Cities Launch Investment Funds to Become Hotbeds for Tech Activity, Improve Resident’s Quality of Life

As the potential nexus of tech-based economic development and community development, cities play an important role in not only making their cities attractive to startups that help drive economic prosperity, but also in bringing together community members to take collective action and generate solutions to common problems. In an attempt to address both of these important issues, several metros have announced new city-backed investment funds that support both startup growth and impact the lives of city residents. These city-backed investment funds are intended to help create, expand, and retain high growth startups. Efforts are being undertaken in Sacramento, Kansas City, San Antonio, and Montreal. 

The City of Sacramento will commit up to $1 million to make investments in startups in 2016 according to techwrie.net. As part of a $10 million plan to bolster the city’s innovation economy, the fund is an one element of a plan to create 500 new startups over the next five years (almost doubling the city’s current startup community) while also improving quality of life for local residents. The newly formed mayoral tech council will oversee the selection of applications for funding. Other efforts include:

• $2 million in prize money for a city-sponsored code-a-thon focused on building solutions for the city's federally designated "Promise Zone" neighborhoods that are economically disadvantaged;
• $1.5 million Rapid Acceleration, Innovation and Leadership in Sacramento program to provide grants of up to $25,000 each for training programs, fund innovation events, and support acceleration and business development programs; and,
• $1 million strategic investment in 500 Startups, a global accelerator and venture capital seed fund.

Mayor Kevin Johnson hopes that the investments in startups will “yield a profit for Sacramento that would be used to continually replenish the city's $10 million Innovation Growth Fund.” The initial funding came from a combination of property taxes, sales of city land, as well as state and federal funding.

In Kansas City, the city and its partners announced the creation of a $10 million co-investment fund for local startups, according to an article from Technical.ly. The new co-investment fund, KCRise fund, will match local investors with approved venture capital (VC)firms. The intent of the program is to scale and fully realize the KC region’s potential as well as increase trade; spur startup and job creation; and, develop, attract, and retain the talent needed to increase KC’s pace of innovation and accelerate regional growth. KCRise also is intended to improve the quality of life of existing residents and address civic issues the city faces. Local investors will be required to invest at least $1 for every $5 invested by a VC. Leaders hope that the KCRise fund will help stimulate up to $120 million in startup investments over the life of the fund.

In partnership with Tech Bloc, and Techstars Cloud, the City of San Antonio announced the creation of the Techstars Talent Retention Pilot Program, a four-year, $800,000 retention fund that aims to keep tech startups from leaving the city after they evolve into small businesses according to the Rivard Report. As part of a larger effort by the city focused on entrepreneurship and locally grown businesses, the city will commit up to $200,000 each year to provide funding to retain companies that have graduated the Techstars Cloud accelerator program. “The City’s goal is to retain 16 new companies in San Antonio by 2020, which would require 100 percent success with its 16 grants of $50,000 over the four-year period,” according to the Rivard Report. The pilot program is supported by the City’s Economic Incentive Development Fund (EIDF), established in 2004. EIDF funding had been previously used mostly for traditional economic development attraction and retention efforts.

In June, SSTI covered the launch of  Capital Intelligent Mtl – a 100 million CD (77.3 million USD) investment fund aimed at smart city startups and established businesses offering solutions to urban challenges that also will spur job creation in Montreal. The intent of this new $77.3 million fund is to help the city become smarter and leaders hope improve the lives of Montrealers while also spurring economic prosperity through startup growth.