Ideas, programs and resources to boost local entrepreneurship
By Judith Sears
Cheering on business startups is about as American as apple pie, and with good reason. Studies by The Kauffman Foundation, among others, have shown that new businesses account for nearly all net new job creation and almost 20 percent of gross job creation.
Of course, community banks are the primary economic engines behind small businesses on Main Street America, funding more than 60 percent of all small-business lending. For communities wanting to jump-start extra entrepreneurial activity, the questions are, what creates and sustains a healthy entrepreneurial ecosystem, and what additional role can community banks play?
That question is as important as ever for all community banks seeking to generate greater economic activity, job opportunities and general quality of life—for both people today and for the next generations—within the cities, towns and commercial districts they serve.
Tim Williamson, founder and CEO of Idea Village, a startup incubator in New Orleans, goes further by arguing that a strong foundation of thriving entrepreneurs is the most important resource for any local community in a variety of ways beyond job creation and economic activity.
“The vast majority of startups commit suicide, rather than any external thing being the reason they failed.”
—Susan Amat, small-business incubator expert
“When you’re looking at key issues in the community, bring entrepreneurs to the table and ask them to solve it—because that’s who solves things,” Williamson insists. “This is a mindset shift for communities. It’s not about, ‘small business needs help.’ Entrepreneurs are the ones who will transform the community.”
Clearly, community banks aren’t angel investors. However, capital isn’t the only or even primary need of startups, various business incubator experts agree. Just as often, they need education, advice, mentoring, introductions and relationships. Some startups may be the brainchild of an engineers with a feature-rich product, but with no idea how to market it or even if a market exists for their gee-whiz product. Some entrepreneurs have never raised capital. Some just need introductions.
In short, firsthand advice and experience are crucial for small-business startups.
“The vast majority of startups commit suicide, rather than any external thing being the reason they failed,” observes Susan Amat, founder and CEO of Venture Hive, a small-business incubator in Miami. “They’re not managed well. That’s why we focus on education. We focus on building the people up so they can execute.”
Entrepreneurial research and grassroots business startup programs indicate that successful entrepreneurial communities often have the following three attributes:
1. Diversity of People and Ideas. Successful entrepreneurial communities promote environments where a diversity of people and ideas can thrive to create new opportunities for businesses.
2. Entrepreneurial Resources. Successful entrepreneurial communities have mentoring and coaching programs and regular business workshops and seminars that support business startups.
3. Networking Opportunities. Successful entrepreneurial communities allow new small-business owners to develop productive working peer relationships that go beyond social receptions.
Many community banks are well positioned to provide educational opportunities for and foster relationships with new and aspiring entrepreneurs. In addition to their financial expertise, the numerous strong relationships community banks have with key community players equip them to be catalysts for professional business collaboration and networking. Community banks are ideal at pulling together the people, needs, resources and problem solvers to address the knowledge and recourse gaps budding small-business owners have.
“The banks, because of their amazing connections to small businesses in their areas, could create a powerful set of educational tools to help small businesses make better decisions,” says Will Silverman, director of The Launch Pad, a small-business startup incubator at the University of Miami.
Of course, some community banks already engage in educational outreach to small-business owners. Many do it routinely, if not reflexively, as part of their diverse everyday dealings, though perhaps informally and on a case-by-case basis. But to really give entrepreneurial activity and job creation an extra boost, community banks could formally and conspicuously sponsor business startup educational forums more purposefully, possibly adopting an ongoing theme of supporting businesses far beyond their lending needs. Some could even create a small-business development program or educational curriculum.
For example, Silverman says community banks could partner with a local small-business owner to present a forum on cash management for young entrepreneurs and business owners (or aspiring ones). A bank representative would teach commercial money management, while the business owner could relate his or her real-world operating experience. Similar workshops or programs could be developed to provide marketing, IT and a host of other topics business owners need to learn, and sometimes learn quickly.
1. Keep an updated calendar of organizational meetings and networking events on your bank’s website.
2. Identify qualified, willing startup mentors.
3. Partner with your bank’s various customers to form a professional network or program to present educational content targeting startups.
4. Sponsor networking events to showcase startups and introduce them to mentors.
5. Invite community members and entrepreneurs to exploratory meetings about important communitywide economic development issues.
A community bank’s main function could be to lead the program and facilitate connections, not to provide all of the expertise such a program might deliver, business development academics and advisors point out.
By leading the way in providing such formalized entrepreneurial programs, a community bank could raise its own profile as a resource for entrepreneurs and small businesses. “This is an opportunity to create goodwill for the bank—some name recognition, some promotion for their clients and increased likelihood of successful startups,” says Silverman.
Mentoring sits at the intersection of entrepreneurs’ knowledge and relationship needs, business development experts say. Community banks can leverage their contacts to identify potential mentors and make introductions. Such matchmaking could be a regular activity at educational forums.
On a more formal basis, for example, The Launch Pad program holds regular meetings in which entrepreneurs “pitch” their business ideas to approximately 45 dedicated, volunteer mentors. The entrepreneurs describe their startup as well as the kind of relationship they’re looking for. Mentors, who sign agreements not to solicit for business or invest in the companies they’re advising, select the entrepreneurs whom they think they can help.
“Entrepreneurs are the ones who will transform the community.”
—Tim Williamson, small-business incubator expert
These gatherings of local business people could also address bigger economic development issues. With their knowledge of local businesses and resources, community bankers are well equipped to help communities identify their most important problems. A first step would be to hold a series of meetings with community and business leaders about community issues and see what networks result.
“What entrepreneurs do is bring diverse networks together,” Williamson points out.
In New Orleans, for example, Idea Village has brought together a broad network of universities, government and business people to address one issue: how to live with water. “We created a convening platform where we brought in all the stakeholders and got them thinking about the challenge and new initiatives around water management,” Williamson says. So far, this has resulted in a $3 million startup that is developing a method of carbon credit transfers that will fund coastal restoration around the Big Easy.
Perhaps the most important quality community banks can contribute to a healthy startup environment is their genuine concern for their communities. According to Williamson, stakeholders who care about the community are critical in developing a healthy entrepreneurial economy. “We started Idea Village to make New Orleans a better place,” he says. “Grassroots programs need to be started by people who really care about the city.”
For community banks that have a direct stake in a thriving local economy, their customers are their friends and neighbors. Their “entrepreneurial ecosystem” is called home. Maybe it’s time to gather your colleagues, customers and contacts to explore what additional entrepreneurial successes you can spark together.
1. The Idea Village, a nonprofit in New Orleans that runs workshops, mentoring and peer-to-peer networks for entrepreneurs.
2. The Kauffman Foundation, a nonprofit organization in Kansas City, Mo., that provides funding grants and education to new and aspiring entrepreneurs.
3. Venture Hive, a for-profit company in Miami that offers institutions and communities training programs, mentorships and grants for startup businesses.
4. Innovation Pavilion, a for-profit company in Centennial, Colo., that, in addition to providing venture capital funding, provides work spaces and educational programs for new and young businesses.
5. The Launch Pad, a nonprofit at the Toppel Career Center at the University of Miami, in Miami, Fla., that organizes educational events such as workshops and networking sessions. The group supports coaches, local business leaders and entrepreneurs who provide free consultation services.
6. AdvantageWest Economic Development Group, chartered by the North Carolina General Assembly, is a nonprofit program that teaches best practices in fostering entrepreneurship. Its program helps communities develop and tap local resources for supporting small-business development.
7. The Innovation Center, a small-business incubator in Wilkes-Barre, Pa., managed by the Greater Wilkes-Barre Chamber of Business and Industry. The center’s services include a mentorship program as well as ongoing business seminars.
Judith Sears is a freelance writer in Colorado.