Supporting Entrepreneurial Communities in Appalachia
1. Erik R. Pages
EntreWorks Consulting
Appalachian Funders Network
March 28, 2012
2. Rural Entrepreneurs: Slow and Steady
◦ What is Impeding Growth?
How can we help spur growth?
What else is needed?
Linkages to Leading Sectors and Clusters
Questions??
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Consulting March 28, 2012 2
3. The Facts!!! Entrepreneurs are your future
engines of prosperity.
You Have No Choice!! Can’t keep “waiting for
Superman.”
Entrepreneurs are the backbone of rural
America
◦ At least 11% of US adults are trying to start a
business
◦ Up to 1/3 of rural workers may be self-employed
by 2015
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Consulting March 28, 2012 3
4. Rural start-ups are prevalent and do not look
much different from start-ups located in other
parts of the US.
Most firms – both urban and rural – start small
and stay small.
◦ Rural firms are more persistent. They tend to have
better survival rates than other firms.
◦ But, survival does not equal prosperity. These persistent
firms tend to grow slower, create fewer jobs, and
generate less spin-off benefits than their urban
counterparts.
Rural firms that do achieve fast growth tend to
lose any distinctive characteristics.
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Consulting March 28, 2012 4
5. Slower rural growth rates seem to result
from:
◦ A mix of natural competitive disadvantages
E.g., Smaller home markets
◦ Concentration in lower growth sectors
◦ More restricted access to business growth services
Sophisticated coaching/mentoring/consulting
Diverse equity capital pools
Diverse Peer Networks
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Consulting March 28, 2012 5
6. Typical Services: Growth Services:
◦ Coach Start-Ups ◦ Expand Markets (e.g.
exports)
◦ Develop Biz Plans
◦ Stimulate growth sectors
◦ Make Traditional Loans (e.g. clusters)
◦ Help Lower Costs ◦ Link to Global Networks
Incubators (e.g. accelerators)
Tax Credits ◦ Coaching/Mentoring
Training Subsidies ◦ Provide equity finance
(e.g. CDFIs, angels, etc.)
◦ Business Model
Innovation
What We Do Now: What We Should Do:
Incubate! Accelerate!
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Consulting March 28, 2012 6
7. Effective acceleration and growth efforts require
similar investments in capacity building that:
◦ Grow More Ambitious Entrepreneurs
◦ Provide Linkages to Growth Opportunities
◦ Provide diverse sources of capital
◦ Develop more local talent—as entrepreneurs and as
employees.
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Consulting March 28, 2012 7
11. ◦ Coworking
Spaces
A New 3rd
Place?
◦ http://wiki.coworking.i
nfo/w/page/42355006
/Rural%20Coworking
◦ www.loosecubes.com
◦ www.opendesks.com
2011 EntreWorks Consulting December 7, 2011
12. Develop and exploit new tools for financing
◦ Angel funds
◦ CDFIs
◦ Crowdfunding
Better use of underutilized capital pools
◦ Revolving Loan Funds (EDA, USDA)
◦ SBA 504 Loans
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Consulting March 28, 2012 12
13. Urban regions get a larger share of 504 loans; Rural areas
have higher average loan per number of firms in the
region
There are still capital deserts
2008 data Urban Micro Rural
Total number of counties 1,100 688 1,359
Counties with 504 loans 738 360 267
% of all counties 67% 52.30% 19.70%
# of firms in active counties (not
# of loans) 4,795,270 406,573 134,720
% of firms in active counties 93% 67% 40%
Total 504 loan $ million $4,549.0 $441.4 $210.4
Average 504 loan/firm $949 $1,086 $1,562
14.
15.
16. 2011 Southeast Angel Deals: HALO Report
19.00%
30.20% Health Care
Internet
4.80%
Software (Non-Internet/Mobile)
6.30% Mobile/Telecom
Industrial
7.90% Consumer Products/Services
Other
23.80%
7.90%
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Consulting March 28, 2012 16
17. Link current clusters to business
opportunities with local anchors
◦ Food, Energy, Health Care Services
Workforce Development as Priority Focus for
Clusters
Think More Broadly about Sectors
Build Rural to Urban Connections
◦ Kansas Opportunity Innovation Network
(www.innovatekansas.org)
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18. Entrepreneursthrive within
systems, networks, and
interconnected webs
◦ But, these systems don’t happen overnight
◦ And they are regional, national, and global in scope:
THINK BIG!!
Capacity building begins at home
◦ But, it can’t stop at home!
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Consulting March 28, 2012 18
19. For More Information:
Erik R. Pages
EntreWorks Consulting
703-237-2506
Epages@entreworks.net
www.entreworks.net
http://www.entreworks.net/blog
Newsletter Sign-Up:
http://www.entreworks.net/Newsletter.php
Editor's Notes
So, hopefully I’ve convinced you that entrepreneurs matter. That’s the easy part. The hard part is how to build an entrepreneur-friendly community. It requires that we rethink how we do ED with a focus on the following kinds of big picture strategies and approaches. It is about building an ecosystem where it is easy for talent individuals to start, grow and expand their ventures.
DATA from EMSISince 2005, more than 4 million new non-covered jobs have emerged. Now make up 23% of workforce—they were 21% in 2005.
Work with NADO—scale of exisitng fundsHUD Loan Funds--$2.2 billionEDA RLFs-$850 millionUSDA IRP--$700 million in lending SBA 504—half of 504s reported lending $30 billion outstanding in 66,000 businesses (2009)CDFIs-$4.6 billion under mgmt.These funds are essential here—after bank loans, public loan funds were 2nd biggest source of small biz lending in Appalachia
This chart comes from a new report that looks at angel investing across the US. All of the states here today are in the Southeast which accounted for 20.1% of angel dollars last year. Here’s a breakdown of the industries receiving investments.This pattern is pretty similar to national pattern—although Southeast had lower in industrials and food/beverage than other regions. Within health care, medical devices was by far biggest sector.
