Another successful Carroll County Chamber of Commerce Biz Challenge occurred, once again highlighting five groups of local entrepreneurs. Startups are an important element of local economic development, and the Biz Challenge is turning into a focal point for fostering entrepreneurship in Carroll.
Everyone talks about economic development as a priority for communities, but what does that mean for Westminster? For larger jurisdictions, big infrastructure projects, wooing large corporations or professional sports teams and their stadiums are frequent examples. For a community our size, entrepreneurship is the growth engine that can drive our local economy.
The importance of entrepreneurship and high-growth small businesses lies in the important fact that they account for 60 percent to 80 percent of net new job growth. That means, if you want to accelerate the growth of the local economy, you need more startups and small companies.
The other important statistic is the five-year survival for startups. Within five years of founding, 80 percent to 90 percent of startups will fail. That’s not a criticism of entrepreneurs, or evidence of incompetence. Rather, it is the mathematical evidence of the enormous risk and uncertainty inherent in entrepreneurship.
The best idea, the best product or service, and the best managers can and will fail due to circumstances beyond their control: international events, weather, problems with supply chains, financial crises, political events, and a host of other ambushes and pitfalls that can derail even the most carefully thought-out business plan. It is the rare entrepreneur who succeeds on the first try. Many have several failed businesses before achieving significant success.
A third important statistic is the frequency of the behavioral traits of successful entrepreneurs in the population. To succeed, entrepreneurs need specific traits such as high tolerance for risk and uncertainty, independence, perseverance, creativity and self-motivation. Estimates vary on the role of these traits, and how many people have them varies between 1 percent and 10 percent of the population. For our purposes, we’ll assume that Carroll County is very entrepreneurial and we’ll use the 10 percent figure.
So let’s do some math: there are about 2,000 teenagers graduating from the seven high schools in Carroll County each year. If 10 percent of them are potential entrepreneurs, that’s 200 young people who need the support, resources, mentors and collaborators to successfully launch a business.
Let’s be optimistic and assume all 200 go on to launch a new business. Given the known five-year survival statistics for new businesses, 160 to 180 of those 200 will fail within five years (80 percent to 90 percent). That means most of the economic growth in our community will depend on those remaining few companies. If we want to accelerate economic growth, we have to find and nurture more entrepreneurs, and increase the odds of their success by supporting them through failure and success.
Fortunately, we have several resources to support the small businesses in our community, like the chamber of commerce, Miller Center and Small Business Development Center.
But how do we create or recruit more entrepreneurs to compensate for the very high attrition rates later in the process? This is where the Mid-Atlantic Gigabit Innovation Collaboratory, or MAGIC, comes in.
According to the Kauffman Foundation, a leading researcher and grantor for entrepreneurial activities, successful entrepreneurial communities have seven factors in common, including things like inclusivity, collaboration, community vision and sustainable support. MAGIC’s programs and projects seek to recruit, cultivate, nurture and successfully launch as many entrepreneurs as possible, both from within our community, and recruited from outside our community. The work has just started, but already we’re seeing signs of early success.
What do entrepreneurs need to succeed? The common feature of communities with successful, dynamic entrepreneurial communities is the emergence of, and continuous support for, an ecosystem, or deeply connected, complex web of relationships to nurture and support entrepreneurs. Places like Boulder, Colorado; Kansas City, Missouri; Palo Alto, California; and the biotech corridor outside Boston all are examples of how entrepreneurial ecosystems emerged, often by luck. Now, organizations like the Kauffman Foundation are studying those places to extract the lessons that can duplicate their success in other locations. That is the blueprint for MAGIC’s activities.
A great resource for those interested in learning more is the book “Startup Communities” by Brad Feld. Like the agricultural traditions of our community, the work of growing entrepreneurs is difficult, and requires sustained support over many years to yield fruit. But given the critical importance of startups and small businesses to the health and vitality of our community, it’s work that must be done.