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Notes from Innovation Policyworks


Judging by the spate of Requests for Proposals on the subject, innovation districts appear to be the latest economic development "fad," whether or not the locality has the assets, infrastructure or commitment to make it happen. There are a lot of bad assumptions, too.


One is, "We have a large technology company in our city, and so we're innovative." Truth is, many large technology companies keep their intellectual property very close, and their employees even closer, so the likelihood of entrepreneurial spinoffs and a deep cluster centered on this technology is actually quite low. 


Another bad assumption is, "We have a college, so we're innovative." Here the problem is more nuanced. Most colleges, and indeed, many research universities, still don't see economic development as one of their roles, and beyond producing educated alumni, they often don't contribute to growing the economy. And, if the alumni leave town after graduation, you haven't gained much at all.


Here's a third bad assumption: "We're a destination for artists, and we're creative, so we're also innovative." Unfortunately, creativity is a prerequisite for innovation, but it needs to be matched with commercialization to make an economic engine go. So while an arts community can drive tourism and retail, it's unlikely, by itself, to also drive rapidly growing entrepreneurs with products that make order of magnitude leaps in their respective markets.


But, even if you have a great cluster or multiple clusters of rapidly growing companies, large and small, and a great entrepreneurial ecosystem, sources of innovation like research universities, there is one more ingredient that's often missing - an innovation culture. You need to be a place where diversity is celebrated, where failure is admired, and where change is embraced. This is the hardest element of a true innovation district, one that is difficult to acquire through policy and governmental action. If you decide that an innovation district is in your future, be prepared for a lot of work, and a lot of change.



Top Small Cities to Start a Business


The top 10 small cities to start a business are not where you think they should be. With four in the Midwest alone (Troy, MI, Minnetonka, MN, Waukesha, WI and La Crosse, WI), this list is not focused on the usual suspects. The list demonstrates that local action in smaller places can make a big difference. I would be remiss if I didn't mention that Portland, ME ranks 42nd. Not too bad.  Here's all the DATA


Congrats to MCED, E2Tech


Congrats to my colleagues at Maine Center for Entrepreneurial Development (MCED) and the Energy and Environmental Technology Council of Maine (E2Tech) for receiving $50,000 awards from the Small Business Administration this week.  These awards will allow each organization to continue to pursue successful efforts to support entrepreneurs. The SBA Growth Accelerator Fund is designed to fund operating budgets for accelerators in parts of the country where there is less access to conventional sources of capital. 


Don Gooding, Executive Director at MCED said it all. "Our mission is to build world-class Maine companies, and this award recognizes the role that our Top Gun program plays in supporting a thriving, active entrepreneurial infrastructure in Maine." Jeff Marks, Executive Director for E2Tech added, "We are thrilled to put the SBA Growth Accelerator Fund grant to work connecting Maine's energy and environmental entrepreneurs with opportunities across the state, New England, and NY."


How Can Cities Support Innovation and Entrepreneurship?


City Initiatives for Technology, Innovation and Entrepreneurship (CITIE), a partnership between Nesta, a UK Foundation, Accenture and the Future Cities Catapult, has recently published a framework to help cities decide what policy actions to take to support innovation and entrepreneurship. The nine roles are:

  1. Regulator - How does the city regulate business models in a way that allows for disruptive entry? (Think Uber!)
  2. Advocate - How does the city promote itself as an innovation hub and to new business community to the outside world?
  3. Customer - Is procurement accessible to small business, and does it actively seek out innovation?
  4. Host - How does the city use space to create opportunities for high-growth companies?
  5. Investor - How does the city invest in the skills and businesses required for innovation?
  6. Connector - How does the city facilitate physical and digital connectivity?
  7. Strategist - How has the city set a clear direction and built the internal capacity required to support innovation?
  8. Digital Governor - How does the city use digital channels to foster high-quality, low-friction engagement with citizens?
  9. Datavore - How does the city use data to optimize services and provide the raw material for innovation?

See the whole framework HERE.

Lessons from Ten Years of Investing


First Round Capital, a seed-stage venture firm focused on building a vibrant community of technology entrepreneurs and companies, has recently released a study of its investments over its first ten years. While likely not applicable across the board, their findings are a bit surprising. This is what they found based on surveying over 300 companies and 600 founders and correlating their successes:

  • Female founders outperform their male peers.
  • Founding teams with an average age under 25 perform nearly 30% above average.
  • Where you went to school matters - at least one team member from an Ivy or Stanford, MIT or Caltech) translated in 220% better performance.
  • The halo effect of former employers also matters. Teams with at least one founder from Amazon, Apple, Facebook, Google, Microsoft or Twitter performed 160% better.
  • Investors pay more for repeat founders.
  • Solo founders do much worse than teams - optimum size: two.
  • Technical co-founders are critical to enterprise companies, not so much for consumer companies.
  • You can win outside New York and the Bay area.
  • The Next Big Thing can come from anywhere; and
  • The action is moving from Sand Hill (Silicon Valley) to San Francisco.


Business Model Innovation - How to Get There


Innovation is hard, no matter what. But business model innovation is the hardest, because it's so difficult to get out of the mindset that you have always had. That's why so many business model innovations come out of companies and individuals who are not in the affected industry. McKinsey has just published an article about how to break out of your own assumptions and consider business model innovation for yourself. They suggest ways to understand the implicit and often unstated assumptions behind your current business model, how to formulate radical new hypotheses that turn previous beliefs upside down, and then turn these into new business models. Worth reading HERE


In This Issue - Summer 2015

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Quote of the Month 


"When you're finished changing, you're finished."


Benjamin Franklin



Five Ways to Foster Growth


We are always surprised by the headlines that folks get when they just tell the truth. Here's an example. E.J. Reedy, director of research and policy at the Kauffman Foundation, recently addressed members of the House of Representatives. Here were his messages about how to foster growth in the US economy:

  1. Prioritize growth and innovation in the tax code - existing tax incentives for investment don't always hit the mark because the tax code limits the ability of startups to use tax losses.
  2. Welcome immigrants - they are twice as likely to become entrepreneurs.
  3. Embrace regulatory evolution - rigidities overwhelm and burden young firms. Regulation must keep up with technological change, and need to adapt to new innovations and business models.
  4. Enable innovators to create new technologies -intellectual property law needs to be balanced to maximize incentives for innovation; and
  5. Encourage competition - laws and regulations can create barriers that keep entrepreneurs out because the paying field is tilted to older firms.



Millennials - Shaping Our Economic Development Strategies


As the Baby Boomer generation ages (yes, I know, don't remind me), the focus on many economic development strategies rightly is shifting to the Millennials, those who were born after 1980, and came into adulthood in the new century. Their choices in terms of housing, transportation, careers, and recreation have been shaping the country ever since. The recent focus on American cities is mainly due to the desire by many Millennials to forsake the suburbs where they grew up for denser, close-knit, vibrant communities, often in downtowns. However, as Millennials marry and think about starting families, their housing choices are changing once again. There is evidence that inner suburbs are gaining favor, with their urban-like settings, but more affordable housing and many amenities.  Farther-out suburbs with larger and more expensive homes, and reliance on automobiles may end up being the big losers, with many, many young people leaving. Ignoring the demographics of this cohort will be perilous for economic developers for the foreseeable future. 


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135 Maine Street, Suite A-183 Brunswick, ME 04011 207.522.9028

Innovation Policyworks enables economic development officials at state, regional and local levels make better, data-driven decisions by providing expert research, analysis and recommendations. Our clients see innovation and entrepreneurship as critical elements of their economic development strategy, and are developing new programs or policies, and/or evaluating existing ones. 

Dr. Catherine S. Renault has been delivering innovation-based economic development results in rural states for 25 years, most recently as science advisor and Director of the Office of Innovation for the State of Maine. Cathy is currently working with the Maryland Department of Business and Economic Development on a study of their economic development incentives, in partnerships with her friends and colleagues at CREC.
For a list of selected projects, see www.innovationpolicyworks.com/projects.