You’re Invited: The CalOSBA State of the Office

From the Advocate

September 2022

If you are reading these words in the CalOSBA newsletter, then keep an eye on your inbox for news about the next innovation of my office: a virtual “Open House” that we will host in the first week of October to give you an overview of our mission, a walkthrough of our programs, introductions to my amazing team (many brand-new recruits!) and, best of all, a personalized explanation of why small business support is a top priority of Governor Newsom’s administration.

As Director, I’m accountable for the investment that the state has made in my office. And, as a human, I am proud to show off my team and accomplishments.

But the most important message we want to send at this Open House is that California is still the best home in the nation for entrepreneurs, despite the undeniable shocks and stresses that you – California’s small business owner – have endured the past three years. And I’m going to tell you why entrepreneurship, here in California and across the country, is more important to our economy – now, more than ever before.

First, I just want to remind us of where we were just two years ago.

Let’s look at July of 2020.

Governor Newsom declared that month “California for All Small Business Month.” At the same time, the Governor’s Task Force on Business and Jobs Recovery launched the ShopSafeShopLocal campaign. I just want to quote from that July 2020 press release:

“The COVID-19 pandemic and efforts to mitigate the spread of the virus have presented extraordinary challenges for California’s small businesses. Small businesses across the state have stepped up to protect their employees and customers with innovations that meet the moment, but thousands have shut down or paused operations and face the threat of permanent closures. According to the Stanford Institute for Economic Policy Research, the United States experienced a 15% drop in active business owners between February and May. That decrease is nearly double for Black-owned and operated businesses at 26%. Latinx, Asian, and immigrant business owners have also seen declines greater than the national average.”

California increased its investment in small business support exponentially as a direct response to that crisis. The main example here is the $4 billion+ that Governor Newsom put into the Small Business COVID-19 Relief Grant program, California Venues Grant Program, and California Nonprofit Performing Arts Grant Program. My office stood up three other small business assistance programs that same year, including the $35 million Dream Fund grant program.

That commitment is visible again in this year’s budget enacted on July 1, 2022. The Technical Assistance Expansion Program, first approved in 2018 to increase services available from the network of small business centers across the state, was supposed to sunset next year. Instead, Governor Newsom approved permanent funding for the program and increased the funding from $17 million to $23 million per year. This budget also sets aside an additional $8 million for the California Women’s Business Center Network (californiawbc.org). Additionally, the Governor approved an increase in state investment for Accelerate California, the state’s network of Inclusive Innovation Hubs, from $2.5 million to $20 million, including a $6.5 million seed fund for new founders emerging from that network. Moreover, that’s not all…but I think I’ve proven my point here.

Obviously, it’s been the same at the federal level. What a far cry from the 2017 blog post from Small Business Majority: SBA Budget Cuts Would Undermine Small Business Growth | Small Business Majority. These budget dollars have served to support the survival of existing businesses, but also to increase the total footprint of small business in our economy. Today, there are more small businesses than ever before in the State of California after unprecedented increases in the number of new business starts in 2020 and 2021 – a testament to the courage of every single new business owner…and to California’s success as an incubator for entrepreneurship.

It’s still scary out there, I know.

Inflation, rising interest rates, the labor market, and the supply chain instability… Despite all of that, California business owners keep rising to the occasion and the Newsom administration continues to meet them in the moment to provide resources to assist.

I’m just going to use some pictures to illustrate.

Here’s a map from a study released just a month ago by Looka ranking all 50 states from Best to Worst for Entrepreneurs. They measured six factors including Median Household Income, Cost of Living, Number of Businesses with Less than five (5) Employees, Annual Payroll, Survival Rate, and the Rate of New Entrepreneurs. California is still #1 on this list.

Best States for Entrepreneurs

Source: Looka, July 26, 2022; What are the Best US States for Entrepreneurs? – Looka

Want a more wonky reference? Let’s look at the Kauffman Indicators of Entrepreneurship, the source for some of Looka’s data points. California made it to #1 on that ranking based on the Rate of New Entrepreneurs, the number of microbusinesses operating in the center (0-5 employees), and, above all, a Strong Survival Rate, outperforming the national average since 2011 including during the COVID-19 crisis.

California Small Business Survival Rate

Source: Kauffman Indicators of Entrepreneurship, California 2020 Snapshot; State Profile: California – Kauffman Indicators of Entrepreneurship

Let me throw one more at you. You may have read about recent layoffs at California tech companies. If you lost your job, a data point won’t make you feel better; further, I’ll agree with those who argue we must stay vigilant about our dominance in the tech industry. That’s the whole point of the Accelerate California program mentioned above… But the truth is that California is home to not just one of the country’s largest tech hubs, but three: San Francisco, Los Angeles, and San Diego. No other state comes even a little bit close.

Source: Telstra Ventures, February 16, 2022; “Tech’s Great Migration, Insights to Emerging Tech Hubs Across the U.S.”

I want to share one more picture.

This is Governor Newsom meeting online in February 2021 with elected leaders, my predecessor at CalOSBA, Isabella Guzman, Governor’s Office of Business and Economic Development (GO-Biz) Director Dee Dee Myers, and small business owners who received support through the Small Business COVID-19 Relief Grant Program.

I noticed the picture of Cheryl Wilson, while I was researching this column. The press release quoted her: “When I found out I was awarded the grant, I was running through my house telling my kids – I got it, I got it, I got it!”