Think Like Cleveland: 6 Ingredients to Boosting Business Growth
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A free MOOC, or massive open online course "Beyond Silicon Valley: Growing Entrepreneurship in Transitioning Economies" launches through Coursera this week, starting today, April 28, using Cleveland as a funding case study. Come back to Entrepreneur.com as we feature additional interviews with experts and instructors connected to the six-week course.
Silicon Valley is its own kind of beast with countless resources for startups to turn when they need funding. But most startup communities around the country and world don't have anywhere near the same access to private capital. What does that mean for entrepreneurs desperate to get funding or struggling communities looking to strengthen the role of entrepreneurship in their economy?
A decade ago, Cleveland was in this very position. In an Entrepreneur ranking of startup-friendly cities in 2002, Cleveland came in 61 out of 61. At the time, entrepreneurs had little by way of funding options and the startup economy was suffering.
But as the need for improvement became more palpable, things started to change. It didn't come from just one place and it didn't happen all at once. "A turn around of an economy doesn't happen overnight," says Dorothy Baunach, chief executive officer at OsteoSymbionics LLC and former president and chief executive officer of the Northeast Ohio Technology Coalition. "Communities shouldn’t get discouraged. They should think big and start small."
Baunach was one of the people who pushed to create Jumpstart, a nonprofit organization in Cleveland focused on helping idea-stage tech companies get access to funds and resources in order to grow. Today, Jumpstart not only helps Cleveland-based entrepreneurs get their businesses funded and supported, it also advises other communities around the country, says Jumpstart chief executive officer, Ray Leach, working with 18 different cities on how they too can create their own thriving entrepreneurial economies. "The fundamentals of what it takes for young companies to grow in the U.S. are pretty consistent," says Leach.
What are those fundamentals? Here are six key ingredients that helped propel Cleveland forward – and which might help bridge the gaps in your community.
1. Innovators. Many people argue about what needs to come first in order to create an entrepreneurial community — ideas or capital — but it's a chicken-and-egg debate, says Brad Whitehead, president of the Fund For Our Economic Future, a program that pools funding for entrepreneurs from various philanthropic organizations across Northeast Ohio.
Communities can't create opportunities for investment if there aren't enough people generating great ideas. This often starts with research institutions in the area that are working on new tech developments, for example. Whether you are an entrepreneur or community leader, tapping into knowledge and resources available at local universities is a key way to generate innovative ideas that attract investors.
2. Advocates. Are there businesses, trade organizations or policymakers in your area who can be more vocal about the need for a thriving entrepreneurial economy? Could your chamber of commerce office be doing more to organize events for entrepreneurs? These organizations can create networking opportunities and help lobby for more financial support. "There's no cookbook for reinventing an economy," says Baunach. "Once you get everyone rallying in the same direction, it really does gain power."
3. Storytellers. When The Cleveland Plain Dealer and the radio program Ideastream collaborated on a series of stories on Cleveland’s economic challenge, called the "Quiet Crisis" -- people started paying attention, says Whitehead. "This caused a lot of anguish in the community, not only among civic leadership," he says. "It went out to the millions of Northeast Ohio residents. That really provoked a lot of soul searching."
While traditional media is still powerful, communities businesses and organizations must understand that they must also tell their community’s story. Through social media, blogs and outreach, these groups can explain the need for change and document progress as it happens.
4. Education and direction. Giving guidance to young people and budding entrepreneurs to pursue their ideas can help build new businesses from the ground up, says Baunach. In Northeast Ohio, this came in the form of universities, local groups and foundations getting involved, providing resources like mentorship, business plan competitions and student-lead investment funds. For example, The Fund For Our Economic Future, which brings together the efforts of non-profits across the region was created in 2002 when this need for a groundswell of change became clear. Members include foundations focused on economic development and entrepreneurship as well as organizations focused on early childhood development or particular neighborhoods.
Creating the talent that leads to innovative ideas is key. There are many ways to do this. You can approach libraries and schools about a monthly entrepreneurial event series, for example. "Talent and capital are clearly interconnected," says Leach. The more talent a community can generate, the greater its likelihood of attracting capital.
5. Sources of risk capital. Getting funding during the early stages of a startup is critical, but also tough because it's one of the riskiest times to invest in a business. This type of funding can come from angel investors, micro-loan funds, pre-seed and seed funds, venture capital and state or federal funding. In Northeast Ohio, the Third Frontier Program, which started in 2002, was one key way that the government got involved in funding startups. The program offered financial support to startups in key growth sectors for the region.
Another source of early-stage funding in Northeast Ohio has been Jumpstart, which launched in 2004. Focused on venture development, the nonprofit offered pre-seed funding and brought together networks of angel investors who could help fund projects. "[Jumpstart] was created by the business and philanthropic community with the sense that there wasn't an organization that had the responsibility and competency to help idea-stage tech companies get the things they need to advance," says Leach.
6. Resource providers. Seed funding is just one piece of the puzzle. When you have the money to go forward, what exactly do you do? Another key role Jumpstart has played is offering resources and mentorship to startups so they make the right decisions. Jumpstart also helps startups connect with venture capital firms that could provide them with later funding.
"It really comes down to this combination of funding and mentoring — the two key areas high-growth startups need," says Michael Goldberg, visiting assistant professor of design and innovation at Case Western Reserve University's Weatherhead School of Management where he created an online course that uses Cleveland as a model for other communities.
But if you're in a community without these kinds of organizations in place, what do you do? Help to create them. "You want to advocate within your community, government and business leadership," says Goldberg. "You are advocating for support from businesses who have made it."