Economic Development Reference Guide

Entrepreneurship

Entrepreneurship is the process of creating a business idea and turning it into a real business. Entrepreneurs create new goods and services based on new technologies or demands. They are extremely motivated and focused, typically spending long, unpaid hours working on their ideas in attempts to turn them into profitable businesses. Entrepreneurs are the engines of the economy in every generation, so many economic development efforts support their needs in the hope of creating new employment prospects.

Entrepreneurship development programs provide potential entrepreneurs with the capital, training, and technical assistance they need to start-up and grow their business. Incubators are one of the many initiatives used for entrepreneurship development, but programs also include technical assistance, financing, legislation, marketing, accounting, and networking.

Trends in Entrepreneurship

• Entrepreneurs create approximately 600,000 - 800,000 new businesses each year.

• Skilled individuals leave large businesses to become entrepreneurs because they see:

  • New and emerging market opportunities
  • Greater career progression/use of skills
  • Independence

• Graduates and university students in IT-related fields are becoming entrepreneurs in IT, e-commerce, and electronic engineering businesses.

• Entrepreneurs need training and technical assistance; technology incubators empower entrepreneurs by giving them access to equipment, funding, and mentoring.

• Entrepreneur training programs through local colleges give entrepreneurs skills and business acumen to develop ideas into real businesses. Programs cover issues such as financing, legislation, marketing, and accounting practices.

• Programs aimed at developing women and minority entrepreneurs, often offer technical assistance, access to capital, administrative services, information, networking, and incubators.

• Angel venture capitalists target university alumni and students for their connections to cutting edge technologies, research and development.

• States are trying to mobilize networks of angel investors who meet regularly and listen to presentations from local companies seeking investments.

• Growth in the entrepreneur population has been fueled by investments of personal savings and lower risk among those with few or no children.

Benchmarking and Evaluating Entrepreneurship Programs

Programs established to support entrepreneurship also need to weed out individuals who would not be good entrepreneurs. Thus, training programs may have as many drop-outs (those who decide not to become entrepreneurs) as those who go out and actually start a business. In the case of this particular type of economic development initiative, drop-out rates may indicate a successful program.

Quantitative Measures

• Number of new business startups
• Numbers of entrepreneurs assisted
• Business failure rates (or ratio of start-ups to failures)
• Number of jobs created
• Cost per job created
• Percentage of women and minorities assisted
• Number of local residents hired

Qualitative Measures

• Diversification of businesses (e.g. new industries, new services)
• Program graduates understanding the costs and opportunities of an entrepreneurial endeavor
• Ability to create a supportive environment for entrepreneurs (courses, networks, mentors)
• Stated project goals and the degree to which they have been achieved (e.g. promotion of female entrepreneurs)

Incubators provide entrepreneurs with affordable space, and on site available technical assistance and management support. Incubators strive to accelerate the successful development of new ventures through low start-up costs. Incubators provide An incubator amy serve a specific objectives such as technology development or neighborhood revitalization. Incubators should be evaluated by the degree to which they meet their unique objectives.

Additional Quantitative Measures

• Incubator occupancy rate
• Incubator graduation rate
• Average time spent in the incubator prior to graduation
• Ratio of failures to total tenant occupancy over the life of the incubator
• Percentage of firms obtaining finance

Additional Qualitative Measures

• Tenant training (exposure of tenants to the business world including courses, seminars, luncheons, access to accounting, financing and legal services)

Web-based Resources for Entrepreneurship

• American Entrepreneurs for Economic Growth
• Ewing Marion Kaufman Foundation
• Grameen Foundation
• MIT Entrepreneurs Club
• National Association of Seed and Venture Funds
• Silicon Valley Association of Software Engineers
• U.S. Department of Commerce
• U.S. Small Business Administration
• U.S. Small Business Administration Loan Programs
• National Business Incubation Association (NBIA)

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• Economic Development Strategic Planning
August 5-6 | San Francisco, CA

• Technology-led Economic Development
August 26-27 | Lansing, MI

• Workforce Development
September 23-24 | Columbus, OH

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