The importance of “Grow Your Own” (Part One)
Posted on March 20, 2018 by bcd
Helping community residents to start and build their own businesses—“homegrown businesses”--is an important strategy for communities of any size. But, in smaller communities, it can be the best and only strategy. Adopting an intentional “Grow Your Own” strategy can have an important impact on job creation and the vibrancy of the community. Grow Your Own is an umbrella term for economic development models that use entrepreneurship and small business development as the tool to create economic growth. Grow Your Own focuses on local strengths, small businesses and entrepreneurs in one’s own community--instead of spending resources to attract companies from outside--as a way to foster economic growth. It involves developing support resources for entrepreneurs, innovation, and access to capital and markets. Why is it so important? First, businesses started by local entrepreneurs are often loyal to their communities; they are more likely to choose to grow their businesses in their communities. In the early stages, they are more likely to hire employees from the community. In other words, they are “sticky”. Their stickiness only increases as they add employees, and those employees have spouses employed in the community and children that attend local schools. The businesses are dependent upon the talents of those employees to grow their businesses and, therefore, leaving the community is not an option. Second, entrepreneurs and small businesses create jobs. According to the U.S. Small Business Administration, small businesses represent 99.7% of all employer firms, and employ half of all private sector employees. Small business is a significant portion of the U.S. economy. The goal is to assist homegrown businesses with growing to a sufficient scale in which they can have a significant economic impact on the community, and then retaining those businesses. In an upcoming blog (Part Two), we’ll discuss the best model for supporting and retaining homegrown businesses in your community.
Can a culture of entrepreneurship be created?
Posted on November 09, 2017 by bcd
Can you really create a culture of entrepreneurship, or must it occur organically? Can it be intentional? Here in Silicon Valley the culture of entrepreneurship permeates just about everything. Entrepreneurs are celebrated. Failure is recognized as part of the process. Almost everyone knows someone who either started a company, or worked in an early stage company. In other communities, the strategy must be more intentional. In my experience working with large and small communities across the U.S., I have witnessed numerous communities that are actively fostering a culture of entrepreneurship. Culture helps to create fertile ground for the startup of new businesses. Here are a few effective strategies to help: Make entrepreneurship visible. Create regular opportunities to increase awareness about entrepreneurship in the community. Many communities around the world celebrate “Entrepreneurship Week” with a series of events hosted by different organizations and institutions in the community that raise awareness about entrepreneurship and introduce the resources available locally for entrepreneurs. Not only do these events attract the participation of individuals who are considering entrepreneurship and those who are starting businesses, but they also attract public attention. Events like Entrepreneurship Week help residents in a community to understand the impact of entrepreneurship and business startup on their communities. Demonstrate entrepreneurship as a career path. Starting with youth (K-12 education), teach basic business principles, create opportunities for kids to create businesses, and instill the philosophy that starting and operating a business is a career path. At colleges and universities, make entrepreneurship courses and programs open to anyone, and provide opportunities to learn practical skills. Don’t limit it to kids. Show adults that entrepreneurship is a career, whether it’s their first career or their second (or third). Teach skills. Not everyone went to business school and many people may not know someone who has started a business…and even if they did, they still didn’t necessarily learn how to start a business that has a solid, actionable model and plan. Offer seminars, training and access to experts to help potential entrepreneurs to learn the necessary skills. Connect. Help entrepreneurs to create networks by connecting them with other entrepreneurs, including those who are new and those who are experienced. Use MeetUps. If there’s a coworking, accelerator or incubator in your community, encourage them to invite the public to attend their networking events. It can be lonely starting a business. Connections matter. Celebrate success. Success doesn’t have to be Google-like success, but launching your first product, generating sales, hiring employees, and gaining market share are all important milestones. Promote entrepreneur successes on social media and at events. And, introduce successful entrepreneurs to your local politicians…after all, you’re going to need their support to build a strong business formation landscape in your community. Remember that creating a culture of entrepreneurship is a long-term strategy, and economic developers CAN have an impact.
Choosing the right cluster to target
Posted on May 16, 2017 by bcd
As simple as it seems, cluster strategies start with selecting the right cluster. Based upon our experience in helping communities to effectively grow clusters, consider these four points when selecting a cluster to target for your community, state or region. First and foremost, conduct an assessment to understand your ecosystem and economy. Utilize both quantitative and qualitative data to determine whether clusters exist in your community, and then identity the ones that offer a competitive advantage. Second, select clusters that are actionable. Your assessment may have identified more than one cluster that offers competitive advantage, but not all of the clusters will lend themselves to strategies that can be implemented. The ability to implement is helped or hindered by resources and capabilities. Also, choose those clusters that you have the ability to act upon in a timely manner. Third, select clusters that will have community support. Your stakeholders—including economic development and public officials, the business community, and residents--must be willing to rally around the selected clusters. They must not only be supportive of growing the identified clusters in your community, but also be willing to play an active role in doing so. If they are not supportive at the onset, can you build consensus among them going forward? Finally, as economic developers, it is important to choose clusters that would be impactful. Pick a cluster (or clusters) that would have the greatest potential impact on your local economy. The impact measures may include jobs (high skill/high pay, jobs for residents), technology commercialization, leveraging of local innovation assets, retention of local businesses, generation of tax revenues, economic opportunity, etc. Establish the impact metrics from the start. Not only does making an impactful choice benefit the entire community, but it also is an efficient use of local resources. Follow these four points when selecting a cluster for targeting and you’ll be on the right path.
Access is critical for women entrepreneurs
Posted on May 04, 2017 by bcd
Access is the biggest barrier to the success of women-led growth companies. One particular challenge is access to equity capital. The statistics show that women-led companies raise far less equity capital than their male counterparts. As a matter of fact, male-founded firms raise capital at a rate of 4 to 1 compared to female-founded firms. Plus, women are less likely to ask their close friends and business acquaintances to invest, and therefore, women-led growth firms are less likely to find the funding necessary at the earliest stages when friends and family are the primary sources. While the number of women-led venture backed firms has increased in the last 10 years, the percentage of funded companies is still less than 20. How can economic developers help women entrepreneurs to gain access to equity capital that will help their firms to grow, create jobs, and generate wealth in the community? Before an entrepreneur can contact a prospective funder, she must have a strong business model, knowledge of the capital raising process, and a solid pitch. Economic developers can help with access to capital by (1) ensuring that programs and services are available in their communities that will mentor women entrepreneurs; (2) helping women entrepreneurs to build an extensive network of contacts (business and industry); and (3) increasing the number of sources of equity capital (angels and venture capital firms) in their communities. Accelerators and incubators provide a proven process for coaching entrepreneurs through business model generation, market research, product development, and funding. Does your community have an accelerator or incubator program that either directs its efforts at women entrepreneurs? Are the accelerators or incubators in your community inclusive, in that they recognize the particular challenges that women entrepreneurs face and provides specific assistance to meet those challenges? Does your community hold events and programs that bring women-led growth companies together to network? Has your community reached out to successful women entrepreneurs, including founders and early team members, and encouraged them to mentor companies? Then, on the funding side, consider how your community can increase the number of women angel investors. After all, 1 in 4 angel investors now are women. That’s encouraging. Creating programs and services that help women entrepreneurs to build strong companies will set them on the path to getting access to capital.
Accelerators and economic development: is there a fit?
Posted on April 12, 2017 by bcd
When designing an accelerator, economic developers face the question: Should access be strictly limited to entrepreneurs residing within our community or region, or be open to anyone regardless of his or her geographic location? What is the accelerator’s target market or geographic reach? If you plan to create an accelerator that is sector (industry vertical) focused, most likely applicants could be located anywhere in the U.S. or overseas. Thus, the conundrum for economic developers: should you place geographic restrictions on applicants, or not? If you accept applicants that are located outside of your community, will they stay after they complete the program, or return to their home communities? Many—if not, most—well-known accelerators (Y Combinator, TechStars, to name a few) are blind to location. Of course, they are venture or investment driven models, not economic development driven. These well-known accelerators seek the best companies and location is not a factor. Nevertheless, I have had countless conversations over the past year or so with economic developers who plan to create a sector focused accelerator that will admit entrepreneurs regardless of whether they reside—or, plan to reside—in the community. They are following proven models, but will they ultimately achieve outcomes that will best benefit their communities and satisfy their stakeholders? Being very clear about your goals and outcomes is critical. If you seek to maximize the number of companies and jobs created in your region, then taking a local approach is a better bet. Design a program that will aim to recruit entrepreneurs from your community or region, and serve their needs. When making a decision, also consider the use of public, or taxpayer, dollars. How comfortable will your funders be when local tax dollars are used to assist out-of-area companies (that may not intend to remain in your community after the complete the accelerator program)? On the other hand, one could easily argue that widening the geographic reach, or being blind to the location of the applicant entrepreneurs, has definite benefits: building community brand as a place that welcomes and supports high-growth startups, and attracting startups from outside of the region to relocate into your community. Before determining your approach, have frank discussions with your stakeholders and financial supporters, and build consensus around clear goals and targeted outcomes.
Helping entrepreneurs to commercialize technology
Posted on March 07, 2017 by bcd
Accelerators and incubators can be very effective at helping entrepreneurs to commercialize technology. It starts with having the right process. Assessment is the first step. Then, targeted assistance must be provided over a period of time that may last 3 months or a year. Accelerators and incubators are a natural fit for this process. Five barriers to commercialization often prohibit entrepreneurs from getting to market: (1) business model and strategy, (2) market, (3) technology and intellectual property (IP) protection, (4) management, and (5) capital. Evaluating each entrepreneur client, and then determining which of the barriers require action and the specific actions necessary, results in a commercialization plan, or roadmap. In an incubator programs, the process is individualized, with a plan developed for each client tailored to its individual needs. Milestones are established and tracked by staff and the entrepreneur. Mentors and staff coach the entrepreneurs through the process, and make introductions to funders, legal, and other resources, as needed. On the other hand, accelerator programs for technology businesses utilize a cohort process to help clients to move their products to market. The cohort is educated about commercialization through the accelerator curriculum (delivered over the course of the program), and the cohort itself adds an element of peer-to-peer networking and assistance. Then, mentors provide individualized assistance to each entrepreneur. Accelerators are structured with milestones for the cohort. The Demo Day is the ultimate milestone, closing out the accelerator program with a big event to showcase the entrepreneurs and their products. Both universities operating incubators or accelerators aimed at enhancing commercialization of university IP, and economic development organizations assisting with business startup and growth, and generating economic impact, can put strong processes in place to help their clients to successfully and more rapidly get their products to market.
Show me the money: how entrepreneurial support programs (and organizations) become financially sustainable
Posted on January 25, 2017 by bcd
Change happens and it can be unpredictable. Creating financially sustainable Entrepreneurial Support Programs (ESPs) and Entrepreneurial Support Organizations (ESOs) helps to ensure that they can survive the loss any revenue stream--and continue to serve clients and generate results, whether those are jobs, new business starts, etc. Sustainability is defined as the ability to cover expenses with predictable, reliable sources of funding. To create a sustainable ESP or ESO requires the adoption of 5 best practices. First, 6 to 8 revenue streams should be developed over time. Second, the sources should be diversified, meaning a balance of public and private, and then different sources within those two very broad categories. Third, client fees are a revenue stream, but remember that entrepreneurs (especially those that are prerevenue) cannot pay full market rate. Fourth, practice long term planning. Financial sustainability is not achieved overnight. Fifth, the ESPs/ESOs that are most successful at financial sustainability are adept at continuous innovation. Creating new programs and services for your ESP/ESO will attract new sources of funding. And, in my experience, the keys to sustainability are planning and persistence. Get organized and keep working at it!
Chicken or Egg: Which is first, accelerators or incubators?
Posted on January 10, 2017 by bcd
Answer: Accelerators. It’s simple: accelerators are precursors to incubators. Accelerators support a cohort of very early-stage, growth driven businesses (and very early stage innovators) through an intense process of education, mentorship, and financing over a period of a few months, culminating in a public event or “demo day”. The accelerator program may run for only three or six months. For many types of businesses, three or six months is not sufficient time to create a successful business. Yes, it certainly can be sufficient for app companies, but many other types (from software to medical device) need more time and assistance to get on the path for success. This is exactly where incubators fit: they can be an excellent next step for companies that have completed an accelerator program. Why? Incubators provide services—including mentoring, advice from subject matter experts, connections to a network of resources, access to markets and customers, preparation for funding and access to an investor network—over the course of an 18 month to 2 or 3 year period (depending upon the type of business). Rather than having a cohort-based program, incubators are individualized for each company’s specific needs. Companies that graduate from incubators have obtained their first customers and sales, and early funding. They are more mature when they graduate. So, if you are considering whether an accelerator or an incubator is the right program for your community, university or corporation, consider that you may need both. And, if you have an accelerator, consider connecting to an incubator (or creating your own incubator) to assist those companies that need more guidance post-accelerator. You’ll be more likely to have companies with successful outcomes.