From the Advocate

By Tara Lynn Gray 

March 2022

What will California Dream Up Next?

Governor Supports Entrepreneurship and Innovation Economies Across State

For the current budget year, Governor Newsom approved a $35 million direct investment in California startups. That program is called the Dream Fund and we just announced the 17 Small Business Centers who are going to be very busy this spring and summer training startup founders and then supporting their efforts with a grant of up to $10,000 each.

In the same budget, the Governor also made a $2.5 million investment to create a network of 10 Inclusive Innovation Hub (iHub2) and our office is also about to announce the list of 10 recipients of those iHub2 grants.

Together, the Dream Fund and iHubs2 represent the first stage in this administration’s effort to create a statewide network of economic clusters of innovation.

Let me explain what that means…and why it is so critical to California’s strategy of growth and diversification on all fronts.

“An economic cluster of innovation”: I’m borrowing language here from Harvard business professor Michael Porter who wrote extensively on this concept: geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions that compete but also collaborate.

Innovation economies drive higher productivity and higher wages, competitive advantages California must maintain to continue its recovery from the COVID-19 downturn. One seminal 2004 study found that innovation is responsible for up to 85% of all economic growth. Innovation and Economic Growth (oecd.org)

Northern California’s Silicon Valley — the semiconductor, computer, software, and electronics industries — is one of the most successful examples in history. Twelve percent of all patents registered in the United States are from companies in this cluster. More than 50 percent of the national venture capital funding, more than $84 billion, landed in California in 2020.  California also leads in Clean Energy, BioTech, and Life Sciences. The San Francisco Bay Area is the largest innovation economy in the country and a fast-growing startup community now makes LA number three. Tech’s Great Migration: Insights to Emerging Tech Hubs Across the U.S – Telstra Ventures

Yet we can’t take this success for granted for one minute; we should probably put “Innovate or Bust” on the State license plate.

At the same time, we must recognize that while the scale of the investment in California has grown, it has not grown equitably.

From 2015-2020, only 2.4% of venture capital (VC) funding nationwide went to companies with Black or Latinx founders, according to Crunchbase Diversity Spotlight 2020. The VC industry itself is not very diverse: only 4% of venture capital firm employees are Black and only 7% are Latinx, according to the 2021 VC Human Capital Survey. According to the Center for Global Policy Solutions, 1.1 million minority-owned businesses, nine million jobs, and $300 billion in income nationally could be generated by fixing discriminatory lending practices.

This is why the Dream Fund + IHub together are needed to support California’s long-term recovery from COVID-19 and an even longer-term preservation of the California Dream:

• Growth of new innovation clusters

• Increased social and financial investment in diverse founders and communities

• An expansion of that innovation economy model to every region in the state

The Dream Fund builds on our robust entrepreneurship ecosystem to train founders in responsible business planning and management skills, the business network, and the banking and lending relationships they need to grow and thrive.

At the same time, the IHubs2 will build on the “Triple Helix” model: a combination of government, business, and public research in the development of knowledge-based communities of interest. These community-driven hubs foster co-creation, coproduction, mutual evaluation, and cross-industry investments as well as a commitment to the inclusion of diverse founders.

We are proud to be part of advancing this California for All economic vision for both Mom-and-Pops and high-tech powerhouses and my team will be completely focused on engineering both planks for success in 2022.

Because Dreams are not one-size-fits-all.