For Release Sunday, June 26, 2011
© 2011 Washington Post Writers Group
However unlikely the proposition, the Northeast Ohio region of 4 million people is giving it a real whirl.
First, it’s leading by practice. Drawing on the region’s historically large foundation resources, since 2004 it’s had a “Fund for Our Economic Future” focused on such goals as connecting cutting-edge industries. “This is regional, collaborative, and for the long haul,” says its president, Brad Whitehead. He cites the sparks of creativity and growth potential in such innovations as taking “a Rolls Royce facility in fuel cells in North Canton, hooking with Case Western Reserve University in Cleveland, with polymer technology in Akron, and then materials and metal strength in Youngstown.”
Now, the Ohioans’ signature job-producing non-profit — JumpStart, a seven-year old organization that invests public and private funds in entrepreneurial start-ups — is “going national” with a new affiliate, JumpStart America, which aims to raise $2 billion in the next decade for investments in promising ventures across the country.
That effort, in turn, is working with with the Obama administration’s recently-announced StartUp America initiative, designed to celebrate, inspire and accelerate high-growth entrepreneurship nationwide. That campaign is working, in turn, with the new StartUp America Partnership, an alliance of venture capitalists, angel investors, universities, and CEOs (AOL founder Steve Case chairs the group). A major focus: to encourage regional business-university-research coalitions (like Northeast Ohio’s) to accelerate the creation of new companies and new jobs.
All this falls under the classic notion of building interactive, idea-, product-and job-generating economic clusters. But it’s needed with special urgency in the United States, right now.
Smokestacks dominated the Cleveland skyline, with fire and smoke belching from great furnaces close to center city, when I first visited in the 1940s. Then came the radical change seen nationwide — hemorrhaging of hundreds of thousands of factory jobs, suburban flight, endless acres of subdivisions, and the consumerist age of big box retailing.
But now the cookie-cutter economy of the last decades is crumbling. To survive in the new global economy, each metro needs to mobilize its wealth, human talent, special assets. The new kind of growth, notes Bruce Katz of the Brookings Institution, must be “purposeful, deliberate, collaborative, pragmatic” — in a word, regionalism on steroids.
The Cleveland region has especially suffered in recent years — down from 28 Fortune 500 firms in 1985 to 11 today, with job losses to match. But its economic straits have been matched, fortuitously, by its historic wealth — the Cleveland Foundation and its local partners have about $8 billion in philanthropic assets, the second most per capita of any American city. So Cleveland had the resources to mount a new nonprofit — JumpStart — targeted at fostering new business start-ups (after McKinsey and Co. donated time, in 2002-2003, to analyze efforts, U.S. and globally, focused on making economies more entrepreneurial).
JumpStart founder/leader Ray Leach can now point to strong regional economic clusters forming in Northeast Ohio — in biomedical specialties (especially medical devices), advanced materials and chemistry. Ohio’s state government has become a major JumpStart funding partner. JumpStart advises high-growth firms (often just two- or three-person startups) on how they can organize themselves, tap university resources, raise additional capital and recruit talent. Its counseling averages about 800 hours a company. It’s also directly invested ($20 million to date) in 55 companies that in turn have raised about $250 million in private sector venture capital.
The idea has caught attention, including federal grants enabling JumpStart to help six Great Lakes regions formulate plans for entrepreneurial development. They include southeast Michigan (Detroit), Upstate and Western New York (Buffalo, Rochester and Syracuse), Minnesota’s Minneapolis-St. Paul and Duluth regions, Akron and the entire state of Indiana.
The good news in these initiatives is that in today’s economy it’s the very young, start-up firms — not established corporations — that generate the lion’s share of employment growth. They can create goods in global demand — a requirement JumpStart requires of firms in which it invests. The multiplier impact of their manufacturing activity is very high. And they mean real added employment — not the tired, zero-sum economic development game of trying to lure enterprises from other states and regions.
The not-so-terrific news is that it takes time — generally three to 10 years — for a new company to add major numbers of jobs. At that pace, it will be a long while until new firm generation takes up the slack for today’s stalled, debt-ridden economy — 24 million new jobs just to get the U.S. employment rate under 7 percent, Leach notes.
Still, it’s surely a smart — and refreshing — strategy to focus on new companies. And to work hard at tapping our metro regions’ many skills and capital pools through new networks of collaboration.
Indeed, how else will the United States compete effectively in the new global economy?
Neal Peirce’s e-mail is email@example.com.
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