Working w/ Growth Companies (GC’s)

Economic Development Finance Services

August 24, 2011

Presented by Ed Morlan, Executive Director of Region 9 Economic

Development District of Southwest Colorado, Inc.

Why is it important to help Growth Why is it important to help Growth Companies?Companies?

“entrepreneurship (is) the source and strategy for economic growth, community development and

economically independent individuals.”• Edward Lowe Foundation

“Economic growth requires continued entrepreneurial innovation and

expansion.”• Ewing Marion Kauffman Foundation

Why is it important to help Growth Why is it important to help Growth Companies?Companies?

Provide higher Provide higher

than average wage jobs than average wage jobs Diversify the region’s Diversify the region’s

economyeconomy Bring income into the Bring income into the

regionregion Creators of innovationCreators of innovation

IIllustration of Income Importing Activityllustration of Income Importing Activity

Growth company focus has Growth company focus has advantages over other direct based advantages over other direct based

revenue sourcesrevenue sources

Oil and GasOil and Gas TourismTourism 22ndnd Homes Homes RetireesRetirees

Stages of Growth Self Employed (1 employee) — This includes small-scale business

activity that can be conducted in homes (cottage establishments) as well as sole proprietorships.

Stage 1 (2-9 employees) — This includes partnerships, lifestyle businesses and startups. This stage is focused on defining a market, developing a product or service, obtaining capital and finding customers.

Stage 2 (10-99 employees) — At this phase, a company typically has a

proven product, and survival is no longer a daily concern. Companies begin to develop infrastructure and standardize operational systems. Leaders delegate more and wear fewer hats.

Stage 3 (100-499 employees) — Expansion is a hallmark at this stage as a company broadens its geographic reach, adds new products and pursues new markets. Stage 3 companies introduce formal processes and procedures, and the founder is less involved in daily operations and more concerned with managing culture and change.

Stage 4 (500 or more employees) — At this level of maturity, an organization dominates its industry and is focused on maintaining and defending its market position. Key objectives are controlling expenses, productivity, global penetration and managing market niches.

Second Stage GC’s

In 2008 Second Stage GC’s represented the largest percentage (34.9%) of the jobs in the United States

yet accounted for only 7.7% of the establishments in the nation • Edward Lowe Foundation – YourEconomy.org

Companies to WatchCompanies to WatchCelebrating Second-Stage CompaniesCelebrating Second-Stage Companies

What is it?What is it?

• An awards competition second-stage companies, created by the Edward Lowe Foundation in partnership with respected local entrepreneurship support organizations.

• Designed to discover, celebrate and spread the news about second-stage companies in a given state

• Offered in six states in 2011: Colorado, Michigan, Indiana, Wisconsin, North Carolina, Florida. Coming to Washington state and Northern California in 2012.

Why Companies to Watch WorksWhy Companies to Watch Works

Companies to Watch is a source of good news• Brings attention to companies that typically fly under the radar

Paints a realistic picture of a state’s economic landscape• Broad geographic representation from beyond the MSAs into rural communities throughout a state• Industry diversity to reflect a healthy mix of sectors• Holistic look at companies to promote strong corporate culture, philanthropy and community giving,

enlightened business practices• These are companies with the intent and capacity to grow. They form the basis for a state’s economic

potential Fosters a vibrant entrepreneurial community through its public-private partnership

model, giving disparate entities a reason to work together• Commercial service providers • Economic developers at all levels of government• Industry associations• The media

Investment PotentialInvestment Potential “The Companies to Watch program is a great filter for us.

We typically invest in companies located in the Great Lakes region that have $1 million to $10 million in annual revenue with scalable products and intellectual property that can be protected. Nearly half of the Companies to Watch honorees meet that initial criteria for investment, which means they’re an excellent target of deal flow.”

Jeff Barry, partner of Plymouth Management Co. in Ann Arbor, Mich., manager of the Plymouth Venture Partners and Plymouth Venture Partners II funds.

Total Revenue in 2010 $338 Million

Increase over 2009 34.9%

Full-time equivalent in 2010 1,543

Jobs Created over 2009 453

5yr Revenue Total (’07-’11) $1.4 Billion

5yr FTE Total (’07-’11) 1,304

5yr Rev. Growth (’07-’11) 190%

5yr FTE Growth (’07-’11) 188%

Economic Impact of the 2011 Class ofEconomic Impact of the 2011 Class of50 Colorado Companies to Watch50 Colorado Companies to Watch

Southwest Colorado Growth Southwest Colorado Growth Company Initiative (GCI)Company Initiative (GCI)

Supporting the Supporting the

Entrepreneurial Entrepreneurial

Environment of Environment of

Southwest Southwest ColoradoColorado

Attributes necessary to build Attributes necessary to build entrepreneurial sectorentrepreneurial sector

High quality of lifeHigh quality of life Educated workforceEducated workforce Outstanding university or collegeOutstanding university or college Supportive regulatory and economic Supportive regulatory and economic

development policiesdevelopment policies Collaborative PartnershipsCollaborative Partnerships Creative ClassCreative Class InnovationInnovation

Growth Company Initiative PartnersGrowth Company Initiative Partners

Region 9 EDDRegion 9 EDD Fort Lewis College School of Business Fort Lewis College School of Business

Administration (SOBA)Administration (SOBA) Small Business Development CenterSmall Business Development Center County Economic Development County Economic Development

OrganizationsOrganizations GC’sGC’s

GCI’s definition of Growth Company:GCI’s definition of Growth Company:

Growing 15% per year Growing 15% per year Innovative product or serviceInnovative product or service

• Intellectual PropertyIntellectual Property Sustainable competitive advantageSustainable competitive advantage Competes outside SW Colorado, Competes outside SW Colorado,

usually nationally/globally usually nationally/globally Significant number of above average Significant number of above average

wage jobswage jobs

GCI’s Job Impact in S.W. CO

In 2011 the 24 GC’s have a total

employment of 886.75 FTE’s of

which 56% of them are paid above the respective counties

average wage.

Five Major ComponentsFive Major Components

1.1. Identify Growth CompaniesIdentify Growth Companies1.1. Survey – Survey – www.scan.org

2.2. CEO Peer NetworkingCEO Peer Networking

3.3. Business Advisors Network (SBDC)Business Advisors Network (SBDC)1.1. Economic Gardening ServicesEconomic Gardening Services

4.4. Facilitate Access to Equity CapitalFacilitate Access to Equity Capital

5.5. Develop Ongoing Systems to Monitor Develop Ongoing Systems to Monitor Progress and Business NeedsProgress and Business Needs

Evolution, Success, & Challenges

1. Identifying Emerging GC’s• Originally 35-40 potential prospects

“Qualified” 25 firms using short survey

• County ED Directors have/had primary responsibility

Lack of stability with Rural ED organizations and turn over in staff

• Continually trying to identify GC’s Added 5 GC’s

Evolution, Success, & Challenges2. CEO Network

• Originally had monthly meetings that were hosted by SOBA

CEO’s meet to:CEO’s meet to:• Share challenges, successes, resourcesShare challenges, successes, resources• Provide mutual supportProvide mutual support• Have guest/CEO presentations on topics of interestHave guest/CEO presentations on topics of interest

• Currently driven by it’s three CEO member’s Executive Committee

Community Awareness/Involvement Outreaching emerging GC’s

• Challenges in continuing to have relevant topics monthly and participation due to CEO’s busy schedules of running their companies

Working on new direction of the CEO Network

Evolution, Success, & Challenges

3. Business Advisors Network (BAN)• SBDC is responsible for the BAN services

Originally started with 3 advisors and has grow to 30 advisors

• Mix of retired and active executives with various/extensive backgrounds in business.

Provides services to broad range of companies, not just GC’s

• One on one counseling or monthly panel Working to develop a BAN in each county of

S.W. Colorado• Finding new ways to tap into the human capital

Evolution, Success, & Challenges

4. Facilitate Access to Equity Capital• Formed the Animas Venture Group

Looked at several deals but have yet to fund one

• Did commit to one deal

• Region 9 EDD Has made equity investments and is open to

future opportunities

• Working with other potential sources of venture capital

Companies that have a need for “pre” venture funding

Evolution, Success, & Challenges

5. Develop Ongoing Monitoring Systems• Quarterly meeting of the GCI partners

Schedules and changes in partners

• Challenges in tracking the impact and measuring the success of the GCI

GCI recognized “player” in the community 2009 Impact study

GCI long-term goalsGCI long-term goals

Work towards developing Work towards developing • Continue to grow and expand the Continue to grow and expand the

GCIGCI• S.W. CO reputation as strong S.W. CO reputation as strong

entrepreneurial (friendly) locationentrepreneurial (friendly) location• Entrepreneurship Center at FLCEntrepreneurship Center at FLC• Extended entrepreneurial Extended entrepreneurial

education programseducation programs• Business incubatorBusiness incubator• One stop shopOne stop shop

Questions?

Ed Morlan, Executive Director of Region 9 Economic Development District of Southwest Colorado, Inc.• Website – www.scan.org• Email – ed@scan.org• Telephone – 970-247-9621