By Erin Joy, CEO Black Dress Partners
Founder, Midwest Women Business Owners’ Conference
In October, I wrote an op-ed exploring a topic about which I’m passionate: St. Louis’ lack of support for second-stage business owners. And boy, was the response overwhelming. While I received many messages in agreement, plenty of readers thought I was taking sides or pitting start-ups against second-stage businesses. I wasn’t; both first and second-stage businesses are essential to a thriving economy.
According to the Kauffman Foundation, “…startups contribute to economic dynamism by injecting competition into markets and spurring innovation.” And, according to entrepreneurial expert Penny Lewandowski, Vice President at the Edward Lowe Foundation, “Second-stagers are powerhouses when it comes to job creation. What’s more, second-stagers often have national or global markets that bring outside dollars into their communities. They attract new investors to a region, and they recruit talented employees, which boosts a community’s human capital.”
So you see, why can’t—or shouldn’t—we create an environment that’s favorable to supporting both stages of business progression? As a community, we must make sure that both sides of the equation are receiving attention.
Recently, with two hundred business leaders in attendance on October 23rd at the first annual Midwest Women Business Owners’ Conference, we were not only able to get to the root of the issues second-stagers deal with, but also come up with some real solutions. And, never one to present a problem without a solution, I wanted to offer some suggestions on how, as a region, we can continue buoying start-ups—while also supporting second-stage businesses.
Below are five ways that St. Louis can cultivate an environment in which this vital segment of our economy– the job creators–can thrive.
Creation of—and Access to—Support Systems
Entrepreneur Support Systems (ESOs)—groups or individuals who work to accelerate entrepreneurial success— are arguably the most important element in creating a welcoming environment for second-stage businesses. This is, in fact, why my firm launched Black Dress Circle and the Midwest Women Business Owners’ Conference.
ESOs can come in the form of chambers of commerce and other membership organizations, universities, small business development centers, technology councils, and economic-development agencies. In the words of Lewandowski, “Entrepreneurs have the power to change the economy, but ESOs have the power to help them be more successful. They are the entrepreneurs’ entrepreneur.”
But, these organizations must tailor their content and context to the unique and complex challenges second-stage business owners face, and make themselves known. In fact, “Lack of awareness of support and programs for entrepreneurs in the region, based on a mismatch between outreach efforts and intended beneficiaries” was listed as a major challenge in a recent study of St. Louis by The Kauffman Foundation. While the metro area works on sorting this out, if your organization is interested in embracing a second-stage initiative in the meantime, http://edwardlowe.org/ is a terrific resource.
Friendlier Lending Environment
It shouldn’t come as a surprise that second-stagers need access to capital in order to grow. While angel investors are pouring more money into St. Louis start-ups, second-stage businesses still struggle to access lines of credit needed for expansion or launching of new products or services. The National Small Business Association survey revealed that 47 percent of businesses denied credit in 2014 were forced to delay business expansion and, in turn, couldn’t afford to hire employees.
It doesn’t seem likely that the second-stage business-lending climate will turn any time soon; but, there are alternatives. Peer-to-peer lending (an individual or institutional investor who chooses to lend money directly) gives businesses the opportunity to bypass banks, providing borrowers with quick access to capital, and higher returns on investment for lenders. Lending platforms like Lending Club offer an online marketplace for peer-to-peer lending, connecting borrowers with lenders in St. Louis.
Unfortunately, multiple reports show that men are more likely to get funded—and get more money when they ask for funding—than their female counterparts. In The Kauffman Foundation study mentioned above, a huge challenge for female business owners was reported as “Persisting gendered occupational norms, perceptions and roles…which impact engagement in [certain] activities.” One of these activities is asking for money. Communities must work together to reverse this trend and encourage women-led second-stage businesses to ask for credit—from family, friends, formal investors, or banks.
According to Lewandowski, local leaders have the unique ability to help create a culture of entrepreneurship by championing second-stage companies and sharing success stories. Ribbon cutting ceremonies and associated fanfare are common when a new business opens in St. Louis, as in most cities. But what are we—and local media—doing to celebrate the successes of prospering second-stage businesses?
Honoring successful entrepreneurs and communicating their value to the community is an important piece of supporting second-stage businesses. Entrepreneurs often lack resources to build relationships with the news media and key stakeholders in the community, and need someone to do it for them. St. Louis certainly has the resources to achieve this, through acknowledging second-stagers for one-off accomplishments, hosting competitions, or even creating a hall of fame and annual award for local business innovation—all in the name of proactively creating exposure on behalf of second-stagers. The media is key to this initiative as well. By deeming growth milestones as worthy as start-up news, we can change the collective culture—and consciousness—about second-stage businesses.
Second-stage businesses often rely on support from local government to create growth-friendly policies. To encourage this support, metro-area residents should consider forming a task force with local chambers of commerce and other stakeholders to better understand the needs of local businesses and ensure policies are supportive of a second-stage culture. Giving business owners access to free market research reports and demographic tools, such as the ability to map competitors’ locations, is another way local governments can help.
Additional Management Training Opportunities
The success and growth of any business is largely affected by the capabilities—and capacity—of its leadership. By offering uniquely-structured management training courses, universities and organizations in St. Louis can help support second-stage businesses. One-day training courses for emerging managers, like those offered at University College at Washington University, are great classes that don’t cost a fortune, don’t require employees to spend a lot of time away from the workplace, and give a big return in just one day.
As St. Louis strives to maintain its support of start-ups while also building a foundation for sustaining a robust second-stage business community and culture, remember that all efforts help to elevate St. Louis’ economy and national prominence. A vibrant economy is what attracts major companies, conglomerates, and innovative professionals to a city. With that influx of positives comes money and growth from which we all benefit.
Whether you’re able to invest in a local second-stage business to aid in growth or a new service or product launch, or simply become an advocate for celebrating second-stagers and their successes, there is something that each of us can do. Supporting second-stage businesses bolsters job creation in St. Louis—and determines the future trajectory for our city.