As small businesses continue the long slog of recovery from COVID-19 impacts, we’re going to need all hands on deck. We are going to need more resources for business technical assistance, more sources of business finance, and a greater focus on local business retention and expansion efforts. There has been an outpouring of new programs to finance small businesses affected by COVID-19 (you can access a useful resource list here). In terms of financing, crowdfunding has been an important tool for many businesses. Many of the major global crowdfunding platforms, like Kiva, Kickstarter, GoFundMe, and Honeycomb Credit, have seen significant growth in recent months. In fact, monthly investment totals doubled during the summer of 2020. Much of this growth is stimulated by the pandemic, but the crowdfunding market has been growing rapidly for years. A new study, from Crowdfund Capital Advisors and the SBE Council, examines how the market has fared since new federal crowdfunding regulations went into effect in 2016. The study notes that, since 2016, 2,600 companies have been funded via these new federally-regulated crowdfunding platforms. These firms have raised an average of $340,000 per firm, and overall capital invested in crowdfunding platforms exceeds $500 million. These funds support local businesses operating in a diverse mix of industries, and also address pressing early stage finance gaps where traditional funding sources may not be available.
These figures suggest that crowdfunding remains a small, but increasingly important part of the small business finance landscape. The report authors recommend creation of a new $20 billion Main Street Recovery Fund to support additional crowdfunding investments. While the future prospects for this fund are unclear, it is clear that crowdfunding will be an important part of ongoing small business recovery efforts. If you don’t have active crowdfunding resources in your community, now is a great time to close that gap.
As we continue to slog toward an economic recovery from the pandemic, communities around the US are coming to grips with the problem of housing. Simply put, too many places lack sufficient (or affordable) housing for current or new residents. This challenge is especially pronounced in many rural areas where plans to attract talented workers and their families may face the harsh reality that they lack places for these new families to live. We’re going to need to build more and better housing, and we should get started on this task now. Some places are already on the way. I recommend taking a look at the Indiana Uplands region which surrounds Bloomington in south central Indiana. I’ve been working this region over the past year (although not on housing), and have been very impressed with the work of county leaders and Regional Opportunities Initiative, Inc. (ROI), a regional economic development partnership covering 11 counties. ROI has done an excellent regional housing needs study, along with individual analyses for each county in its region. The deep analysis (the report is more than 350 pages long!) contains deep details on what’s happening in each community, and seeks to enhance both public and private efforts to build and maintain more and better housing. It includes recommendations for each county as well as for a region-wide strategy that upgrades existing housing stock, develops funds to finance new construction, and reviews current rules and regulations that may be impeding new construction. It’s an excellent guide for addressing a complex series of regional challenges. If you to learn more, ROI is sponsoring a webinar series that starts this week and you can sign up here. This effort is just one example of local innovation in the face of our current housing shortage. If you’re interested in following trends in this field, I also recommend a newish organization, Up for Growth, that advocates for better housing opportunities.
It’s back to school time again. If you’re pursuing professional development or just want to learn about new trends in economic development, join us on September 17-18, 2020 for another on-line version of the International Economic Development Council’s Entrepreneurship and Small Business Development Strategies course. This intro session will give you the basics on what makes entrepreneurs tick and how we economic developers can help them succeed—much needed info as America’s small business owners are getting pounded by the pandemic. I’ll be teaching with my friend and colleague Carol Lauffer, and we’ll also be joined by our colleagues at Maryland Economic Development Association (non-Marylanders are also welcome!). You can learn more and register here.
I recently returned from our annual Maine vacation to find my pre-ordered copy of The Startup Community Way by Brad Feld and Ian Hathaway. This new book follows up on Feld’s excellent 2012 work Startup Communities, which I still consider to be among the best guides to entrepreneurial ecosystem building. This new work digs deeper into the real life challenges facing ecosystem builders, with a focus on sustaining this work over the long term. Key topics include performance metrics, embracing diversity, and integrating lessons learned from complexity theory in supporting local ecosystems. I’m just getting started on this book, but my early reactions are very positive. Check it out!
During my time up in Maine, I was also pleased to see the continued development of the ecosystem in Bangor, Maine’s third largest city and the business center for much of Northern Maine. Maine has many excellent business programs, including the Maine Technology Institute, the Maine Center for Entrepreneurs, Coastal Enterprises Inc., and many others. For many years, these efforts never really seemed to gain traction in Bangor. But, that appears to be changing with a new regional collaboration, UpStart Maine that engages local business networks, coworking spaces, and the University of Maine system in nearby Orono. UpStart Maine has great promise—they’re now in the process of hiring a new Ecosystem Coordinator who I’m sure will benefit from reading The Startup Community Way. I’ll be watching this work with great interest and excitement!
I just finished an interesting new book by Martin Sandbu, economics writer for The Financial Times. The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All was published pre-COVID 19 but is full of good ideas that would enhance our economic recovery from the pandemic and beyond. Sandbu seeks to understand the economic causes of the current backlash we’re seeing across developed economies. He argues that too many workers and too many communities now feel that they do not belong as part of a wider economy, and thus have chosen to opt out or protest in the streets, the ballot box, and beyond. He does not view cultural clashes as the key factors behind this backlash, and instead argues that economic disconnection is the driving force behind these sentiments. He is particularly focused on left-behind places and strategies for reintegrating them into the 21st century economy.
Finding ways to instill a sense of belonging are essential to moving people out of their current precarious economic circumstances and toward greater prosperity for all. His remedies are not necessarily new or radical, but perhaps unique coming from someone with a Financial Times affiliation. They include Universal Basic income (via a net wealth tax), an expansion of collective bargaining rights for unions and other worker organizations, big increases in spending on education and training, and a carbon taxation system. The Economics of Belonging is worth a read as it does an excellent job of both diagnosing our current crisis, and in providing a good compendium of potential solutions.
I will admit that I don’t spend a lot of time thinking about or studying fiduciary rules related to retirement plans, but a new proposal from the Department of Labor has me a bit concerned. Recently, DOL issued a proposed rule (with a request for comments by July 30, 2020) related to private sector retirement plans (such as 401Ks) that include funds with an environmental, social, and governance (ESG) focus. These ESG funds seek to promote both financial and social benefit goals, and have outperformed the market in recent years. The proposed rule would define ESG criteria as “non-financial” factors. This shift could have the effect of limiting the availability of these retirement fund options because fund managers are required to offer fund options based primarily on financial factors alone. Under the new rule, ESG advocates believe that fund managers would likely opt to avoid including ESG funds as an option in many retirement funds. (This is a very complex issue so if you want to learn more, visit here and here.) ESG advocates further warn that this move would greatly limit future funding for ESG-related investments that focus on supporting a triple bottom-line of profit along with environmental and social benefits. As a result, a promising, growing and successful set of tools for socially-responsible investing may be restricted. If you share these concerns, share them with DOL or reach out to your Senator or Member of Congress by July 30!
If you’re an entrepreneur working in rural America or in sectors with a focus on food and agriculture, consider competing in the American Farm Bureau Federation’s 2021 Ag Innovation Challenge. This annual competition recently kicked off, and the Farm Bureau and its partners are looking for startups with great ideas addressing challenges faced by America’s farmers, ranchers, and rural communities. Up to ten entrepreneurs will be selected to compete in the final rounds at the Farm Bureau’s annual convention in January 2021. Winners and top performers get lots of great publicity, coaching, mentoring, consulting services, and yes—money! EntreWorks Consulting assisted in the creation of this competition in 2015, and I’m really pleased that it is thriving. Some great companies have been past competitors and winners! If you have a great idea or a great business, consider applying. But, do so quickly, as the application deadline is July 31, 2020. Please also note that you must be a Farm Bureau member to compete, but you can sign up with your application. Details and application materials are here.
As communities push toward economic recovery after COVID-19, many regions will be making a big push to improve local broadband capacity. The poor quality of broadband in many rural locales is a disgrace, and I’m hopeful that our current mess will at least trigger some action to close the broadband gap. Fortunately, there are tons of great resources out there if you’re working on broadband improvements in your community. I have been especially impressed with ongoing work in North Carolina. The state developed an excellent broadband strategy that has been touted by Pew Trusts and others. North Carolina’s Broadband Infrastructure Office has also produced an excellent Community Broadband Planning Playbook. This guide has been out for a couple of years, but it’s definitely worth a look. It contains useful real-world tips and ideas on recruiting local leaders, connecting with broadband providers, and finding critical financing for local projects. The state’s broadband website also contains other useful information, like new grant opportunities such as the new BAND-NC grant programs for digital inclusion.
Economic recovery from the COVID-19 pandemic is uncharted territory, and none of us really know how, when, and if things will return to “normal.” I’m on the hunt for any type of lessons learned from past experiences, from history (such as the 1918 Spanish Flu pandemic) to more recent events. An interesting new Harvard Business School report, “Why Japanese Businesses are so Good at Surviving Crises,” looks at how Japanese firms dealt with the impacts of the 2011 earthquake and tsunami.
Japanese firms must be doing something right, as they are long-lived. In fact, the five oldest companies in the world are all Japanese. The oldest, Kongo Gumi, a construction firm, got its start in 578CE. In these case studies, Japanese companies pursued strategies advanced disaster relief and recovery, and strengthened their companies along the way.
In 2011, successful and resilient Japanese firms exhibited the traits known as “toku,” which refers to having a moral purpose in running a business. In our terms, Japanese firms are community minded or are pursuing a double or triple bottom line. The report authors discuss the model of “wise leadership” as driving the business response in 2011 and beyond. Wise leadership is not a complicated concept; it simply refers to a business focus on building both economic and social value. This is a welcome shift from an exclusive and maniacal focus on shareholder value, which is still embraced by many US corporate leaders. The pandemic seems to be changing this perspective, and there are many promising signs that “wise leadership” thinking may be gaining traction here. As these Japanese examples show, this approach not only supports business longevity, but it also helps with economic recoveries as well.
Back in a previous life (early March), my wife and I were preparing for a nice long weekend in Boston where, among other things, I was going to do a presentation at the International Business Innovation Association’s (InBIA) annual conference. Like so many other events, this one is now virtual and it’s happening this week. While we won’t have the in-person networking or Boston’s sights or good food, it will still be a great event. There are lots of great panels on key topics like ecosystem building, supporting minority entrepreneurs, working with special sectors like food and manufacturing, and many more. I’ll be part of a panel, with my colleagues Cathy Renault and Jocelyn Sterenchock, on Thursday, June 24, at 4:45PM. We’ll be discussing trends and effective practices for working with rural entrepreneurs. Hope to see you virtually this week.