Goldman Sachs’ Misguided Gift to Philadelphia
Last week the investment firm of Goldman Sachs made a very generous offer to the City of Philadelphia as part of its three-year-old, $500 million “10,000 Small Businesses” program.
Twenty million dollars would be invested, of which $5 million would go to fund small business educational programs at the Community College of Philadelphia for the next five years. Ten million dollars would be available for low-interest loans to qualifying small businesses through the Philadelphia Industrial Development Corp (PIDC). And the remainder would go to a Lancaster-based fund to make small-business loans in surrounding counties. According to Goldman Sachs, in the past three years more than 1,000 businesses in 10 cities either have received loans or completed the business-education curriculum through the program. Philadelphia is their eleventh.
Of course it’s wonderful for the city’s business community to receive this kind of money and help. And I’m sure some of our companies will benefit. But in my opinion, the effort is a waste. Why?
Because with all due respect to the Community College of Philadelphia, the people that could really benefit from Goldman Sach’s largess are today sitting in classrooms at Wharton, Temple and Villanova. And when they graduate many of them may likely become employees of Goldman Sachs, future investors, market movers and venture capitalists. But in New York, not Philadelphia.
Because that’s where Goldman Sachs is. That’s where the money is. The $20 million that was thrown our way in the form of “education programs” and “small business loans” is petty cash to this firm. They probably misplaced a similar amount since I began writing this essay. And wait…only 1,000 businesses have been affected over the past three years and 10 cities? At this rate there’s only another 27 years to go to achieve your goal of 10,000 businesses. The Eagles…the EAGLES…have a better chance of making the Super Bowl before then.
Let’s call it what it is: a great public relations program. But is it really helping Philadelphia? Really? Here’s what would help: if, like 40 other organizations in the area, a firm like Goldman Sachs took that same amount of money and invested it in a program like Philly Founded. This is an organization that, according to Brad Denenberg (one of the program’s chairs) “…is dedicated to helping build our startups’ businesses locally by letting the whole region know that we’re here, we are creating innovative products, and we’re open for business.” Denenberg wants to “…put Greater Philadelphia on the national map, demonstrating that we have everything it takes to compete with other great startup regions.”
I’ve written this before and I’ll say it again: Philadelphia is still not a great city for startups. Yes, we have a fantastic startup community with smart, passionate people, a huge amount of resources, a world-class academic community…and yet we still can’t hold a candle to the startup scene in New York or San Francisco. There are many reasons for this. But one of the biggest is that the only time we get to see investors like Goldman Sachs is when they helicopter in, drop a few bucks for “education” and “small business loans” or some other PR stunt to generate goodwill, have a press conference with the Mayor, and make it back to Manhattan in time for martinis and a late supper at that trendy new restaurant in the meat packing district.
What does our startup community really need? That’s easy: Money. Investors. Commitment. The Community College of Philadelphia is a wonderful institution, but we’ve already got plenty of places where entrepreneurs can get free business education: from small business development centers, to SCORE, to programs put on by local accounting and law firms. And every business person knows they could spend a lifetime of learning online at sites like Ted, Khan Academy and Inc. Magazine, just to name a few of the thousands out there. Does Goldman Sachs really need to spend another $5 million in education when there are dozens of startup companies in West Philadelphia who, at this very moment, are sitting on tremendous ideas and ground-breaking technologies that could employ thousands of people in the future and are starving for a sliver of that cash?
Loans from the PIDC are nice, but most startups won’t get access to these funds. PIDC loans have been traditionally used to fund existing businesses with historical operations and balance sheets audited by CPAs. The loans come with a lower interest rate, but the same strings are attached that you’ll find in any banking deal. And besides, every banker I know tells me they’ve got plenty of money to lend out to small businesses. As long as those businesses pass their due diligence requirements. That’s going to exclude 99 percent of the startups in Queen Village struggling to make payroll.
Our local venture community is active and passionate. But to New Yorkers they’re really nothing more than cute and cuddly, aren’t they? The amount of money they have to invest is a drop in the bucket compared to their neighbors up the turnpike. So if Goldman Sachs really wanted to affect 10,000 businesses, how about making more of a commitment to the city? Like opening up a significant operation here? Moving a few dozen of their most senior partners to the Main Line? Commit. Grow roots. Be a long-term partner. Take the lead on a few local deals that our venture guys could piggy back. Fund partnerships with other large companies in the area like Comcast (wait….who?) and academic institutions like Penn and Drexel. We have some of the best business schools in the world…right here.
Twenty million dollars for “education” and “small business loans”? Thanks. Of course it’s nice and of course no one would turn it down. It’s great marketing and even better PR. But is it really helping Philadelphia’s small businesses and startup community? Please.