To get started, small businesses need cash, promotion and help from the state. Executives tell McAuliffe they’re not getting it.
MCLEAN – Despite all the effort and good intentions, startup businesses in Virginia still face some challenges.
“We ranked 25 out of 50 in terms of entrepreneurial activity,” Monique Adams said. “And that’s really poor because every state that we compare ourselves to is in the top 10.”
Adams serves as executive director for 757 Angels. The Hampton Roads-based investment group provides investment capital, advice and a mentorship program to startup companies.
Part of the problem companies face is a lack of marketing. For people to take action, they first need to know the story. That’s an area Virginia needs to improve in, according to Adams.
She noted that Virginia lacks in both storytelling and awareness, highlighting businesses across the Commonwealth. Companies in different regions could help each other or provide resources people need, but they remain unknown outside of their home area.
“I think we have a lot of fabulous founders and we need to get those stories out there. Founders that are doing great things, that are growing,” Adams said. “This is really going to help in the recruiting effort. It’s going to create some awareness for the growing entrepreneurial ecosystem.”
Despite the pandemic or rather because of it in some cases, startup companies are springing up across the country. In July 2020, the Census Bureau received 551,657 business applications, an increase of 95% compared to July 2019’s 281,692 applications. By the end of April 2021, the numbers were still above average, with the Census Bureau receiving 487,939 applications.
Bringing Business Owners Here
So how do you bring those companies here or encourage Virginians to start more of their own? And most importantly, how do you make those companies successful? That was a question former governor Terry McAuliffe looked to answer last week, as he took part in a roundtable discussion withAdams and several small business owners.
“Think of the built-in assets that Virginia has,” McAuliffe said. “[A] great education system, we’re the number one state in America for Department of Defense spending, all the built-in technology and innovation incubator work that’s being done here by the government. The idea that, you know, we’re 25th out of 50, [when] we have all these assets here, it really doesn’t make any sense.”
In addition to better marketing, Adams called for a larger focus on diversity. McAuliffe agreed.
“We’ve seen 41% of small black and brown businesses [that] have gone out of business in the last year since COVID has started,” McAuliffe said. “I can’t think of a more important time for us to be talking about how we stand up an ecosystem here where everybody wants to come start a business.”
Adams noted Virginia’s “incredibly diverse population” and highlighted the strength that distinction brings to the Commonwealth.
“I think diversity in ideas and talent really favors innovation,” Adams said. “As I look at some of the efforts underway around the state, I think more can be done. And I think the state can play a more active role in encouraging a more diverse community.”
Alongside new business ideas, current employees also had new working options in the pandemic. That’s changed the landscape somewhat. Rather than clocking in at the office, companies across the country implemented and expanded remote working options.
According to an Oct. 2020 Pew Research Center study, 20% of employees surveyed worked from home at the beginning of the pandemic. Approximately seven months later, that number jumped to 71%. Additionally, 54% expressed a remote working preference following the pandemic.
In McAfee’s experience, many qualified tech employees moved from their office areas in Washington, DC, to different parts of the state. In some cases, employees transplanted to different parts of the country – all the while still virtually working in the nation’s capital.
“That transformation is really going to change the way that companies work,” McAuliffe said. “And I think that a lot of our kind of second-tier cities have a really big opportunity here to attract a lot more talent because they have great work-life balances, they have great education systems. They also have reasonable housing prices. And so it’s kind of the best of both worlds now for a lot of places around here.”
The Challenges, Big and Small
But with change comes challenges as well. One of those issues involves hiring.
“Right now it’s difficult across the country to hire and retain technology talent,” McAfee said. “It means that businesses miss out on a huge number of great talent. It often takes six months to get an employee hired and onboarded, and that’s just too long when there’s thousands of open jobs for it.”
And the jobs are here. Bernard Harkless, co-owner of Richmond-based developer Lynx Ventures, pointed out small companies are ready to grow.
“There’s a wide berth of really great product-based businesses in Richmond that are more small business oriented,” Harkless said. “Not necessarily, like, high growth, but have been in business for three, four years and have steady revenue growth and frankly could scale or grow their businesses to the next level, you know, hire more people.”
But to grow, companies need funding. That’s the second problem. Austin Green pointed out that food-based businesses in Virginia often struggle to find investments. Green serves as executive director of Hatch Kitchen, an incubator for food startups.
“We’re not talking about hundreds of thousands of dollars. Sometimes in the food business, it could be $50,000 that makes or breaks them,” Green said. “But the banks aren’t really interested in providing loans for that. And a lot of times it’s difficult to find investors interested in putting that kind of capital into a small business.”
Adams said that’s true of multiple industries, as resources that support entrepreneurs “are starving for funding.”
“These are the backbone organizations that provide all of the resources, the connections to startups, and we could do a much better job at providing funding to those resources,” Adams said.
To get Virginia rolling, Adams estimated the state needed about $20 million annually to help startups.
Brainstorming a Plan
But if $20 million is too big a number right now, the business owners offered other ideas.
Green suggested that the state or local governments fund micro loans to help jumpstart potential businesses. He suggested putting a panel in place, as well as a vetting process, to ensure proper use of tax dollars for such a fund.
Harkless focused on resources for funding. He noted that while organizations exist to help start or maintain a business, people often don’t know they exist. He called for ways to connect investors with ideas in a more streamlined fashion.
“Just generally speaking, there’s always a frustration of, ‘Well, where do I go to get this?’” Harkless said. “And, you know, the inefficiency of having to talk to four or five different people to get to the outcome you need to. All those four or five people, in my experience, are always really great to talk to and willing to help. But that’s lost time and lost money that people are spending, having to go research and find those things as opposed to having it readily available for people to access.”
In addition to business owners securing funding opportunities, investors moving to the state also took center stage.
“We have to do a better job of saying, ‘We are the place for new technologies for innovation,’” McAuliffe said. “You are going to be successful if you invest here in our state.”