Why Entrepreneurship is the Key to Our Region’s Success
If you’ve been reading the papers, watching local news, or listening to our local leadership then you have undoubtably heard a rise in the occurrence of the word Entrepreneurship.
For decades, this word has commonly been used by economic development, city officials, and state government officials in blanket statements such as, “Entrepreneurs are the backbone of this country.”
For a very long time I would get frustrated when I heard politicians say this phrase to me. It seemed like their eyes glossed over from repeating it in a monotone voice for the millionth time. I saw it as a statement they all said so they could seem to support small business and Entrepreneurs while still voting in ways that actually hindered innovation.
Then a close friend provided me with a hard truth I should have considered long ago. It was such an obvious and simple point that changed my own perspective and approach to growing Entrepreneurship in our region.
He simply stated, “They don’t know. That is your world, not theirs.”
He was absolutely right. I’ve expected someone from an entirely different world (and we are from different worlds!) to immediately grasp my Entrepreneurial language and culture. I expected them to understand how innovation thrives, and what it would mean to our region without sharing any data, numbers, or helping them understand why other regions have succeeded in embracing innovation.
The pandemic has forced our region to look to new approaches for economic growth. The opportunity of remote workers, a shifting workforce migration, and the fearful reality that our own economy is still very fragile has opened the doors to new ideas.
Now it is time to truly embrace Entrepreneurship and the innovation economy in or region.
And here is why we should.
Why does Entrepreneurship Matter for Our Region?
For the last few years, I’ve had a lot of opportunities to chat with individuals from across the state that are focused on industrial recruitment and economic development. I’ve been asking them all the same question:
“If everyone knows that recruiting factories and large industrial opportunities rarely succeed, and when they do the payoff is a fraction of what it used to be, why do we still focus 100% of our energy and budgets on this?”
The overwhelming response is simple. A general playbook has been developed for this style of recruiting. When the playbook works, everyone celebrates it. If it doesn’t work, we all make excuses about why the known process isn’t successful:
“There’s not enough flat land.”
“We don’t have the workforce.”
“The opioid epidemic really hurts our area.”
“There’s not enough parking.”
“Bigger cities always out bid us.”
“No one wants to live near an X”
There is a natural tendency to stick with the program that has been used for generations. It is also understandable to blame the rules of the game when we are not winning.
But at some point, we have to stop and realize we are playing the wrong game.
Entrepreneurship vs Traditional Industrial Recruitment
The Factory Impact:
Let’s say our region is successful in recruiting a new factory to be built. A smaller mid-sized factory may create 100 jobs that pay $15 per hour or $28,800 per year to each employee.
Estimates show 30% (or $8,640) of this is disposable income each employee could spend in our local economy.
At 100 employees, this means $3.1M in salaries are created with a potential of $936,000 in disposable income injected into our local economy. Clearly, this is a huge win for our region!
The Startup Impact:
When we look at Startups, or early-stage companies that sell products/services to the national or global market, we gain a very different outcome.
A great example to illustrate the difference is an existing local tech Startup in Johnson City that grew from a spare bedroom to a company with over 10 people in 4 years. Their average pay ranges from $50,000 to $100,00.
This Startup results in an estimated $1.1M in salaries created which results in a potential $330,000 of disposable income that can be injected into our local economy. The average employee has $22,500 of disposable income to spend in our local economy.
Pause for a moment and think about these numbers…
Understanding the Difference:
A single Startup employee provides almost 3x the economic growth to our region than a traditional factory employee.
This does not mean factory jobs are not needed! This is only a statement for perspective.
Now imagine if we had 10 Startups at a similar early stage. We would see $11M in salaries added and $3.3M in disposable income added to our region. And Startups aren’t limited to 10 employees. They tend to grow quickly and exponentially when they succeed.
Best of all, a Startup doesn’t require large flat land, access to special shipping routes, or any special machinery. Startups don’t require a multi-year investment of economic incentives (i.e. loss in our tax revenue) and planning to attract them to our region.
Instead, they rent office spaces in our downtowns (look at Allied Dispatch Solutions, ActionVFX, etc.). They visit our small businesses for lunch, shopping, and they seek out specialty coffee shops. After work they visit gyms, craft breweries, and attend local entertainment because they are looking to (and are able to) spend their extra income on these types of comforts
So the real question is…
Why do we spend 100% of our recruitment budget and efforts on traditional industrial manufacturing? We rarely win these types of businesses and there is an alternative happening right in front of us.
Oh yeah… the traditional economic development playbook…
Can Entrepreneurship really be done here?
If this can happen, then why hasn’t it happened already?
“It can’t be done here. We like to go to our jobs, go home, and we don’t do Entrepreneurship here. It’s not in our culture.”
Unfortunately, I’ve heard this response more than once.
When we launched our company BrewFund, we eventually had several thousand people using our mobile app. The best and worst compliment I ever received was someone shocked to learn that the app was built here. I understand they thought it was a Silicon Valley quality app, but I simply didn’t understand why they thought something like this couldn’t be built here.
We all need to remember our history and our culture. This region was built on innovation and Entrepreneurship. It has been happening here since the beginning and even in recent years there have been inventions, acquisitions, and multiple high-growth Startups launched.
Here is just a small sample of the Startups we already have in this region:
Micronic Technologies in Southwest Virginia has invented a new way to filter water for production purposes.
Stone Mountain Technologies might just reinvent the HVAC market and is working towards opening a local manufacturing facility in our region.
ActionVFX sells special effects like explosions and other atmospheric effects to the film, tv, and game industries. You have seen their work in Stranger Things 3, Spider-Man, and many tv shows.
See the Full List at FoundersForge
If you’ve never heard of these companies, you are not alone.
I often describe the feeling of running a new Startup as watching a balloon rolling across a bed of needles. The fear that at any moment the success you have been building could burst and disappear. This creates an immense pressure that causes Entrepreneurs to fully immerse themselves in their work to further their success. This often prevents them from wanting to attend events and marketing their existence to their local community unless it directly benefits their business. This creates a disconnect and missed opportunities between those trying to help and the businesses that need the help.
It’s on the Startup Community to tell its own story. No one can tell it better than us. Supporting organizations, like FoundersForge, can help with this process to make it easy on both sides. And telling this story has an even greater impact than connecting existing businesses with the help they need.
The sole reason more people don’t launch ventures in our region is because it appears it doesn’t happen here. People still very much think that Entrepreneurship can’t happen here because they aren’t seeing it. A strong community of Entrepreneurs coming together, telling our stories, and connecting all of those that have interest is a primary focus of FoundersForge for this reason.
Are We Trying to Make Us Silicon Valley?
No. We are not.
Anyone who sets out to create the next Silicon Valley is destined to fail. Many people from the Valley are moving to Austin, Texas. Yet, Austin will never be like Silicon Valley. It’s like trying to build the next facebook from the beginning. Silicon Valley, and facebook, never set out to become what they are. Many happy accidents led to them becoming what they are today. Even if we did want to become Silicon Valley, you can rest easily knowing that it’s impossible for this outcome to happen.
However, there is one guiding principle that has helped the Startup ecosystems thrive in Silicon Valley, Boulder, and Austin. This principle is a #GiveFirst mentality. When you attend events in any of these regions you quickly find people that are very willing to give you ideas, feedback, and connections. Often these transactions happen before they tell you about their own backgrounds or Startups. This culture of supporting each other, even when you are in direct competition, is what has built these regions resilience.
So, while we aren’t setting out to become Silicon Valley; we are learning from their success. We want to build an ecosystem that supports each other. When someone succeeds, they give back to other Entrepreneurs as mentors, advisors, and possibly even investors. When a company becomes a huge success, we need them to feel the need to #GiveFirst to the community that supported them.
The Appalachian Highlands has this culture built into it. Now we need to build the Startup ecosystem around our Southern hospitality because we know we can #GiveFirst better than any other region in the United States.
What about the industrial jobs? Aren’t they important?
We can’t abandon industrial jobs! But succeeding in creating these jobs may need an alternative approach.
Another problem in our region is the lack of mid-range jobs for our workforce. Minimum wage jobs are prevalent and salary-based jobs are also common here. The mid-range $12-$25 per hour jobs can be hard to come by. This problem should not be abandoned.
There is a hard truth our region needs to face. What we are currently doing is not working. We need to evolve and change our process, or this problem may never be solved. But once again, the solution may be right in front of us. Instead of recruiting major industry, we should be recruiting early-stage Startups similar to Stone Mountain Technologies. This new innovation can lead to manufacturing jobs across our region.
Allied Dispatch Solutions is another great example. This company launched and quickly scaled to hire lots of employees. Many of these jobs are for their call centers and fill this needed workforce tier. They have also heavily invested in the old Kress building downtown Johnson City.
Moog Protokraft recently opened an advanced manufacturing facility in our region after acquiring a local technology company that was once a company in ETSU’s Innovation Lab.
And NortonHurley.com is a new Startup that recently established their headquarters in our region and is partnering with another local company to build out the logistics and shipping infrastructure they need to succeed in their venture. These all result in jobs created to fill this needed manufacturing gap.
These are huge wins for advanced manufacturing, logistics, and the creation of hourly mid-range jobs.
And they all came from Startup activity in our region.
As retail changes, we will see a new focus on direct-to-consumer brands, less on-site inventory and a huge increase in shipping to consumers. The pandemic has pointed out our shortcomings of relying on the outside world to manufacture our products. New opportunities in on-demand manufacturing and production are coming back to our country. But we must be realistic on what this means. Automation will limit the jobs created and new skill sets will be required for these new positions.
The regions that invest in recruiting innovation in logistics, production, and inventory-on-demand will capitalize on these new opportunities. Investments in the culture of innovation and Entrepreneurship through programming, community, and access to support will succeed while others fall behind.
To put it plainly…
Those that follow the same old playbook will continue
to blame the rules of the game that no one else is playing.
What do we do now?
It’s time to invest in the innovation economy in the Appalachian Highlands.
And it’s time to make this our region’s priority.
We don’t have to give up on industrial recruitment, but we do need to make a lot of room for investments in our Entrepreneurial ecosystem, recruitment of Startups, and new programs to attract tech workers to our region.
Luckily, our region has already started to embrace innovation and Entrepreneurship in our region. They have helped fund FoundersForge and other Entrepreneurial Supporting Organizations (ESOs). They have helped sponsor individual events and they are continuing to ask questions about how we do more, together.
Now it’s time to double down and embed an Entrepreneurial focus into all of our future plans.
What FoundersForge is Doing to Help:
FoundersForge is a non-profit that was created to support the underdog Entrepreneurs in our region and to help them on their Startup journeys. Our goal is to help create at least 100 successful Startups and 1,000 new jobs within the next 5 years.
This year, FoundersForge is launching its Startup Bootcamp program to help Entrepreneurs take their ideas to market and to help existing Startups reach the next stage in their venture; further promoting job growth to our area. We’ll also be fostering a community for Entrepreneurs by hosting multiple events, workshops, and our shark tank-like pitch event returns this year!
But we need your help. If you or someone you know has a side hustle, app idea, or is always talking about their next great idea, connect them to FoundersForge so they can join a community of other Entrepreneurs that can’t wait to start conversations and brainstorm potential ideas with like-minded individuals.
If you are in economic development at the local or state level, let’s chat about how we can work together to combine our two worlds to build a better, more resilient future for us all.
It’s time we throw out the old play book, burn it,
and work together to write the next one.
When we do, others will look to our region to better understand how we accomplished such a difficult task so they can build their own brighter futures. And we will be happy to #GiveFirst.