Collaborative Consumption

Sharing and Caring towards Entrepreneurial Success

‘Collaborative consumption’ may not have caught your attention yet but one day soon it will.  This is a general trend in entrepreneurship, which aims to do good for the environment, by utilizing more effectively existing resources.  It has been around for a while but it jumped out at me most recently when I encountered a new business launched by moms in Brighton (UK).  The venture called Unihomeswap is the idea of Herimone Pask and allows moms to literally ‘swap’ their children when they go away to college.  The idea is that parents who have a spare room while their child is away might be able to take a student from the city where their child is studying.  An organized swap of this nature saves families money and allows them to get to know the people their children are staying with.  The website allows families to explore swapping options while paying nominal membership fees ($40) for the site.  This is a great example of collaborative consumption – which is the idea that society can utilize more effectively the resources that we have under our control if we find more effective ways to share what we already have.

The more you look for examples the more evident it becomes that this is a wider phenomenon that offers a host of entrepreneurial opportunities and is set to become a trend that will grow.  Take for example parkatmyhouse.com in the US.  Here home owners can generate a second income by renting out parking spots and drivers who want to park near difficult to park places like busy stations; airports and sports venues can find an unusual way to fulfill their parking needs.  The site brokers relationships and generates fees and it has become a particularly useful source of extra income for churches and synagogues.  If you want to swap a house for a vacation you can now do this at a host of sites (e.g. homeexchange.com and homeforswap.com) and a range of other swapping sites have grown recently.  Now you can swap: books; baby goods; clothes; kitchen equipment; makeup; and, tools.  You can also share bicycles and cars.

One might reasonably ask though – all this sharing and swapping is great but is there money in it?  To best illustrate the entrepreneurial potential you need only look at ZipCars.  ZipCars has been described as a, ‘nouveau car-rental company’, but really it is one of the first collaborative consumption companies to IPO.  It launched its public offering in April 2011, debuted 60% up on its IPO price and closed the day at a value of $1.2billion.  ZipCar’s IPO raised around $174million dollars for investment some of which was used to acquire its UK rival Streetcars.  Its model has also changed the rental industry and now many of the rental companies are offering alternatives, for example, WeCar (Enterprise Rent-a-Car) has just teamed up with Georgia Southern University to offer a car sharing service across the campus in Statesboro.

Such sharing and swapping – is also ‘caring’.  It enables all of us to save money as an incentive but ultimately we are using fewer resources because by sharing and swapping we are using our resources more efficiently.  At the vanguard of this movement is Freecycle; here you can give items away that you don’t want and would have thrown out and receive items you need for free.  If you’re bootstrapping a new venture, even one that has nothing to do with collaborative consumption, this is one site you need to know about.

Growing Our Own Entrepreneurs

Imagine what it would be like if Statesboro had its own Google, Facebook or Microsoft.  It would be a game changer for the city and Bulloch County.  For many years this has been the purpose of industrial development; to do everything possible to attract such business goliaths.  In Statesboro we’ve had some successes, for example, Great Dane’s recent decision to locate here.  This approach can work but it is getting more difficult as the current downturn impacts on large businesses and their willingness to invest, and more communities are jumping on this “bandwagon” of opportunity.  So, at the moment the chances of attracting a game changer are low.

So what’s the alternative?  The alternative is to develop some businesses ourselves that are underpinned by new technologies and that have the potential to grow.    We may need quite a few to get one big success story but it will only take one significant success, or a host of little successes, to have a major impact on our local economy.

This is the logic that drives the Entrepreneur Zone (or E-Zone) in the City Campus in downtown Statesboro.  The City Campus is a collaborative effort between the City of Statesboro, the Downtown Statesboro Development Authority (DSDA) and Georgia Southern University, and it recently won the   “Best Commercial Redevelopment Activity” for the DSDA.  As Dean of the College of Business and Administration (COBA) Ron Shiffler explained at its launch earlier this year, “We are supporting economic development — that’s the short answer.  This is where it all begins.  This is where the first job is created, and so our goal is to try to develop some new businesses that can stand on their own and hopefully grow into those big game that will stay in Bulloch county”. 

The E-Zone seeks to encourage the development of “organized serendipity”, simply translated as, if you put a bunch of entrepreneurial people together something interesting and unexpected happens.  In fulfilling this obligation the E-Zone is helping local and student entrepreneurs by providing suitable space from which they can run their businesses.

Rob Wilkerson owner of Reboot a PC optimization business and the first entrepreneur to sign up to the E-Zone says, “You get some great space at a reasonable price, but also I have been paired with entrepreneurial mentors and have a student team helping me with a business plan”.  Jamie Gilleland owner of Misyte.com, a Web design, development, SEO and hosting company. concurs, “The space is just great.  I use it for meetings and training courses, as well as, to work from. I believe networking is important and this type of facility really helps.” The E-Zone’s efforts to help start-ups have also drawn support from the Small Business Development Center (SBDC) and the Savannah Chapter of SCORE who provide help to the entrepreneurs in the E-Zone.

The E-Zone is helping student entrepreneurs get started. For example, Malcolm and Marcus Howard  are developing an internship and consulting business matching student labor with small businesses (Howard Consultancy & Investments) and an internet analytics business.  Malcolm explains, “This is a perfect facility for us.We use the conference room regularly and it enables us to have a professional setting for our business, which is critical as we get started.”

In addition to providing space for entrepreneurs, the E-Zone is also seeking to help established businesses.  It is doing so by providing training facilities in the 30-seat classroom and offering a conference room with sophisticated video and tele-conferencing technologies, all provided at a nominal price.

The E-Zone also hosts forums for small businesses, each focusing on specific business issues, such as Sales Tips for Small Businesses and How to Avoid Running Out of Cash. It is also the venue for many of Georgia Southern University’s entrepreneurship courses.  MBA student John Keith comments, “Dr. Pittaway talks about organized serendipity in his class, but you really see it in the E-Zone.  We often arrive on a Thursday afternoon for our weekly class at the E-Zone and end up meeting many of the small business owners who are here for the E-Zone Forum.  We are also helping local entrepreneurs with our MBA business planning projects.”  Jerry Blakely of Novel Imaging agrees, “It’s been a great experience working with the MBA students in the E-Zone.  I am really excited by some of the things they have come up with.”

Organized serendipity takes all of these things: new entrepreneurs; established small businesses; and students, as well as organized support and assistance.  We are just beginning this journey and if you think you can use, or recommend someone to the E-Zone, please take a tour soon.

Contact: Jaye Parker, City Campus E-Zone, cparker@georgiasouthern.edu, 912-478-8701

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Micro-lending in entrepreneurship programs

Over several months Georgia Southern University’s Center for Entrepreneurial Learning and Leadership has been exploring the development of a micro-lending program; especially how such a program might work at a University.  The focus has been to establish a micro-lending fund for entrepreneurs (both student, graduate and local) at Georgia Southern University in Statesboro.  The concept is to provide small loans ($2,000-$15,000) to help establish businesses where the prospective entrepreneur does not have collateral and may not have a good credit rating.  The loans are designed to support links between entrepreneurs and the University, as well as, to be focused on distressed rural locations.

The Center has conducted research on micro-lending (micro-finance) programs that are linked to Universities and particularly entrepreneurship centers.  This research concluded:

  • In theory a University foundation can administer a fund from a legal and governance standpoint
  • A number of universities in the US have had micro-lending funds targeted at inner city entrepreneurs.
  • MBA entrepreneurship students are sometimes used to administer the fund, as part of their learning experience
  • Universities that have been successful have partnered with a local credit union to help administer the funds
  • Most funds are started with around $60,000, which is usually donations from alumni
  • At one University there was an equity seed capital fund and they found a greater need for small grants and no interest loans.  Once again money came from alumni donations.
  • Another US University tended to have micro grants for students, again funded by an endowed gift from a parent of a student.  The same university also has’ runway’ loans which are a bit larger (up to $25k), these are no interest loans which are tied to cash flow.  Once principle is repaid there is an automatic gift agreement, the university gets 1% of revenues until they sell the business and a commitment of 1% of the sale price of the business. 
  • A third university proposed contributions from alumni, students, parents and supporters but the idea of a $2 addition to student fees was not attractive.
  • Loan payments on principal and interest are usually recycled back into the fund
  • Any fund needs a clear philosophy for eligibility (e.g. geographic location of enterprise or just a student of particular institution – at what point after graduation is too late?)

A further study carried out on the administrative aspects of a micro-lending highlighted that a university would:

  • Need to consider fund collection and orchestration.  Key issues include:  Size and unit of loans, critical mass of funds, programming for growth of businesses and fund, loan placement practices, returns of loans and interest, growth and reuse of funds.
  • Need oversight procedures: advisory board, audits, approval mechanisms, recipient tracking and delinquency handling
  • Need processes: applications; review approval; documentation; repackaging; repayment collections; operational reviews.
  • Need repayment processing methods: software; adaptation; learning; loan setup; statements; payments; arrears notices; and, reports.
  • Need to consider confidentiality agreements for students working on due diligence
  • The default rate could be as high as 25%-35%

When we started to develop our own proposals for a fund we made the following conclusions.

  • The fund will need to be not-for-profit
  • Most institutions will have foundations that will allow them to govern such funds and there is evidence of these working in other parts of the US.
  • Partnering with a bank or a credit union is essential for the fund to be properly administered.
  • $40,000-$200,000 should be enough to start a fund; the source could be government grants or alumni gifts.
  • Students and local entrepreneurs will need small loans with low or no interest (typically $2,000-$15,000 at 5-10% interest)
  • It is possible to innovate by providing low or no interest loans tied to future gift agreements to the University.
  • The operational aspects of managing a micro-finance fund should not be under-estimated.  These include loan orchestration, oversight, application processes and repayment processing methods.  All of these suggest that we would need to partner with a bank or credit union.
  • The philosophy for the program would be both educational and practical.  Students would need to be involved in the decision making process, student and graduate entrepreneurs as well as local entrepreneurs would be the recipients and it would need to have a focus on distressed areas.

Statesboro to get Entrepreneur Center

Over the last several months I have been working with the Downtown Statesboro Development Authority (DSDA) on the concept of an Entrepreneurial Zone for downtown Statesboro.

See Statesboro Herald article

This is collaboration between the City of Statesboro and Georgia Southern University designed to enhance the prospects of entrepreneurial activity both from the University and for the locality.  The idea, like any entrepreneurial endeavour, has gone through some ups and downs. The initial idea included drop-in space for students and faculty, a reception area, a conference room, a classroom for our entrepreneurship and small businesses classes, space for pre-incubation of businesses and full incubator space.  While the DSDA was aiming to buy the building the university was due operate it and it was likely to become a focal point for the activities of the Center for Entrepreneurial Learning and Leadership.   Like many ideas, timing is everything and ours has been quite bad as the University System of Georgia has been hit by significant uncertainty over its 2011 budget and consequently this project has gone through some uncertainty.  It is  difficult for a university to commit to a project of this nature, regardless of its economic development value, when it is facing potential cuts of the magnitude that have been discussed recently in Georgia. 

One only needs to look at the downtown area of Statesboro to see that we desperately need something like this to encourage entrepreneurial start-ups and the University could benefit from a space that becomes a focal point for entrepreneurial efforts.  It is also evident that while the university contributes an enormous amount to the local economy through its traditional work (research and teaching), it could do more on economic development, local engagement and outreach.

So the report in the Statesboro Herald is great news.  The DSDA has purchased the building (the Galleria) calling it a ‘City Campus’, the GSU President Brooks Keel has confirmed the university’s involvement but now the hard work begins to define exactly what the building will provide.  It seems likely that it will host a University bookshop and café and have other components of the original idea (e.g. classroom space and pre-incubator).  In the long-term increased foot-fall from students into the downtown area will itself be a major achievement. 

Small Businesses in the Community

Speech at the Statesboro and Bulloch Chamber Small Business Awards, April 22nd 2010.

See Statesboro Herald article

Thank you for inviting me to speak at the Chamber Small Business Awards and for the very generous introduction.  I promise to be brief, as I know everybody is interested in the outcome of the awards. 

As many of you know I run the Center for Entrepreneurial Learning and Leadership at Georgia Southern.  We are trying to develop programs that enhance the University’s efforts in entrepreneurship education both with our students and the local community.

Given today’s event I have decided to focus my short talk on the importance of Small Businesses: to the economy and to our community.  I intend to ask and answer several questions.  First, why are small businesses important?  Second, what can we do to promote and develop them?  And finally – to what extent are current government efforts helping or hindering the development of small businesses.

Let’s take the first question – why are small businesses important?  I think the best way to highlight this is the Small Business Administration’s top ten reasons to love American Small Businesses:

1) Small businesses make up more than 99.7% of all employers.

2) Small businesses create more than 50 percent of the nonfarm private gross domestic product (GDP).

3) Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.

4) The 22.9 million small businesses in the United States are located in virtually every neighborhood.

5) Small businesses employ about 50 percent of all private sector workers.

6) Home-based businesses account for 53 percent of all small businesses.

7) Small businesses make up 97 percent of exporters and produce 29 percent of all export value.

8) Small businesses with employees start-up at a rate of over 500,000 per year.

9) Four years after start-up, half of all small businesses with employees remain open.

10) The latest figures show that small businesses create 75 percent of the net new jobs in our economy. 

Turning to the last point – it is interesting to note that the Kauffman Foundation research takes this further and shows that between 1980 and 2005 virtually all net new jobs created in the U.S. were created by firms that were 5 years old or less.  In other words – entrepreneurship and small businesses ARE THE ONLY REAL ENGINE OF NEW JOBS IN THE US ECONOMY.

Okay, so we can see that small businesses are important for our economy.  But surely their importance goes beyond this.  Small businesses ARE the local community – they are our brothers, sisters, fathers, mothers, uncles.  They employ our friends, sons and daughters.  They generate their money locally and they spend it locally.  They contribute services that are needed in our rural communities.  They donate time and resources to churches, schools and community groups.

Sometimes when one considers the importance of small businesses we concentrate on the economy, but we need to remember… And perhaps we forget this…  small businesses are important for our society and our community – they have a SOCIAL VALUE that GOES WAY BEYOND their ECONOMIC VALUE; can we always say that of other larger businesses?

Let’s turn to the second and third questions?  What can we do to promote and develop small businesses? AND do current government initiatives do enough?  Let’s be honest.  Most of our small businesses are still hurting.  Yes – the economy has perhaps turned the corner. BUT the evidence suggests that small business sales are still down, profits are down, credit is tight and small businesses are closing in surprisingly high numbers; just look at downtown Statesboro for the evidence.  I like the quote from Robert Frost which describes the current attitude of many banks to our small businesses:    “A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”  It has been raining and that umbrella has definitely been removed.  We need to get credit flowing again for small businesses and especially we need to do a better job of supporting new entrepreneurial businesses.  You can’t say this often enough – good-paying jobs don’t come from bailouts they come from start-ups – AND where do start ups come from?   Yes, they come from smart, creative, inspired risk-takers. 

For a moment let’s consider the current stimulus funding for small businesses?  $30 billion aimed at small employers sounds great doesn’t it?  I guess it is better than nothing.  BUT consider a few facts.  With 27 million businesses that’s equivalent to $1,100 per company; that’s less than cash for clunkers or the home owner’s tax credit.  It is dwarfed by the $50 billion given to General Motors and the $185 billion given to AIG.  According to the Congressional Budget Office – large businesses have received $10 trillion of stimulus funds.  Given that large businesses haven’t created any net new jobs the decade prior to this Recession would our economy fair better if we invested more of this money into entrepreneurship and small business?  Surely we should be seeking to invest these funds in THE JOB Generation machine that we know actually works? 

Let’s start with a few obvious ideas.  We need more prototype development funds and seed capital grants; so entrepreneurs can get ideas from the lab to working prototypes.  We need regional venture capital companies making for-profit investments in entrepreneurial businesses that stay in our region.  We need to waive student loans for student entrepreneurs; so student debt is no longer a barrier to entrepreneurship. We need to streamline and reform patent processes and reduce unnecessary red tape.  AND… while we’re at it what about lower or no corporation tax for start-ups during their first three years when they most need extra funds to invest in development or growth.

I’d like to close by thinking about what this might mean for us locally.  Economic development, in a local sense, tends to focus on the next big business that we can get to locate here or on setting up infrastructure to attract such new industry.  BUT really this is like providing stimulus funds to those big businesses – it misses the point.  We need to look to ourselves. [PAUSE]  Real job generation in Statesboro and our local counties is going to come from small businesses growing and from entrepreneurial efforts located here.  The 500 pound gorilla in the room is of course Georgia Southern University and the 100 pound gorilla is Ogeechee Tech.  Imagine what one successful technology focused business employing 100 knowledge intensive workers could do for Statesboro.  AND then consider that at the moment at least 7% of our students are trying to start businesses – that’s potentially around 100 businesses a year.  If we can keep these businesses here, get them focused on new technologies and help them grow.  While we’re at it can we not do more to help local inventors, entrepreneurs and small businesses tap into the resources of the University so that they can grow and access new technology and knowledge.  In some ways this already works.  Many local entrepreneurs are alumni of the University and many students come from local family firms.  But we can still do more.   If we can provide the infrastructure to help these businesses get off the ground.  If we can provide the seed capital, the entrepreneurial expertise and the start-up funds.  If we can make these efforts community driven beyond relying on the individual – then and only then will we have our own job generating machine.  That is what I hope for and I am working towards and anybody is welcome to help.   For those of you that are up for awards today I commend you for your entrepreneurial efforts, you make important economic and social contributions to our community and I am pleased to celebrate your successes with you today.  I’d like to thank you for your time and I look forward to talking to you at the end of the awards.

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