Thinking Outside the Bank for Start-Up Funding
When it comes to starting a new business, there are new (and old) ways to fund your ideas that step past the traditional middle-men.
For a long while, banks have led us to believe there’s only one responsible way to get money to invest in a small, start-up business. You go into the bank, sit in green leatherette chairs for an hour, then go back and explain your business plan to a loan officer. Then they decide your fate. But what happens when the banker doesn’t believe in your vision, or thinks the audience isn’t large enough to make a go of it, or any number of reasons to not stamp your loan application?
There are better ways to do this. At least 27 better ways, in fact. Maury Forman, Senior Manager for Rural Strategies and Entrepreneurship for the Washington State Department of Commerce, along with Washington State University Economic Development Specialist Jordan Tampien, decided to compile these ways and publish them in an e-book, and then give it away. So he did. Startup Wisdom: 27 Strategies for Raising Business Capital is a treasure for anyone looking for help with the start-up costs associated with a new small business. Whether you’re trying to sell your cupcakes in the local grocery store or developing a cupcake-locating app, there’s at least one funding model in the book to fit the bill.
We recently spoke with Forman about the book and the culture of rural entrepreneurship.
Why is entrepreneurship important for rural communities?
Primarily because it creates healthy communities. Economic development, especially entrepreneurship, and small business, truly are the backbone of rural communities, and no matter how much emphasis that you put on the idea of recruiting, or international trade, small business is at the heast of any successful community.
People need to truly recognize that no matter how important Seattle is, no matter how important Spokane is, that those places still need rural communities. They need them for food, for agriculture, they need them for all sorts of services that they don’t produce themselves.
What do you think is a unique challenge as far as starting up your own business in a rural area?
When you started that question, the first thing I thought about was the idea of kids leaving rural communities. I think that is a very big issue right now. It doesn’t bother me that kids leave rural communities, because I think studies are showing that, oftentimes, after high school, or after college, that they will go ahead and do something, they’ll be successful, but eventually, especially when they want to start a family, recognize that they really liked their rural roots, and as a result they’ll move back to the community. Normally I talk to people and tell them don’t worry about having a brain drain. What you need to do, if you are going to do recruitment as an economic development strategy, is begin to go after the talent that you once had in your community. Encourage them. Show them why they should return to the communities that they grew up in.
If a small community has a culture of entrepreneurship, do you think that encourages folks to come back once they finish college?
I think [it does]. It’s nice because, number one, they can see what’s going on in the rest of the world. Number two, they can make their mistakes in somebody else’s state or community, come back to your community, and learn from those mistakes. I thought that was a real positive thing. Let kids get out and explore. People keep saying we want to keep our kids after high school. I think we should let them go out and explore new ideas, new things, and then come back educated and experienced, so that they can start a business, and create new jobs, and live in healthier communities.
You know, you can start a business anywhere, and oftentimes if you have a good product or service, most people don’t know where you live anyway.
Another thing we put emphasis on in rural strategies is getting kids involved in high school, whether it be junior or senior high school, into understanding entrepreneurship. That can include a number of things, whether it’s business plan competitions, whether it’s math, or whether it’s literature, because you have to know how to write well. I had written an article a while back ago identifying about 10 different classes that you’re required to take in high school, and how you can incorporate entrepreneurship in all those. Have entrepreneurship as part of career day.
“I am not good with sound bites because rural economic development is more than just a sound bite. I do believe that Washington State is changing the way economic development should take place in rural areas… It’s sort of the ‘create,’ not ‘relocate’ strategy.”
How did you get interested in rural development policy?
I think I’ve just been interested in rural from the very beginning, because I actually think it’s easier to do economic development in rural areas than it is in big cities. Big cities have all the resources that they could ever imagine. Seattle, Spokane, they have a ton of resources, but rural doesn’t. When you have small successes in rural, they’re big successes. They really are. We may not move the needle on unemployment very easily or quickly, but you know what? When you’re working with an entrepreneur, and they get that first sale, or when you’re working with an entrepreneur and a small business, and they hit a milestone mark, or they hire new employees, the thrill is so much bigger there than it is if Seattle hires 10 employees. It’s going to make the newspaper in a rural community. I find rural communities to be easier to work with, more fun to work with, they take life a little less seriously. They have a real great sense of humor, and to me, humor is really important for any type of business or social engagement that you need to have.
Tell me a little about Startup Washington. Give me your elevator pitch on what that is and how it got started.
Startup Washington is a website that identifies resources available to people all over the state of Washington, but also all over the country, because a lot of our resources that you have there are not limited just to Washington. Like Angel Investors. We just added two target audiences, for women and veterans, on the website.
The Book Startup Wisdom seems like a great resource for people interested in starting a small business. It’s all about raising startup capital. How did the book come about? How did you decide to write this book, or why?
There was a mine closure that took place…a while back, and they were going to lose about 200 jobs. The mining company came to me… They were very community focused, and they were very concerned about what was going to happen to the 200 people that they were going to lay off. They approached me and said, “Would you do something on entrepreneurship, because a lot of our people are creative, they have lots of ideas, they’ve really been an asset to the community.” So we went there and we discovered, no big discovery, that one of their big concerns was access to capital, that banks were not loaning to people in order to get businesses started. They didn’t like the idea. It was a risk. The whole bank idea of making bank loans just wasn’t in the banks’ interest, especially in micro-loans. That’s really what many small communities are looking for, probably under $50,000.
We did this sort of workshop and taught people how to come up with ideas, we taught people how to put together a business plan. Then we also put a section on access to capital, which was a big hit. Now, at the time, we only had 10 things. It was ‘10 ideas to access capital, or non-traditional capital, I should say. We decided that we would go seeking and looking at ideas for other ways, because there’s plenty of money out there to start businesses, just people don’t know about them. They really think just about the idea of going to bank. There’s so many good ideas how to raise money inexpensively and start your own business. That’s how it came about.
What am I not asking that’s important?
The importance of libraries in rural communities. There’s a new role for librarians that need to take place, and that new role truly is to work with economic developers, to be on their boards, to assist them in identifying companies, and industries, and to assist startup companies in how to be successful. I’m just one person. I provide all these resources to them, [but] I don’t get to go out as much into communities as I would like to. That’s one of the reasons we contract with the various counties to do economic development services. Those economic development entities should really then work with librarians who can be so important to the success of an economic development strategy by helping people learn how to come up with ideas, and where they can access capitol, and learn how to write a business plan.