Small Business Reading Room

Thursday, February 02, 2006

Government and Entrepreneurs: Emerging Technology Wanted (Sort of)

When it comes to helping startups, and even medium sized companies, state governments can be pretty clueless. That's the conclusion I've reached after attending a focus group on Monday afternoon hosted by a company hired to help the State of Delaware, and the Delaware Economic Development Office (DEDO).

The company that the State has hired, GSP Consulting, hosted four focus group meetings across the State of Delaware on Monday, January 30th. I attended one of those in the afternoon at the Delaware Technology Park in Newark, Delaware.

I imagine that this is a scene being played out at one level or another across the nation, as state governments try to figure out how to attract employers to their states. If you are considering starting a business, or have one that is looking at expanding or entering new markets, it makes sense to explore the offerings of the organization that is charged with trying to help build the economy of your state.

Be warned, however, that you may need to spend some serious time looking around. While some states are more helpful than others, there can be a serious lack of coordination and integration of offerings from them on the web. Chances are good that there is an economic development office in your state, and chances are also good that they haven't made their web site a priority.

The reason why? In many cases, it's a political reason. It looks a lot more impressive if an Economic Development Office can attract a very large employer to the area. News of "800 new jobs" as a major company decides to relocate is a lot more impressive than "Economic Development Office Helps Open Home Based Business."

But the truth of the matter is that it's the small businesses that will make a real difference if given an atmosphere where they can take root and grow. As a Small Business Administration press release noted this last fall, Small Business Drives Inner City Growth And Jobs. A study by that organization noted that:

...small businesses are the greatest source of net new employment in inner cities. They comprise more than 99 percent of inner city business establishments and they generate 80 percent of the total employment in those areas. In all, America’s inner city small businesses employ about nine million people, or eight percent of the U.S. private workforce.

That growth of jobs isn't limited to cities. How much of the work force in Delaware comes from small businesses? Not counting farms, it's almost half, according to the SBA and the Census Bureau:

Small firms with fewer than 500 employees numbered 18,779 in 2002 and employed 170,732 individuals, or 43.9 percent of the state’s non-farm private sector.

Those statistics are from the 2005 Small Business Profile: Delaware from the SBA. This page includes profiles from other states and territories within the United States. If you look closely, you'll see how important small businesses are to the economy.

I mentioned above that states can be pretty clueless when it comes to helping startups. I was encouraged by being given a chance to participate in this focus group. I was heartened by the statements of one participant who started a web hosting company locally seven years ago with two employees, and now has more than 100 and an international reputation as one of the best hosting companies on the planet.

He noted that the State had done absolutely nothing to help his business, and the reason that his company was located in the State had less to do with chosing Delaware as a location than it did with him just being here when it started. With the exception of help from SCORE, the State hadn't lifted a finger to assist his company, and seemed to make it difficult to find any help from them.

I enjoyed those statements because they seem pretty much on target. I mentioned in the meeting that the State Economic Development Center web site was poorly organized and less than helpful resource. I cited the National Cancer Institute's site as the type of resource that a government agency could create to help the people they were working with. The back story on the site is that the U.S. Department of Health and Human Resources works with a large number of Treatment Service Providers which each had their own web sites. Many of those websites were difficult to use. The government agency conducted and shared research with those providers to help them make their sites better, and published that research on the site.

There is some information on the DEDO site. But, its presentation and organization leaves a lot to be desired. Unfortunately that's true for many states. The information is there, but you really need to dig around for it.

I was also encouraged that the folks from DEDO kept their mouths shut at the focus group and appeared to be listening. Or at least I was until the end of the meeting. There were a number of folks at the meeting who had their own small businesses, and raised issues and ideas on how the State of Delaware could work to create an atmosphere where small businesses could start and thrive. Many of these comments were articulately raised, and well considered, and could lead to significant improvements.

But at the end of the meeting, the only interaction I saw between someone from DEDO and a member of the focus groups was one of the DEDO staff running over to our successful web host entrepreneur and making sure he had a business card from someone at DEDO. I guess his company is now big enough that they are willing to help. (I'm not completely sure, but I think the card was refused.)

There's a lot of useful and helpful information that could be found on state Economic Development Office web sites. Just don't expect it to be very well organized, or focused much on helping startups. Before looking around those pages, take a look at what the Small Business Administration has to offer first. Their Business Plan Basics and their Marketing Basics are very good. And, in the middle of the front page of their site is a way to navigate to the local SBA office in your area if you are within the United States. Chances are that they can help you find more useful information about starting a business in your area than your local Economic Development Office can.

States want economic growth, but it looks a lot more impressive if that growth comes from attracting large employers to their area. A focus group like the one I attended might make them think about the importance of helping startups grow into those large employers, and work upon things like incubators for development. But, those don't make the front page of the newspapers. I wonder how many of our comments fell on deaf ears. One can only hope that they were listening.

I have to say that I've seen more than a few small information technology companies achieve some great successes with only a handful of employees. A great idea, plus a successful implementation of that idea can result in some successful companies without adding large amounts of jobs to a region. Imagine the number of successes that a State could achieve if they focused upon creating an atmosphere where these types of companies could thrive.

There's something attractive about a very large number of small successful businesses than there is about a small number of very large successful businesses. Delaware's economic approach over years past has been to focus on helping those large companies, such as Dupont, or later MBNA. This type of reliance on a small handful of industries has hurt the State rather than helped it, and has made it vulnerable to the regulations affecting those industries, and the business climates surrounding them.

Emerging technologies often come from small companies taking risks, and not large companies placating shareholders. If the State of Delaware wants to attract emerging technologies, then need to start thinking small. That's where the big gains are.


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