Take an American city where the number of companies has increased by over 50 percent in the past ten years, but where economic growth is stagnating, with per capita income consistently falling behind the American average by over USD 4,000. A city with great quality of life, excellent access to a skilled workforce, and successful entrepreneurs with a desire to reinvest in others. Clearly, the entrepreneurial spirit, a nice environment and even starting capital should be present. What may be missing? What explains the mystery of arrested economic development and how should it be addressed?
The city in question is Louisville, Kentucky, where Endeavor Insight has recently completed an assessment that attempts to address the mystery of simultaneous entrepreneurial activity and stagnating growth. It seems that, while the number of startups has been rapidly increasing, the number of large businesses has declined, despite a steadily growing population. This leads to problems of employment and as a result, stagnating growth. Based on Endeavor Insight’s research, here is what local policymakers can do to improve the Louisville economy.
Step 1: Improve the local ecosystem to foster more scaleups, create more employment, and jumpstart economic growth in the area. This implies improving the way that individuals, companies, organizations, and government interact to influence the development of local entrepreneurs and their firms.
Step 2: Cultivate the cycle of growth. Successful ecosystems and their companies follow a specific cycle of growth, in which entrepreneurs who succeed in building scalable firms go on to reinvest their financial, intellectual, and social capital into the next generation of entrepreneurs. This increases local access to funding, talent, and customers. The combined impact of these improvements creates a virtuous cycle for growth.
Endeavor will work to support fast-growing companies in Louisville and improve the local ecosystem for scaleup companies. The major weaknesses of Louisville’s ecosystem for high growth companies, such as a lack of founders promoting entrepreneurship and lack of serial entrepreneurship, closely match the challenges that are addressed by Endeavor’s model. With the help of this assessment, Endeavor staff have identified hundreds of high-growth and high-potential companies in the area. Each of these firms will be invited to apply to join the Endeavor network.
The report will be available soon on the new Endeavor website with more recommendations to improve the local ecosystem.
Contributed by Lili Torok.