In my work at JumpStart, I hear stories like this a lot: "Our regional economy is declining, but it wasn't always like this. Did you know that [insert name of large, successful company here] was founded here? It still employs thousands of people. Unfortunately, it's been a while since we've had a success like that."
With 14 million Americans out of work today, leaders in hundreds of regions across the country are in this situation. Knowing that all net new job growth in the past 30 years has come from high-growth, entrepreneurial companies, regions want to tap into their entrepreneurial legacies and once again become thriving centers of commerce by spurring the growth of new, technology-based, high-value companies.
In fact, a fellow Huffington Post blogger, Nick Seguin of the Ewing Marion Kauffman Foundation, recently posted a blog titled "Building Entrepreneurial Communities: Lessons From 'Big Omaha,'" which included a section on communities doing just that. He said communities need to focus on their advantages and I agree. But even armed with that thought, the first question a region will face when trying to transform itself is almost paralyzing: "Where do we start?" In many regions, the answer is "We need a plan." So they form committees, hire national experts, conduct a lot of research, and publish a plan. It's a valuable exercise that offers a large number of ancillary benefits. But most often, the plan fails to answer that fundamental question.
Instead, the plan highlights a seemingly obvious conclusion: the region lacks the resources it needs to accelerate company growth in a way that will transform its regional economy. It identifies the need for grant money and related services to establish the viability of commercial concepts now sitting on lab benches or in the heads of scientists or engineers. It notes the absence of the resources to determine the market potential of technologies and commercial concepts. The plan identifies the need for experienced mentors to help first-time entrepreneurs convert concepts into high-potential businesses, and for experienced entrepreneurs to lead startups. It mentions the "Valley of Death" and the lack of risk capital to cross the valley, and then highlights the need for angel investors, venture capital, technical experts, specialized facilities and much more.
Ultimately the plan identifies tens of millions of dollars of required resources for a region that barely can find the funding necessary to perform basic economic development functions. The net result of this overly ambitious, fix-it-all-at-once approach is the plan takes its place on the shelf next to all of the other plans and studies that the region was unable to transform into action. The plan is not practical or actionable -- and nothing happens.
So what is the right approach to initiate the transformation? The answer is clearly defining a high-impact first step; one that generates positive results and paves the way for subsequent investment. Providing regions with a path to this first step is the challenge the Economic Development Administration, the John S. and James L. Knight Foundation, and the Surdna Foundation has given to JumpStart. For about seven years, JumpStart has been working to reinvent Greater Cleveland's economy by supporting high-growth entrepreneurship and now we're applying what we learned to several regions in the Midwest.
Our goal is to help regions take this first step that generates measurable results and catalyzes the development of regional resources supporting entrepreneurship and innovation. We fail if we add one more plan to the shelf. The first point of action will almost always be the creation of a new, fully-funded, operating entity that helps entrepreneurs succeed. But it's not quite that simple. Every region must play to its entrepreneurial strengths if it's going to start and sustain an economic transformation based on high-growth companies.
Because of that, the action plan must be tailored to the opportunities available in the region. There is no cookie-cutter solution for a region's economic woes. It's virtually impossible to replicate an organizational model, whether it's an incubator or a seed fund, that's been successful in another area of the country and expect it to have a significant economic impact on a region if it's not what the region needs. The success and ripple effect of this organization is dependent on the region and its current economic landscape; things like population density, the number of higher educational institutions, existing entrepreneurial activity, active funders, government involvement, supply chain opportunities and much more. There are a number of ways to sort through these traits, but here are the first five, specific questions a region's leadership must answer:
- What are your region's most promising sources of innovation?
- Where are there gaps in the resources (capital, expertise, facilities, etc.) necessary to transform these innovations into high value businesses?
- Can your region realistically fill one or more of these gaps?
- By filling one or more of these gaps, can your region generate tangible evidence of opportunity and success?
- Can the region build on this success to attract complimentary resources?
By getting started on this thought process, regional leaders can identify their unique first step toward economic transformation.
This blog was originally written for Huffington Post
Mike Mozenter is President of JumpStart Community Advisors. He has over 20 years of experience working with software, technology and services companies in a variety of capacities, with a focus on technology commercialization, strategy development, financing, and business development. He has a J.D. and a B.A in Science Policy from Duke University and a Masters of Management from the J. L. Kellogg School of Management at Northwestern University.