Private Sector: Moving up the entrepreneurial ladder

Tuesday, September 19, 2006

My heart sank when I read that Pittsburgh ranked 48th of the 50 top cities in Entrepreneur magazine's list of the best cities for entrepreneurs. Some people might think making the top 50 is an accomplishment, but it's nowhere good enough.

	Chris Allison, former CEO of a public company, teaches in the entrepreneurial studies program at Duquesne University, is Entrepreneur-in-Residence at Allegheny College in Meadville, and lectures in the Executive Education Program at the Don Jones Center For Entrepreneurship at CMU's Tepper School of Business.

Entrepreneurship is the life-blood of our future growth and part of our tradition.

In my mind, you create critical mass addressing issues such as seed funding, entrepreneurial education and harnessing the collective power of local economic development activities.

Water the acorn tree

A lot of startup executives will tell you that it's harder to raise $500,000 than it is to raise $2 million. The seed money is not as bountiful locally as it could be.

For many venture capital firms, a minority of investments account for a majority of profits. They invest in risky ideas, so the batting averages are low. But when they hit the ball, it usually bounces in the river. Because venture capital firms only can invest in companies with addressable markets exceeding $500 million, they usually don't make bets on companies that can only hit a single.

Seed money for that must come from high-net-worth individuals in the private sector, sometimes called "angels." Places like Palo Alto, Calif., Boston, Raleigh, N.C., and Austin, Texas, became hotbeds of technology because the young tech-company founders, who became mighty financial oak trees, dropped startup capital acorns on folks with good ideas. Part of the reason is empathy for their plight; part is wealth creation; most because they have fun doing it.

We need to create an environment where there is an incentive for successful local entrepreneurs who have created personal wealth to reinvest in local startups. A nice complement to Gov. Rendell's venture capital program could be state income tax breaks for angel investors who deploy capital into Pennsylvania startups or invest in venture capital firms based in the Commonwealth.

Teach your children well

Most heads of tech companies don't fail because they didn't work hard enough or didn't have good ideas. It is primarily due to poor business planning. If most entrepreneurs understood market research techniques, long-term strategic planning resulting in the creation of competitive differences, cash-flow planning, go-to-market strategies, capital formation techniques and basic management techniques, they would have a fighting chance.

Entrepreneurial education on a high school, collegiate and executive seminar basis is a must. Every major local university has entrepreneurial education programs. Many are taught on a graduate and undergraduate level. Programs such as the National Foundation for Teaching Entrepreneurship take it into our high schools.

Why couldn't the Commonwealth create a program such as the Job Training Partnership Act to provide tuition dollars for this type of education for adult entrepreneurs? Why can't an introduction to entrepreneurship be part of a life skills curriculum that is mandated for high schools by the Commonwealth?

Pittsburgh's Gang of 7

We have a lot of organizations in the community that want to help local business creation. They are all well-intentioned and have different charters. Sometimes I wonder if they occasionally step on one another's toes. Human nature may make them a bit competitive with one another. Is there a way to make sure that efforts are not duplicated but compounded?

The Group of 8 is an international association that represents 65 percent of the world's economy and includes the United States, Canada, France, Germany, Italy, Japan, Russia, and the United Kingdom. They get together every year to find ways that they can work better together to further our global economy.

Could we bring together the leaders of the Allegheny Conference on Community Development, the Pittsburgh Technology Council, Innovation Works, CMU's Don Jones Center For Entrepreneurship, the Idea Foundry, the Pittsburgh Life Sciences Greenhouse and Pitt's Institute for Entrepreneurial Excellences and form a local group that functions much the same was as the international version?

What if the Commonwealth gave them a chunk of the venture capital program dollars with the proviso that they hire a staff of experienced venture capitalists to administer the fund? After all, they do have day jobs running their own organizations. The profits of the firm would then be redeployed in the region in the form of economic development grants. A portion of the profits also would be used to provide reasonable incentives for the pros running the fund. Good venture capitalists do not come cheaply.

Green cards with diplomas

Tom Friedman has proven that the world is flat. We need to think globally. You know how we beat China and India in the world economy? Let's take the advice that I got from a highly successful local venture capitalist that I know. Every foreign student who receives a diploma from a local college should have a green card stapled to it. How about we create a local bureau of immigration lawyers that provides free legal service to foreign kids coming out of local schools. If we get them a green card, they must commit to living here for another five years.

So here's hoping next year that we're No. 10 with a bullet on Entrepreneur magazine's 2007 list. If not for the region, let's do it for Mayor Bob. He'd have loved it.