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Michael Bolick and Frank Greer: State focus on small-business startups right approach

Michael Bolick is the president of Lab21 and Frank Greer is the CEO of Zipit Wireless. Both live in Greenville.

In her inaugural address, Gov. Nikki Haley identified this time as a unique opportunity for South Carolina to “strengthen our small businesses to help them create the jobs our people need.” By focusing her administration on small business development and expansion as a driver for new jobs, our new governor is hitting the job creation nail right on the head.

New company creation by itself is critical to boosting positive net job creation in any given year. Large, established companies, of course, do hire people, but much of the gross hiring among these companies is accompanied by equivalent levels of gross firing, which means the net creation of new jobs among these companies is usually zero.

A recent report from the Kauffman Foundation has spurred new discussion around job creation — one that not only promotes entrepreneurship, but, specifically, high-growth entrepreneurship. The report demonstrates that high-growth firms — often called “gazelles” — provide a disproportionate share of new jobs in the United States: approximately 10 percent in any given year.

The Kauffman report, titled “High-Growth Firms and the Future of the American Economy,” identifies three strategies policymakers could follow to generate more gazelles and more jobs:

• Focus on creating more new firms, with the expectation that this also will increase, by simple arithmetic, the number of gazelle firms.

• Remove barriers that block the emergence of gazelle companies, including taxes and regulations.
• Target those areas of the economy that may be fertile sources for gazelle firms (like universities).

Fortunately, leaders in our state recognized many years ago that we needed to focus our efforts to this end. Our Legislature designated the South Carolina Research Authority (SCRA) to serve as a steward for our state’s transition to the knowledge economy. In the intervening years, SCRA has worked with others in our state to make headway on exactly the same three strategies that Kauffman has now validated as key to future job creation.

SCRA formed SC Launch with the particular idea of incenting formation of new firms and to reduce the barriers to the success of these firms in becoming gazelles. SC Launch provides crucial early seed capital and an array of support services to help new companies over critical hurdles in their development.

In return, SC Launch has a stake in companies like Zipit Wireless, Selah Technologies, Lab21 and many other new startups that, on average, will provide returns that can then be reinvested in the next wave of new startup companies.

While seed capital is a crucial element in the growth of startup companies, the job doesn’t stop there. Starting and growing high-impact companies is a difficult task. Hundreds of challenges must be overcome. Many startups will fail, some will plod along for years, and a few will rise to the gazelle level — think of home grown successes such as ScanSource and Datastream.

SC Launch provides promising startup firms with:

• Assistance in creating business plans,

• Introductions to service providers, provides educational events for entrepreneurs, and
• Connections to follow on investors.

This effort is cultivating a supportive climate for new companies that can overcome the challenges that inevitably arise. Since SC Launch was formed in 2005, we’ve seen the growth and formation of other organizations that also support the development of new companies. For example, just in the Upstate, Innoventure, NEXT, Innovision, Greenville Spartanburg Anderson Technology Council (GSATC), Upstate Carolina Angel Network (UCAN), and Greenville Local Development Corporation (GLDC) are all working together to build a climate for success. The South Carolina Venture Capital Act is starting to bear fruit as well. For example, Nexus Medical Partners, a Venture Capital firm based in Boston has invested $20 million of allocated funds in companies located in SC.

In the closing remarks of her inaugural address, Gov. Haley said, “We must seize these inspiring opportunities. If we do, we will have a state where good jobs are in constant supply, where South Carolina becomes the envy of the nation, and where we are so free of political distractions that the media is forced to report on good news. Just imagine that.”

After pausing to reflect on our new governor’s bold vision during this moment of opportunity, we are reminded that Browning once said, “Ah, but a man’s reach should exceed his grasp, or what’s a heaven for?”

What’s a heaven for? Reaching. South Carolina has come a long way in the right direction. Now we must push forward beyond what is readily obtainable to what is possible with more determination, hard work and God’s blessing.