Response to Request for Information on Entrepreneurial Mentoring and Education

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SSTI appreciates the Small Business Administration’s interest in entrepreneurial mentoring and education, and the work done by organizations across the country to create high-growth, innovative companies. Many state and local technology-based economic development (TBED) organizations have implemented their own mentoring and education programs for high-tech entrepreneurs. The most successful of these programs capably draw on the resources available to them and are designed to complement both the strengths and needs of the local economy. One size does not fit all, and SSTI believes that the best approach to any TBED initiative, including entrepreneurial guidance, is to customize services to fit the particular situation of a state or region.

Effective entrepreneurship mentoring and education programs provide lessons about how to start a business, but also connect entrepreneurs to the local resources they need throughout the process of building their current venture and beyond. These connections do more than improve the prospects of a single new company. Programs that bring together experienced entrepreneurs and the next generation of business-owners connect businesses, industries and, often, universities. In aggregate, these connections help cultivate innovative communities and high-tech local industries with strong ties to their region, giving new and existing businesses a reason to stay as they grow.

Organizations with strong ties to the community are in the best position to create these connections. They have direct knowledge of the high-tech community, the needs of the local economy and the skills that will best serve entrepreneurs. Federal entrepreneurial mentoring and education programs should draw on these state, local and university organizations to maximize their impact.

Entrepreneurial Mentoring

What are successful mentoring models that exist today to serve early-stage, high-growth companies?Many TBED organizations have a long history of providing entrepreneurial mentoring services and have customized their services to match the needs of their client companies. These needs vary between communities. Mentoring services are often provided in conjunction with other resources that can increase the value provided by mentors.

Organizations generally provide a mix of approaches that meets the needs of the region and of a specific region. Among the approaches taken by TBED organizations are:

• Gateway-based mentoring • Workshop mentoring • Executive mentoring • Concentrated entrepreneurship support

Gateway-based mentoringGateway-based mentors help companies navigate the web of resources and programs offered within a particular state or region. They are former or serial entrepreneurs that have experience dealing with local organizations, agencies and universities who can guide first-time entrepreneurs through the early stages of business development while providing them with access to capital programs, networking opportunities, funding for collaborative research projects, tax credits, incubation services and marketing assistance. Since these mentors have experience within the local business community, they can steer their clients toward useful programs and resources that offer the best return on their time and monetary investment.

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Organizations providing these kinds of services include: Montana’s TechRanch, St. Louis’ Center for Emerging Technologies, the New Jersey Economic Development Authority Business Mentoring Program, the Michigan Economic Development Corporation and San Antonio’s STARTECH (formerly SATAI).

This approach can help entrepreneurs draw on every advantage available to them. By working closely with a mentor, entrepreneurs learn about opportunities sponsored by public, private and nonprofit organizations. In some cases the assistance provided by these kinds of mentors can be described as one-on-one counseling sessions, in which the mentor simply points the entrepreneur in the direction of the best resources with a minimal time commitment. These sorts of programs, however, can also provide longer-term, hands-on guidance as the client entrepreneur’s needs change.

Mentors help to make entrepreneurs aware of local, state and federal opportunities, and create a dependable pipeline of informed and qualified applicants for programs offered by state and regional organizations. By engaging entrepreneurs with local networking groups, funding sources and economic development organizations, these programs can increase the odds that a company will thrive and remain within the community. This approach can meet the needs of states and regions that have a comprehensive set of programs that can seem daunting to an individual entrepreneur. It may also be appropriate in states where resources are scare and entrepreneurs may have to connect to organizations outside of their region.

Gateway-based mentoring can also focus on helping entrepreneurs secure particular types of resources. Some mentoring programs specifically address the capital requirements of entrepreneurs during early-stage development and through the Valley of Death period when new businesses are most likely to falter. These mentors help entrepreneurs develop their business plan and pitch, and helps them to make the right decisions for their company. Local TBED organizations often offer business mentoring that helps entrepreneurs be successful in seeking funding from angel investors, angel groups, venture capital firms, and state-sponsored sources of capital. This approach meets the needs of states and regions where new companies have insufficient access to capital resources, and where investors perceive a lack of high-quality deals.

State-sponsored venture funds often provide some kind of mentoring to portfolio companies or applicants. By mentoring these companies, state funds increase the odds of a return on their investments and help portfolio companies receive investments from other sources. Many private venture funds offer similar services. This type of mentoring is provided by SCLaunch, Innovation Works, the Great Lakes Entrepreneur’s Quest and InvestMichigan!’s Growth Capital Program.

Workshop mentoringOften entrepreneurs require information and assistance from experienced entrepreneurs to address specific issues they are facing at the time. Many state and regional organizations offer mentoring workshops where entrepreneurs can work with experienced professionals. Workshop mentoring allows entrepreneurs to hone their business plans, improve their pitch to investors or seek marketing assistance in front of a group of seasoned entrepreneurs. The fact that this assistance is provided through periodic workshops does not necessarily preclude an ongoing relationship. Entrepreneurs can show up to these events whenever they need special assistance, and the mentors involved can become familiar with the company and its team.

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As with gateway-based programs, these workshops are often provided by organizations that provide additional services for entrepreneurs. Workshops complement the work done by entrepreneurial service organizations by providing direct assistance and networking opportunities.

Organizations that provide these types of workshops include: North Carolina’s Council for Entrepreneurial Development, The Entrepreneur Center @ NVTC, and Hawaii’s HiBEAM.

Executive mentoringSome organizations provide mentoring that doubles as an executive recruitment service. These programs recruit a pool of Entrepreneurs- or Executives-in-Residence to advise companies and, in some cases, join their team. This approach is effective in states and regions that suffer from a shortage of highly-qualified startup teams.

Executive mentors can provide a number of valuable services for the companies they join. They act as mentors who can impart knowledge of how to lead a new company through its early stages. They also take an active stake in the company’s success by serving as C- level executives. These executives are chosen because of their experience and talents, and can be a significant advantage for a new company. If there are gaps in the local executive labor market, these new recruits may also solve a hiring problem for the company.

By bringing experience, talent and connections to the companies they join, executive mentors strengthen the companies appeal to investor. Business teams that include an entrepreneur with a history of success are more likely to receive funding and to win awards and grants. Executives can also draw on their connections to help find other employees and to recruit board members.

Executive mentoring is provided by several organizations, including: Pittsburgh Life Sciences Greenhouse, University of Florida’s Tech Connect, TechColumbus and Northeast Ohio’s JumpStart.

Concentrated entrepreneurship supportConcentrated mentoring services provide intense, comprehensive mentoring with a select group of high-potential entrepreneurs throughout the process of starting a new company. Often these programs target a specific population of entrepreneurs that has been underrepresented in high-tech entrepreneurship and underserved by other initiatives. Small groups of entrepreneurs are matched with best-in-class training, one-on-one coaching and mentors with direct knowledge of their industry. During this period, they develop their business plan, their pitch to investors and their relationships in the innovation community.

Because these programs involve a substantial investment of time and money in their client entrepreneurs, concentrated mentoring programs only admit entrepreneurs with demonstrated talent and the potential to create high-impact companies. Clients work with mentors who are experienced in their field and who can help them access capital and other resources. Often, these programs also provide funding for the startup. Entrepreneurs who participate in these programs may have an easier time securing support from other state and regional programs.

These programs require a significant investment for a relatively small number of entrepreneurs, but by providing focused, sustained assistance they are able to develop a cadre of high-quality entrepreneurs in their state or region. Concentrated support programs also offer a reliable pipeline of qualified applicants for other support programs.

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Organizations providing concentrated mentoring services include: Kansas’ PIPELINE, the University of Maryland, Baltimore County’s ACTiVATE, and Ben Franklin of Central and Northern Pennsylvania’s Transformation Services Unit. ACTiVATE has begun to expand its program to other parts of the country.

Please describe what types of mentoring programs have been less than successful.The list of mentoring approaches described above is not comprehensive, but indicates the variety of programs that exist in different states and regions. Well-implemented mentoring initiatives recognize what kind approach will work best for the situation in a particular region or state based on its needs and resources. Mentoring programs that are not properly customized will not be as successful as they can be.

Successful mentoring requires sustained contact between mentors and clients over a period of months or years. In order to ensure that entrepreneurs receive the guidance they need, mentor programs need a reliable source of funding to serve as a dependable long-term resource. These programs must also be able to recruit and retain a pool of high-quality mentors, who are often busy and engaged with multiple organizations.

Since TBED organizations can rarely hope to pay a mentor a competitive rate for their services, these organizations must rely on their reputations as effective leaders within the high-tech community. With regards to mentoring programs, this sort of reputation is built through a sustained commitment over time and through strong roots within the state or region it serves.

Mentoring programs that fail to meet the requirements of the local economy or that cannot consistently deliver quality service over time are likely to fail. In either case, the program will be unable to develop the valuable connections and recognition that attract promising entrepreneurs, help recruit experienced mentors and provide clients with the resources they require.

How do you measure success in an entrepreneurial mentoring relationship?Ultimately, jobs creation is at the heart of any TBED initiative. As such, mentoring programs for high-growth companies should track the number of jobs created and sustained by their client companies. Tracking the number of jobs these firms create helps to ensure that these firms are benefiting from the assistance provided and that the companies being targeted are truly “high-growth”.

One of the key benefits of targeting high-tech companies is their tendency to create high-paying jobs and attract skilled employees. In order to take into account the nature of the new jobs, mentoring programs should also record data on salaries and wages within these companies. High-tech economy metrics often include multipliers to account for the new jobs that are created within service companies that work with high-tech startups. Programs must be cautious and conservative in how they use these multipliers, so that their metrics are an accurate reflection of their actual contribution to the local economy.

Angel and venture capital raised by client companies is also a useful metric of mentoring programs. Many mentoring programs are specifically intended to provide companies with access to sources of capital. Venture funding also indicates that a client company has assembled a promising company in which investors are willing to take a stake.

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Job and salary metrics require mentoring programs to stay in touch with their current and former clients even after the mentoring relationship has ended. Staying in contact with these companies can have the side benefit of providing a way to recruit experienced entrepreneurs for mentoring programs.

While mentoring programs need to keep track of the meetings they arrange between mentors and clients and the number of companies they serve, metrics for mentoring should focus on the outcomes of these relationships. Metrics that measure the productivity of the program, such as the number of hours spent with clients or the number of portfolio entrepreneurs, are less important than metrics that track jobs, angel and venture funding secured by clients or portfolio company revenues.

What is the track record of successful mentoring models that you are aware of?TBED organizations rarely report the impact of their mentoring initiatives separately from their other initiatives. Mentoring services are often well-integrated with other programs and it can be difficult to sort out their impact. Several SSTI members and TBED organizations will be submitting their own responses to this request for information, and will be able to provide a complete picture of their track record. The data below is from a few TBED organizations that offer mentoring programs.

• STARTECH (formerly SATAI) provides extensive mentoring and capital access assistance. Since 2003, 79 STARTECH clients have received $159 million investment. In 2009, 31 companies joined the STARTECH portfolio, which indicates that they have received consulting and guidance from STARTECH and have been judged a desirable candidate for investment. Those 31 companies employed 423 people and created 56 new jobs in 2009. The average salary at these portfolio companies was $64,219, well above the national average.

• Technology Ventures Corporation (TVC), a nonprofit charitable foundation organized in 1993, offers multiple entrepreneurial services for high-tech entrepreneurs. The organization reports that their entrepreneurship support has helped to create more than 100 companies, more than 12,700 jobs and more than $1 billion invested in the companies supported. TVC also provides patent writing training and counseling for entrepreneurs from an on-staff patent attorney; entrepreneurial training (more than 15,000 individuals have attended classes in the last five years); executive search for senior management and technology staff and publication of a nationally circulated magazine, Innovation, America’s Journal of Technology Commercialization (circulation 16,000).

• TechColumbus provides guidance for entrepreneurs through its Venture Development Services. These include mentoring, incubation, education and funding. Firms that are housed at the TechColumbus incubator or receive funding for one of its capital programs are eligible to receive more extensive mentoring. Since 2005, TechColumbus has provided 508 startups with business support and/or funding. The organization provides domain-specific assistance for companies, which over the past five years has included 113 healthcare and bioscience companies, 246 information technology companies, 28 advanced materials companies, and 121 companies in other technology areas.

• PIPELINE has been in operation since 2006 and has graduated three classes of 8-10 entrepreneurs from its year-long intensive entrepreneurship program. Between 2007 and 2010, PIPELINE companies have increased their revenues 4.5 times faster than other Kansas-based small companies and 8.5 times faster than the average U.S. small businesses. These companies won $1.65 million in SBIR awards during 2007 and 2008, 26 percent of Kansas’ SBIR total for those years. During that same period, PIPELINE companies attracted $11.3 million in funding from angel investors, venture capital firms, state programs and federal sources. The average job at PIPELINE companies paid $56,000 in 2008, compared to $37,000 for all Kansas companies and $42,000 for the U.S. companies overall.

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What changes in public policy and research should the Administration consider that would promote increased mentoring of high-growth companies?In recent years, state budget allocations for TBED initiatives, including mentoring services, have gradually (and sometimes rapidly) declined. Since a sustained commitment is vital to the success of these efforts, mentoring services cannot afford to see their funding disappear. A federal source of funding for mentoring programs offered through state agencies and regional TBED organizations could help improve the stability of these programs.

Overall, federal policy should focus on ensuring that mentoring programs are available, consistently funded, set up to attract mentors with high-quality entrepreneurial or investment experience and allowed to respond to the changing needs of the community. To the extent that federal policies and programs can include rules or goals for mentoring programs recruit successful entrepreneurs, this could help improve the quality of the mentoring provided by these programs and their recognition in the community.

State and local TBED organizations are well-positioned to determine the optimal mix of approaches needed to mentor local entrepreneurs. They are connected to state agencies, the high-tech business community, universities, the existing pool of high-growth entrepreneurs and local organizations. Any federal strategy on entrepreneurial mentoring should involve these organizations when implementing efforts in specific states or regions.

Federal policies should focus on supporting mentoring efforts underway within TBED organizations, rather than creating a new overarching structure to provide mentoring across the country. In many states and regions, there are already a number of mentoring programs providing services to high-tech entrepreneurs. Additional funding would allow them to provide consistent support and to add more high-quality mentors. Federal funding would also allow these programs to increase their expertise in specific stages of technology commercialization and in individual high-tech industries.

Is there any other information regarding entrepreneurial mentoring that would be helpful to the SBA?Effective mentoring programs for high-tech entrepreneurs should incorporate several key elements.

• Flexibility - The overall design of the program must address the needs of the state or regional technology economy and draw on the resources available. These programs should respond to the demands of entrepreneurs and the high-tech community.

• Appropriateness - Mentoring should meet the needs of client entrepreneurs. Different startups have different needs and the business development process can vary by industry. This can be accomplished by recruiting mentors with appropriate skills, training mentors to provide the right kind of assistance and maintaining a diverse pool of talented, experienced entrepreneurs.

• Integration - Entrepreneurial mentoring services for high-tech businesses work best when they are integrated into a comprehensive innovation strategy. Mentoring can help entrepreneurs find state and regional programs the address their needs and provide a pipeline of qualified entrepreneurs. Mentoring services are less effective when they are offered in isolation from other services.

• Outcome-Orientation - Mentoring programs should track their success by measuring the performance of their client companies and their impact on the regional economy.

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• Recognition - In order to attract high-quality mentors and entrepreneurs, a mentoring program must be respected. When mentoring programs are well-known, they are able to provide their clients with access to local networks and greater resources. Investors take notice when a startup has worked with a respected program. Mentoring programs gain recognition by providing high-quality service and helping to launch successful companies consistently over time.

• Quality – Experienced entrepreneurs and investors are vital to mentoring programs. It is critical that mentors understand the journey that the participating CEOs are going through and that they have connections within the high-tech community. These connections allow mentors to consult with other experienced experts when their client CEOs need support in areas outside their expertise.

• Accessibility - Mentors should have direct contact with their clients, at least most of the time. While web tools may be valuable in addressing specific problems, in-person relationships provide clients with a chance to share their experiences and to fully benefit from the connections their mentor can provide.

Entrepreneurial Education

What kind of entrepreneurial education programs work best at imparting entrepreneurial skills and knowledge?Within the TBED community, the lines between mentoring and education are frequently blurred. Many TBED organizations, such as the Center for Emerging Technologies, offer education sessions along with their mentoring, business plan and capital workshops. Concentrated entrepreneurial support programs, such as PIPELINE and ACTiVATE, often offer a full entrepreneurial curriculum. Many offer entrepreneurial courses, workshops, internships and fellowships to K-12 or university students, but, more often, their services focus on individuals in the process of commercializing new technologies by launching a high-tech startup.

The most effective entrepreneurial education programs for high-tech entrepreneurs are fully integrated into a state or region’s innovation strategy. This helps to ensure that entrepreneurs who take advantage of educational opportunities are also able to participate in networking events, workshops and mentoring services. When entrepreneurial education does not teach students about the realities of starting a business within a particular state or region, or let students know about the resources available to them, it does potential entrepreneurs a disservice.

One concern arising within many communities is the fear that high-tech businesses will relocate to regions with greater labor, capital and technical resources once they begin to grow. Often, relocation makes sense, but sometimes the decision to move is made because an entrepreneur is unaware of the resources available within their current region. Greater involvement with state and local networks can connect entrepreneurs with skilled workers, local investors and assistance programs. These connections can lead to a strong attachment to the community and the growth of local innovation networks.

A strong entrepreneurial education that is well-integrated into a state or region’s innovation strategy can prepare students for the realities of entrepreneurship and provide a sustained source of entrepreneurial talent for a region. Organizations that provide educational opportunities do not necessarily have to provide a full suite of entrepreneurial services, but they should partner with state and regional TBED organizations, incubators, university commercialization offices and other resources.

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What are the successful models for teaching entrepreneurship to entrepreneurs preparing to launch high-growth companies?The following TBED organizations offer entrepreneurship education opportunities that are well-integrated with other entrepreneur services and their state’s innovation strategy.

Maryland Technology Enterprise InstituteThe Maryland Technology Enterprise Institute (MTECH) offers educational opportunities and entrepreneur services for University of Maryland students, faculty and staff, and for entrepreneurs outside the university. The institute offers entrepreneurship classes for K-12, university and mid-career executives, while providing them with access to the wide variety of opportunities available through MTECH and other Maryland TBED organizations.

Students participating in MTECH’s entrepreneurship education program have many opportunities to draw on entrepreneurial services. The UM $75K Business Plan Competition and the Impact Pre-Seed Fund offer access to capital to develop business ideas. If a student is trying to commercialize a new technology, MTECH provides prototyping assistance, business advice and support, and incubation facilities. The Technology Advancement Program and the VentureAccelerator offer hands-on support for student ventures as well as assistance in raising capital.

John Pappajohn Entrepreneurial Center The University of Iowa John Pappajohn Entrepreneurial Center (JPEC) provides educational opportunities for entrepreneurs around the state. The center has partnered with the Iowa Community College System and the University of Northern Iowa to provide FastTrac® New Venture training programs at several institutions. While any type of entrepreneur may participate in these educational programs, high-tech entrepreneurs have access to additional resources through the University of Iowa’s other Centers of Enterprise. These services include incubator space at the Technology Innovation Center, commercialization assistance through the University of Iowa Research Foundation, and consulting and mentoring through JPEC.

Connecticut Center for Advanced TechnologyThe Connecticut Center for Advanced Technology (CCAT) offers Ground Up Seminars and Workshops that educate entrepreneurs about the realities of starting a business in Connecticut. Ground Up seminars teach entrepreneurs the fundamentals of bringing a new technology to market and educate them about the opportunities available in the state. The organization recruits experienced entrepreneurs and professionals to lead occasional webinars on tech entrepreneurship. CCAT also offers incubator, laboratory and collaboration space for high-tech companies. These companies are eligible for up to $30,000 in funding.

At the same time, CCAT has engaged in partnerships across the state to improve the quality of STEM and entrepreneurship curriculum for K-12 students. These educational programs bring students and teachers in contact with leaders from the innovation community.

Is there any other information regarding entrepreneurial education that would be helpful to the SBA?Successful education programs for high-tech entrepreneurs should meet most of the same requirements as mentoring programs. They should meet the need of both the local economy and their students. They should be integrated with an overall innovation strategy and allow the students to meet one-on-one with their instructors to maximize the benefits that can accrue through networking. Educational programs improve over time as they increase their recognition in the community and create partnerships with other organizations. The only way to accomplish this is by proving their value to the economy over a sustained period of time.

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Brian DarmodyChairman of the BoardAssociation of University Research Parks

Marcia MellitzPresident & CEOCenter for Emerging Technologies

Ray LeachChief Executive OfficerJumpStart, Inc.

James K. BowmanExecutive DirectorRenew Moline, Inc.

Renee M. WinskyChief Executive OfficerTechnology Council of Maryland

Dan BerglundState Science & Technology Institute

Kerwin TesdellPresidentCommunity Development Venture Capital Alliance

Christine SmithExecutive DirectorRhode Island Science & Technology Advisory Council

David ChicoinePresident & Prof of EconomicsSouth Dakota State University

Bob BaileyExecutive DirectorCenter for Advanced Engineering and Research

James A. JaffePresident and CEONational Association of Seed and Venture Funds

Marianne HudsonExecutive DirectorAngel Capital Association

Betsy LulfsExecutive DirectorMinnesota Science & Technology Authority

We appreciate the Small Business Administration’s interest in seeking input on the best approaches to entrepreneurial mentoring and education. We would be pleased to provide any further information that would be helpful as you move forward.

Sincerely,

Peter Longo President and Executive Director Connecticut Innovations

Yuka Nagashima Executive Director and CEO Hawaii High Technology Development Corporation

Thomas Thornton President and CEO Kansas Bioscience Association

David MonkmanPresident & CEONational Business Incubation Association