Guidance on how ecosystem builders and entrepreneur support organizations can protect funding, find support, and develop long-term sustainability strategies amidst shifting federal policies
Our normally staid federal government has been in turmoil in recent weeks, with no explicit end goal or date in sight. Even if this period yields a policy landscape that benefits entrepreneurs and the initiatives that support them (e.g., ecosystem builders and entrepreneur support organizations, ESOs), leaders need to guide their organizations through an indeterminate period of uncertainty, threats, and, perhaps, opportunities.
I have spent years, primarily at SSTI and CDFA, working with nonprofits, institutions of higher education, state governments, Congress, and federal agencies to improve, fund, and communicate the importance of initiatives related to entrepreneurship and economic development. In that time, there has not been a moment like this one.
While no compass exists that can guide ecosystem builders through the current situation, we can draw parallels to government shutdowns, federal agreement changes, or dramatic state transitions to suggest actions leaders can take to put their organization’s clients, staff, and operations on the best possible footing.
Review the details of existing grants and contracts
Federal grants and contracts are conveyed through an agreement that stipulates what both the recipient and federal agency must do over the life of the project.
Given the talk of canceled contracts and altered scopes of work—and that the government is currently funded only through March 14—the details of these agreements could matter to many ecosystem builders and ESOs in the near future.
Recipients with open federal awards should review two key sections of their agreements:
The agency’s rights to cancel or alter the work unilaterally, including what procedures it must follow to do so.
Terms about when and how the agency provides payment, including what notifications are required if the agency wants to (or must) freeze the project’s work.
After this review, recipients should be prepared to do each of the following:
Document if and how an agency violates its obligations.
Demonstrate approvals for any changes to your project's work timeline or scope that may, if unapproved, enable an agency to trigger its termination rights.
Review requirements and documentation procedures with the project teams.
Raise concerns about actions to date with key stakeholders (e.g., organization board and counsel, local or state officials, congressional delegation).
These actions will put a federal funding recipient in an optimal position to seek redress, should there be a problem with an open award.
Revisit mission and vision
When navigating through a crisis, an organization can seek guidance from reflecting on its core purpose.
For example, if an organization is being directed to eliminate the diversity, inclusion, and equity components of a federally-funded grant project, its best response may depend on its mission:
If DEI is central to the organization’s purpose, then the smarter long-term approach for the recipient may be to either stand firm on the work (with, at most, a relabeling of the activity) or let the funding go rather than conduct work that fails to meet the organization’s mission—federal grants, as discussed below, often have more restrictions than are justifiable for tangential projects.
If DEI is secondary to the organization’s purpose, the recipient may better serve its community by allowing the change to the award and looking to other approaches, partnerships, or funding sources to support DEI within its work.
As this example demonstrates, focusing on mission will not limit the downsides of difficult choices that ecosystem builders and ESO leaders may need to make about their federal awards. However, keeping the organization’s purpose at the center may provide some clarity of thought to support the decision.
Prepare advocacy networks
During a period of uncertainty, ecosystem builders and ESOs may not know what they will need help with or when. But if the organization’s work is threatened, its leaders want to be able to have conversations that spend as much time on practical actions and as little on background explanation as possible.
Leaders should consider communicating with their advocates and stakeholders now and follow up regularly to ensure they understand the organization’s work and how it relates to the federal upheaval.
Organizations with a federal award will likely find that their congressional delegation has an interest in making sure your project continues, that any local staff can be paid, and that entrepreneurs in the region continue to launch and scale new companies.
Organizations with a connection to the state’s economic development strategies or funding may have stakeholders in the governor’s cabinet, which almost certainly staffs a DC office that focuses on federal funding, who have similar concerns about seeing local initiatives continue.
If the ecosystem builder or ESO leadership does not have good connections to these sources, then it needs to look at its board, client entrepreneurs, and other stakeholders to map out an effective approach. Working through these channels can sometimes take a while to be productive, which is another reason to begin working on a communications approach sooner than later.
Join a trade association that represents the ecosystem’s concerns
Ultimately, there is only so much communication that any organization can do.
There are multiple trade associations that represent ecosystem builders, ESOs, entrepreneurs, economic development, sector-specific concerns for every industry, and nonprofits. Many of these associations have government affairs strategies and will be tracking, and responding to, federal actions affecting grant funding.
If your organization can cover the cost of membership, then consider joining one (or more) of these groups to (a) monitor federal actions affecting grantmaking and policy spaces of interest, (b) work with Congress and the Administration to block or reverse course on negative actions, (c) provide resources that will advance entrepreneurs and their champions.
Trade associations active in entrepreneurship policy can be found in the EBLN Community or on the list of ESHIP National Resource Providers. For ecosystems focused on tech- and innovation-driven entrepreneurship, I biasedly recommend SSTI.
Develop a sustainability strategy
The current federal upheaval should drive home to all ecosystem builders and ESOs the importance of implementing a sustainable funding strategy.
Federal grants are good to help launch or scale an initiative, but they do not contribute directly to an organization’s sustainability. As most past awardees likely have experienced, the challenges with federal awards include the following:
The need to recompete periodically (one- to two-year award windows are common, with a typical max of four to five years) means federal grants are not reliable over the long run.
A high administrative burden, with hundreds of pages of terms and regulations, regular activity and financial reporting, and often reimbursement procedures—all on top of the organization’s internal management.
Reimbursements being limited to actual costs (even indirect costs, for organizations with an approved rate, represent a fair share of overhead) means that most grant-funded projects will be, at best, revenue-neutral.
Given these challenges with federal grants, organizations need to develop and pursue sustainability strategies that will enable the organization to tap into a set of non-federal revenues. Common sources in the economic development space include:
Local funding
Special assessment district revenues
State appropriations
Special/dedicated taxes (e.g., occupancy)
Fee-for-service
Rent
Memberships
Event, organization, or initiative sponsorships
Diversity of income is critical so that an organization can survive a challenge from any one of its revenue streams.
Action items for leaders to navigate federal uncertainty
As a summary of the approaches discussed in this post, here are the actions that ecosystem builders and ESO leaders should take to help their organization be prepared for whatever may happen over the coming weeks and months:
Review any open award’s termination, freeze, and scope of work conditions.
Document any detrimental agency actions to date.
Collect information about any approved changes to the award.
Re-ensure that project teams understand grant requirements.
Revisit—and recommit to or revise—the organization’s mission and vision.
Communicate current federally-funded projects and exposure risk to the organization’s board, state and federal officials.
If your organization does not have state or federal connections, develop a plan to reach these stakeholders.
Research and join a trade association that will represent the organization’s interests.
Develop (or revisit) sustainability strategies for grant-funded initiatives (as well as other initiatives and the organization as a whole).
Jason Rittenberg is the principal and founder of Excel Regional Solutions LLC, which strengthens America’s technological and economic competitiveness by providing expert advocacy management, strategy development, and information services. He can be reached at rittenberg@excelregions.com.
This post is licensed under Creative Commons CC BY 4.0 and may be shared or republished with attribution. Photo Credit: Steve Green (CC BY 2.0) + + + +
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This post is part of the Ecosystem Building Leadership Network's guest contributor series, featuring voices and perspectives from across the entrepreneurial ecosystem building field. We welcome contributions from practitioners, supporters, and advocates who want to share insights, experiences, and ideas that advance our work. If you’re interested in contributing a post, please get in touch with us at hello@ebln.us.
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