Nurture startups, don’t import them, Sacramento is advised

What's the best way to bring sustained economic growth to Sacramento? Go local, suggests a new report from the Ewing Marion Kauffman Foundation in Kansas City, Mo.

Researchers there urge state and regional officials to stop trying to entice companies into moving operations and instead focus on forming and growing new companies right in their region.

The foundation cited clusters of entrepreneurial activity such as Silicon Valley, Route 128 around Boston and Research Triangle Park in North Carolina as examples.

At the Sacramento Area Commerce and Trade Organization, Executive Director Barbara Hayes didn't quibble with the recommendation.

"Our policy here in the region has always been never to put all your eggs in one basket," she said, referring to attracting businesses from outside and growing them from within. "We do both."

Here's how government policies can fuel startups:

Education

Tuesday's report lauds programs such as InnovationAccess at the University of California, Davis, created to bring research discoveries to the marketplace.

"Strong universities can stimulate growth by cultivating enterprising faculty, educating students who become entrepreneurs … and transferring ideas that are commercialized."

That element rang true for Oleg Kaganovich, a principal at the DFJ Frontier venture capital firm, noting that DFJ staff teach at the university and lecture around the region.

The report acknowledges that the road to entrepreneurial success doesn't always meander through university walls. Microsoft, Starbucks and Amazon.com all emerged in the Seattle area with little help from the University of Washington.

Analysis: While having a strong research university is clearly helpful, it is not necessary to create clusters of successful startups.

Safety and amenities

Entrepreneurs choose cities where police have crime under control and officials invest in attractive public spaces, museums and good restaurants.

Cities seeking to attract and keep new companies should focus their limited resources on "a series of small, inexpensive ways of making their locales more attractive" rather than on sports stadiums or other big, expensive projects.

Analysis: The Sacramento region recently laid out a vision for land use in the region in the Blueprint project and, as part of that plan, encouraged the incorporation of public open space within development projects, over and above state requirements. As to crime, the Sacramento region ranked as the 47th worst out of 344 nationwide on an annual list compiled by CQ Press in 2007, so there's some work to do there. Finally, voters in 2006 soundly rejected a sales-tax hike to build a new arena for the Sacramento Kings, a move in line with Ewing Marion Kauffman researchers' recommendations.

Taxes

Tax breaks targeted to a specific company are not recommended even though they sometimes work. They pit one community against another.

Analysis: Overall tax rates should be kept low and playing favorites should be avoided.

Infrastructure

Researchers say that entrepreneurs want roads that allow easy movement of people and products, and telecommunications lines that can quickly move information.

Analysis: Sacramento is attempting to launch a Wi-Fi system for its downtown core to fulfill the latter need. The system should be fully functional in May, officials have said.

Regulation

Cities should streamline rules that add to company expenses and delay startup. One way to do that is by vesting authority for regulatory approvals in a single agency.

Analysis: Business interests routinely complain about burdensome regulation by the state of California. On a local level, Sacramento established a little over a year ago a multidisciplined action team to reduce the regulatory process in all areas of development.

"The city of Sacramento … has created an economic development department, and they really are trying to streamline entry points for small businesses," said Pat Fong Kushida, president and chief executive of the Sacramento Asian-Pacific Chamber of Commerce. "But it's really all about a holistic approach. It's not just regulatory hurdles. How do we get small businesses access to capital or in touch with the education community? What we could do a better job of in the region is all working together."

About the writer:

• Call The Bee's Mark Melnicoe, (916) 321-1976.