We believe that entrepreneurship is a powerful way to reduce poverty, reduce the unemployment rate, build local community economic stability, and grow economies.
The 5 C’s were summarized from the reading of a variety of entrepreneurship researchers. I am particularly fond of the work of Daniel Isenberg, Don Macke, Chris Gibbons and Thomas Lyons. These individuals have all done outstanding research on the subject. In addition they are also practitioners who have sought to help communities apply these principles. Daniel Isenberg in particular focuses on ecosystems in America and abroad and has a much more extensive chart categorized slightly different from mine available online at - http://www.forbes.com/sites/danisenberg/2011/05/25/introducing-the-entrepreneurship-ecosystem-four-defining-characteristics/Thomas Lyons has developed the Triple AAA system of entrepreneurship development, which focuses on size, type and need. Don Macke is the rural entrepreneurship from the Center for Rural Entrepreneurship. He is a great friend of the Kansas City Federal Reserve Bank. The most important thing to remember is that the 5 C’s actually interact with each other as well as the entrepreneur. For example, the regulatory and policy climate can influence capital sources. Culture can influence connections and networks. When strategizing for development, the develop has to be cognizant of the interactive nature of all the parts and account for how they influence each other.
On of the current trends in economic development is to focus on stage 2 growth companies. Research shows these companies create the most net new jobs and the most growth. While growth is important, we also have to consider the pipeline of entrepreneurs (how do we move a company to stage 2, for example) as well as the importance of self-employment and micro-businesses. The Associate of Enterprise Opportunity states that if every micro-business in America hired one employee we would be at full employment. Another important point to make is the power of place. Small businesses imbue a community with a sense of identity and a sense of connection and ownership. While that specialty pizza shop down the street may not hire 100 workers, it creates part of a rich tapestry that makes a community a community.
Many of the services that currently exist in the entrepreneurship development landscape focus on start up businesses or micro businesses. For example, in Omaha we have seven micro lenders that lend up to $50,000 of non-traditional business credit. However, we have a huge gap in non-traditional credit above that level. Many of these same organizations provide business services to businesses with 4 employees or less. While this is an important segment of businesses, in many instances our ecosystem doesn’t have the level of quality and just in time services that growth oriented and larger companies require. The challenge of the economic developer is to help their community find the balance necessary to create the optimum level of growth in the community. Finding out the best types of services and policies can be challenging and require much effort, but the long run results will be worth it.
Fogginess is a great metaphor for many of our current communities’ entrepreneurship support systems. When you drive in fog you can still drive, but the pace is much slower, finding your turns are much more difficult, and seeing street signs that give direction or tell you when to stop or go are hard to see. From an entrepreneurs perspective a foggy system is very similar. In times of need they struggle to find the appropriate organization, resource or information. This in turn reduces the potential effectiveness of the owner in growing the business. One of the best things that we can do for our entrepeneurs is develop collaborative systems that are linked together and can refer to other agencies as needed. One of the friends of the Kansas City Federal Reserve Bank is US Sourcelink. This is an online portal that serves as a one stop shop for entrepreneurs as well as provide service providers with tracking systems and measurement. Visit http://www.ussourcelink.com/ for more info.
Sparse ecosystems are not necessarily bad they are just limited. The programs can be of high quality and very effective in what they do. The problem with sparse ecosystems is that they leave gaps in service, policy or culture development, which ultimately stunts the potential growth of local entrepreneurs across the entrepreneurship continuum. Dense ecosystems must be developed with the overall strategy for development in mind. It is going to be the structure of the ecosystem that creates the environment to drive certain types of entrepreneurial behavior. Probably the most notable ecosystem is Silicon Valley, which fosters high tech innovation. While Silicon Valley is unique to itself, we have to consider what type of ecosystem we currently have, what it is producing and what kind of ecosystem we need to produce the growth that we want.
A useful way of looking at an entrepreneur is to look at them as if they are an economy unto themselves. Within an economy we are consistently making opportunity cost decisions with the goal of maximizing utility (in our case it would be the entrepreneurs business growth) and increasing efficiency. My argument for creating transparent ecosystems is that we want our entrepreneurs to spend as much time as possible either growing the business, or developing the skills to be more efficient and effective at growing the business. By reducing the amount of time required by the entrepreneur to find the right training or resource, we increase the amount of time the entrepreneur can spend on getting trained and utilizing the resource to grow their business.
While models like this are useful I recognize that they are limited and don’t account for all the variables. However, I believe this model provides a great visual guideline for individuals as they reflect on their own communities entrepreneurship ecosystem.
Dell Gines - Strengthening the Entrepreneur
Strengthening the Entrepreneur Centered Economic Development Ecosystem Dell Gines, MBA, CeCD Sr. Community Development Advisor Federal Reserve Bank of Kansas CityThe views in this presentation do not represent the views of the Federal Reserve Bank ofKansas City nor the Federal Reserve System.4.2.13 Sourcelink Conference
Grow Your Own At the Kansas City Federal Reserve Bank we are taking a particular interest in entrepreneurship economic development strategy. We feel that entrepreneurship development benefits low to moderate and disadvantage communities in rural an urban environments. We encourage thoughts andThe Grow Your Own Guideprovides a high level overview of feedback by practicing economicwhat it takes to conductentrepreneurship based economic developers as we continue to supportdevelopment. our local communities.
The Five C’s of theEntrepreneurship Ecosystem Capital Financial Resources Climate Regulatory, Econo Capability mic Development Entrepreneurship & Policy Skillset Environment The Entrepreneur Culture The local Connection communities’ Resource & perception and Relationship support of Network entrepreneurship
The Entrepreneur Focus What makes a Michael Jordan Entrepreneur?1. Ability – They have natural talent that they develop formally and informally2. Actualization – They have a high internal drive to continue to grow, build and create3. Awareness – They know where there are opportunities, resources and education4. Access – They have access to markets, networks, capital5. Acceptability – Their community holds up entrepreneurship as a career http://celebjug.com/wp-content/uploads/2013/02/1michaeljordan-jpg_171100.jpg possibility, a noble goal, and a recognized Psychologist Anders Ericsson positive course of action wrote that to become an expert it requires intentional6. Affirmation – Their community publicly practice in the range of affirms, celebrates and supports 10,000 depending upon the entrepreneurs field and the competition. http://www.psy.fsu.edu/faculty/ericsson/ericss on.exp.perf.html
The Entrepreneur Focus Not All Entrepreneurs Will Be Michael Jordan Entrepreneurs! But all entrepreneurs add value. The Entrepreneur Continuum Hobby Self- High Growth Employment Gazelle To have a sustainable and balanced ecosystem it must behttp://2.bp.blogspot.com/_u1ysKRt1C9M/TTa5uqgsdjI/AAAAAAAAAJE/8ET8_2dICOc/s1600/basketball+nerd.jpg organized in such a way the needs of all types of entrepreneurs are addressed, even if certain types of entrepreneurs are a priority focus.
The Transparent Ecosystem Transparent Foggy and Fragmented and Connected One of the largest complaints we hear from individuals seeking to start or grow a business is that the service system is complex and hard to navigate
The Dense Ecosystem Ecosystem #1 - Sparse Ecosystem #2 - Dense Policy Microloan Group MentoringMicroloan Networking Business K-12 Market Plan Education Research Business Mentoring Plan Community Venture University Capital Support Business Celebration Are the programs, policies and activities sufficient in number and type to meet development goals?
Entrepreneurial Opportunity Cost Simply stated, an opportunity cost is the cost of a missed opportunity. – inc.com Foggy & Sparce Ecosystem Transparent & Dense Ecosystem Time and energy spent figuring out How more productive how to get could our businesses be support from the Time and energy if they had more time entrepreneurship spent figuring out and energy to focus on 10% ecosystem how to get growing? 25% support from the Time and energy entrepreneurship spent working on ecosystem building the business Time and energy spent working on 75% building the business 90%The strongest entrepreneurship development ecosystems do the best job of allowing existingand potential entrepreneurs to spend more time and energy 1) focusing on building thebusiness and 2) becoming more effective business owners rather than wasting time figuringout how to get support, information, and resources to build the business.
Effective Ecosystem Model Dense Ecosystem • Quality policy • Quality policy • Supportive culture • Supportive culture • Appropriate information & • Appropriate information & resources resources • Struggle to access • Easy to access • Difficult to navigate • Easy to navigate • Slow responsiveness • Rapid responsiveness Foggy Transparent • Poor policy • Poor policyEcosystem • Resistant culture • Resistant culture Ecosystem • Lack of information & Resources • Lack of information & Resources • Struggle to access • Easy to access • Difficult to navigate • Easy to navigate • Slow responsiveness • Rapid responsiveness Sparse Ecosystem
Why Sourcelink MattersTraditional economic development is centralized andorganization based.Entrepreneurship based economic development isdecentralized and organic.SourceLink can connect the dots and fostercollaboration across the entrepreneurship ecosystem
Why Sourcelink MattersAs previously discussed, entrepreneurs need areduced opportunity cost to acquire knowledge,resources and connectivity to increase productivityand business growth.SourceLink can improve productivity across theecosystem because they eliminate or reduce the timeand energy required by entrepreneurs to acquirewhat they need.
Why Sourcelink MattersAs previously discussed, entrepreneurs need areduced opportunity cost to acquireknowledge, resources and connectivity to increaseproductivity and business growth.SourceLink can improve productivity across theecosystem because it helps eliminate or reduce thetime and energy required by entrepreneurs to acquirewhat they need.
Contact Dell Gines Sr. Community Development Advisor Federal Reserve Bank of Kansas City firstname.lastname@example.org (402) 221-5606 For more information & resources http://kansascityfed.org/community/To sign up for our bi-monthly email please email the address above