ICIC’s Small Business Ecosystem Framework

Written by Lena Ferguson and Kim Zeuli

Get the Infographic (PDF) (.JPG)

Raleigh, NC is the best place to do business, reports Forbes. According to WalletHub, Jacksonville, FL is the best city to start a business. And Arlington, VA is best for young entrepreneurs, according to NerdWallet. While rankings like these are interesting, they obviously don’t paint a complete picture.

ICIC has significant experience navigating the business networks of cities across the country through our research and urban business initiatives. We believe a more meaningful ranking would be based on the strength of each city’s small business ecosystem. This fuzzy term is aptly named, as it represents all of the components, each with their own niche, or vital role to play, that together create a fertile environment for business growth. When one of the components is missing or weak, startups or growth may be hindered. Consider the analogy of a forest ecosystem. Healthy trees require rich soil, sunlight, an ideal climate and a steady water supply. Just as one cannot plant a redwood in a desert and expect it to thrive, one cannot expect startups in cities without sufficient access to capital, workforce or contract opportunities to flourish.

We developed a conceptual framework, illustrated in our latest infographic, around the six key players, or types of organizations, that are vital to the small business ecosystem:

• City Government
• Small Business Development Centers (SBDCs)
• Economic Development Authorities
• Community Development Organizations
• Financial Institutions, Microlenders and Community Development Financial Institutions (CDFIs)
• Community Colleges and other workforce development organizations

This set of six represent essential connection points, or nodes, in the ecosystem that help establish links to all other components within the ecosystem, including small businesses. Think of both soil and animals in a forest, for example. It’s obvious that trees directly benefit from the nutrients rich soil provides. But animals help the trees as well even though they do not directly interact with them. Policies, programs and practices that create relationships between the different organizations are represented by the lines in our ecosystem web graphic. These relationships ensure coordination and collaboration, and the delivery of effective support to small businesses.

The infographic also provides an example of some of the ecosystem’s organizations at work in Chicago. While Chicago historically has been a manufacturing hub, the city has emerged as a center for tech innovation. The city has the second-highest number of high-tech startups, trailing only California. 1871, one of Chicago’s tech incubators, opened in 2013 and, after one year, had 225 startups that created 800 jobs. In turn, Chicago, with 13 winners, was the city most represented on our 2014 Inner City 100 list of the fastest-growing inner city businesses in the United States. Four of Chicago’s winners were in the top ten, including the list’s number one company: Fruition Partners.

From startups to established, multi-million dollar companies, Chicago’s small businesses are supported by a strong ecosystem. The City of Chicago’s small business efforts are organized under its Small Business Center, which is designed as a one-stop shop for small business owners with concierge-like services and access to business consultants and other experts. Among its many resources, the Small Business Center manages a large network of Neighborhood Business Development Centers that help the City implement its Neighborhood Small Business Growth Strategy and offers free biweekly, small business workshops. The city also helped launch the Chicago Microlending Institute in 2010 by giving $1 million in loan capital, which, by 2014, helped 126 small businesses in 54 Chicago neighborhoods.

There are at least 15 Chicago SBDCs in the Illinois SBDC network. One of them, Women’s Business Development Center Chicago, is the oldest, largest and most comprehensive women’s business assistance center in the United States. In 2013 they served 3,300 clients, through 2,203 counseling sessions and 238 workshops, among other technical assistance, mentoring and educational programs. They also facilitated over $7 million in lending and helped businesses secure over $34 million in government contracts.

As the organization responsible for implementing Chicago’s Plan for Economic Growth and Jobs, World Business Chicago plays a key role in connecting small businesses to regional growth. The Plan centers around 10 key strategies, many of which directly involve small business development. As part of the Plan’s implementation, World Business Chicago launched their CASE initiative in 2014. CASE connects Chicago’s anchor institutions with local businesses around procurement opportunities and includes a workshop series to prepare small businesses to work with anchors. They expect 100 businesses will participate in the workshop series in its first year. World Business Chicago has a unique business model as a private-public partnership with the Mayor’s Office.

Most urban community development organizations have worked in their neighborhoods for decades. They are acutely aware of the issues their local small businesses face. Bethel New Life, for example, was founded in the 1960s and serves Chicago’s West Side, including its Austin, West and East Garfield Park, Humboldt Park and North Lawndale communities. A holistic nonprofit community investment organization, Business Development is one of their many areas of focus. Their competitive 14-week Entrepreneurship Training Program graduated 27 entrepreneurs in 2013, and they also helped open 17 new businesses in 2013.

As one of Chicago’s alternative lending organizations, Accion Chicago combines financing and business education and has a unique, largely character-based lending methodology. They offer loans of up to $20,000 for startups and up to $50,000 for established businesses and disbursed $3.6 million through 430 loans in 2013.

City Colleges of Chicago offers links between workforce training and business needs as a network of seven community colleges. Each college has an industry focus that corresponds with the network’s College to Career program, which aligns the curriculum with the demand in growing fields in Chicago including healthcare, advanced manufacturing and information technology. City Colleges of Chicago is also the local academic partner for Goldman Sachs 10,000 Small Businesses, which has graduated 213 entrepreneurs since the site was established in 2011.

Chicago is just one example of the many strong, small business ecosystems that exist in cities across the United States that deserve more recognition. Our framework can help rank ecosystems across cities as well as help city leaders identify important gaps in their ecosystems, especially when paired with the innovative maps, guides, and infographics that connect entrepreneurs to resources, such as BizGrid in Detroit or KCSourceLink’s Resource Navigator in Kansas City. Because even the most visionary entrepreneurs need the right resources at the right time to scale their businesses.