People may often wonder: How do you actually create jobs? Well, often it starts with an entrepreneur or two.
Studies have shown economic growth depends on a thriving entrepreneurial foundation made up of small enterprises. Because they are more nimble and better able to generate a return with seed funding or research and development money, small enterprises serve as an engine for job growth and productivity.
Indeed, the vast majority of new businesses start small. New companies with one to four employees account for 86 percent of new firms formed each year since the late 1970s. The tricky part is to ensure those firms grow and succeed.
The entrepreneurs of Maine — and it has many — are a resource, and they need much more attention and support.
Maine — which Forbes Magazine ranked worst for business — actually ranks 29th for entrepreneurship, according to the University of Nebraska’s Lincoln Bureau of Business Research, which measures states based on the income of entrepreneurs, business formation rates, technological innovation and growth in the number of entrepreneurs.
And it has gotten to that level with little investment. Maine spends $11.31 per capita in venture capital investment, according to the National Venture Capital Association. Massachusetts, which is ranked No. 1 for entrepreneurship, spends $432 per capita on venture capital.
Imagine what would happen if entrepreneurs had more resources at their fingertips — for example, a continuously funded seed capital tax credit program to reduce risk for would-be investors; a more robust, dependable research and development program; or more private venture capital foundations targeting Maine endeavors.
As Muskie School public policy professor Charles Colgan pointed out at the BDN’s Solutions for Maine’s Economy conference last week, Maine does fairly well when it comes to having entrepreneurs. It just lags in getting those firms to the next level, to be larger engines of job growth.
Fifty percent of small businesses fail in the first three to five years, according to the Small Business Administration. Why? Most often it’s due to management inexperience and insufficient capital.
Maine does have valuable resources: For example, the Maine Center for Entrepreneurial Development offers networking and training; the University of Maine conducts important research that helps startups; the Maine Technology Institute can be a funding source for companies creating new technologies; the Blackstone Accelerates Growth initiative connects leaders of potentially high-growth companies with training and financial capital; Maine Angels is a group of independent investors willing to fund early startup companies; and the Maine Venture Fund invests exclusively in Maine companies.
But there’s much more to do. All these efforts could be boosted with more funding, promotion and public involvement. Maine could do more to reach people from away who love the state and might move their business here, buy Maine-made products or fund Maine business ventures. The public could participate in high-visibility crowdfunding projects to help a new business reach its final funding goals. A foundation could work specifically to help grow what small businesses are doing right. The Maine Legislature could prioritize continuous, significant funding for research and development.
And to those Mainers out there who have a good idea for a future business? Test it out. Create a plan. Reach out to other like-minded business people or entrepreneurial professionals. Take the first steps and stick with it.