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.