The Value of Talent In New Enterprises in West Michigan
It is often asked in venture investing whether you bet on the horse (the market and the idea) or bet on the jockey (the manager and the management team). The story of Pat Day may help answer the question.
Pat Day is a jockey legend in horse racing. Before his retirement in 2005, Pat Day had close to $298,000,000 in winnings, which ranks No. 1 in lifetime earnings for jockeys. He was the all-time leading money rider at Churchill Downs and Keeneland. In the Breeders Cup, the world series of horse racing, Day came first or second in 25 percent of the races. Day was so dominant at Churchill Downs that bettors would often bet on any horse with Day in the saddle and the odds would decline because of the Day followers.
But the raw numbers hardly do justice to Pat Day, he was respected for his remarkable integrity, faith, strength and compassion, both on and off the track. Fellow jockeys knew not to underestimate Day and his mounts. Behind the smile was a fierce competitor who always saved something for the finish. He competed from the high ground with noteworthy respect from and for the welfare of his fellow riders and the sport. Pat Day’s success was built on persistence, constant learning, trying new approaches based on an even-keeled perspective built upon a long term and balanced perspective toward his goals and profession. These skills surrounded by a character of integrity, strength and competitiveness, made Pat Day the most successful jockey in history.
Whether in horse racing or in new enterprises, it is the individual steering the wheel that makes the greatest difference in the success of a new venture. Likewise, how we in West Michigan develop and retain these leaders will determine our success in developing and growing an entrepreneurial environment in the region.
Entrepreneurial Leaders: The Great Gap and the Great Challenge.
A vibrant entrepreneurial community is composed of strong components of capital, expertise, ideas and talent, specifically, entrepreneurial managers and idea creators. When these components are present in a geographical market, a dynamic entrepreneurial ecosystem and culture emerges. Building an entrepreneurial ecosystem, however, is not like building a house; a vertical structure built one component on top of the other. Building on an entrepreneurial ecosystem is more akin to creating a puzzle; constantly putting various complex components together to make a whole picture. Creating the talent piece of the puzzle is the most difficult, but often necessary component of building and growing a new enterprise.
In their book, Engines of Innovation: The Entrepreneurial University in the 21st Century, Holden Thorpe and Buck Goldstein identify two trends that point to the need of entrepreneurial mindset to unlock the innovations that will solve today’s challenges.
- The complex nature of today’s problems requires attacking them with nontraditional and multi-disciplinary approaches.
- Tools and information available to individuals undermine institutions and empower entrepreneurs.
The latter half of the 20th century, the United States used the linear process and massive resource allocation to solve the country‘s big problems. The Space Race and the atomic energy projects were the result of this approach. However, today’s problems such as climate change, environmental degradation, communicable diseases are complex, ambiguous, crossing over multiple agencies, disciplines and constituencies. By their very nature and size, these problems require fundamental new approaches to problem solving. At the same time, individuals have access to information and tools through the Internet that enables one person to have an unprecedented impact, as was seen in the overthrow of the Egyptian government in early 2011.
Today’s problems require building diverse teams with different disciplines, skills and entrepreneurial approaches, as well as tapping into the research and creativity that originates in our universities. The Green Technology Entrepreneurial Academy held at Grand Valley State University in July 2011, illustrated this fact. This program supported over 20+ university researchers and scientists from 10 Michigan universities in a week long program that walked them through the process of how to commercialize their green technology ideas and research and prepare a pitch for fundraising. Even though all of the participants were master or PhD trained university faculty, the overriding first step for each of these fledgling but promising new technologies was to recruit and hire a CEO or business partner who could execute on a business plan to take these products to market and build a new enterprise around them. On that day alone, we saw 15 scientifically validated, qualified business ideas that needed entrepreneurial managers. Where will this pool of new enterprises find their managers? How can we commercialize the research that is being created in our universities’ labs if we are not also creating the entrepreneurial talent that will execute on the research?
The Role of Universities in Creating Entrepreneurs
Venture investors will tell you that the top three priorities in making investment decisions are management, management and management. Specifically, do the managers have a record of success in new venture, do they have domain experience, do they know how to grow a business and do they show the integrity that prompts the respect of investors and customers?
With the great need and emphasis on entrepreneurial leadership, how will we in West Michigan create this critical component of the puzzle? Speaking as part of a panel of on the world of economic crisis in 2009, Google CEO Eric Schmidt said, “We are going to have to innovate our way out of this thing and our great research institutions will have to lead the way.”
In fulfilling this critical piece of the entrepreneurial puzzle, the community must turn to the universities and institutions of higher education. Likewise, we must respond by creating an environment where the process of entrepreneurship is built into the learning experience.
A recent article in Forbes Magazine on student entrepreneurs defined entrepreneurs as “do-ers.” Like Pat Day’s success in horse racing, entrepreneurs take an idea, an innovation or an improvement and act upon it. These individuals take incremental steps that eventually create a self-sustaining enterprise, movement or company. In addition to a subject or discipline of study, entrepreneurship is also an ongoing practice and a way of thinking. In our universities, we must teach entrepreneurship as a lifestyle discipline, series of learned experiences both inside and outside the classroom that together increase the impact of innovation and incrementally improves upon its potential for success.
Strategies for Developing and Attracting Entrepreneurial Talent
We can all agree that attracting and developing talent is a key component to a robust economy. Numerous studies and research have suggested that entrepreneurs play a role in gearing investments towards the communities they live in by creating businesses and jobs, stimulating innovation and creating social and financial capital. West Michigan is well positioned to capitalize on that and create a successful entrepreneurial system by creating a hub that is adept at developing and retaining entrepreneurial talent. Public and private partnerships, in turn, play a key role in nurturing and supporting a robust economy and providing critical mass of human capital, business-friendly policies and relatively easy access to finance.
Essentially, organizations and institutions of higher learning have to invest in their entrepreneurial community by strategically working together to “grow” a critical mass of entrepreneurially minded individuals, as well as facilitate knowledge transfer by encouraging “hot spots” of technological and educational institutions to create conditions conducive to entrepreneurship. Here are the four key initiatives to developing and retaining talent:
Networking and Mentoring:
People do business with persons they like and trust. Networking is about making connections and building trust and mutually beneficial relationships. Professional organizations and local business leaders should be catalysts in providing these opportunities to ensure that upcoming entrepreneurs are meeting the “right” people to expand their network and, ultimately, success. Further, entrepreneurs need proven and experienced business leaders to help them grow and gain business knowledge to navigate the many challenges startup businesses can face. Beyond acting as a sounding board, mentors can provide industry expertise that inexperienced entrepreneurs may not have.
Training and Education:
Training helps entrepreneurs acquire the knowledge and skills necessary to set up and operate a successful business. Having the next best idea or business concept is not enough to spur the creation of businesses. Offering training programs on developing a business plan, marketing and sales, building a team and funding, provides guidance and practical steps needed to take an idea from concept to an actual enterprise
Human and Social Capital:
Education and training is not enough to create social capital. The presence of other talented and like-minded individuals creates opportunities for partnerships, work synergy and innovation. These human clusters provide access to valuable social networking, intellectual capital, knowledge transfer and joint ventures among colleagues.
Access to Capital:
Financial capital is important for individuals seeking to pursue entrepreneurial activities. Loans, microloans and competitions have paved the road to entrepreneurs who operate on a very small scale. Venture capital, on the other hand, is essential to creating and growing new and existing industries such as high-tech, cleantech, life sciences and other high growth sectors.
West Michigan is blessed to have a solid foundation and infrastructure to build upon for developing and retaining talent. We have a comprehensive network of organizations and business leaders who are dedicating their time and resources to creating and sustain our most important asset. Together, the West Michigan entrepreneurial community and institutions of higher learning are beginning to transform the way entrepreneurial talent is created, managed and spread.
- Eric Schmidt, interview by Kai Ryssdal, Marketplace, American Public Media, July 7, 2009.
- Holden Thorp and Buck Goldstein, Engines of Innovation, the Entrepreneurial University of the Twenty First Century; (University of North Carolina Press,2010),9-11.