Program Summary

Overview and Lessons Learned

Structural changes in declining sectors such as textiles, apparel, steel, coal mining, and tobacco farming—exacerbated by globalization and technological change—have hit Appalachia disproportionately hard, threatening to reverse the modest economic gains that many Appalachian communities have made.

Appalachia's future economic vitality—and the future vitality of rural America—in large measure depends upon nurturing home-grown firms, encouraging innovation and risk-taking, and enhancing investment in new businesses. While the Region has several outstanding examples of entrepreneurial communities and organizations and possesses many entrepreneurial assets, including the self-reliance of its people, it also faces many challenges. These entrepreneurial shortcomings stem from Appalachia's longstanding dependence on extractive industries and branch plant manufacturing and the presence of many absentee landlords who have siphoned off value from the Region. Furthermore, the culture of entrepreneurship is neither broad nor deep throughout Appalachia, and research findings indicate that there are many gaps in the infrastructure for supporting entrepreneurship, ranging from technical assistance to development finance.

ARC views entrepreneurship as a critical element in the establishment of self-sustaining communities that create jobs, build local wealth, and contribute broadly to economic and community development. Appalachia needs to cultivate resourceful entrepreneurs who not only create value by recognizing and meeting new market opportunities, but also increase the value-added assets within the Region.

Responding to these conditions, in 1997 ARC launched a multi-year Entrepreneurship Initiative to build entrepreneurial economies across Appalachia. Through the Initiative, ARC has provided support to develop a culture and vision of entrepreneurship by engaging state and local leaders, the business community, and forging links with institutional partners. Through funded activities, ARC has learned how entrepreneurial activity can be nurtured by a variety of educational, business-assistance, and capacity-building initiatives.

ARC has focused the support of the Entrepreneurship Initiative in four areas critical to building the infrastructure necessary for creating entrepreneurial economies:

• Improving access to investment capital for local businesses by developing new venture capital funds, subordinated debt funds, and micro-credit lending programs;
• Educating current and future entrepreneurs through new training programs in middle schools, high schools, and community colleges;
• Nurturing new businesses by creating technical assistance networks through business incubators, association development, and private sector resources;
• Strengthening local economies by identifying and capitalizing on particular industries in which communities have a competitive advantage.

Some examples of successful projects include: support for youth entrepreneurship education like the REAL Enterprise program in Alabama; creation and capitalization of new 'development' venture capital funds in West Virginia and Tennessee; and targeted support for specific strategic industries such as wood products in Virginia and a value-added food products Incubator in Ohio.

ARC is hopeful that these efforts—both specific entrepreneurship activities, as well as the development of supportive local leadership and a broader community vision—are part of a systemic change in the economic development landscape of the Region. We invite you to learn more about these new tools rural communities are adding to their economic development toolbox.

Lessons Learned - Developing Sustaining Institutions

Through work with hundreds of grantees, ARC has identified several elements that are essential for the success of local efforts to promote entrepreneurship. One of the most important is the building of sustaining institutions—developing capable organizations that have broad vision and assume leadership over local entrepreneurship efforts. These institutions champion entrepreneurship activities through coordination, fundraising, or the direct delivery of entrepreneurial services.

Leading entrepreneurship organizations look very different in different communities. ARC state offices have employed many strategies to identify partners to lead entrepreneurship efforts. These partners have ranged from Local Development Districts, to business incubators, to schools and universities, to private investment groups and philanthropies. Programs in Alabama, Kentucky, and North Carolina provide excellent examples of these differing approaches.

In Alabama, the Shoals Entrepreneurial Center manages a network of three business incubators with almost 100 tenants. They have leveraged their leadership role in the community to initiate entrepreneurial education and training programs with the local school system and university and have developed excellent relationships with local lending institutions.

In Kentucky, the Kentucky Highlands Investment Corporation is a $35+ million development finance institution providing debt and equity capital to a range or portfolio businesses, as well as one-on-one technical assistance. They have invested in over 80 businesses and, with the support of other lenders, have helped to create over 4,000 jobs in rural Kentucky.

And in North Carolina, the Council for Entrepreneurial Development acts as a network, bringing together hundreds of private and public sector service providers (such as accountants, attorneys, marketing firms, engineers), banks, and venture capital firms with entrepreneurs to create a vibrant fabric of entrepreneurial activity in a multi-county region.

Even with some excellent models to follow, communities beginning to invest in entrepreneurship activities are often uncertain or overwhelmed. The range of programs, partners, and resources is extensive. To shorten the path to results and increase chances of sustainability, ARC provides the following recommendations for building entrepreneurial institutions:

• Identify gaps in the entrepreneurial infrastructure. Before embarking on development of a new initiative, identify the gaps in the entrepreneurial landscape. Creating new lending programs isn't helpful if half-a-dozen community loan funds are already serving your community. Be strategic with your limited resources.
• Invest in organizations with the greatest opportunities for success—not necessarily the traditional service providers in your community. Programs and/or champions who have the ability to effectively engage local partners—especially private sector partners—are good candidates for success and, hence, for continued support. Programs that have achieved minimal outcomes, and have shown limited ability to engage local public and private sector leadership, are not likely to become successful in the future.
• Provide the support necessary for local efforts to reach scale. Just like private businesses, successful entrepreneurship programs must have sufficient financial support to reach scale and sustainability. Best practice programs didn't get that way overnight, and funders—including ARC—need to have the staying power to get promising efforts out of the start-up phase, even if it requires several years of continued support.
• Engage successful entrepreneurial institutions to mentor new, developing institutions. State and community leaders can leverage the expertise of mature entrepreneurial institutions with a track record of success, tasking these successful entities to mentor organizations with emerging entrepreneurship programs. There are a range of potential mentor organizations that can match the program and geography for a wide variety of local entrepreneurship efforts.

ARC hopes these experiences are helpful for your community and invites you to use the range of national resources available to support entrepreneurial efforts. For a listing of national resources visit 'Entrepreneurship Resources.'

And remember, every year hundreds of thousands of new businesses start in America. You can help ensure some of these firms are started and grow in the garages and Main Streets of your community!