Sacramento Approves $10 Million for Largest City Innovation Fund in US

The Sacramento City Council and Mayor Kevin Johnson will invest millions to grow the local tech ecosystem and support entrepreneurs.

Last Tuesday, the Sacramento City Council and Mayor Kevin Johnson approved a $10 million innovation fund to grow the local tech and start-up scene. The fund will generate about $2 million annually, which will be used to support tech entrepreneurs, govtech initiatives, and the city’s burgeoning innovation sector. The Innovation and Growth Fund is now easily the biggest in the country of its kind—Los Angeles’s fund, in contrast, is only $1 million.

Abhi Nemani, Sacramento’s 27-year-old interim chief innovation officer and the project lead, tells Civicist the fund has three main focus areas: the startup pipeline, the tech ecosystem, and government technology projects like streamlining city permitting and instituting open data standards. What’s most notable about Sacramento’s approach, Nemani says, is the sustainability of the program.

“The dollars coming into this fund stand currently at $10 million, but we expect at least $2 million in annual growth. That gives this city a special opportunity to build out its innovation efforts through a safe, protected, and guaranteed channel that would keep the Office and its operations intact. That’s a lasting model—fiscally and legally—that can sustain itself,” he wrote in an email to Civicist.

Mayor Kevin Johnson created the fund in 2013 as a traditional economic development program drawing money from local property taxes. After it grew in 2014 from the sale of city-owned lands, Johnson renamed it The Innovation and Growth Fund in 2015.

Of the more than $2 million the fund will generate annually, $500,000 will be marked for the economic development department to lure technology companies to Sacramento, $425,000 will pay salaries and maintenance in the Office of Innovation, and approximately $125,000 will go to improving local governing practices through the purchase and development of new technologies to streamline Sacramento’s business pursuits.

The Office is also planning a one-time investment of $1 to $3 million in venture capital funds in order to support Sacramento startups. “By engaging the VC community we not only leverage our dollars against others, but also draw attention to the need for additional investment in this emerging market. It’s the city playing a platform role,” explained Nemani.

Nemani tells Civicist the fund “is not just about internal optimization, but it’s actually more about external innovation: specifically how to support the the great startup community that’s growing and thriving here.” To encourage growth among Sacramento entrepreneurs, the Office of Innovation launched the 2016 grant-giving program called RAILS: Rapid Acceleration, Innovation, and Leadership in Sacramento.

With an allocated budget of up to $1.5 million, RAILS aims “to support ‘startup enablers,’ leadership (and technical) trainings, innovation spaces and events, and acceleration programs,” Nemani writes. “That’s a bit different than the way San Francisco and Philadelphia deal with the startup sector, which is through direct engagement of companies themselves.”

RAILS will draw in civic tech startups through innovation grants—designed for groups “making it easier to work with and in Sacramento or for local organizations bringing together the innovation community,” according to the program webpage. Their site (which was designed by 18F) also highlights RAILS’s focus on diversity, filling industry gaps, and “catalytic” ideas.

When asked how RAILS would prioritize diversity, Nemani responded, “Governments can have norms when we make investments, and by specifically requiring a commitment to those principles we can help drive the kind of change we support. On the application, we specifically ask for real metrics that the programs can commit to around driving outcomes around diversity.”

The Office of Innovation seeks applicants with existing projects and proof of funding or plans for development—RAILS is not for entrepreneurs in very early stages. The grants are available for “both nonprofits and for-profits, as long as their mission aligns with the program’s goals and principles,” says the website. This distinguishes the initiative from similar programs launched in Portland, Los Angeles, and Baltimore, which are only accessible by municipal employees or agencies—used to promote innovation within government rather than the private sector. I asked Nemani about the decision to open RAILS to the public and it was clear that maximizing the variety of applicants is a priority for him and the city. Anything to avoid “a level of front-end bureaucracy that’d limit our backend ability to select the best ideas,” he explained.

Sacramento opened the RAILS application portal on June 29 and may award funding as soon as August. All submissions will be reviewed by a panel of local business leaders and city personnel.

“It’s important to have successful entrepreneurs participate in the process to gain private sector insight,” added Nemani. “We should be investing in the expertise on the outside to create ongoing, sustainable capacity.”