Tracking Business Dynamism and Entrepreneurship in Your

Community

ERIK R. PAGES, PH.D.ENTREWORKS CONSULTING

DDAA PROFESSIONAL DEVELOPMENT SEMINARCHARLESTON, WV

JULY 31, 2019

• The Basics (1): What is a Small Business? Who is an Entrepreneur?

• The Basics (2): The Role of the Eco-System

• Building the Eco-System: What are Seeking to Do?

• What Data Can We Track?

• How Can We Track It?

• Exercise: A Quick Local Ecosystem Snapshot

Today’s Presentation

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Who is the Entrepreneur?

• A person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk

• A key driver in our economy

• Entrepreneurs and their ventures account for majority of net new jobs and innovations

• A dynamic force for change

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•Self-Employed: Account for vast majority of new

businesses

•Lifestyle Business: Goal is self-employment—often

refers to family-

owned business (“Mom & Pop”)

•High Growth Entrepreneur: Seeks fast growth for

company

Entrepreneurial Businesses: Types of Firms

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Employers vs. Non-Employers

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• All firms start small, most remain small

• Most start with limited capital

• Few Firms enter the high-growth entrepreneurial phase

• 1-5% of all firms depending on definition

• As firm grows, needs and goals evolve

• Transition from desire for independence/economic well-being to building a world-class company

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Entrepreneurs vs. Small Business

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• As firms grow, needs change

• Equity vs. Debt Capital

• Intense need for Talent

• New Business Models Emerge

• Sophisticated Coaching/Mentoring

• Fast-growth firms exist in all sectors

• Small Businesses tend to concentrate in service and retail

Entrepreneurs vs. Small Business (2)

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Small Business vs. Entrepreneur Policy

• Quantity

• Firms

• Self-Employment/ SMEs

• Support

• Quality

• Individuals

• High Growth Firms

• Enable

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• Small Business Policy • Entrepreneur Policy

• Business Attraction (“The Buffalo Hunt”)

• Traditional ED Role

• Business Retention

• Business Growth

• Our Topic Today!!

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Supporting Entreprneurs: Rethinking Economic Development’s Three-Legged Stool

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Creating Jobs: What are We Trying to Do?

START: Spur New E's

INFORM: Train "Better"

E's

GROW: Build "Better"

Businesses

PROSPER: Create

Wealth & Jobs

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What’s the Goal? Innovation Ecosystems: Pick A Model. . .

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Ecosystems as Pathways

The Big Picture: Keys to Ecosystem Building

• Entrepreneur Focused: Meeting entrepreneurs where they are; responsive to their demand

• Pipeline Approach: Wide and deep mouth of the pipeline; Process for moving through the pipeline

• Not Another Program: Holistic; interconnected

• Collaboration among Resource Providers: Offers “no wrong door” and leads to “hard referrals”

• Hub: Someone making Connections; “Network Weaver”

• Regionally Asset-Based: Connected to Community and Regional Assets

(Source: Deborah Markley, RUPRI Center for Rural Entrepreneurship)July 2019 14

• Supportive Community Culture

• Easy Access to Technical Assistance & Training

• Capital

• Access to Talent

• Access to Networks

Inside the Ecosystem: What Do Entrepreneurs Need?

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• Effective entrepreneurship support helps:

• INVEST: Provide diverse sources of capital

• SPUR AMBITION: Grow More Ambitious Entrepreneurs

• LINK: Provide Networks and Linkages to Growth Opportunities

• GROOM: Develop more local talent—as entrepreneurs and as employees.

How to Get There . . . .

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The Kauffman Policy Map

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Turning to Data and Analysis . . . • It’s tough to track innovation and

entrepreneurship

• Data is old and hard to access

• Data sources for local level are limited

• Plus . . .

• Issues of Attribution

• Issues of Timing

• Issues of Impact

• Limited Prospects for Dialogue

• Will Policymakers “get” a complicated story?

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What do Current Measures Assess?

• Seek to Assess:

• Business Dynamism

• Investment Inputs

• Ideas & Innovation

• Quality Human Capital & Productivity

• Digital Connectivity

• Cost of Doing Business

• Idiosyncratic Issues

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Some Sample Sources for Data

• Business Dynamism

• www.youreconomy.org

• INC. 5000: https://www.inc.com/inc5000/index.html

• Investment Inputs

• PWC MoneyTree: https://www.pwc.com/us/en/industries/technology/moneytree.html

• ACA HALO Report: https://angelresourceinstitute.org/

• Ideas and Innovation

• U.S. Patent and Trademark Office (http://patft.uspto.gov)

• NSF Indicators: https://www.nsf.gov/statistics/2018/nsb20181/

• University Tech Transfer: www.autm.net

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More Sample Sources• Quality Human Capital/Talent

• Education Attainment: US Census Bureau

• https://www.census.gov/topics/education/educational-attainment.html

• NSF STEM Education: https://nsf.gov/nsb/sei/edTool/

• Tech Employment (CompTIA): https://www.cyberstates.org/

• Digital Connectivity

• Fixed Broadband: https://broadbandmap.fcc.gov/#/

• Mobile Broadband: https://broadbandmap.fcc.gov/#/

• Cost of Doing Business

• Tax Foundation: https://taxfoundation.org/publications/state-business-tax-climate-index/

• US Chamber-State Legal Climate: https://www.instituteforlegalreform.com/states

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DIY: Building Your Own Data Sources

• Quantitative Data alone is insufficient

• Especially at Local Level

• Build your own sources of local data?

• Surveys

• Focus Groups

• Use this information to supplement outside/hard data

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Other Tools and Resources

• Stats America (Innovation 2.0): http://www.statsamerica.org/ii2/Default.aspx

• Kauffman Index of Entrepreneurial Activity: https://indicators.kauffman.org/

• Milken Institute Best Performing Cities: https://www.milkeninstitute.org/reports/best-performing-cities-2018-where-americas-jobs-are-created

• Community Indicators Consortium: https://communityindicators.net/

• World Bank: www.doingbusiness.org

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Some Excellent State/Local Reports and Studies

• Silicon Valley Index: https://jointventure.org/publications/silicon-valley-index

• Illinois Innovation Index: https://www.istcoalition.org/data/index/

• Michigan Entrepreneurship Scorecard: https://www.sbam.org/Portals/0/ScoreCard2019_FINALforWeb_1.pdf

• NC Rural Center: https://www.ncruralcenter.org/wp-content/uploads/2019/05/RC-1910_Small-Business-Dynamism_5-7.pdf

• Walton Foundation-”Most Dynamic Micropolitans:” https://www.waltonfamilyfoundation.org/learning/most-dynamic-micropolitans

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Business Dynamism: A Deeper Dive

POTENTIAL METRICS

• START

• Number of new business starts

• INFORM

• Number of trainees

• GROW

• Average Firm Growth

• PROSPER

• Jobs Created by New Firms

OUR LOGIC MODEL

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http://arceco.creconline.org

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Data Dashboard• Startups: Tracks new

establishments, i.e. companies that reported employment in 2016 and/or 2017, but not earlier. This label intends to capture startup companies with at least 1 year of activity.

• Stage 2 Businesses: This category uses a classification scheme first developed by the Edward Lowe Foundation. Stage 2 firms are those establishments that employ anywhere from 10 to 99 people.

• High Growth Businesses: Refers to establishments that have 3 or more employees in 2013 and their employment grew by 75% or more between 2013 and 2017.

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Our Exercise

• Select a County for Analysis (www.arc.gov/ecosystems)

• Ecosystem Snapshot: Key Questions

• How is County Performing on Key Metrics?

• How does it Compare to Others?

• Does the Resource Inventory Add any Insights?

• How Would You Interpret the Results?

• What’s Missing?

• What Else Would You Like to Know?

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Additional Reading

• David Audretsch: Everything in its Place: Entrepreneurship and the Strategic Management of Cities, Regions and States (2015)

• Steve Blank and Bob Dorf, The Start-Up Owner’s Manual, 2012.

• Brad Feld, Start-Up Communities, 2012.

• Victor Hwang and Greg Horowitt, The Rain Forest: The Secret to Building the Next Silicon Valley, 2013.

• Kauffman Foundation, Ecosystem Playbook, 2019.

• Maria Meyers/Kate Hodel, Beyond Collisions: How to Build your Entrepreneurial Infrastructure, 2018.

• Erik R. Pages et. al., Entrepreneurial Ecosystems in Appalachia, 2019. (www.arc.gov/ecosystems)

• Eric Ries, The Lean Start-Up, 2012.

• Center for Rural Entrepreneurship, Energizing Entrepreneurial Communities, 2014.

• Michael Shuman, The Small-Mart Revolution (2009).

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Thanks!!

• For More Information:

Erik R. Pages

EntreWorks Consulting

703-237-2506

Epages@entreworks.net

• www.entreworks.net

• www.entreworks.net/blog

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Back Up Slides: As Needed

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1) Local is Good

• More Jobs

• Less Poverty

2) Smaller is Better

• Small Firms > Large Firms

And it’s about Home-Grown Innovators: Small & Local is Good!

Source: Atlanta Fed (Rupasingha, 2013)

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That’s Where the Jobs Are!

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How to Get Entrepreneurial and Inclusive!

• The Ingredients

• Self-Belief

• Access to Ideas

• Relevant Skills

• A Playing Field for Innovators

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Rethinking Economic Development: “People are the New Companies”

What Do Entrepreneurs Want? Key Location Factors

FOR CORPORATE LEADERS FOR HIGH-GROWTH ENTREPRENEURS

• Highway Accessibility

• Labor Costs

• Access to Skilled Labor

• Quality of Life

• Tax Exemptions

• Occupancy/Construction Costs

• Proximity to Major Markets

• Corporate Tax Range

• State/Local Incentives

• Available Land

• Source: Area Development, Corporate Executive Survey, 2018.

• Personal Factors & Quality of Life

• Residence Location is Key Factor

• Access to Talent

• Access to Customers & Suppliers

• Tax Burden or Biz-Friendly Regulations Rarely Cited

• Source: Endeavor Insight, “What Do the Best Entrepreneurs Want in a City?” February 2014.

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