs are looking for and what their funders are looking for, is a major shift for us. It is the goal of our work.
“If we have the freedom to figure out what would make a startup want to move into downtown Grand Rapids and whatever incentives we can provide to make that happen, that is a job that’s worth undertaking.”
For instance, instead of measuring how many people attended networking events or how many startup prospects staff met with in a given period, Start Garden would shift to outcomes-based measures. Past measures were “creating a lot of activity that wasn’t contributing to what the community needed,” Moore said.
Start Garden was “very intentional” in proposing an outcomes-based contract, Moore said.
“There’s X amount of startups that we want to bring in to this specific geography. There’s X amount of startups that we’re going to incubate that are owned by minorities. There’s X amount we’re going to serve through the incubator space,” he said. “It actually aligns now to what the startup community needs, as opposed to measuring activity just for the sake of measuring activity or just for the sake of measuring something.”
For the first time, the new deal specifically includes a diversity initiative to generate more minority- and women-owned tech startups, an issue that’s become an increasingly important topic in recent years, Moore said.
A survey Start Garden conducted shows that white males overwhelmingly account for startup activity in Kent County. The data show that within the SmartZone service area, for example, 83 percent of founders are white and 83 percent are male.
That’s not unique to Grand Rapids or the SmartZone.
Statewide in 2017, just $2.3 million of the $179 million in venture capital invested in 79 companies went to women-led startups and $9.1 million went to startups led by a racial minority, according to the Michigan Venture Capital Association’s 2018 research report.
In the new contract, Start Garden will seek to address that issue.
“What the data is pointing to is we’re going to need to do a better job at creating on-ramps for women and minorities, and if we’re not doing that with any intentionality, there’s no reason we should expect to see anything change,” Moore said.
Another goal is to create greater geographic density in the SmartZone service area around downtown by clustering startups within a single facility or neighborhood by “creating enough value that startups will want to move into that,” Moore said.