Rodney Foxworth isn’t worried about Silicon Valley, New York City, or other capital-rich business hubs. Those ecosystems have a strong infrastructure in place to quickly rebound after the pandemic, says the CEO of Common Future, an Oakland, California-based advocacy group for community-based economic development across the U.S.
Conditions for less robust–but to this point emerging–business hubs aren’t looking too hospitable these days, however. The picture is even more bleak in rural and poor regions of the U.S.
A January 2021 study from Utah State University, Yale University, and New York University on wellbeing in the rural North American West found that more than 21 percent of the region’s full-time workers have either become unemployed or shifted to part-time work during the pandemic. And a December 2020 report from the Brookings Institute, a Washington D.C.-based think tank, cites a lack of adequate access to capital and broadband connectivity as significant barriers to rural small-business revitalization in the post-Covid world.
Cities and towns can recuperate, though. The key to reviving Main Street small businesses and rebuilding America’s smaller startup ecosystems, Foxworth says, lies in just how much money and attention states and local governments are willing to spend. For its part, Common Future acts as part-think tank, part-intermediary between investors and small businesses focused on building community wealth and equity.
Here is Foxworth’s vision for how communities can build or rebuild startup infrastructure, further strategic relationships, and enter the recovery on stronger footing.
1. Support the support system.
Startup ecosystems tend to thrive when support networks like accelerators, incubators and co-working spaces are plentiful. Foxworth says state and local government officials should work to support these organizations, along with helping area businesses. Such investments could be “the best chance that we have” to effectively jumpstart local economies post-Covid, Foxworth says.
Nationwide, many of these organizations are struggling, especially away from such hubs as Silicon Valley. Numerous rural and poor areas lack them altogether. Building or rebuilding that support system could help small-business communities prosper in the years to come.
2. Reallocate local government resources.
Federal pandemic aid efforts like the Paycheck Protection Program delivered for some businesses better than others. Business owners without strong banking relationships or large numbers of employees, for instance, missed out during different stages of the forgivable loan program, which has doled out more than $771 billion to small businesses since last April. Those entrepreneurs could have benefited from a helping hand in navigating the program.
The same is true for regulations more generally, says Foxworth: State and local governments taking on more of a guiding role than usual can be a net positive for Main Street, particularly in spreading the wealth between big business and startups. As they revisit budgets in the wake of the pandemic, he says, they should consider levying higher taxes on large corporations that have grown enormously in the past year, such as Amazon and Alphabet–and put that money toward loans, grants, or other forms of investment in small-business ecosystems.
3. Invest locally.
Investors can also play a role in rebuilding America’s startup ecosystem. The country’s new rule for enhanced equity crowdfunding, which allows private companies to raise capital in small chunks by selling securities like equity or debt, offers a grand opportunity, says Foxworth.
In March, as part of the 2012 Jobs Act, the Securities and Exchange Commission raised the legal cap for crowdfunding campaigns to $5 million, up from $1.07 million. Some small-business owners and investors, like Backstage Capital founder Arlan Hamilton, have already begun taking advantage.
Foxworth says the new rule could be a game-changer for small-business communities. The difference between $1.07 million and $5 million would be substantial for many smaller companies, especially as many Americans emerge from the pandemic ready to spend. Crowdfunding campaigns could even enlist nearby corporations and angel investors to match donations, as part of an effort to encourage local residents to invest locally. The message to send, Foxworth says, is: “If we don’t have these Main Street businesses, these local businesses, how are our communities going to exist?”
Traditional investors can also do more to encourage stronger and more equitable startup centers. Foxworth recommends focusing specifically on minority-led and rural businesses, to help create a virtuous cycle of reinvestment and community wealth for those startup ecosystems hit hardest by the pandemic.