Special Edition #1: Access to Small Business Capital
By: Karl R. LaPan, President & CEO, The NIIC
This past Friday, I had an incredible opportunity to participate in and share insights at an invitation-only Access to Small Business Capital Forum hosted by the Federal Reserve Bank of Chicago. This forum gathered over 60 bright minds and practitioners from banking, non-profits, community/economic development organizations, municipalities, Fintech companies and regulators from governmental agencies.
While Chatham House Rule was invoked for the meeting, I will share some of my key insights and takeaways from the discussion and panel presentations. I also want to thank my two outside advisors in the preparation of my remarks – Bob Cohen, who knows everything there is to know about crowdfunding, and Mark Long, who is an acknowledged global expert in entrepreneurship. Thanks to both of them for their insights and peer-reviewed feedback of my presentation.
In my first blog, I will cover my key points in the talk I gave on Access to Small Business Capital: Engaging the Entrepreneurial Support Organizations (ESOs). In my second blog, I will cover some of my key insights from the broader meeting discussions and conversations.
My key discussion points included:
- Entrepreneurship is a team sport and inclusive of the broader entrepreneurial organization definition proffered by Steve Blank when he referred to the four types of entrepreneurial organizations as all “real entrepreneurs”. The entrepreneur is at the epicenter of the ecosystem. Entrepreneurs are rare and special (according to Gallup, only 2.5% possess all 10 of the talents so the rest of us have to account for it on our teams.)
- The explosive growth in the entrepreneurial support organization landscape, and how it has empowered the entrepreneur to have lots of flexibility in choice; control; speed; scale and access to various formats (cohort, team, individual; online, in person etc.) to accomplish their goals and dreams.
- I shared our NIIC approach on the 4 pillars of entrepreneurial success for entrepreneurs today. This includes access to capital, access to talent, place-making, and connectivity. While the degree of utilization may be different for the various types and stages of entrepreneurs and their teams, the 4 pillars provide the essential ingredients to increase an early stage venture’s odds of success.
- The challenge of integrating entrepreneurial services in a more turnkey, cohesive and dynamic way to address gaps, blind spots and deficits entrepreneurs and their teams have in the business life cycle (start-up, grow, expansion and scale). I shared the use of Gallup EP-10 and other psychometric assessments like Predictive Index, the use of place-making to enhance community building, accountability, and speed; utilization of business development services to foster and nurture entrepreneurial skill building and the explosive growth in online and hybrid training (WKI So What methodology and portal; NIIC launching its own LMS solution – NIIC Navigator next month, the pervasive use of business model/lean canvas over business plans, and other high impact tools like Growth Wheel) to meet the entrepreneur where we find him/her and to address cost and complexity of delivering technical assistance especially in LMI (low to moderate income) and rural communities. The goal being to balance high touch services with high-tech delivery mechanisms.
- Finally, I also covered some of the myths and realities about the capital raising process, the appropriate use of equity and debt financing and some of the impact equity crowdfunding has the potential to have on how early stages consume and raise funding. My key point, though, was when an entrepreneur shifts his/her focus from funding to revenue, the business is more likely to succeed. Often, if an entrepreneur, shifts its focus from early capital formation to capital raising after customer discovery, validation and customer acquisition, the results are better for the entrepreneurial venture. I also shared that the Title III funding has had some early success and promise with over $14 Million raised in just over 100 deals in the second half of 2016. My hope is this vehicle will continue to level the playing field for early stage modest capital needs (under $1 million per transaction) given many angel investors have moved downstream in their deployment of capital.