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

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Glenn Kinstler Auecdi 7 17 09

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

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