Community Colleges Expand Partnerships to Develop. Innovative Models for Small Business Growth, Economic Development and Job Creation 1

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1 Community Colleges Expand Partnerships to Develop Innovative Models for Small Business Growth, Economic Development and Job Creation 1 With overall economic growth flat and the effects of the recession still being felt, small businesses are recognized as important economic engines for job creation, economic stabilization in American households, and new places for employment around the country. According to the U.S. Small Business Administration (SBA), there are an estimated 28 million small businesses (defined as having fewer than 500 employees) in the United States. The SBA reports that small businesses have generated almost two-thirds of net new jobs over the past 17 years. Since the latest recession, from mid-2009 to 2011, small firms accounted for 67 percent of the net new jobs. Communities across the country are taking note of the role small businesses play in generating new jobs and economic opportunity and are stepping up their efforts to serve and support small businesses both existing and startups. With nearly 1,200 institutions serving more than 13 million students nationwide, community colleges are key local players in providing education and career paths for students and workers. Community colleges already have long had a reputation for being flexible, accessible, and responsive to local community needs. And now many are expanding their services to reach not only individuals who are pursuing business education, but also small businesses themselves. A 2013 report by the U.S. Small Business Administration Office of Advocacy finds that small businesses employ 55 million workers nationwide, nearly half 49.1 percent of the privatesector labor force. Data from the U.S. Census Bureau indicate that 78 percent of American businesses are non-employee businesses with no employees and that 13 percent of businesses employ fewer than four people. The role community colleges play in meeting the training needs of a single major employer that requires training or retraining for significant numbers of workers is straightforward and well established. But the diversity and varied needs of startup companies and small businesses requires a more creative response, including multiple supports, course options, and connections to capital to help those firms grow and prosper. In this new role, community colleges are often important catalysts working closely with Small Business Development Centers, Community Development Financial Institutions, economic development organizations, and other local partners interested in helping small businesses succeed. 1 Prepared for Goldman Sachs 10,000 Small Businesses by American Association of Community Colleges. June 21, 2013

2 These new partnerships are happening at the same time that community colleges are meeting a national call to streamline access and substantially increase completion for community college students. Broadly defined, completion refers to making sure students who enter community college leave with the knowledge, skills, and credentials required in the job market. As community colleges increasingly collaborate with the private sector, their interactions with businesses help to build the capacity of faculty, ensure that students graduate with meaningful credentials, and expand the colleges presence as economic development partners. More and more community colleges are finding innovative ways to provide comprehensive, intensive, and practical training for small businesses and entrepreneurs to help them thrive and create jobs and economic opportunity. The program models that follow are examples of creative In 2012, the American Association of Community Colleges (AACC) released a report calling for dramatic changes to America s community colleges to ensure U.S. competitiveness. The 21 st Century Commission on the Future of Community Colleges report challenges community colleges to reinvent institutional roles, redesign students educational experiences, and create partnerships and incentives for student and institutional success. partnerships that build on community colleges experience in providing educational supports and services to adult students and serving as workforce development partners in their communities. These programs go to the next level by using philanthropic and corporate resources to enhance how colleges are supporting small businesses and startups, including offering targeted coursework, financial capital, mentoring, networking, and other services. Goldman Sachs 10,000 Small Businesses Created in 2009 and funded by Goldman Sachs and The Goldman Sachs Foundation, Goldman Sachs 10,000 Small Businesses is a $500 million investment to help small businesses in the United States create jobs and economic growth through a practical business and management education, business support services, and access to capital. Goldman Sachs 10,000 Small Businesses focuses on small business owners who have a business poised for growth, who would benefit from a business and management education program, and who have limited access to capital. Applicants must generally be an owner or co-owner of a business in operation for at least two years, with revenues between $150,000 and $4 million, and with at least four employees (including the owner). In applying, they must demonstrate a commitment to growing their own businesses and creating jobs within their communities. Those accepted get free practical business management training to help them evaluate business opportunities, analyze financial statements, access financial capital, and lead a growing business. 2

3 The investment includes $200 million for business and management education for business owners that is offered through community colleges. The 100-hour curriculum, delivered over approximately three months, was developed in partnership with Babson College, one of the nation s leading schools for entrepreneurship. Lessons are designed to be highly interactive and practical so that business leaders can apply them immediately in their businesses. In addition to coursework, participants receive one-on-one business coaching and broaden their professional networks with support from local business organizations, professional services firms, and the people of Goldman Sachs. The remaining $300 million is invested through a combination of lending and philanthropic support to Community Development Financial Institutions (CDFIs) and local community-based lenders, which offer loans to qualifying small businesses. The investment increases the amount of growth capital available to small businesses in underserved communities and expands the capacity of the CDFIs and local lenders to deliver enhanced technical assistance to small businesses. Small business owners are not the only beneficiaries. Thanks to the Goldman Sachs 10,000 Small Businesses partnership with Babson College, community college faculty gain experience educating small business 10,000 Small Businesses Success Story Teresa Lawrence, owner of Delta Personnel in Metairie, Louisiana applied to the Goldman Sachs 10,000 Small Businesses program at Delgado Community College to understand what factors were hindering her ability to expand her client base for temporary and direct-hire permanent staffing after Hurricane Katrina. While she found enormous benefit in the whole package of curriculum, innovative classroom practice, and business support, a big draw was having the opportunity to discuss successes and failures with other business owners. When she first started, she was not particularly interested in taking college classes, but having seen how the 10,000 Small Businesses lessons are helping her overcome business challenges, Teresa enrolled in a Delgado accounting course to continue her learning. owners by practicing innovative teaching methods that emphasize peer learning and engagement. This reinforces the role community colleges can play in strengthening economic development. Community Development Financial Institutions (CDFIs), as recipients of lending and philanthropic support from Goldman Sachs and the Goldman Sachs Foundation, also improve their capacity to deliver financing and technical assistance to small businesses. Currently, Goldman Sachs 10,000 Small Businesses works with community colleges and other nonprofit organizations in nine locations, including the City Colleges of Chicago (IL); Community College of Philadelphia (PA); Cuyahoga Community College (Cleveland, OH); Delgado Community College (New Orleans, LA), Houston Community College (TX); LaGuardia Community College (New York, NY); Long Beach Community College District (CA); Los Angeles City College (CA); and Salt Lake Community College (UT). The program also has five capital-only sites in: Kentucky, Montana, Oregon, Tennessee and Washington. 3

4 Over 1,300 small business owners have participated in 10,000 Small Businesses programs across the United States. Just six months after graduation, approximately 63 percent of participants grew their revenues, and 47 percent created net new jobs. Goldman Sachs investment signals a belief that bringing together business, education, local financial institutions, and community partners is good for all businesses and creates a healthy environment for growth. Goldman Sachs 10,000 Small Businesses Success Story Miguel Guajardo was inspired to start his own construction company in El Camino Construction & Engineering Corp is now a full-service construction and masonry businesses. Miguel applied to the 10,000 Small Businesses program to learn how to better prioritize his business and management decisions regarding overall strategy, hiring support staff, and delegating work so that he could focus on pursuing new markets and grow his business. The coursework and coaching he received also helped him to improve his understanding of his financials and his ability to negotiate. After going through the program, Miguel secured his first public works contract in 2010, which led to a sales jump of 80 percent, adding two full-time employees and a 135% increase in revenues (crossing the $1 million mark). Mott Foundation Virtual Incubation Network In 2011, the Charles Stewart Mott Foundation made a two-year grant to the American Association of Community Colleges (AACC) and 11 community colleges to encourage the creation of more startup businesses through virtual business incubation services and supports provided by community colleges and their partners. Through its Virtual Incubation Network (VIN), the Mott Foundation is helping community colleges, particularly those in geographically isolated, depressed, and hard-to-serve areas, make use of new communication technologies to support entrepreneurs and foster small business development. By test-driving new delivery mechanisms, the VIN initiative is intended to bring virtual incubation services to scale at hundreds of community colleges across the country. As part of the initiative, participating community colleges bring new levels of entrepreneurial services and supports to fledgling businesses to help them succeed through each stage of startup growth. In many of these communities where there are no large employers, these investments are critical because entrepreneurs and small businesses are the main source of new jobs and economic opportunity. Previously, colleges were limited by geography and the cost of building bricks-and-mortar facilities to house small business incubation services. VIN Network Colleges: Rio Salado College (Phoenix, AZ); Long Beach Community College (CA); Indian River State College (Fort Pierce, FL); North Iowa Area Community College (Mason City, IA); Mott Community College (Flint, MI}; Southeast Community College (Lincoln, NE); White Mountains Community College (Berlin, NH); Burlington County College ( NJ); Santa Fe Community College (NM); Lorain County Community College (Elyria, OH); and Northeast Wisconsin Technical College (Green Bay, WI). 4

5 But today, with the help of technology, flexible learning networks, coursework, and other supports can be made available to small businesses much more easily and across a greater area. In order to have an impact beyond the VIN Network Success Story participating colleges, AACC worked with the North Iowa Area Community College in VIN colleges to create a virtual incubation Mason City, Iowa, is a VIN Network participant. NIACC offers intensive and toolkit that can be used by other community comprehensive consulting services to preventure, new and established businesses, colleges outside the network to grow entrepreneur talent through flexible delivery of including networking and access to capital. services. Some of the tools are aimed at college Its John Pappajohn Entrepreneurial Center leadership and other tools are designed for the has supported almost 40 business startups college staff responsible for actually creating since 1997 and assisted businesses in raising virtual incubators and formalizing partnerships. over $25 million The toolkit may be found at Innovation Fund America The Innovation Fund America (IFA) is a partnership between the Kauffman Foundation and Lorain County Community College (LCCC) in Elyria, Ohio, designed to replicate LCCC s successful Innovation Fund model that supports technology-based entrepreneurial endeavors and emerging technology-based businesses. The Innovation Fund makes grants of up to $100,000 to early-stage technology-based companies located or willing to locate in economically depressed Northeast Ohio to help them validate the technology or provide them with business models. In turn, the businesses are required to provide internships or other educational opportunities to students, faculty, or staff of Lorain County Community College. This symbiotic relationship is designed to foster a robust environment where innovation and entrepreneurship are encouraged and supported. To date, LCCC s Innovation Fund has invested $6.5 million in 94 companies that have created more than 300 jobs, provided more than 150 paid internships, generated $17 million in revenue, and raised $71 million in follow-on funding. The grant from the Kauffman Foundation is designed not only to replicate this successful model of education and early-stage funding for startups, but also to give community colleges the tools they need to play an important part in grow your own local economic development efforts. Companies supported by Innovation Fund grants are required to help community college students and faculty to experience firsthand what it s like to be a successful entrepreneur so that the college can better incorporate entrepreneurism into course curricula. This component ensures that the Kaufmann investment not only supports technology business startups, but also enhances community colleges capacity to accelerate innovation in their communities. 5

6 In 2012, after several rounds of interviews, site visits, and study of entrepreneurs needs in each community, three community colleges were selected to pilot the program: Long Beach Community College(CA); Johnson County Community College (Overland Park, KS): and Catawba Valley Community College (Hickory, NC). The intent is to expand the program to additional community college campuses over time. As part of IFA, the selected community colleges are given tools and support to help startup firms to identify capital and get access to education, internships, coaching, and mentoring from a broad network of partners that includes other postsecondary institutions and business incubators. This level of comprehensive support helps stimulate high tech entrepreneurship in local communities. Innovation Fund Northeast Ohio: Endotronix, in a Cleveland, Ohio was a 2008 grant recipient from the Lorain County Community College Foundation Innovation Fund. The medical device company developed a wireless, implantable heart monitor that can alert doctors of blood pressure changes in heart failure patients. Endotronix has strong ties to Northeast Ohio, conducting animal tests of its device at Cleveland Clinic and licensing its technology from Cleveland s NASA Glenn Research Center. Endotronix has successfully secured venture capital to pursue its business. National Association for Community College Entrepreneurship (NACCE) NACCE is a non-profit organization founded in 2002 to help community colleges act as catalysts for economic growth through entrepreneurship education. NACCE encourages community colleges to integrate entrepreneurship into all of their courses and to promote students abilities to innovate, think creatively, and be willing to take calculated risks. By ingraining entrepreneurial thinking across their campuses much the way technology is integrated into our lives community colleges can foster economic vitality through entrepreneurship. With over 300 community college members, NACCE serves as a key information resource and dissemination tool with an annual conference, symposiums, newsletters, webinars, podcasts, discussion boards, and other networking opportunities. The organization also works with policy makers, advocates for entrepreneurship and entrepreneurs to urge community colleges to take an entrepreneurial approach in how they operate, how they educate, and how they work with their communities. Finally, NACCE recognizes and promotes the successful impact that colleges working directly with small businesses can have. NACCE conducts a Shared Vision for Small Business grant competition in partnership with Sam s Club, one of the nation s leading retailers. In February 2013, four community colleges with strong programming that supports successful and sustainable business ventures were awarded grants from Sam s Club to help foster the growth of best practices nationwide. The winning colleges were: Fox Valley Technical College (Appleton, WI); Long Beach City College (CA); North Seattle Community College (WA); and South Mountain Community College (Phoenix, AZ). 6

7 StartUp America acknowledges that entrepreneurs often lack networking opportunities and ways to learn from one another. Since its launch in January 2011, the initiative has evolved as the more than 12,000 startups located across 30 states have come together. Startups in the network indicated an interest in building strong regional learning communities and support networks. In response, StartUp America has organized regional chapters within the larger national movement. Each of the initiatives and partnerships highlighted above includes working with community colleges to provide education and National Focus on Small Businesses: The White House s StartUp America Initiative is a public/private effort that brings together innovative entrepreneurs, corporations, educational institutions, and foundations to work with federal agencies to increase the number and success of the country s entrepreneurs. The partnership is intended to stimulate economic growth and create quality jobs by channeling funds and expertise to startup companies. In addition to funding from the Kauffman Foundation and the Case Foundation, the initiative received financial investments from a number of large technology companies, including Intel, IBM, and Hewlett Packard. business support to small businesses and startups. Each program also has distinguishing characteristics and a unique approach to address the capital, education, and networking needs of small businesses. Goldman Sachs 10,000 Small Businesses is a model, developed by Goldman Sachs and the Goldman Sachs Foundation with its partners, that aims to transform how small businesses are supported in communities across the country. Its success derives from the unique mix of components, combined with the knowledge and experience of community colleges in serving adult student populations. Distinguishing features of the initiative include: The innovative 100-hour curriculum, designed by Babson College, focuses on skills with immediate application to issues critical to business growth. Coursework is highly collaborative, draws upon real-world experiences of small business owners, and is immediately applied to the growing businesses. Business advisors, hired by the colleges for their experience working in or with small businesses, provide individual coaching. They also advise "growth groups, small groups to which each participant is assigned for the duration of the program and which often serve as "CEO advisory panels" for the members. The program s peer learning environment encourages participants to interact with each other in and out of class, sharing ideas, successes and challenges. Networking with peers and experts, including the people of Goldman Sachs. The opportunity to access capital through loans from Community Development Financial Institutions and other local community-based lenders, for those business owners who qualify. 7

8 The Mott Virtual Incubation Network is a foundation-supported effort focused on using the latest technologies to make community college entrepreneurial business incubation services more widely available, particularly in geographically isolated, depressed, and hard-to-serve communities. Innovation Fund America is a foundation effort to invest in community colleges to scale a successful model of funding, mentoring, and supporting technology-based startup companies and spur sustainable economic growth. The National Association of Community College Entrepreneurship is working to instill an entrepreneurial culture into community colleges across America to ensure that the next generation of workers has the skills needed to succeed in today s job market. While small businesses play an increasingly vital role in economic growth and job creation, community colleges are at the center of a number of important efforts to provide comprehensive supports to assist small business growth and development of new sources of jobs and revenue within their communities. These efforts are changing the face of community colleges, resulting in increased visibility, credibility, and impact. 8