Keys to an Entrepreneurial Community

Four Factors to Help Keep Our Regional Economies Vibrant

By Jim Mikles

(Excerpted from Insights Magazine)

An old college friend of mine was visiting Chico late last year. As we strolled across campus and through downtown, he mentioned, “I love coming home to this place.”

Ninety percent of his life spent in the SF Bay Area, yet Chico to him still feels like home. I suggested off-handedly he should think about moving back. With the equity in his condo, he and his wife could do pretty well here. Just ask the hundreds of other urban refugees who have done the same thing.

In the months since then, he’s thought about it more seriously than I ever expected. He could telecommute to his job at Fortune 500 for awhile, driving back once of week or so, and his wife could probably land something decent at the university or with local government, but ultimately, he expects, “I’d want to start my own thing.”

More and more, there is a sense that opportunity is available for those with the right stuff willing to take a chance, and that they can set up shop wherever they desire.

A very interesting article in a recent Economist speaks to the phenomenon of the New Nomadism. This is great news for communities who have positive “quality of life” attributes and who want to build momentum from the ground up based on innovative entrepreneurial companies.

As communities wrestling with how to make our regions better places to live and work, we can look to various national thought leaders and a current body of cutting-edge research to see that a four-pronged approach focusing on attitude, alignment, talent and companies can help foster entrepreneurship and improved economic prosperity for ourselves and our children.

A lot of it is pure common sense, but if you look at what’s worked in other places, “The keys to success are not complex or mysterious,” writes Jack Schultz in his book about small town success factors, Boomtown USA: The 7 ½ Keys for Big Success in Small Towns. “Rather, they are grounded in common sense and tried principle. What’s most startling about them is that they are not more commonly adhered to.”

Attitude

In his nationwide study, Schultz identified several community personality types. There are the “Mules,” those so set against change they aren’t open to any possibilities (also known as Cave people: Citizens Against Virtually Everything); the “Moles,” those who fear failure and change so much they constantly talk about investing in the future but would never actually do it; the “Jackals,” who deride others for their ideas but will never try to address a challenge themselves; and the “Eagles,” who remain intent on looking forward, minimizing their weaknesses and capitalizing on their strengths.

Every town has each of these. The question becomes one of which type dominates the debate and action.

Successful entrepreneurs tend to be proactive and forward-looking, and “eagle” communities likewise tend to be more entrepreneurial in their approach to problems.

Entrepreneurial communities will find opportunities where others don’t, they will take calculated risks at the right times to achieve their goals and they will not let fear of failure hinder their progress.

Alignment

Visionary leadership is critical for any region wanting to establish or maintain its standing as a desirable and prosperous place to live and work. Collaborative leadership is that much stronger.

The collaborative model has gained momentum across the nation for communities seeking solutions to complex problems. The fundamental underlying theme of these collaborative initiatives is that to improve any one “issue area” requires an understanding all are interconnected: economic prosperity; education; environment and community vitality.

We all know from experience it’s easier to blow something up than build it. Taking a chance to try something new only happens when there is collaboration, consensus, shared risk and shared credit.

Talent

It is my experience that when venture capitalists or private angel investors screen companies for potential investing, the first thing most of them look at is the team. Who are the people involved with the venture? How smart, passionate, committed, knowledgeable, persuasive and coachable are they?

This “bet on the jockey not the horse” approach to screening companies also applies to communities. Who are the people in the neighborhood, and what does that say about a community’s potential?

A steadfast belief that “human capital” is a community’s most important economic asset is a common factor in regions that have a thriving, entrepreneurial economic culture.

A young “creative class” is exactly the key component that keeps a community vibrant and moving forward, writes Richard Florida in Rise of the Creative Class.

The creative class shares a common ethos that values creativity, individuality, difference, and merit, according to Florida. The Creative Class is “a fast-growing, highly educated, and well-paid segment of the workforce on whose efforts corporate profits and economic growth increasingly depend.”

Florida says the creative class now includes some 38.3 million Americans, roughly 30 percent of the entire U.S. workforce---up from just 10 percent at the turn of the 20th century and less than 20 percent as recently as 1980. He also writes that regions with more members of the creative class are also some of the most affluent and growing.

Members of this class are more likely to start innovative, entrepreneurial companies because they have the energy and the understanding of new technology that is lacking, by and large, in their elder counterparts.

“Most of all, the creative class values real experiences in the real world,” Florida says. “They crave stimulation, not escape. They want to pack their time full of dense, high-quality, multidimensional experiences.”

Consider conversely the changing demographics of the workforce as millions of Baby Boomers are getting ready to retire, many of them in leadership or senior management positions.

Companies

If the next generation of workers is being groomed to take over when Boomers retire, then what kinds of companies are they most apt to be interested in, and what kinds of companies should a region like ours try to help grow or attract where our young adults and our children will be happy to work?

Exciting companies with great growth prospects where individual opinion is valued and workers can pursue their work as part of a team that shares in a company’s success, says James O’Toole, author of New American Workplace.

He characterized these “high-involvement companies” as firms where employees have higher pay and greater benefits and the companies have lower employee turnover, greater worker productivity and a stronger bottom line.

O’Toole argued that in almost all industries, productive, higher-paid workers can more than cover the costs of their salaries and benefits, if they are managed appropriately.

Prosperous regions can also expect to have higher percentages of home grown innovative companies selling products and services to the national and global marketplace.

These types of companies are a particularly potent addition to regional economic mix because they bring dollars into the community from the outside, they tend to create higher wage jobs, and the owners are locally invested. They started a company here because they want to be here. They are motivated to create something special in their own community.

When the entrepreneur sells the company or has an otherwise successful exit, which is the goal of high-growth firms, the wealth generated stays within the community and the entrepreneur often goes on to start more companies, or seed new ones with early stage risk capital.

These wealth-generating events and the entrepreneurial clusters they spur are a recurring pattern we see in other communities with successful entrepreneurial economies.

In places with these successful clusters of innovative companies, a common factor for success was the existence of a network of people, talent, capital and advisors that could help early stage growth companies establish the relationships and find the capital they needed to succeed.

These growth entrepreneurs may start small, but they have the attitudes, skills, products and aspirations to grow something substantial.

The road for these companies is fraught with peril, as is the road for a community tackling big picture economic issues in times of uncertainty.

As for moving forward to develop a more entrepreneurial regional economy, the question is not whether to do it, but to understand what it means and how to do it, and then have the foresight and fortitude to see it through.

Jim Mikles is co-founder of Golden Capital Network, a Chico-based non-profit that catalyzes grass roots entrepreneurship and investing for regional economic growth.