Creating an entrepreneurial culture for city

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(Editor’s note: This is the first of a two-part series on the guest column page, with the conclusion next week.)

What makes a city entrepreneurial? Entrepreneurial cultures, once underway, tend to have positive feedback loops (such as entrepreneurial recycling) to further enhance the culture.

As such, it’s sometimes hard to identify what the original initiating factors might have been vs. the status of an entrepreneurial economy once it gets traction.

In any event, entrepreneurial cultures and innovation represent the future for economic growth in the U.S.

Without a greater focus on entrepreneurs, it’s difficult to see how Colorado Springs can have a vibrant future economy.

This is the premise of the Colorado Springs Technology Incubator. Yet, this has not been the traditional approach to economic development in Colorado Springs. Neither the past Economic Development Corp. nor the city has ever placed this as a high-priority item — in spite of overwhelming evidence from successful entrepreneurial cities throughout the U.S. as to what is needed.

Let’s put this another way: We are not an island by ourselves. We purchase goods and services outside the city. Therefore we also need to export goods and services, or otherwise find a means to import wealth into the city.

Different strategies

We can do this in several ways. One is to cater to more and more retirees (we are already on this path, becoming a retirement town). Another is to play to tourism; this path is already well established. Another is to create more anchor companies — primary employers — who want to stay here.

Primary employers are one of the few sources of high-quality jobs — and the only way to keep a vibrant employee base of younger professionals who want those quality jobs. We are losing those people to other cities due to lack of emerging anchor companies. Research has shown that new firms — no more than five years old — over the past three decades have been responsible for virtually all of the net new jobs created in our economy, according to U.S. Joint Economic Committee data.

Over the past decade or so, Colorado Springs has not done a good job of creating or otherwise capturing primary employers. There is not a coherent, adequately funded plan in place to do so.

Seattle, originally a Boeing and lumber town, had to reinvent itself after the Boeing bust. A spate of entrepreneurs (some homegrown, such as Microsoft founders Bill Gates and Paul Allen; others, e.g., Amazon’s Jeff Bezos came from other cities) was responsible for the city’s comeback. Microsoft, once a small, Seattle-based startup, served as the driving force that led to numerous spinoffs and a vibrant economic culture.

Was this entirely accidental? What about Silicon Valley? What factors contributed to its entrepreneurial culture and success? There are many factors, but probably the single most important is the presence of a great university with aggressive entrepreneurial policies (Stanford University). How about Austin, Texas? There, it was closer to a planned process (great university, absence of abusive regulation, reaching out to the semiconductor consortium, etc.).

We don’t have to go that far: We can drive up the road to Fort Collins to observe a community with a coherent economic plan in place. Fort Collins’ economic plan, like those of many other forward-thinking communities, includes support for innovation/business startups as a key pillar of its economic strategy.

In general, communities with more educated workforces have more startup growth, particularly in industries that depend on college-educated workers.

Necessary characteristics

That said, here are the factors I would identify (without regard to the significant dynamics involved) in growing an entrepreneurial culture, whether the culture is planned or grows topsy turvy (order of listing is arbitrary):

Great universities: world-class researchers in key departments; enlightened and innovative intellectual-property transfer policies, solid science/engineering college; tradition of shuttling back and forth from the university to the private sector (think Stanford University); creating vibrant innovative ideas that are realized in the private sector, so that professors are connected with what actually works in the real world.

Sponsored research and development: It does not have to be university-based; it could be federal dollars.

Talented workforce: Well-educated; as a general rule, U.S. entrepreneurs have a preference for healthy choice, physical well-being and an intellectual curiosity that distinguishes them from their counterparts.

Good infrastructure: Parks, roads, events, etc., but let’s not go wild on this — businesses just want to see the basics in place; Places where professionals can get together, exchange ideas, etc., regardless where they work; fun place for younger professionals.

Viable industry sectors: Enough company density that losing a job means you can walk down the street and find another job quite easily if competent. Otherwise the talent leaves.

Neither the past Economic Development Corp. nor the city has ever placed this as a high-priority item.

Startup tradition: Tradition of creating startups that are scalable, higher-growth companies with national sales footprints. These become the primary employers of tomorrow, which this city doesn’t have. We need to distinguish between lifestyle/service companies vs. scalable startups. Commercial property developers are mostly service providers, not the startups we need.

Availability of successful mentors: Successful entrepreneurs who have cashed out and want to give back with true generosity, not fee for service. (Colorado Springs has very few. To the contrary, we have too many service providers taking advantage of unsuspecting first-time entrepreneurs.)

Availability of risk capital: Ideally, a large number of entrepreneurs who have cashed out and want to reinvest. (We have some but not enough. We need more thought leaders in the public sector willing to advocate for more risk capital coming from wealthy philanthropists. But in the absence of other factors, risk capital is wasted.)

Enlightened regulatory environment/business friendly climate: A community that values communication, collaboration and transparency; inclusive vs. autocratic society; strong networking and cooperation; streamlined and transparent permitting processes.

Affordable cost of living: This we do have.

Great outside environment: This we certainly have, but we cannot sell this piece without addressing the other factors.

Entrepreneurial bright spots

Colorado Springs certainly has had some entrepreneurial successes. One of the themes is that success breeds more success, as created wealth is recycled in the community. Here are some examples (the focus is on primary employers, and not service providers):

The Loo family founded Looart Press, later Current. The Loos created a huge legacy and wealth here, and descendants have helped keep the arts community alive for at least the past 50 years. Current may be the single biggest business success of Colorado Springs in recent times.

Ron Muns founded FrontRange Solutions, then the Help Desk Institute in 1989. He sold it for a few million dollars. A few years later, Ron bought it back for around $1 million. Two years later, he sold it a second time, this time to a private equity firm for a few million. He made a fortune selling the same company two times. Muns was awarded the Colorado Springs entrepreneur of the year award. Then he joined forces with founder Vance Brown of local Cherwell Software, which recently received a major venture capital infusion.

John Street has been a key local entrepreneur. He created Telephone Express and sold it to VarTec Telecomm in 1997, with 200 people in his organization. He founded Internet Express, which was acquired in 1999 for $2 million. He sold MXLogic to McAfee in 2009 for $140 million. The wealth in these transactions has been key in supporting Colorado Springs, most notably the Philharmonic.

Joe Woodford moved his company, Woodford Manufacturing, here in the late 1970s, contributing to the region’s economic growth for more 35 years. Woodford transformed areas such as employee profit-sharing, quality control, marketing and purchasing to become a market leader. Since retiring, he has remained very engaged in the community, teaching the values of entrepreneurship through his foundation.

The Lane family founded a Pepsi bottling business in 1936. When it sold to Pepsi Bottling Group in 2008, its territories included portions of Colorado, Arizona and New Mexico. The deal was PBG’s largest acquisition of a U.S. bottler since becoming a publicly traded company in 1999. At the time of sale, Lane Affiliated Companies employed approximately 450 people, another example of successful entrepreneurs giving back to the community, in this case an intergenerational contribution. The Lane family is known for contributions to UCCS and various charities.

Laura McGuire, Becky Medved and Jeff Ziegler were co-founders of Saligent, with McGuire the CEO. Saligent, sold to Protocol Communications in 2000, was one of the early pioneers in sales lead management. When it sold, 200 people were working here. Later, McGuire sold LeadWorks to Ernst and Young in 2003.

Overall, we would make the observation that these isolated ventures brought significant wealth into Colorado Springs, a very good thing for all of us, but did not always result in industry clusters that had a lasting impact.

Also, we would comment, based on inputs from a variety of sources, that these entrepreneurial successes were due to the entrepreneurs involved and had little to do with any coherent economic development policy on the part of the city.

Part 2: Whatever happened to Silicon Mountain, and conclusions.

Ric Denton is CEO of the Colorado Springs Technology Incubator.

One Response to Creating an entrepreneurial culture for city

  1. “To the contrary, we have too many service providers taking advantage of unsuspecting first-time entrepreneurs.” One of the most dangerous things you can do is start your own business. And one of the dangers of going public with your business is the number of vendors who will call, email, fax and visit trying to sell you crap you don’t need. It is bad enough that the law forces you to buy insurances that add no value to your business operation. It does guarantee an income for this set of paperwork predators.

    Steven Shepard
    November 19, 2013 at 4:53 pm