Small steps to help grow small business
So now what do we do? How do we create a more entrepreneurial climate in St. Louis, and ensure the companies of the future grow here?
The short answer, the easy answer, is money, in the form of bank loans, seed funds, venture capital. But money is tight these days, and it has a tendency to follow results, not fertilize new ground. So here are a few other ideas — most already in play on a small scale — that St. Louis can build on to make its economic garden bloom.
Lower the barriers to entry — Most startups operate on a drum-tight budget. And any hurdle to opening the doors makes that budget even tighter.
Yet many entrepreneurs say they face a maze of paperwork, inspections, licenses and approvals. This takes precious time and money.
"Business assistance centers," like the one run by the city of St. Louis, try to help smooth the road for would-be business owners. More publicity for programs like these, and less paperwork in general, would be big step in the right direction.
Pull in the same direction — St. Louis has scads of people working on this problem. There are incubators and counseling programs and angel networks and mentor teams. Most do good work. But sometimes, they do the same work.
"It’s difficult sometimes for business support organizations to work together," said Eddie Davis, director of the Center for the Advancement of African-American Roundtable. "This impedes our growth."
And despite all these efforts, everyone has stories of small-business owners who don’t know the resources available to them. A more streamlined effort to steer people in the best direction would make the most of all of this.
Maybe it’s a regional clearinghouse. Maybe it’s (horrors!) a committee. Maybe it’s as simple as stronger informal networks among the many groups working on this. But more cooperation would go a long way.
Cash on the barrel — Yes, the kind of money needed to fuel lots of startups is probably too much to hope for. But small, well-targeted loan funds can make a difference. Like St. Louis County’s new Boost loan program.
Funded with a $5 million line of credit from PNC Bank, the Boost program is designed to help small businesses struggling to get bank loans, by offering funds with lower eligibility requirements, and county backing payday loans. Since January, the county has received more than 30 serious applications and will soon issue its first loans.
Small partnerships like this could augment bank lending and provide more support to startups at a relatively low cost.
Leverage our universities — Two years ago, a group of investors launched the Billiken Angel Network, a fund designed to provide seed capital to entrepreneurs with a tie to St. Louis University — students, alumni, faculty. They leverage their own money, plus $1 million in funding from SLU, to help fund startups, many of them here in St. Louis.
This region has a lot of universities. And they create a lot of ideas. Pooling investors around their ties to other local institutions, from Columbia to Rolla to Edwardsville, is a low-cost way to spark more companies that are born, and will stay, in St. Louis.
Pool Midwestern venture capital — Most of the Midwest — not just St. Louis — lags when it comes to creating high-powered, innovative startups. This is despite research universities that are among the nation’s best, and that win more than their share of federal grants, R&D funding and patents.
"But it’s not getting translated into new businesses," said John Austin, who heads the Great Lakes Economic Initiative at the Brookings Institution.
He co-authored a recent report detailing how the Midwest ships much of its venture capital to the coasts. Investing closer to home, he contends, would be profitable for all involved. More Midwest-specific funds, like the Clayton-based Mid America Healthcare Investors Network, would provide opportunity, and profit, in the region.
"We need more entrepreneurial investors," said Frank Samuel, the study’s other author.
The big steps — more state seed funding, a flood of venture capital — will help, if and when they arrive. But small steps now can help prepare the ground for entrepreneurship to bloom.