Recently, President Biden’s administration announced grants for smaller communities to help them attract and create technology. In short, the idea is to make what may seem to be an unexpected community or two or twelve into a tech hub.
This program comes from the Commerce Department and is more formally known as the Regional Technology and Innovation Hubs (Tech Hubs) competition.
It is officially run by Department of Commerce Secretary Gina Raimondo as a part of the Economic Development Administration.
What is a Tech Hub?
Technology hubs are essentially parts of the country where technological talent tends to cluster. This can be people in robotics, biotechnology, artificial intelligence, or other tech-heavy industries where technological advances readily occur.
As you may expect, a lot of tech hubs can be found on the coasts. But San Francisco, Los Angeles, Seattle, New York, DC, Raleigh-Durham, and Boston aren’t the only places where tech workers find opportunities to create new technologies, gather, and put down roots.
Tech hubs also exist in (among other places) Salt Lake City, Kansas City, South Florida, Dallas/Fort Worth, Minneapolis, and Baltimore. The most diverse workforce in tech is in South Florida.
Some of this may be a chicken and egg issue. Biotech companies are probably going to spring up where the premier research institutions are. Technological innovators will likely be where major universities and world class companies are, as well.
But those higher education institutions and hospitals may be better or more competitive due to the presence, labor, and influence of the local community of innovators. Hence, the chicken and the egg.
There is also the rather logical fact that tech hubs are going to be found in major population centers. After all, a tiny town of 2,500 people won’t be in the same league as Detroit, where tech workers number in the tens of thousands.
This is the case even if every man, woman, nonbinary person, and child in town is a technological wizard developing the latest AI.
What is the #1 Tech Hub in the US?
Currently, the two largest tech hubs in the United States are the San Francisco bay area (so, this includes Oakland and San Mateo) and New York City. San Francisco edges out New York, but as of late 2022 they both have over 300,000 tech workers.
It’s not likely that these grants and the regional economic development they kick off will create a tech hub larger than Silicon Valley or New York.
The Tech Hubs initiative takes advantage of how tech is currently clustered and creates a tech hub region, like the Northeast. These regional consortia come with regional partners to help implement the innovation hub program.
These economic development organizations push for regional technology and innovation in a way that assures the most economic opportunity for the most businesses.
Since the Commerce Department seeks to spread the economic opportunities across the country, areas are assigned a certain number of grants.
What is the Recompete Pilot Program and the Tech Hubs Grant Programs?
The Recompete Pilot Program is grants for distressed communities. In general, the idea is to connect workers with good jobs. And that means a distressed community is supposed to use the grant to create good paying jobs.
But they don’t have to already have existing innovation foundations.
Since Recompete does not specify, those good jobs could conceivably be in the retail supply chain or, say, manufacturing sectors. Hence it’s not the same as Tech Hubs Grants, as that one is specifically for tech work in relevant technology.
Per the Economic Development Administration, Tech Hubs is “an economic development initiative designed to drive regional technology- and innovation-centric growth.” The idea is to strengthen a region’s capacity to manufacture, commercialize, and deploy critical technologies.
Tech Hubs will invest directly in regions with the assets, resources, capacity, and potential to transform into globally competitive innovation centers in approximately 10 years. This is to stimulate the creation of good jobs for workers at all skill levels, both equitably and inclusively.
Since the Tech Hubs program is for regions with assets and capacity, it’s not likely to be for exceptionally distressed communities, like Recompete is.
The initial funding opportunity for the Tech Hubs program is for a total of $500 million dollars.
Is it a Good Idea for a City to Become One of the Nation’s Tech Hubs?
There are several positives to the Tech Hubs program. According to Smart Cities Dive, each Tech Hubs grant will be around $50 – $75 million—$65 million in capital, on average.
This is a serious amount of money, but it’s not enough to complete major physical infrastructure projects. As cities like Tulsa; Columbia, South Carolina; New Haven; and Albany eye the grant money, truly distressed cities likely would not be able to benefit.
Without having the wherewithal to squelch crime or build reliable public transportation or address homelessness or gun violence, a city could have science and tech startups developing critical technology for economic and national security but not qualify for funding.
But combined with other aid, perhaps planning grants from the state, tech could start to spring up in places where it really hasn’t before. Programs such as these could refocus cities built on older technologies that are now all or partly obsolete, such as Rochester (home of Kodak).
If these programs work, then they could be the starting point for transformation in several cities. But if they don’t work, then the President Joe Biden and the White House will have to think of something else.
How Does This Affect Business Credit for Tech and Non-tech Businesses?
Any funding opportunity that you don’t have to pay back is often a good one. And anything that can spur startups and help them succeed is absolutely worthwhile. But these grants are for the cities and not for the companies in them.
While this type of funding opportunity will help companies in the private sector, it is less likely that the cash will go directly to the businesses. Rather, the financial benefits may come in the form of tax breaks or maybe the creation of less expensive coworking spaces.
Corporate credit is unaffected by grants. And it generally doesn’t require the kind of paperwork that grants do. Also, a non-tech company (even a startup) can get company credit, whereas these grants are for just tech industries.
For tech companies, corporate credit and grants such as Tech Hubs can work together synergistically to help these businesses succeed, survive, and thrive—even in the face of a changing economy.
Takeaways
Grants are a useful form of company financing, but entrepreneurs should not rely on them. Changes in government regulations or budgets, or different parties in power, can bolster or kill programs like this.
Corporate credit isn’t subject to the whims of politics, and it does not depend on government budgets or fiscal years. Contact us today to learn more about how to start growing your company credit, leveraging it, and perpetuating it.
Grant programs may come and go, but business credit is forever.
