A recent kerfuffle between Grand Rapids economic development officials and executives at Start Garden Inc. highlights the challenges cities face when they try to encourage more entrepreneurial investments.
Start Garden, a local entrepreneurial support organization (ESO), has contracted with the city since April 2016 to manage the Grand Rapids SmartZone, a tax increment financing mechanism for leveraging technology investment in the city.
On Aug. 15, the Grand Rapids SmartZone Local Development Finance Authority (LDFA) board presented Start Garden executives with two new draft agreements that would have reduced the city’s monthly payments by about 75 percent for services related to “incubation” and “ecosystem development.” The agreement also called for more emphasis on Start Garden’s event-based programs, including 5x5 Night and 100 Ideas.
To city officials, those programs “have the potential to bring new high-tech entrepreneurs and innovations into the Grand Rapids ecosystem and help fill and diversify the pipeline” for entrepreneurial growth in the city.
The proposed agreement, which the city sent Start Garden the day before a scheduled meeting to discuss the contract, exposed a rift between the two groups, as evidenced in an email exchange obtained by MiBiz.
“We don’t feel confident that the dramatic implications throughout the ecosystem have been considered and discussed by the full board,” Start Garden co-director Jorge Gonzalez wrote in the email, saying the city’s proposal “effectively dissolves the relationship with Start Garden in December 2018.”
“We do not believe this aligns with the mission of the Grand Rapids LDFA full board of directors and respectfully ask the proposal is discussed and approved at the full board level in a public meeting before we can agree to something in a private meeting,” Gonzalez wrote.
Start Garden and city officials say they’re continuing work to draft a new agreement that could come as soon as next month.
Still, the incident only underscores the difficulty and time-consuming nature of aligning public and private interests to create an environment that fosters innovation and high-tech growth in an equitable manner.
“It’s a 20-year project,” said Craig Hall, a West Michigan serial entrepreneur who serves on the board of Start Garden and chairs the board of the Holland SmartZone. “The trouble is how do you measure success in a 20-year project when we live in a quarter-by-quarter mentality. The number one tenet of a (successful ecosystem) is that it be led by an entrepreneur, not by an ESO, not the government, not by a not-for-profit.”
Seeking a new model
Start Garden officials say their work in “ecosystem development” takes a long game, and requires a paradigm shift for economic developers.
“It’s an emerging field where we’re realizing that people who are innovators and are creating value from scratch are searching for a great place to start,” said Paul Moore, a co-director at Start Garden.
“That’s different from an era of trying to bring in a company that already has 1,000 employees or to retain a company that has 1,000 employees in the city,” Moore said. “It has more to do with developing the conditions of a place to live around the needs and desires of entrepreneurs and innovators versus waiting for a company to grow and then try to meet its needs.”
To help with that paradigm shift, Start Garden has sought to tap into resources at the Ewing Marion Kauffman Foundation, a Kansas City, Mo.-based nonprofit focused on entrepreneurship and innovation, Moore said.
Along those lines, Victor Hwang, the Kauffman Foundation’s vice president of entrepreneurship, noted in a recent report the importance of embracing the “ecosystem model” for encouraging community economic development.
“That model focuses on how the whole of a community is far greater than the sum of its parts,” Hwang wrote. “It means starting with what a community has and connecting the pieces. More than ever, we believe ecosystem building can transform communities of varying sizes, demographic and socioeconomic contexts, and geographies, and create more sustainable economies everywhere.”
Activities versus outcomes
To that end, some clear differences appear to exist between Start Garden and the goals of the city as initially laid out in the August 15 proposals.
In seeking to focus more on activities and programming, the city is in some ways looking more at metrics in the short term than longer-term outcomes, according to Hall.
“A part of the challenge when you have these public-private partnerships is to get out of the way sometimes,” Hall said. “When you talk about measuring success, they don’t look at the outcomes so much as they look at the activities, which is a real problem when you have a 20-year project. Activities don’t necessarily deliver outcomes.”
Kara Wood, the city’s economic development director, said as this report went to press, the LDFA board would be meeting to send recommendations for regulatory changes to the Michigan Economic Development Corp. The suggestions would better account for the ecosystem-building activities that groups like Start Garden say are necessary to create an environment that fosters entrepreneurism, she said.
The city hopes to ramp up the holistic focus on creating an entrepreneurial environment that can meet a variety of goals, including marketing the region to a broad-based group of people and developing a talent pipeline for high-tech employers in the area, Wood said.
“We’re trying to hone in on evaluating what the (LDFA) board is looking for in terms of deliverables,” Wood said early last week. “I think we’re getting to a place where we’ll have a product after this week.”
Start Garden officials say they believe they will reach an outcome in which the partners will continue working together to deepen the entrepreneurial pool in a way that allows opportunity for a wide variety of the region’s population.
“We want to see the growth companies that will become the real wealth creators coming out of that pool of people just pursuing opportunity,” Moore said. “We’re not trying to predict who’s going to win and who’s going to lose. We’re allowing someone to start off with a small business and then pivot into something that could be the next Steelcase.”