Supporting Entrepreneurial Visions

It is no secret that the largest job creation in the country comes from small businesses and entrepreneurial efforts. Do the economic developers in the community you plan to start your business in truly understand this?

In San Jose, Calif., 87 percent of its new job growth in the 1990s came from companies that did not exist before 1990, such as eBay and a multitude of companies that range from 10 to 100 employees.

By Rachel Duran

http://bxjonline.com/bxj/article.asp?magarticle_id=647

That number is clearly the reason why the city’s economic development officials unveiled a strategy that focuses on start-up companies and entrepreneurial efforts.

“That is where our job growth comes from, rather than from the significant expansion of large, established companies or from attracting companies in from the outside,” says Kim Walesh, assistant director, city of San Jose Office of Economic Development.

“It is clear that we should focus our efforts on being a place where people can come to start and grow companies.”

Walesh says that economic development leaders across the country are often confused about where their job growth comes from. She says many think jobs come from attracting headquarters from other places. “However, typically, that is only where a small share of the job growth comes from,” she says.

Places such as coastal Maine, the Kentucky Highlands and the Upper Peninsula of Michigan have also developed successful entrepreneurial communities through the support of their economic development leaders.

“The organizations created a business climate in these rural areas to help local entrepreneurs achieve success,” says Don Macke, co-director, Center for Rural Entrepreneurship. The center was created by the Rural Policy Research Institute and the Ewing Marion Kauffman Foundation. “This ranges from microenterprise entrepreneurs to large businesses working in the global marketplace,” he says.

Macke adds that the organizations asked the entrepreneurs what they needed to succeed and grow. It was important to determine how the communities could support them.

“What we have found in our research of 1,000 successful rural entrepreneurial communities is that in almost every region of the country, there are successful, high- growth entrepreneurs, just not as many as you will see in the urban areas,” Macke says.

He notes that these businesses have adapted their business models to be successful in rural locations. “In almost all cases, these entrepreneurs remained in rural areas as a matter of choice.”

A leading example of this is Cabela’s, one of the fastest-growing and largest outdoor recreation suppliers in the world, which is headquartered in Sydney, Neb., a community of 6,000.

“This business is there, with its 1,500 corporate headquarters workforce, because that is where the owners want to live,” Macke says. “They grew the business there.”

Entrepreneurial League System

Tom Lyons and Gregg Lichtenstein have developed the Entrepreneurial League System, which is a framework communities can use to organize themselves to become top-notch entrepreneurial communities. Lyons is the director for the Center for Research on Entrepreneurship and Enterprise Development at the University of Louisville. Lichtenstein is the president of Collaborative Strategies in Margate, N.J.

Aspiring entrepreneurs and start-up companies should note the league system assists communities in building social capital and quality of life for the location, which goes beyond the traditional value of the land, the resources and markets.

“The league system ties everything together, builds a network and treats a community as a whole instead of in parts and silos,” Lyons says. “This method creates a seamless system that is much more visible to entrepreneurs than what most communities are doing now.”

Lyons says entrepreneurs find there are several service providers to assist them, but that these groups don’t work well together, or often don’t know about one another. These service providers offer different services in different levels of entrepreneurial skill levels.

Lyons says when entrepreneurs are ready to enter the system they are confused about where to do so. Or they don’t know where they need to be in the development of their companies.

The idea behind the league system is to give communities the ability to organize their service organizations so they are highly visible to entrepreneurs. This way, entrepreneurs know where they should be at all times of their development, and understand where they are headed.

“This is important in the new economy because transaction costs are so high that no longer can a company or government afford to operate on their own,” Lyons says. “Networking and creating social capital brings down costs.”

“Across time, San Jose has developed a business support infrastructure that includes both private and public groups,” Walesh notes. She says there are law firms, human resources firms, marketing and communications firms, and real estate firms, among others, that are focused on working with startups to grow their businesses.

Walesh says the San Jose Entrepreneur Center is a partnership with the federal government, the state government and Cisco Systems, Inc., where technology entrepreneurs, or low-tech entrepreneurs, can learn how to write businesses plans and find connections to resources.

Additionally, San Jose features a number of incubators in fields such as technology, software, environmental technology and bioscience. “These are not only low cost spaces to operate in, but also important for the networking that happens between the companies and the advisers, who help companies write their business plans, find markets and partners,” Walesh says.

Macke says networking can be powerful. “This doesn’t have to be in a specific place,” he says. “In a lot of businesses, with the technology today, your management team may live in five different cities. What makes it possibly is when the communities have networking capabilities and support.”

Pieces of the Puzzle in Place

There are several additional elements entrepreneurs should look for in communities that will support their survival. One is strong, highly skilled human capital, where a good education system and appropriate training is available, such as that found in the Silicon Valley.

Walesh notes that San Jose has a special environment for entrepreneurship and innovation that attracts people from around the world to start up businesses in the area. The university system is key to its success because it produces and attracts talented people that undertake research, which helps commercialize and create new technologies.

“This includes Stanford University but also San Jose State University, which produces more engineers than Stanford University, and the University of California-Berkeley combined each year,” Walesh says.

Lyons points out that a research university or college doesn’t always mean that a community will be an entrepreneurial haven. “One study looked at Baltimore,” he says. “It wasn’t enough just to have Johns Hopkins University in the area to support entrepreneurship, because other things were missing. The education institutions have to be there in tandem with other elements.”

The government has to act entrepreneurial as well. “It has to be looking for ways to improve the community and willing to be innovative and to seize those opportunities,” Lyons says. “They should also be open to entrepreneurial thinking.”

San Jose is a perfect example of this element. “We have a culture that is open to people coming from outside to start their own companies, whether from the United States or internationally,” Walesh says.

She believes that is why entrepreneurship activity flourishes in the Silicon Valley and not as much in other communities. “They are closed to new ideas, new people and risk taking,” she says.

Macke concurs about the openness to diversity. “If a company wants to grow an international market, for instance in a rural area, is the community willing to accept people of different colors, orientations and religions?” He says this is important as companies build teams because they want to be able to attract people to a community where they and their families will be comfortable.

Naturally, another element of great importance in entrepreneurial activity is the availability and accessibility of venture capital. “This is not just the money but also access to the people who have successfully started and grown companies over and over again,” Walesh says. “It is the wisdom and experience of serial entrepreneurs, some of whom become venture capitalists themselves and board members and advisers.”

Deborah Markley, co-director of the Center for Rural Entrepreneurship, says start-up companies also want to learn about nontraditional sources of capital. She says to look for community or state revolving loan funds, or a community development financial institution. Also look for a state-sponsored venture capital fund.

Another important factor that assists in fostering an entrepreneurial climate is a critical mass of larger, anchor technology companies. Walesh says a study by the Public Policy Institute of California demonstrated how important large companies are as a source of producing people who begin start-up companies. She notes the study showed that former Sun Microsystems and Hewlett-Packard employees were responsible for hundreds of startups.

Markley also encourages entrepreneurs to look for communities that are creating a culture and environment for entrepreneurs and small businesses. In addition, find out what the corporate tax structure is like for small businesses.

Also note if the business section of the local paper is writing about entrepreneurship or small-business activities. Are there small business organizations in the area, or small- business committees at the local chamber?

Additionally, learn what is happening at the local community college and how effective it is in meeting the needs of small businesses. Are there courses available for you and your employees? Does the local high school have an entrepreneurship program or Junior Achievement club?

“These things say the people in the community are committed to not just encouraging existing businesses, but to creating the next generation of entrepreneurs in those communities,” Markley says.

Entrepreneurs eager to launch the next Amazon.com no longer have to toil away in their garages or basements, or find the majority of their start-up funds from friends and family. There are a plethora of organizations to support all levels of entrepreneurial development, and communities that cater to these needs. These communities understand that job creation comes not only from existing businesses but also from entrepreneurial ventures and small businesses.

For more information about the companies and organizations featured in this article visit:

Center for Research on Entrepreneurship and Enterprise Development, http://creed.louisville.edu

Center for Rural Entrepreneurship, http://www.ruraleship.org

City of San Jose Office of Economic Development, http://www.sjeconomy.com

Boot Camp, Southwest Michigan Style

The Kalamazoo Valley Community College Michigan Technical Center (M-TEC) in Kalamazoo recently wrapped up its inaugural “Boot Camp” for entrepreneurs in February. In the final gathering of four meetings, eight teams of would-be entrepreneurs interacted with chief executive officers and corporate leaders, who acted as presenters and mentors in helping them mold successful business strategies.

The four-week competition ended with a prize of $5,000. Each team put together an executive summary and gave a 10-minute presentation, which were assessed by two panels of judges.

The $5,000 prize went to Reality Check, a telecom audit/resource company. The second place, $2,500 prize went to T.F. Solutions, which described a concept of a company providing information-technology support and services for local businesses. A new Gateway laptop went to third-place winner Kteq Information Technology Solutions LLC, which provides information-technology services to small businesses.

The KVCC M-TEC plans to hold a second Boot Camp. The time frame has not been selected. For more information call James DeHaven at (269) 353-1280.