In October 2019, City Council conducted a public workshop to affirm the City’s mission, vision, and values. As part of that process, and with input from the public, Council prioritized six focus areas and identified enhancing economic vitality as a priority goal for the City of Roseville.  To advance this goal, Economic Development has focused on better understanding entrepreneurship, as part of a holistic economic development strategy that impacts the community through job and wealth creation, human capital development, and innovation.

Accordingly, over the past 15 months, staff in partnership with Mark Haney and the Growth Factory has worked to develop an accelerator/incubator program aimed at helping small businesses and innovators grow within our community, consistent with City Council goals and the City’s Economic Development Strategy.  With unprecedented shifts in the workplace (as a result of the pandemic), an increase of residents with entrepreneurial and business start-up backgrounds, and a regional need to support local innovation ecosystems, this initiative addresses a changing market, technology demands, and demographic trends of our region.

The proposed entrepreneurship center will include an accelerator, incubator and community enrichment component to best address the needs of our community and capitalize on our proposition values. The programs will be established within 2,416 square feet of leased City-owned space located at 316 Vernon Street (see Attachment 1). The space and associated programming will be managed by the Growth Factory and overseen by a five-member Advisory Committee. City staff will chair the committee and oversee program-funding allocations. The Growth Factory will operate the facility consistent with the terms of the program agreement (see Attachment 2).

Growth Factory

Based in Rocklin, CA, the Growth Factory is a nonprofit startup accelerator with an accompanying early-stage venture fund that builds and invests in venture backable startups primarily focused in FinTech, MedTech, and GovTech industries. With a focus on capitalizing on the region's existing assets (known as the “Backyard Advantage”), the Growth Factory has reimagined the traditional accelerator model to address the vital needs of entrepreneurs by providing early-stage founders from Northern California with capital, capacity building programs, and a community of investors, mentors, customers and advocates. In addition to overseeing the initiatives outlined in the program document, the Growth Factory will expand its current operations and hold a minimum of 25% of its existing events at the Roseville location (see Exhibit A).

Outreach

Over the last year Economic Development staff has engaged the start-up community, non-profits, corporate businesses and accelerator operators to identify the needs of our community and assess the potential impacts of the proposed initiatives. This due diligence affirmed the following:

1) Start-ups have the potential to be high growth companies that evolve into top revenue generators, job creators and problem solvers.
2) There is an existing start-up community in the region, and many champions here to support them, but more awareness is needed regarding the availability of resources.
3) There is a strong need to increase the offerings of accelerator/incubator programs in the region. There is limited cohesion around offerings for start-up companies needing services such as mentorship, funding, education and access to investors in Placer County.
4) A successful initiative will rely on strategic partnerships, including support from local non-profits like the Roseville Area Chamber of Commerce, neighboring cities, colleges and universities, local companies and the City of Roseville.
5) A foundation for success has been laid by efforts the Growth Factory has undertaken through the development of their Accelerator and associated venture capital fund.

The information gained through outreach, combined with the Growth Factory’s current efforts, set the foundation for program implementation.

Program Implementation

The proposed program provides a roadmap for growing Roseville’s innovation ecosystem, small business community and venture backable sectors through targeted programs, strategic partnerships and community events. The program document outlines objectives for the first five years as follows:

Year 1 - Launch of Roseville’s Entrepreneurial Ecosystem Hub
Year 2 - Strategic Implantation
Year 3 - Capacity Building and Partner Value Proposition Enrichment
Years 4 & 5 – Program Advancement

Annual goals have been set to provide benchmarks that will help align City efforts and direct partner engagement in achieving the objectives noted above. In addition, key performance targets are outlined for Years 1-3 to help measure success and better direct efforts in subsequent years. There are also six critical initiatives outlined within the document as noted below:

Space Activation – Use of the space is intended to increase downtown pedestrian traffic that results in additional patronage of local businesses. To further this objective, three downtown restaurant merchants (i.e. 105 Noshery, Monks Cellar, and Trax Taproom and Kitchen) agreed to pilot a program that will offer discounts to attendees of the entrepreneurship center and will track the economic impact on their businesses, allowing staff to analyze the best strategies to further support downtown Roseville in the future. In addition, priority will be given to downtown merchants when securing services associated with space activation (e.g. catering, entertainment, decorating, etc.).

Due to the uniqueness of the space offerings, the use will not operate like a traditional office and Development Services, Planning staff has noted that the use is consistent with the property zoning and meets the intent of the Downtown Code. Furthermore, activation of the space aligns with the downtown revitalization efforts and is consistent with the Downtown Specific Plan (DTSP).

Innovation Challenge - This effort will provide local innovators an opportunity to engage corporate and civic leaders in identifying organizational challenges. In addition, this initiative will include branding/attraction efforts focused on engaging innovative companies that are looking for industry specific mentors and opportunities to secure pilot programs to test and validate solutions.

“Dreamers” Program - Similar to the Downtown Sacramento Partnership's “Calling all Dreamers” program, the City’s “Dreamers” program will be designed to catalyze the launch of new main street businesses. The program may include educational workshops, mentorship opportunities, temporary downtown storefront space, concept testing/validation, and promotional/celebration events.

Partner Programs - The City of Roseville and the Growth Factory will work collaboratively to onboard a range of partners (e.g. Sierra College, Placer County, Sacramento State, Sutter Health, Kaiser Permanente, PRIDE, Westfield Galleria and Five Star Bank). This collaborative effort will ensure leaders and subject matter experts, provide support in growing key sectors through mentorship opportunities, educational resources, funding and in-kind services.

Community Engagement/Enrichment - A variety of entrepreneurial events will be offered to the community via workshops, trainings, and seminars. These activities will be held in collaboration with our strategic partners to ensure experts from their respective fields provide appropriate support to program participants.

Inclusive Economic & Workforce Development - The goal of this initiative is to build awareness of and access to skills development, educational programs, and apprenticeship/internships opportunities to underrepresented citizens in the Roseville community. A focus on exposing the public to entrepreneurial opportunities and community resources will help provide inclusive career development options and employment connections.

Project Costs
Project costs over the first three years are estimated to total, but not exceed, $1,162,000. As fully noted in Exhibit B, this amount includes permit fees, tenant improvements, programming budget, grant funding and ancillary/miscellaneous fees.

In addition, the Growth Factory anticipates expending an additional $400,000 as part of this effort to cover staff salaries, marketing expenses, payroll taxes, event costs, insurance, furniture and equipment. Staff anticipates that following Year 3, funding will be primarily secured through a variety of grants, partner contributions and in kind services.

Project Benefits
As indicated by the Greater Sacramento Economic Council’s (GSECs) impact report for the Roseville Entrepreneurship Center, conservative estimates anticipate a total direct economic output exceeding $5 million by Year 5 based on the proposed initiatives. It is likely the economic impact will be much higher, however to set realistic expectations, this estimate is based on the establishment of a minimum of one technology company and one main street company scaling within the City of Roseville (see Attachment 3). Other aspects of the project will also result in numerous indirect and induced economic impacts including an enhanced reputation as a pro business community, upskilled workforce, and a positive impact on disadvantaged communities. Additionally, notable benefits typically related to these efforts include:

· Most net new jobs come from high growth entrepreneurial companies less than five years old and with less than 20 employees.
· Information technology has been the number one driver of job growth over the last 5 years.
· Small businesses account for approximately 45 percent of economic activity in the United States and creates two-thirds of all new jobs.
· Support of main street businesses catalyzes investment and revitalization of urban cores.
· On average, new technology job wages exceed the median income levels of other sectors.
· Small businesses in the United States generate approximately 50 percent of GDP.
· Access to entrepreneurial resources and space can provide underrepresented communities an equal opportunity to start and run a business.

Program Agreement
The proposed agreement expressly outlines the program duration, early termination contingencies, management of personnel, marketing guidelines, intellectual property rights, data collection, and confidentiality guidelines. To provide further flexibility in program implementation, subcontracting options allow for alternatives to program management. It is also important to note that the program agreement is independent of the lease, allowing both parties to explore onboarding additional partners that might assist with program implementation.

Lease Agreement
The lease agreement is provided as Exhibit C and conditions of particular note are summarized below:

1. Lease Term – The five-year lease will begin following the issuance of the Certificate of Occupancy and the verification of improvements specified in Section 2.3.
2. Option to Extend – The agreement provides an option to extend the lease for two separate five-year terms at the then-current fair market rental rate.
3. Rent – An escalated rent based on a percentage of the base-year’s fair market value of $1.50 shall be collected, totaling $.50 per square foot in Year 1. Thereafter, rents shall increase by $.50 per square foot annually.
4. Lease Buy-Out – In the event the tenant terminates this lease within months 1-36, payment of 6 months’ rent is required and 3 months rent is required if terminated in months 37-60. The lease buy-out will be calculated based on a monthly rental rate of $3,624.50.
5. Tenant Improvements – The City will provide up to $330,000 towards permanent tenant improvement costs related to permitting, design work and construction.  All furniture and appliances will be provided by the Growth Factory and maintained at their sole expense.

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Dominick Casey, City Manager