The World Bank recently published a 287-page paper on entrepreneurship training and education programs around the world. It is a review of the many efforts working to improve the number and quality of entrepreneurs from Viet Nam to El Salvador. A few pages in, however, you get the sense that there is a heightened awareness of the value of entrepreneurs:
“There is a growing interest in the role that entrepreneurship can play as a catalyst to achieve economic and social development objectives, including growth, innovation, employment, and equity.”
Need I say more?
Turns out, we need entrepreneurs, now more than ever. And from everywhere.
Let’s be clear about what we mean. This is not about promulgating entrepreneurs with an emphasis on value-extraction and short term financial profit to the exclusion of all other considerations. World leaders seem to be coming to terms with notions of responsibility, sustainability, and stewardship, (but that’s another blog post…) The point is, we need to support entrepreneurs who are improving communities.
“Entrepreneur” is from the French, and it derives from entreprendre ‘to undertake’ or, ‘to assume the risk.’
It is only very recently that we associate entrepreneur with business. It really means to step up, take it on, shoulder the burden, accept the challenge, lead. Sometimes the challenge is an obvious need – we say, “a gap in the marketplace” – but sometimes it is a community ill, something that needs someone to step up and take it on. It is often something everyone else sees as unchangeable, but the entrepreneur sees it as malleable, fixable – an opportunity.
One thing is certain, entrepreneurs are catalysts for communities, and without them, we’re in trouble.
Fostering an entrepreneurial culture is a critical component for successful, resilient, strong communities. Without the force of ideas, the determination of entrepreneurs, and the outcomes of enterprise, communities have no real engines for solving their own problems, generating innovation, and sharing wealth. An entrepreneurial culture not only nurtures existing entrepreneurs but nudges new ones into existence.
So, what feeds entrepreneurs? What attracts a wide variety, helping plant them across a community in the local soil like so many colored seeds?
I know a market is important, and talent and mentors are key. Sure. But people with ideas need early support, like stakes for young trees, or greenhouses for tender plants. Even if you are a “serial entrepreneur” everyone started as a first-time entrepreneur at some point. And every single idea, solution, invention that we know of had some kind of financing behind it. Money doesn’t guarantee a good idea, but I can guarantee that a great idea goes nowhere without money.
“Angel” funding is hard to come by, and venture capital is scarcer still. You can read about the few successes in the papers, like unusual animals you hear about and rarely see, but the vast majority of businesses are self-funded (savings account, a personal loan, a second mortgage, or the 401K. Ten percent of businesses will use a personal credit card). Banks rarely loan to start-ups.
So, what’s a city to do that wants to foster a strong entrepreneurial culture? Or, actually attract entrepreneurs? Or, more challenging yet, create them from populations or areas where their greatest identifying feature is that they’re under-served? The World Bank is working out what programs work well to help with some of this, but I contend that it is money that will attract, foster, and strengthen entrepreneurs. Nothing says “Grow here” than ready capital, community backing, and shared risk.
We’ve got an opportunity in this country to shape entrepreneurial ecosystems as a result of the changes in finance law. Intrastate laws are spreading across the country such that by 2020 I predict there will be one in every state. The new JOBS Act change in Reg A finally announced last week enabling corporations to offer securities across the country (interstate) to ordinary citizens will also free up capital for enterprise development.
This money is community capital. It will come from community members who aren’t defined as holding any other class title such as “wealthy”, “accredited” or “sophisticated.” The inclusion of this new “investor class”, (the 99%) has opened up opportunities for local economic and community development, but only if they realize their power, and open up their checkbooks.
The citizens of this country now hold the key to the growth of their community’s entrepreneurial ecosystems, and therefore, the key to the health of their local economies.
About 60 percent of the private-sector net new jobs are from existing establishments and about 40 percent from the churn of startups minus closures in the last two decades (Bureau of Labor Statistics, Business Employment Dynamics).
“A dynamic economy is one that produces high rates of churn among firms and high rates of economic growth.” (SBA Small Business Facts, May, 2012)