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“Jumpstart” Strategies to Boost Regions’ — and the U.S. — Economy

Neal Peirce / Jun 23 2011

For Release Sunday, June 26, 2011
© 2011 Washington Post Writers Group

Neal PeirceCan one region “JumpStart” a national economy?

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 npeirce@citistates.com.

 

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6 Comments

  1. Bert Berkley
    Posted June 24, 2011 at 10:16 am | Permalink

    Neal, thank you for continuing to send me your editorials. I find them thought provoking and in each case a practical approach to the particular problem. I am immpressed with your work, and congratulate you for being at the forefront of contemporary thinking.
    Warmest regards, Bert Berkley

  2. Posted June 24, 2011 at 11:01 am | Permalink

    I am absolutely sure JumpStart will eventually excite Cleveland’s economy and help lead the way to a revival. But its greatest contribution now, in its own early stage, is the enthusiasm, hope and optimism it exudes. It and its people are among Cleveland’s greatest evangelists — a collective antidote to the self-loathing and negativity that corrodes too many corners of our civic psyche. If you look at some of the JumpStart firms, you’ll see ingenious ideas and innovative solutions — two things that the region has in spades. I’m proud.
    (Disclosure: My firm, Coleridge Communications, is also a JumpStart Service Partner, offering communications/PR consulting to its portfolio of startups.)

  3. Posted June 26, 2011 at 9:26 pm | Permalink

    Neal,

    Great story. I sense that many of our young people have never learned entrepreneurial lessons . . . . So many have no idea that they can create a business, provide a service . . . It is not handed down from generation to generation. When we wait for someone to “give” us a job, we fail. We have to look for opportunities to serve, to provide new products . . . to work at benefitting others. You see this in some cultures, ingrained into the fabric of society . . . . For example, what Vietnamese families create businesses together.

    We have become complacent. How do we create this hunger to create in our young people?

  4. Posted June 28, 2011 at 2:41 pm | Permalink

    Neal-

    I really enjoyed your article. We launched a civil engineering firm in Austin, Texas (BIG RED DOG Engineering) at the bottom of the recession in 2009 without a dime in the bank. Two years later, we’ve managed to capture a sizable share of the land development market in Texas. In late 2009, we also launched a solar energy company (Self Reliant Solar) which has showed continued growth in the Texas, Colorado, and Arkansas markets as well.

    All of that being said, I would do it again no questions asked. Start up capital or no capital, it takes work, dedication, and passion. Having a program such as this available would be a great motivation to help turn an idea into reality! Thanks for sharing.

    -Regards, Bob Brown

  5. Neal Peirce
    Posted July 7, 2011 at 8:48 pm | Permalink

    Received from Good Jobs First — an organization dedicated to fighting unnecessary corporate job breaks:

    Paid to Sprawl: Subsidized Job Flight from Cleveland and Cincinnati

    by Greg LeRoy and Leigh McIlvaine

    July 2011
    Contact: Greg LeRoy 202-232-1616 x 211 or cell 202-494-0888

    Study: Companies Get Subsidies to Move, Mostly Leaving Hard-Hit Areas in Cleveland and Cincinnati Metro Areas

    Cleveland, Ohio, July 7, 2011–One hundred and sixty-four companies were given lucrative property tax breaks as they moved facilities around within the Cleveland and Cincinnati metro areas. The subsidized relocations, affecting an estimated 14,500 workers, were overwhelmingly outward bound and by many measures fueled suburban sprawl, especially in the Cleveland region.

    By dispersing jobs away from the urban cores, the relocations worsened inequalities in wealth and opportunity. They moved jobs away from areas hardest hit by plant closings and with higher rates of poverty, unemployment and people of color to more affluent and less diverse areas. Most also moved to locations that are inaccessible via public transportation, denying job opportunities to carless workers and denying thousands more any commuting choice.

    Ominously, Ohio’s economic development programs are becoming much less transparent, denying taxpayers the ability to see how their job investments are performing–or where.

    Those are the key conclusions of Paid to Sprawl: Subsidized Job Flight from Cleveland and Cincinnati, a study released today by Good Jobs First at a press conference in Cleveland. The study is available at http://www.goodjobsfirst.org. Funded by the Ford Foundation, it is the largest study of subsidized relocations ever performed in the United States.

    “Ohio’s enterprise zone program is so loose it has been perverted,” said Greg LeRoy, the study’s lead author. “It has become pro-sprawl, which is tragic given that it was originally created to revitalize older areas.” The study also examines Community Reinvestment Areas, a program succeeding enterprise zones.

    To remedy these problems, the study recommends that the state encourage the creation of cooperation systems among local officials and anti-poaching protocols like those in effect in Montgomery County (Dayton) and Summit County (Akron) and that being debated in Cuyahoga County (Cleveland). To reverse declining transparency, the study recommends that all economic development deals’ costs and benefits be disclosed online. It also recommends that proposed deals should be ineligible unless they are accessible via public transportation. Finally, regional revenue-sharing would reduce tax-base competition and complement a cooperation system.

    Founded in 1998, Good Jobs First is a non-profit, non-partisan research center promoting accountability practices in economic development and smart growth for working families. Headquartered in Washington, DC, it has a project office in New York.

  6. Posted July 13, 2011 at 9:28 pm | Permalink

    I hate to break the news but the only jobs Jumpstart has created are the increasing staff they employ and the ever increasing salary of their CEO. Looks like you drank the cool aide but plenty of people are as they’ve got a huge marketing department spinning their story…Cleveland-Style I might add.