In 2016, nearing the end of his term as Mayor of Sacramento, Kevin Johnson sought to elevate the city’s position within California as a top choice for entrepreneurs and innovators. More broadly, the City of Sacramento sought to become a hub of innovation, technology, and entrepreneurship to create new private-sector jobs that will bring new wealth to the community and drive growth in other industries — and position the city as a national leader in municipal innovation.
Based on Abhi Nemani’s experience leading local innovation, Mayor Johnson tapped EthosLabs to develop a program to put Sacramento on the map. Over a year, Ethos built a framework for building Sacramento’s attractiveness, created the nation’s leading Innovation Fund, and launched and funded innovative programs – all while garnering national press and additional capital to galvanize ongoing momentum.
- Created largest innovation fund for mid-sized city in the country ($10M)
- Set up Innovation & Entrepreneurship Office with sustainable revenues and partnerships
- Built, launched, and completed entrepreneurship grant program (RAILS) in under 4 months
- Developed broad-based community and stakeholder engagement program through events, tech council, etc
- BizJournal: Mayor’s framework for Innovation & Entrepreneurship has come together
- KCRA [VIDEO]: Mayor: Tech Startups next generation for Sacramento
- TechWire: Sacramento’s Innovation Fund will invest in local startup community
- SacBee: Sacramento approves $10M for local tech companies
- SacBee: More than 140 Apply for RAIL
- COMSTOCK: Can Sacramento Become a Capital of Entrepreneurship?
Developing Capacity for Innovation
Nation-Leading $10M Innovation Fund
As part of the Mayor’s Economic Development 3.0 strategy, the Mayor’s Office recommended to the City Council a repurposing of the existing Innovation and Growth Fund towards diversifying and growing the economy through new technologies and new industries.
Three areas of focus were identified:
- Supporting a Pipeline of talent and startups in Sacramento (RAILS program)
- Attracting Capital through Limited Partnership (LP) with 500 Startups
- Connecting and highlighting the region’s successful innovations (MOFIE)
These three IGF strategic programs were designed to be sustainable over time, falling under the expected $2M annual revenue from the special fund supporting the IGF. Additionally, with a reserve balance of $5-8M, the city retains its ability to make larger-scale strategic investments as opportunities arise, such as the 500 Startups investment described below.
This $10M plan — which makes it the most prominent innovation fund of its kind — was presented to the Council in May 2016, and it was approved unanimously (9-0). Following this vote, the Economic Development Department, the Information Technology Department, and the Mayor’s Office collaborated to identify concrete recommendations for appropriations for Council to fulfill the IGF’s goals and objectives by creating an Office of Entrepreneurship & Innovation.
First City Entrepreneurship & Innovation Office
For sustainablity, there is the need for a permanent institution within City Hall that can cut across departments and drive structural change and serve as a bully pulpit to celebrate Sacramento’s innovative culture to attract and/or retain new entrepreneurs and businesses. Practically, this meant the creation of a Mayor’s Office for Innovation and Entrepreneurship, led by a Chief Innovation Officer and supporting staff. Key organizational activities included:
- Created organization design & structure for new Mayor’s office unit
- Crafted job description for permanent Chief Innovation Officer, key staff
- Hired a full-time Chief Innovation Officer & Product Manager
- Developed working group amongst relevant departments for efficiency & collaboration
Creating a Pipeline for Startups
After a thorough review of other cities’ innovation programs, Sacramento decided to focus not simply on an individual company or organization but instead the pipeline for entrepreneurship: from training new leaders to incubating new projects, and finally scaling up successful ideas.
RAILS: Rapid Acceleration, Innovation & Leadership in Sacramento
The RAILS program (Rapid Acceleration, Innovation, and Leadership in Sacramento) was designed to have the city act as a platform to support each piece of that pipeline; for example a STEAM education program for area youth, or a hackathon focused on civic issues. Leveraging funds from the Innovation and Growth Fund, the city allocated up to $1M in grants for these “startup enablers” to openly compete for funding.
After receiving 100+ applications in a short span of just 4 weeks, and going through an extensive review process with internal and external leaders, City management selected 15 grantees for Council to consider for funding. ( >See the full list here .) These 15 organizations represent the following values, which reflect the City’s value and unique strengths):
- Diverse, Inclusive, and Creative
- Broad-based innovation in fabrication, energy, avionics & more
- Civic & Socially Oriented
Since then, multiple cities have developed similiar programs, using Sacramento as a model (e.g. Philadelphia, Kansas City, etc)..
Partnership with 500 Startups
Training and facilitating entrepreneurs locally may not encourage them to stay. Upon review with Sacramento technology leaders, the issue of the lack of startup capital – angel, VC, etc – was a major concern with emerging founders looking for a more permanent home. Indeed, this finding aligned with the “brain drain” issue experienced in Los Angeles.
The city’s financial commitment was significant ($10M) but relatively insignificant when considering the funding needs of growing companies. Accordingly, the Innovation Office opted to leverage its funding with a high-profile, proven, and successful VC/accelerator, 500 Startups. In additional to regular LP terms, 500 Startups agreed to make a Sacramento office to support local entrepreneurs and attract others. Aside from the potential financial upside, this “marketability” of the partnership showed outsized value.
Connecting the Community
Mayor’s Tech Council
Modeled off of Kansas City’s “Challenge Cabinet” and Los Angeles’ “Tech Advisory Council,” MOFIE established a “Mayor’s Tech Council” to provide external expertise, guidance, and input on the city’s strategy. This group brings to bear tremendous insight in the innovation arena and helps evangelism Sacramento’s commitment to entrepreneurship; in so doing, they help attract and retain talent within the region. Further, the Tech Council serves as a “sounding board” for critical strategic decisions (e.g., organizations to fund) outside the traditional City Hall mindset.
It’s important to note that while similar models in other cities exist, critiques also follow; particularly, members of other councils often feel unengaged or not influential — more of a “rubber stamp” than an insightful lens. And with rosters exceeding 30+ participants, any one individual had a little direct impact. Learning from this, Sacramento’s Tech Council was deliberately created to be decidedly small (currently 7 members) and tasked with specific, actionable requests (e.g., reviewing the RAILS applicants). To date, every member of the Tech Council has been actively engaged in some fashion, and continues to ask for more ways to help the city and the Mayor’s office accomplish its innovation and entrepreneurship goals.
Events & Outreach
- Innovate Your State: Civic & GovTech Showcase: The City partnered with an internationally recognized Venture Capitalist, Tim Draper, to host a demo day of 15 companies in front of an audience of 200+ regional leaders. Sacramento is the only city outside Silicon Valley where Draper has held such an event.
- National Day of Civic Hacking: As part of a national effort coordinated by the White House, Sacramento hosted a hackathon over the summer with over 100 attendees, where a handful of apps were built with a focus on economic development and access.
- TEDxSacramento: The Mayor’s Office was asked to present Sacramento’s TEDx event, celebrating the city’s innovation leadership, and the video was featured on TED.com for national and international attention.