Transcript National Rural Entrepreneurship Gathering

NORTHERN INITIATIVES
National Rural Entrepreneurship
Gathering
Fairfield, Iowa
June 2-4, 2005
Supporting Entrepreneurs And Their Growth
Since 1992
Northern Initiatives
Dennis West
Marquette, Michigan
[email protected]
906-226-1671
NORTHERN INITIATIVES
• Created as an academic department within Northern
Michigan University in 1985.
• A partnership was created in 1992 between ShoreBank
Corp. and Northern Economic Initiatives Corporation. A
501©3 non-profit was created – d/b/a Northern
Initiatives.
• $10 mm in assets with 14 staff and student interns.
• Working in 51 counties the U.P., rural northern Lower
Michigan and the 5 border counties of Wisconsin.
Jane Jacobs theory of Rural
Development
• Rural Development needs connection to
urban centers in order to overcome the
shortages that rural communities face:
– Capital
– Access to information
– Access to larger markets
The Northern Initiatives Model
• Capital
• Business
– $8.5mm loan fund
Development
– 59% of loans to startServices
–
–
–
–
ups
Subordinated debt
Equity & loan
guarantees
Current portfolio: 120
loans at $5.5mm
$16mm in loans have
created nearly 800
jobs
– Technical assistance
supporting start-upsaccounting, website
development, and
marketing
– Technical assistance
supporting competitive
businesses- marketing
assistance, costing,
process improvement,
and continuous
improvement
The Northern Initiatives Model
Inspiration: K-12 Educators, Universities, UPEDA (the
Upper Peninsula Economic Development Alliance), SBTDC
(First Step), Michigan Works Biz Resource Centers
Start Up:
Personal Wealth, Family or
Friends, Community Banks, Northern Initiatives
Fledgling: Northern Initiatives,
Economic Development Corporations,
Michigan Economic Development Corp.
Account Managers, Michigan Works
Sustainable: Northern
Initiatives, Economic Development
Corporations, Michigan Economic
Development Corp. Account,
Community Banks, Michigan Works
Scale: Regional Banks, Venture
Capitalists
The Northern Initiatives Model
• Assisting Entrepreneurs
– K-12, Adult (inspiration)
– Start Up to Fledgling
– Sustainable
– Scale
SubTerra
Jacquart Fabric Products
The Northern Initiatives Model
• Manufacturers
– Make up 14% of the U.P. economy.
– Provide some of the best paying jobs in the U.P.
– 80% of U.P. manufacturers employ 20 or fewer
employees.
– 6% of small businesses create 80% of the new jobs
and represent 60% of total innovation.
The Northern Initiatives Model
• Secondary Wood Processors
– Slightly over half of each whole log is used in
primary production.
– Wood waste, residues, and low value wood
products can produce environmental hazards
and hinder competitiveness.
Research and Development
– Hardwood trusses and I-beams, “Fish and
Chips”, red maple veneer, post and beam
construction.
The Northern Initiatives Model
• Nature Tourism Sector
– 80% of the U.P. is accessible
to the public - hundreds of
lakes, streams, waterfalls,
trails, etc…
– www.greatwaters.net
• Growth sectors popular with
baby-boomers: soft adventure,
bird watching, biking, hiking,
cross-country skiing, kayaking,
etc…
Big Bay Point Lighthouse
Key Milestones
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
1984-85 Mine layoffs drove unemployment rate to 20% in U.P.
1985 Northern Economic Initiatives created as an academic department of NMU.
1992 Northern Economic Initiatives Corporation formed- 501 © 3.
Initial activities: manufacturing extension partnership, craft networks, small business development
center, innovation, small business lending.
1993 loan fund created using SBA and Intermediary Re-lending Program.
1994 outstanding loans - $425,000.
1996 Sawyer Air Force Base closed (Marquette County).
1997 closed small business development center; craft networks suspended.
1998 annual Board retreat identified issues associated with wood waste and low value wood
products - led to sector exploration.
2000 the Upper Peninsula Economic Development Alliance is formed to collectively market the
Upper Peninsula and promote information sharing among EDCs, intermediaries, government and
utilities.
2002 Outsourced innovation work through agreements with the Northern Michigan University
Center for Economic Education.
2003 U.P. Business Capital launched to provide equity and near equity investments in support of
U.P. entrepreneurs.
2003 Three-year plan emphasizes: financial services, information services and work in three
sectors, manufacturing, secondary wood processing and nature tourism.
2004 Northern Initiatives expands territory to cover 31 northern lower Michigan counties and 5
counties in Wisconsin - 51 total county service area; www.greatwaters.net launched.
2005 Loan Fund capital reaches $8mm outstanding loans $5.2mm, 60% of loans to start-up
companies, 3% loss rate, loans made with or in cooperation with 20 of 29 community banks.
2007 Loan Fund capital to reach $12mm.
Key Strategies
• Establish a theory of practice- Jane
Jacobs model
• Charge market rates for services
whenever possible
• Relationships matter (long term is good)
• Collaborate wherever possible
• What is our Theory of Change?
• Evaluate regularly
Best Practices
• Sound underwriting
• Quarterly loan reviews
• Technical assistance in support of borrowers
– 12 Accounting firms under contract
– Marketing, website developers
•
•
•
•
•
•
•
Annual Board Retreat
Good Risk Management practices
Strong intentions to be in the relationship business
Sell customers what they need not who you employ
Consistent customer evaluations
Participate in peer reviews
Encourage networking
Failures
• Absolutely
– What was learned?
• Leadership matters!!!!!
• Willingness to take advice matters!!!!!
• Willingness to adapt by adding more complex systems
determines who grows and who flat lines.
• Attributed to the late Ewing Kauffman “Some people work in
their business, and some people work on their business.”
• Those who once they get started can be seen working on
their business are the ones that we want to build our
portfolios around.
Key Lessons
• Models matter: When someone is seen as
doing something successfully others will be
willing to try.
• Peers matter: because trust matters.
• Institutions have a role, but a lot of commerce
happens without them, so…institutions need to
be concerned with their relationships. How can
they leverage “their entrepreneurs” to influence
broader numbers of entrepreneurs?
Principals that Support Key
Lessons
• Entrepreneurs are important drivers to
social change.
• Market recovery leads to opportunity for all
people.
• Community renewal requires permanent
institutions.
Enhancing Rural Community
Entrepreneurial Support
• Capital
– CDFI Support
– Patient capital and near equity products (but not
venture capital in our experience)
• Information
– K-12 education
– Ubiquitous technology infrastructure
• Access to Markets
– Sector supports (caveat ~ what is the right subsidy,
what customers should pay and how much?)