As part of the work we are doing on the Small City Segment, we send out a brief weekly post of thoughts, links, and research in progress that reflect the week’s work. I’d love to hear from you if you have any thoughts, questions, disagreements, or things to add. Please forward this on to people you think might enjoy reading it.
Learnings
Last week I mentioned doing some reflection on what I’ve learned since I started writing about the Small City Segment last July. I wanted to take this week’s post to share those thoughts, along with my plans for this newsletter for the foreseeable future.
Rural ≠ Small Town ≠ Small City ≠ Mid-Size City ≠ Suburb ≠ Big City
When I wrote the first post on the Small City Segment I commented that small cities are often misunderstood:
They are misunderstood because they are in a messy middle of how a lot of people think about the US. Movies like Sweet Home Alabama contrast the bustle of NYC with a one-stoplight town in Alabama. But small cities exist on a spectrum between those two extremes.
When I said “spectrum”, I meant it, but I didn’t understand it. I still don’t entirely, but I can at least name some other points along it. Whether it’s the problems they face or how they think about entrepreneurship and economic development they each have their own nuances. I remain committed to the small cities - MSAs with 50k-500k people, distinct from other large metro areas. But just as there is opportunity here, there is probably opportunities in these other places as well.
Understand Systems, Remain Open about Solutions
Since last July, we’ve made three investments on the Small City Segment thesis. In each case, we had an understanding of the systems they affect, but could not have named them as a specific solution we were searching for. We are thesis-driven investors, but not prescriptive investors. We plan to continue this approach with even more intentionality going forward. We will be doing a lot more research and writing on systems in small cities and keeping an open mind about the companies and solutions that can influence them in positive ways.
Declining Local News Means Declining Legibility
I was certain that the decline in local news over the last two decades meant that small cities were harder to understand, both internally and externally. I thought this was mostly just a coverage issue - fewer reporters, unviable cost structures, and distribution challenges. What I didn’t understand is that the current responses to these challenges are also making these cities less legible. Paywalled local news means that anyone outside of the city has almost no access to what is happening in them. With small readership bases, the rise in independent journalism that has been built on platforms like Substack nationally has not made its way into these places yet. I hope to contribute in a small way to the legibility of these problems, but a lot more coverage is needed.
Technology & Scale Go Both Ways
Most in the technology and entrepreneurship world are obsessed with scale. This is usually synonymous with how big something can get - riding waves of decreasing or negligible marginal costs of production. What isn’t as common is to talk to how small things can get - riding waves of decreasing operating and overhead costs. Whether in hardware, software, or both, continued innovation is going to make things possible at ever smaller scales - a boon to small cities where the definition of “scale” from the tech world has usually meant being disqualified as a market.
What’s Ahead
The last six months have been an honest exploration of where I have original thoughts and perspectives on the intersection of small cities, entrepreneurship, and economic development. There are a lot of problems to solve: how to create the conditions for more entrepreneurial activity, how to source new solutions to our problems, and how to build on the historical strengths of our local economies. Each of these areas are deep wells in their own right.
I get the most energy from thinking about how small cities can create and source more innovation that improves the lives of the people that live in them. I think this is the most overlooked, yet exciting corner of economic development. Others will continue to work on how to build more robust local entrepreneurial ecosystems and how to advance more traditional economic development levers. For me, expanding the aperture of the relationships between founders, startups, and small cities is where I want to spend my time. And I think there is a compelling investment thesis to accompany it. So going forward, you’re going to see:
More Problem Research: I plan to spend a lot more time researching and publishing on the core systems of small cities: financial, healthcare, housing, employment, energy, infrastructure, local government, small business, and transportation. I’ll be publishing more posts like Mortgage Economics at the Edge. This was part of the original vision of the newsletter, but I drifted off in some other directions over the past few months. I want bring this back as a core focus.
More Company Profiles: In addition to profiling problems, I also want to profile more solutions. You’ll be seeing company profiles from our portfolio as well as companies that we admire from a distance.
More Different Ways of Building: There is a lot of experimentation happening in the entrepreneurship world when it comes to how to build companies, how to invest in them, and how to engage their stakeholders. This is a personal interest area of mine and I think has interesting ties to how things get built for the Small City Segment in the future.
More Collaborations: I’ve found a small group of really smart people that are also interested in these topics and I’m hoping to collaborate with them more on content for this newsletter. I hope you’ll learn as much from them as I have.
This won’t be for everyone - and if it’s not for you, I won’t be at all offended if you chose to no longer subscribe. The fact that you spent any amount of time reading my explorations of these topics is humbling - thank you.
For those of you that are interested in these topics, I hope to engage in deeper ways with you. Whether it is a call, an email, or even just a comment, I welcome any interaction that may be valuable to you. I’m always looking for new people to learn from.
Links
I’ve kept track of all the links I’ve shared in an Airtable that you can find here. I’ll continue to update this every week, so if you ever want to find one, this is a great place to start.
Now We Know: Exit to Community Is Possible, Nathan Schneider, Hacker Noon
“History has demonstrated that, with the right policy in place, large-scale capital access for community ownership is possible. That’s what happened after 1936, when the US government passed the Rural Electrification Act; thanks to a (revenue positive!) loan program at the Department of Agriculture, cooperatives now operate nuclear power plants and deliver high-speed Internet in once-underserved areas. In 1974, a relatively small change to the federal tax code unleashed the employee stock ownership plan, or ESOP, which has enabled millions of workers to become co-owners of the companies where they work.”
My friend, John Garry, sent me this piece this week. I’ve been following the “Exit to Community” line of thinking for a few years now and it’s cool to see them have some real case studies now. What I love about this line of thinking is that it still promotes real, value-creating, sustainable businesses, but just asks simple questions about who owns them over time. This is a good example of “More Different Ways of Building” category of things I hope to explore further going forward.
‘A Beautiful Place That Has a Dragon’: Where Hurricane Risk Meets Booming Growth, Aatish Bhatia, NYTimes
“In these booming coastal counties, residents and local officials say that roads and bridges are not keeping pace with the growth.
“Our biggest problem is our infrastructures not being able to keep up,” said David McIntire, the deputy director of emergency management for Brunswick County, the fastest-growing coastal county in North Carolina this century and part of the Wilmington metro.
…
In neighboring New Hanover County, his counterpart Mr. Still is grappling with a shortage of affordable housing, which he said was making it “exponentially difficult” to shelter people displaced by disasters.
After a disaster, the surge in demand for short-term housing drives up already high rents. Poorer residents often rely on the state and local governments for assistance with evacuation and housing.
The problem lies in where to house them. “If there is zero housing availability in the community right now,” Mr. Still said, “where do you put 100,000 people?””
Maria has family in this part of North Carolina and I’ve gotten to spend some time there over the last few years. It’s as beautiful as described. What I find most interesting about this article is the secondary effects of this increase in flooding risk - things like affordable housing and infrastructure for evacuations. There are so many interesting problems in need of new thinking and solutions.
The Deleted Scenes, Addison Del Mastro, Substack
“I write daily about urbanism, land use, suburbs, small towns, and the built environment in general. I’m not a planner or engineer; I think a lot about how ordinary people perceive and react to urban design, and I explore places as a layman, but with a keen focus on detail. I also sprinkle in posts here on food and cooking, old technology, stores and retail, and commercial history.
The built environment is in some ways the most fundamental issue there is. It’s the physical setting of, well, everything. Yet many people don’t give it much thought, and zoning and urban planning can feel wonky, even irrelevant. Urbanism is also frequently coded as a “left-wing” area of concern, reinforcing an urban-rural or urban-suburban culture war.
This newsletter is all about pushing past these impressions and stereotypes, and conveying urbanism and the physical design of our places as a practical, human, and broad concern.”
I have my friend Samuel again to thank for turning me onto this newsletter. There is a lot of overlap between my interests and urbanism, but I usually don’t find myself drawn to reading a lot about it. Addison does a nice job of making things approachable and speaks to some of the overlaps I find interesting.
If you…
are interested in building for the small city segment…
are already building for the small city segment…
know someone who might be/should be building for the small city segment…
want to contribute expertise to problem profiles…
or want to help us expand our network in small cities…
please subscribe and reach out at dustin@invanti.co.