glenn kinstler auecdi 7 17 09
DESCRIPTION
Presentation at the Auburn University Economic and Community Development Institute on the importance of entrepreneurship in economic developmentTRANSCRIPT
The Impor tance o f Smal l Bus inesses and Ent repreneursh ip
A u b u r n U n i v e r s i t y E c o n o m i c & C o m m u n i t y D e v e l o p m e n t I n s t i t u t e
J u l y 1 6 t h , 2 0 0 9
Glenn Kinstler, Director
Today’s agenda
1. Quick introduction of Alabama Launchpad
2. Ideas of Entrepreneurship and the Role of
Small Businesses in Job Creation
3. Three High-Growth Examples from Alabama
4. The Case for Alabama Launchpad
5. Closing Thoughts
What is ALABAMA Launchpad? Alabama Launchpad is a not-for-profit organization
dedicated to the support and promotion of “high-growth” and technology entrepreneurship in Alabama.
Alabama Launchpad was formed in 2006 by the state’s public, research universities and the business community. Unique collaboration between business and academia
Effort to advance “The New Economy” in Alabama
“Building an innovation economy through
collaboration and entrepreneurship”
Alabama Launchpad Partners
Alabama A&M University
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State University
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn University
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn UniversityUniversity of Alabama
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn UniversityUniversity of AlabamaUniversity of Alabama at Birmingham
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn UniversityUniversity of AlabamaUniversity of Alabama at BirminghamUniversity of Alabama in Huntsville
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn UniversityUniversity of AlabamaUniversity of Alabama at BirminghamUniversity of Alabama in HuntsvilleUniversity of South Alabama
Alabama Launchpad Partners
Alabama A&M UniversityAlabama State UniversityAuburn UniversityUniversity of AlabamaUniversity of Alabama at BirminghamUniversity of Alabama in HuntsvilleUniversity of South Alabama
The Economic Development Partnership of Alabama (EDPA)
Role of EDPA
Privately funded, not-for-profit organization Private side of economic development
Created in the early 90’s to help attract business to Alabama
Assists the state, local and corporate economic development/recruiting agencies
Extensive Existing Industry Program Entrepreneurship is Economic Development
“Entrepreneurs are society’s rejects, instead of becoming hobos, criminals or professors, they start their own business.” – Henry D. Thoreau
Entrepreneurship & Small Businesses
Form of Social Responsibility Entrepreneurship makes the world better
Entrepreneurs see what can be, not what is Idea of Creative Destruction Two types of Innovation
Incremental: Small improvement to pre-existing products or services that make them cheaper, faster, better
Disruptive: Completely new products or services that transform entire industries
Inventors are not always entrepreneurs
Interesting Statistics
US Small Business Administration defines a “small business” as one with fewer than 500 employees.
Represent 99.7% of all employer firms Employ about half of all private sector,
non-farm employees Pay nearly 45% of total US private payroll Generated 60 to 80% of net new jobs
annually over the last decade Produce 13 times more patents per
employee than large firms
Who creates more jobs? Small vs. Large “The Role of Small & Large
Businesses in E.D.” Kelly Edmiston, Senior Economist at the Federal
Reserve of K.C. From 1990 to 2003, 23 million net new jobs
were created 239 million gross new jobs – 219 million gross
jobs lost Small Business (< 20 employees) created 79.5% of net
new jobs Midsize Business (20 – 500 employees) created 13.2% Large Business (> 500 employees) created 7.3%
Large firms lose more jobs than they create, but…
Statistics are deceiving, more study needed Small firms become large ones, so the statistics are
skewed
Size-Wage Effect
< 100 100-499 500-999 1000-2500
2500+0
5
10
15
20
25
30
15.6917.72
19.94 21.07
27.05
Average Hourly Wages
Source: US Dept. of Labor
Another Study
“Employment Dynamics: small and large firms over the business cycle” US Dept. of Labor Statistics Study attempts to address the skew in past data by
dividing firms into many more categories From 1990 to 2005, small firms (1 to 499) create 64%
of net new jobs Expansions account for 83% of all gross job gains vs.
17% for startups Small firms had more net job losses in the recession of
the early 90s, while large firms had more net job losses in the 2001 recession
“In today’s economy…”
From April to May: 532,000 jobs lost Large firms (500+) shed 100,000 jobs – 19%
Medium firms (50 to 500) shed 223,000 jobs – 41%
Small firms (>50) shed 209,000 jobs – 40%
From Jan to May: 2,494,000 jobs lost Large = 313,000 – 12.5%
Medium = 1,098,000 – 44%
Small = 962,000 – 38.5% Source: ADP National Employment Report, May 2009
Rates of Success
Two-thirds of new employer firms survive at least two years
44% survive at least four years, 31% survive 7 years.
Results were consistent from different industries
Research found that after four years, the rate of firm closing declines considerably.
Source: US SBA
Not all small businesses are equal !! Lumping all of these small businesses
together is misleading Just think about the variety of small
businesses you see every day! All businesses are important, but
special attention should be given to “High-Growth”, innovative companies Often technology related More efficient than larger firms, more
patents too Higher wages Create real wealth in the community
Three High-Growth Alabama Examples
Digium
Digium is the original creator and primary developer of Asterisk, the industry's first open source VOIP platform.
Digium also offers a full range of professional services, including consulting, technical support, and custom software development.
Currently employee over 80 people Long list of awards and recognitions from
VOIP and entrepreneurial publications Headquartered in Huntsville
The New Digium
DAXKO Software
Leading provider of operations and financial management solutions for member-based nonprofits, with a particular focus on the $5.2 billion YMCA market
Customers in 48 states Products help customers operate more
efficiently and serve their communities more effectively
80 employees; plans to add 20 to 30 more in next two years
Average salary more than $60,000 Headquartered in Birmingham
“DAXKO Culture”
ProEthic Pharmaceuticals
ProEthic is a specialty pharmaceutical company specializing in the areas of cardiology, pain and migraine. Started in 2001 focusing on generic drugs
Company focuses its efforts on the acquisition, development, licensing, and marketing of pharmaceutical products. Became anchor tenant in Montgomery
Industrial Park Created two spin-off companies that also
located in the park Recently acquired by Kowa
Pharmaceuticals of Japan Headquartered in Montgomery
Other Alabama Examples
AdTran HealthSouth QMS Banks
Regions, Colonial, Compass Bates Enterprises
Idea of Entrepreneurial Churn
Idea
Grow
SurviveMature
Sell
What can be done to support start-ups? Look at programs in other states:
Georgia Research Alliance Ben Franklin Technology Partners - Pennsylvania Maryland Technology Development Corporation
Spotlight and reward entrepreneurs Mentoring programs Networking opportunities for entrepreneurs Recruiting success creates opportunities for
small businesses More entrepreneurship education at every level
Common Theme: Public-Private Partnerships
Business Incubators
Incubators provide: Shared space and
overhead Expert advice and
guidance Connections/
Networking Access to capital Intangibles
“Writing a business plan is the first step to creating a successful venture. Everything starts with the plan.” – Dr. Bob Kolodney, Harvard Business School
Governor’s Business Plan Competition
Business Plan Competition
Competition is for technology and high-growth ideas
Eligible teams must be affiliated with a partner university Current Student Current Faculty Other University Employee Alumni of no more than five years Former Faculty of no more than three years
Must establish and maintain HQ and the majority of business operations in Alabama for 5 years
Universities are “Centers of Innovation”
Goals of the Competition
Provide a structured approach to writing a business plan
To showcase Alabama’s best start-up ideas and promote the opportunities for entrepreneurship and innovation in Alabama
To educate and nurture entrepreneurs To create a statewide network of individuals
interested in high-growth entrepreneurship
To provide seed financing to three high-growth businesses on an annual basis
Nuts & Bolts
Competition occurs over four phases; Follows academic calendar
Judges come from business and venture communities
Final event where teams “pitch” their ideas 2009 Finale: April 18th at UAB Opportunity to bring together government
officials, entrepreneurs, university officials, business leaders, economic developers, investors
2008-2009 Registration Figures
36 team registrations Industry Categories:
IT – 6 Materials Eng – 5 Biotech – 5 Medical Devices – 3 Consumer Products – 3 Pharma/Drug Delivery – 3 Auto/Aero Eng – 3 Green Tech – 2 Ag/Vet – 2 Other - 4
What do the winners win?
Grand Prize: $100,000
2nd Place: $50,000
3rd Place: $25,000
While cash is king, the real prize is the opportunity to connect with members of the venture and angel communities and other
business leaders.
A few past winners…
2007 2nd Place: Halo Monitoring
Led by two UAH MSEE alumni Wearable health monitoring system
that uses wireless technology to monitor health and lifestyle of the elderly. Caregivers can monitor vitals of subject in
real time
Fall detection and automatic notification of 911
Currently incubated at BizTech Since competition, Halo has received
$1.7 million of investment from the Huntsville Angel Network, Greer Capital Advisors and Jemison Investments
More on Halo Monitoring
First sales in early 2009
Halo Research goes to Consumer Electronics Show ►
Company now has 10 full-time employees
2007 Grand Prize Winner: OcuMedic
Team led by Dr. Mark Byrne, Professor of Chemical Engineering at Auburn Univ.
Drug delivery company with a patented technology that creates therapeutic contact lenses for the treatment of ocular diseases
Time release Used much of prize money to file
international patent applications and new “field-of-use” patents
Currently in animal testing at the Auburn College of Veterinary Medicine (FDA process)
2008 2nd Place: SEA Desalination
Led by Ph.D. candidate from The University of Alabama
Sun-powered system that removes salt from seawater or pollutants from contaminated ground water
Made from recycled soda bottles
Initial sales are targeted to third world markets and coastal homeowners
10 full and part-time employees Currently incubated at UA AIME
Center
2009 1st Place: Innovative Composite Solutions
Company led by 3 professors from UAB School of Engineering
Design and manufacture of high-end thermoplastic composites
Military, aerospace and mass transit market opportunities
Company uses a proprietary manufacturing process
Lighter, cheaper, more energy efficient and recyclable
Many opportunities for ICS
Competition going forward
Alabama Launchpad winners have gone on to attract over $3.0 million in follow-on money from the Alabama venture and angel communities. More coming Other participants have raised capital, established
joint ventures, hired employees, etc. We have directly helped create 9 companies in
3 years Educational Programs
Seminars, website, etc.
Financial Support
Expenses – a lean organization
Prize Money62%
Ad-minis-trative
Ex-pense
s34%
Finale Event3%
Marketing & Media1%
Current Sponsors – 2008/2009
Platinum Level
($25,000 and up)
Alabama Power Company
Foundation
Alabama Research Alliance*(ADECA)
Economic Development Partnership of
Alabama
Current Sponsors – 2008/2009
Gold Level ($10,000):Vulcan Materials Company*
Silver Level ($5,000):
Alagasco AT&T
Blue Cross & Blue Shield of Alabama
Bradley, Arant, Boult, Cummings, LLP*
Burr & Forman LLP EBSCO Industries, Inc.
Greer Capital Advisors, LLC
Harbert Management Corporation*
Hudson-Alpha Institute for Biotechnology
Metropolitan Development Board*
Current Sponsors – 2008/2009
Bronze Level ($2,500):
City of Auburn Innovation Depot
Kinetic Communications*
Maynard, Cooper & Gale, P.C.
Southern Research Institute
Thomas, Kayden, Horstemeyer & Risley,
LLP
The UA Office for Technology Transfer*
Warren, Averitt, Kimbrough & Marino,
LLC*
Closing Thoughts
Small businesses come in all shapes and sizes Data varies on economic impact High-growth companies have the greater impact
Economic diversity is incredibly important Alabama must be a leader in The New Economy
Mentoring programs are very helpful Recessions are great times to start new
businesses Entrepreneurship and Innovation are hot topics
Alabama Launchpad is the only statewide initiative to support high- growth entrepreneurship in the state
