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So you’re an entrepreneur with high-growth aspirations and you don’t live in Silicon Valley, Boston or New York City. Crazy, right? While there are perceived advantages to locating a business that needs private investment in these high-performing regions – capital concentration results in shorter fundraising cycles, deep talent pools satisfy technical hiring needs, professional/social networks spur acquisition scenarios – capable entrepreneurs and successful companies exist in every state. It defies logic, common sense and shared economic interests for America’s entrepreneurs to physically relocate to a small number of cities.
While business startup activity is rebounding after a period of decline and taking root in cities across the country, capital accessibility remains a challenge for young, high-growth potential companies in most states. Entrepreneurs learn quickly that “risk” capital, in the form of equity-based financing, is concentrated in a small number of regions. With nearly 80 percent of venture capital managed and invested in California, Massachusetts and New York, this extreme geographic resource concentration often results in businesses moving to the capital rather than the capital flowing to the business.
Related: 6 Ways to Grow a Startup Community in Your Own Backyard
As experts on capital formation strategies, we see many state and regional leaders focusing more of their economic development efforts on supporting entrepreneurs between the coasts. The goal of these innovation-based economic development strategies is not for regions to replicate Silicon Valley, which is unrealistic, but rather to build and strengthen innovation capacity within their regional ecosystems to the greatest extent possible. There are opportunities for entrepreneurs to help, and your help is needed.
Tell your story
It has been said that entrepreneurs have great stories but are not good storytellers. We believe this is not quite accurate; entrepreneurs do have good stories and are good storytellers. However, most entrepreneurs are too busy building businesses to allocate time to public relations. This is a missed opportunity for celebrating success stories.
Engage with diverse stakeholders
Sharing information on the impact of growing small businesses is important to improving the value and needs of entrepreneurs. We encourage entrepreneurs to seek out corporate executives, public officials, venture development organizations and private associations to help drive an innovation-based economic agenda with a long-term outlook.
Related: The 5 Ways People Can Build a Thriving Startup World in Their Community
Understand the local investment landscape
When engaging with stakeholders, it is important to serve as an expert on local market conditions, which can vary significantly from region to region. Entrepreneurs should know the local sources of investment capital and the gaps in the financing lifecycle of high-growth firms in order to be credible advocates.
Research the number of active venture capital funds, their size and investment philosophies, and the role of accredited “angel” investors in your region. Accurately matching investment supply with investment demand is essential to improving regional competitiveness.
Furthermore, entrepreneurs can help business, philanthropic and government leaders learn more about successful models for increasing access to venture capital by studying best practices and investment strategies. For example, states and regions have experimented with initiatives to support new fund formation – seed funds, fund-of-funds and co-investment funds – that can be managed by for-profit or non-profit entities. These initiatives can be private sector led, public sector led or a combination of the two for a market-oriented solution.
Be successful and build critical mass
At the end of the day, nothing is more impactful than business success to change both the perceptions and reality for entrepreneurial ecosystems. Developing new companies and industries is important to maintaining a competitive economic advantage as a country. What is needed is for more small businesses to grow into the large businesses that create jobs and wealth.
Related: How Entrepreneurs Can Succeed Outside of Silicon Valley
New firm formation and growth needs to happen in regions all across America, and regions need to continue improving their entrepreneurial ecosystems. We encourage entrepreneurs to embrace their important role as the future of cities and help lead the way to widespread economic prosperity.
Eric Cromwell and Dan Schmisseur
Eric Cromwell and Dan Schmisseur, the founding members of Cromwell Schmisseur LLC, are entrepreneurs and economic development consultants based in Nashville, Tenn.