Glenn Kinstler Auecdi 7 17 09

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Presentation at the Auburn University Economic and Community Development Institute on the importance of entrepreneurship in economic development

Presentation at the Auburn University Economic and Community Development Institute on the importance of entrepreneurship in economic development

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  • 1. The Importance of Small Businesses and EntrepreneurshipAuburn University Economic & Community Development InstituteJuly 16th, 2009
    Glenn Kinstler, Director
  • 2. Today’s agenda
    Quick introduction of Alabama Launchpad
    Ideas of Entrepreneurship and the Role of Small Businesses in Job Creation
    Three High-Growth Examples from Alabama
    The Case for Alabama Launchpad
    Closing Thoughts
  • 3. What is ALABAMA Launchpad?
    Alabama Launchpad is a not-for-profit organization dedicated to the support and promotion of “high-growth” and technology entrepreneurship in Alabama.
    Alabama Launchpad was formed in 2006 by the state’s public, research universities and the business community.
    Unique collaboration between business and academia
    Effort to advance “The New Economy” in Alabama
    “Building an innovation economy through collaboration and entrepreneurship”
  • 4. Alabama Launchpad Partners
    Alabama A&M University
  • 5. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
  • 6. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
  • 7. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
    University of Alabama
  • 8. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
    University of Alabama
    University of Alabama at Birmingham
  • 9. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
    University of Alabama
    University of Alabama at Birmingham
    University of Alabama in Huntsville
  • 10. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
    University of Alabama
    University of Alabama at Birmingham
    University of Alabama in Huntsville
    University of South Alabama
  • 11. Alabama Launchpad Partners
    Alabama A&M University
    Alabama State University
    Auburn University
    University of Alabama
    University of Alabama at Birmingham
    University of Alabama in Huntsville
    University of South Alabama
    The Economic Development Partnership of Alabama (EDPA)
  • 12. Role of EDPA
    Privately funded, not-for-profit organization
    Private side of economic development
    Created in the early 90’s to help attract business to Alabama
    Assists the state, local and corporate economic development/recruiting agencies
    Extensive Existing Industry Program
    Entrepreneurship is Economic Development
  • 13. “Entrepreneurs are society’s rejects, instead of becoming hobos, criminals or professors, they start their own business.” – Henry D. Thoreau
    Entrepreneurship & Small Businesses
  • 14. Form of Social Responsibility
    Entrepreneurship makes the world better
    Entrepreneurs see what can be, not what is
    Idea of Creative Destruction
    Two types of Innovation
    Incremental: Small improvement to pre-existing products or services that make them cheaper, faster, better
    Disruptive: Completely new products or services that transform entire industries
    Inventors are not always entrepreneurs
  • 15. Interesting Statistics
    US Small Business Administration defines a “small business” as one with fewer than 500 employees.
    Represent 99.7% of all employer firms
    Employ about half of all private sector, non-farm employees
    Pay nearly 45% of total US private payroll
    Generated 60 to 80% of net new jobs annually over the last decade
    Produce 13 times more patents per employee than large firms
  • 16. Who creates more jobs? Small vs. Large
    “The Role of Small & Large Businesses in E.D.”
    Kelly Edmiston, Senior Economist at the Federal Reserve of K.C.
    From 1990 to 2003, 23 million net new jobs were created
    239 million gross new jobs – 219 million gross jobs lost
    Small Business (< 20 employees) created 79.5% of net new jobs
    Midsize Business (20 – 500 employees) created 13.2%
    Large Business (> 500 employees) created 7.3%
    Large firms lose more jobs than they create, but…
    Statistics are deceiving, more study needed
    Small firms become large ones, so the statistics are skewed
  • 17. Size-Wage Effect
    Source: US Dept. of Labor
  • 18. Another Study
    “Employment Dynamics: small and large firms over the business cycle”
    US Dept. of Labor Statistics
    Study attempts to address the skew in past data by dividing firms into many more categories
    From 1990 to 2005, small firms (1 to 499) create 64% of net new jobs
    Expansions account for 83% of all gross job gains vs. 17% for startups
    Small firms had more net job losses in the recession of the early 90s, while large firms had more net job losses in the 2001 recession
  • 19. “In today’s economy…”
    From April to May: 532,000 jobs lost
    Large firms (500+) shed 100,000 jobs – 19%
    Medium firms (50 to 500) shed 223,000 jobs – 41%
    Small firms (>50) shed 209,000 jobs – 40%
    From Jan to May: 2,494,000 jobs lost
    Large = 313,000 – 12.5%
    Medium = 1,098,000 – 44%
    Small = 962,000 – 38.5%
    Source: ADP National Employment Report, May 2009
  • 20. Rates of Success
    Two-thirds of new employer firms survive at least two years
    44% survive at least four years, 31% survive 7 years.
    Results were consistent from different industries
    Research found that after four years, the rate of firm closing declines considerably.
    Source: US SBA
  • 21. Not all small businesses are equal !!
    Lumping all of these small businesses together is misleading
    Just think about the variety of small businesses you see every day!
    All businesses are important, but special attention should be given to “High-Growth”, innovative companies
    Often technology related
    More efficient than larger firms, more patents too
    Higher wages
    Create real wealth in the community
  • 22. Three High-Growth Alabama Examples
  • 23. Digium
    • Digium is the original creator and primary developer of Asterisk, the industry's first open source VOIP platform.
    • 24. Digium also offers a full range of professional services, including consulting, technical support, and custom software development.
    Currently employee over 80 people
    Long list of awards and recognitions from VOIP and entrepreneurial publications
    Headquartered in Huntsville
  • 25. The New Digium
  • 26. DAXKO Software
    • Leading provider of operations and financial management solutions for member-based nonprofits, with a particular focus on the $5.2 billion YMCA market
    • 27. Customers in 48 states
    • 28. Products help customers operate more efficiently and serve their communities more effectively
    • 29. 80 employees; plans to add 20 to 30 more in next two years
    • 30. Average salary more than $60,000
    • 31. Headquartered in Birmingham
  • “DAXKO Culture”
  • 32. ProEthic Pharmaceuticals
    • ProEthic is a specialty pharmaceutical company specializing in the areas of cardiology, pain and migraine.
    • 33. Started in 2001 focusing on generic drugs
    • 34. Company focuses its efforts on the acquisition, development, licensing, and marketing of pharmaceutical products.
    • 35. Became anchor tenant in Montgomery Industrial Park
    • 36. Created two spin-off companies that also located in the park
    • 37. Recently acquired by Kowa Pharmaceuticals of Japan
    • 38. Headquartered in Montgomery
  • Other Alabama Examples
    AdTran
    HealthSouth
    QMS
    Banks
    Regions, Colonial, Compass
    Bates Enterprises
  • 39. Idea of Entrepreneurial Churn
  • 40. What can be done to support start-ups?
    Look at programs in other states:
    Georgia Research Alliance
    Ben Franklin Technology Partners - Pennsylvania
    Maryland Technology Development Corporation
    Spotlight and reward entrepreneurs
    Mentoring programs
    Networking opportunities for entrepreneurs
    Recruiting success creates opportunities for small businesses
    More entrepreneurship education at every level
    Common Theme:
    Public-Private Partnerships
  • 41. Business Incubators
    Incubators provide:
    Shared space and overhead
    Expert advice and guidance
    Connections/Networking
    Access to capital
    Intangibles
  • 42. “Writing a business plan is the first step to creating a successful venture. Everything starts with the plan.”
    – Dr. Bob Kolodney, Harvard Business School
    Governor’s Business Plan Competition
  • 43. Business Plan Competition
    Competition is for technology and high-growth ideas
    Eligible teams must be affiliated with a partner university
    Current Student
    Current Faculty
    Other University Employee
    Alumni of no more than five years
    Former Faculty of no more than three years
    Must establish and maintain HQ and the majority of business operations in Alabama for 5 years
    Universities are “Centers of Innovation”
  • 44. Goals of the Competition
    Provide a structured approach to writing a business plan
    To showcase Alabama’s best start-up ideas and promote the opportunities for entrepreneurship and innovation in Alabama
    To educate and nurture entrepreneurs
    To create a statewide network of individuals interested in high-growth entrepreneurship
    To provide seed financing to three high-growth businesses on an annual basis
  • 45. Nuts & Bolts
    Competition occurs over four phases; Follows academic calendar
    Judges come from business and venture communities
    Final event where teams “pitch” their ideas
    2009 Finale: April 18th at UAB
    Opportunity to bring together government officials, entrepreneurs, university officials, business leaders, economic developers, investors
  • 46. 2008-2009 Registration Figures
    36 team registrations
    Industry Categories:
    IT – 6
    Materials Eng – 5
    Biotech – 5
    Medical Devices – 3
    Consumer Products – 3
    Pharma/Drug Delivery – 3
    Auto/Aero Eng – 3
    Green Tech – 2
    Ag/Vet – 2
    Other - 4
  • 47. What do the winners win?
    Grand Prize: $100,000
    2nd Place: $50,000
    3rd Place: $25,000
    While cash is king, the real prize is the opportunity to connect with members of the venture and angel communities and other business leaders.
  • 48. A few past winners…
  • 49. 2007 2nd Place: Halo Monitoring
    Led by two UAH MSEE alumni
    Wearable health monitoring system that uses wireless technology to monitor health and lifestyle of the elderly.
    Caregivers can monitor vitals of subject in real time
    Fall detection and automatic notification of 911
    Currently incubated at BizTech
    Since competition, Halo has received $1.7 million of investment from the Huntsville Angel Network, Greer Capital Advisors and Jemison Investments
  • 50. More on Halo Monitoring
    First sales in early 2009
    Halo Research goes to Consumer Electronics Show ►
    Company now has 10 full-time employees
  • 51. 2007 Grand Prize Winner: OcuMedic
    Team led by Dr. Mark Byrne, Professor of Chemical Engineering at Auburn Univ.
    Drug delivery company with a patented technology that creates therapeutic contact lenses for the treatment of ocular diseases
    Time release
    Used much of prize money to file international patent applications and new “field-of-use” patents
    Currently in animal testing at the Auburn College of Veterinary Medicine (FDA process)
  • 52. 2008 2nd Place: SEA Desalination
    Led by Ph.D. candidate from The University of Alabama
    Sun-powered system that removes salt from seawater or pollutants from contaminated ground water
    Made from recycled soda bottles
    Initial sales are targeted to third world markets and coastal homeowners
    10 full and part-time employees
    Currently incubated at UA AIME Center
  • 53. 2009 1st Place: Innovative Composite Solutions
    Company led by 3 professors from UAB School of Engineering
    Design and manufacture of high-end thermoplastic composites
    Military, aerospace and mass transit market opportunities
    Company uses a proprietary manufacturing process
    Lighter, cheaper, more energy efficient and recyclable
  • 54. Many opportunities for ICS
  • 55. Competition going forward
    Alabama Launchpad winners have gone on to attract over $3.0 million in follow-on money from the Alabama venture and angel communities.
    More coming
    Other participants have raised capital, established joint ventures, hired employees, etc.
    We have directly helped create 9 companies in 3 years
    Educational Programs
    Seminars, website, etc.
  • 56. Financial Support
  • 57. Expenses – a lean organization
  • 58. Current Sponsors – 2008/2009
    Platinum Level
    ($25,000 and up)
  • 59. Current Sponsors – 2008/2009
    Gold Level ($10,000):
    Vulcan Materials Company*
    Silver Level ($5,000):
  • 60. Current Sponsors – 2008/2009
    Bronze Level ($2,500):
  • 61. Closing Thoughts
    Small businesses come in all shapes and sizes
    Data varies on economic impact
    High-growth companies have the greater impact
    Economic diversity is incredibly important
    Alabama must be a leader in The New Economy
    Mentoring programs are very helpful
    Recessions are great times to start new businesses
    Entrepreneurship and Innovation are hot topics
    Alabama Launchpad is the only statewide initiative to support high- growth entrepreneurship in the state
  • 62. For more information…
    Glenn Kinstler, Director
    gkinstler@edpa.org
    (205) 943-4709
    www.alabamalaunchpad.com