Supporting the launch and scaling of innovation-based startups is a popular economic-development strategy today. This is true across the U.S. and around the globe.
There are several reasons for this. It is complementary to traditional approaches like industrial recruiting and existing industry development. And like those strategies, it generates new jobs and attracts capital investment which are critical for the local economy.
Supporting high-growth entrepreneurship has a unique benefit that no other economic-development strategy can claim. It creates local wealth. We are talking game-changing, generational wealth. Here’s how it works.
First, the founders and early team members own the business that’s growing in the community or at least a large part of it. It’s not a branch of a larger corporation that’s been recruited to come there; it’s a local business that sells its products and services nationally or globally.
Later, when the company is acquired or goes public (such as through an IPO), the owners will be compensated for their equity stakes. It’s at this point that wealth creation is made tangible and the community begins to realize the true impact of successful entrepreneurship.
After such an exit event, the founders oftentimes turn around and invest some of their newfound wealth in other startups as well as launch new ventures themselves. They also typically invest in the community at large, supporting other causes like the arts, education and local charities in their home area at a disproportionate level.
It’s the entrepreneurial circle of life: as a byproduct of entrepreneur exits, there will be more startups and more capital to fuel startups locally and more wealth to invest in the community as a whole. This cycle can and will repeat again and again.
Entrepreneur exits typically take a long time to develop. Thus, a community must be patient as it works to build a stronger startup ecosystem. Supporting high-impact entrepreneurship will pay off — in the short term like other strategies and with a big payoff down the road if you’re willing to wait for it.
John Moore is a principal with Momenteum Strategies, an Upstate-based consulting firm specializing in helping communities and their economic development organizations build thriving, impactful innovation ecosystems.
