As we learn more about what works in fostering more entrepreneurship, here are a number of recent lessons for economic development officials, grant-makers, investors, and entrepreneurs that can help Central Ohio continue to develop a thriving environment for new businesses.
The Kaufmann Foundation State of Entrepreneurship report notes that entrepreneurship is increasingly a mid-size metro phenomenon, which bodes well for the appeal of Central Ohio. The expanding role of technology in entrepreneurship, however, has spawned start-ups that grow without creating as many jobs as startups did in the past. Moreover, entrepreneurs nationally remain 80 percent white and 60 percent male while the U.S. population is becoming much more diverse. In contrast, social entrepreneurship in Central Ohio is highly focused on job creation and is especially attractive to minorities, women, and millennials.
Fortune offers a lesson to investors that the future direction of investing will measure success in three dimensions: risk, return, and impact. Women and millennials are the most interested in graduate programs that integrate impact into investment decisions, but they are not finding significant job opportunities in start-up investment funds. Moreover, investors still focus their hiring on candidates with traditional business skills, but the future direction of investing will require recruiting investment staff with nonprofit experience and skills to evaluate impact.
Entrepreneur notes that social entrepreneurs are not adequately exploiting the advantages of being social enterprises. Social impact motivates employees and makes them more likely to feel a stake in the success of the business. It also motivates people to want to help by volunteering time, money, or resources. By focusing on social impact, social entrepreneurs have a longer-term orientation and are more likely to focus on the sustainability of the business and not be distracted by the noise of quarterly financial results. In approaching investors, social entrepreneurs should recognize that they have an inherently more valuable business because it is selling intangible social impact and socially-oriented image as well as the tangible product or service. But to gain these advantages, the social mission needs to be relevant to the business, not just a marketing add-on.
On the flip side, Forbes reminds us why the majority of start-ups fail, offering key lessons to entrepreneurs. Most fail because there isn’t a market yet they persist in launching the business before testing the market. Focusing the business and staffing plans on finding and attracting customers is critical. Growth in sales is the grease for everything: it generates the cash to pay expenses and it attracts investors that provide even more cash. Entrepreneurs also need to continue to think about where the business is going, and never stop working on processes, the business model, and scalability. In particular they need to be willing to let go and change anything and everything as the business evolves: product, compensation, marketing, rebranding.
Good lessons for entrepreneurs, investors, and development policy-makers.
Allen Proctor, President & CEO
Center for Social Enterprise Development