#1 Missing Link To Build Unicorns Everywhere

An interesting article outlines strategies for Washington to help “areas left behind.” The policy statement highlights two key areas of focus:

· Labor-based programs – train residents in the skills needed to find jobs or move to areas that offer job opportunities. But such programs are ineffective if there are no attractive jobs available.

· Business-focused programs – attract and/or help businesses expand to create jobs. But many companies, especially branch plants seek high productivity with low cost – and often find foreign locations more competitive than U.S. options.

The Missing Ingredient: Unicorn-Entrepreneurs.

The statement from Bloomberg Businessweek overlooks the most important, long-term factor in the place-based economic problem – the need for local Unicorn-Entrepreneurs. Here’s why:

· Small business needs wealth importers. Small businesses mainly recirculate existing local money or export local wealth by importing goods or services. They are good as a job creator if the area has other companies import wealth by exporting from the area.

· Branch plants mainly prefer low wages. Branch plants often seek regions with low wages, and high productivity. If wages rise, these companies often move – and they have been moving abroad.

· VC does not work before Aha: VCs fund after Aha, i.e., after evidence of potential. It is world-class entrepreneurs who start high-performance ventures and prove their potential. More importantly, VC has mainly worked in Silicon Valley and for few – about 20 out of 100,000 ventures.

· Locally controlled growth businesses are essential. Growth businesses that target regional, national or global markets import wealth to the area and boost local purchasing power to increase “place-based” economic success. They also attract VC if they have unicorn potential and help small businesses create jobs. Such growth businesses are typically started by Unicorn-Entrepreneurs, who are key to long-term, local economic development.

Here are 4 strategies that place-based program can use to succeed:

#1. Focus on the entrepreneur – NOT on the Money or Innovation.

One of the biggest mistakes governments make is emphasizing funding and research over the entrepreneur. They promote venture capital (VC) as a source of high-risk capital. But outside Silicon Valley, about 90 percent of billion-dollar entrepreneurs grew without VC proving that VC is not the primary factor. Even in Silicon Valley, most entrepreneurs who used VC got it after Aha. While governments spend a lot of money on research, most billion-dollar entrepreneurs are masters at imitating (or acquiring) and improving – as demonstrated by entrepreneurs like Walton (Walmart), Jobs (Apple), Gates (Microsoft), Dell (Dell), Bezos (Amazon.com), Kalanick (Airbnb), Taratuta, and Martin. The focus should be on the entrepreneur.

#2. Make high-quality education universal.

Many successful entrepreneurs come from the hungry lower-to-middle income segment. To foster entrepreneurial talent, means that every child should have access to high-quality education. The U.S. prides itself on this policy, but many states seem to be falling short, especially in the inner cities. Without a strong educational foundation, the lower-to-middle-classes will lack the expertise needed to build high-performance ventures in emerging technologies.

#3. Offer local training in emerging trends.

Consider the giants built in the last few decades, from Intel and Apple to Genentech, Cisco, Google, Facebook, and Uber. They all took advantage of trends. Emerging trends based on revolutionary technologies offer opportunities to topple the existing order and build giants. Governments aiming to develop high-growth ventures must focus on training entrepreneurs with the skills to succeed in emerging industries. Silicon Valley benefits by attracting skilled, world-class entrepreneurs from around the world. Few other areas are that fortunate.

#4. Train entrepreneurs to grow without venture capital.

Outside Silicon Valley, entrepreneurs grew without VC by learning how to be ‘opportunity-smart’ to find the right venture, ‘business-smart’ to develop the right business model, and ‘finance-smart’ to get the right financing that allows them to grow with control. Even in Silicon Valley, many entrepreneurs took off without VC. Unfortunately, many governments mistakenly believe they are encouraging entrepreneurship by offering VC before developing skilled entrepreneurs to takeoff in emerging industries without relying on capital-intensive strategies.

MY TAKE: To develop high-performance ventures, governments must focus on training high-performance entrepreneurs to grow independently and sustainably. But governments seem to prefer wasting money. In high-performance venture development, more money before skills and proof only results in wasted money. It is easier to invest after Aha, i.e., after evidence of potential. This is what the “smart money” does, and it is what smart governments should do.

ForbesFrom $375 To The Newest Unicorn In Beauty: How Joe Martin Built Boxycharm.com Without VCBy Dileep Rao
ForbesBootstrapping Unicorns: 7 Finance-Smart Insights From Gaston TaratutaBy Dileep Rao
ForbesLessons From Utah For Growth Ventures: Focus On Entrepreneurs, Not On CapitalBy Dileep Rao
BloombergBloomberg