Allentown Economic Development Corporation

Monthly Archives: November 2017

Bridgeworks welcomes International Business Innovation Association CEO

When it comes to business incubators, manufacturing-focused programs are a rarity. In fact, there is only a handful of manufacturing incubation programs in the country. And during her two years as President & CEO of the International Business Innovation Association, Kirstie Chadwick’s visit to the Lehigh Valley was her first time checking one out.

“The manufacturing sector in the United States is starting to grow again, in part due to rising labor costs overseas, the quality of goods produced, and outsourcing becoming financially unbeneficial,” said Chadwick. “Many business incubation programs today have makerspaces, but those are only early stepping stones to manufacturing. Our country could use more manufacturing incubators.”

Chadwick’s organization, known as InBIA for short, is a global network of incubators, accelerators and other entrepreneurial support organizations in a variety of industries. The global nonprofit organization serves a diverse group of entrepreneurship centers, program managers, directors, and policymakers with guidance, mentorship, and the development of sustainable entrepreneur support programs in every industry and demographic. Its goal is to enrich the entire ecosystem by providing industry resources, education, events, and global programming to help its members better serve the needs of their communities and regions.

“Advocacy is our key role,” explained Chadwick. “We look at trends and patterns and use research and data collection to inform us and our members on what areas need our support the most. So being here to learn about the manufacturing industry is very helpful to me since it’s such a niche industry as far as business incubators are concerned.”

With over 25 years of experience at technology companies, including executive roles at five venture-backed technology startups, and a role as co-founder and CEO of her own company, she admits she quickly learned that “business incubation isn’t all about tech, software companies, and venture capital. After all, the vast majority of startups aren’t funded through venture capital.”

“There is a diversity in entrepreneurship, which I love,” she explained. “Incubators are a blending of dynamics; superhubs and centers with multiple facets. They help entrepreneurs get from the ideation stage into the development and production stages, and connect them to resources in the community that they might not have had otherwise.”

Visits such as the one Chadwick did to the Bridgeworks Enterprise Center in Allentown earlier this month help to inform her about different aspects of incubation programs and thereby allows her to use actual case studies of programs she has visited in her advocacy work. “A lot of stakeholders don’t want to hear some things from their startups or program managers, so they need an organization like InBIA to say it for them on a larger scale.

During her visit to Bridgeworks, Chadwick and Program Manager Anthony Durante toured the facility where she visited many client spaces and met with the owners of Amorphic Tech Ltd., JH Plastics, and LightLab International Allentown LLC, each of which shared the story of their business.

She also received a tour of several other incubators around the region, including Jump Start Berks in Reading, TechVentures in Bethlehem, and TekRidge in Jessup. Chadwick was also the keynote speaker at Venture Idol, the annual pitch competition put on by Ben Franklin Technology Partners Northeast.

PEDA Conference showcases AEDC’s role in the city’s resurgence

During the week of October 25, the Pennsylvania Economic Development Association held its Fall Conference in Allentown. The three-day event took place at the Renaissance Allentown Hotel and boasted record attendance with nearly 200 people attending from across the state and surrounding regions.

“We couldn’t have been more pleased with the way the conference played out,” said Joshua Skopp, PEDA Executive Director. “PEDA’s decision to hold this year’s event in Allentown was based not only on the major transformation that continues to take place but also upon the enthusiasm with which Lehigh Valley stakeholders participated in the development of the event.”

AEDC, which was a silver level sponsor of the conference, had several staff members participate in conference sessions, and Executive Director Scott Unger was a member of the planning committee. Sessions covered a wide variety of topics such as entrepreneurship, lending programs, and brownfield redevelopment, but there was a heavy emphasis on workforce issues and the impact that automation is having in the manufacturing sector.

Showing off Allentown and its community of experts

On Monday, conference goers were offered the opportunity to tour several key sites across Allentown. The tour began with a walk-through of the manufacturing business incubator at the Bridgeworks Enterprise Center. Attendees got a firsthand look at how AEDC is supporting entrepreneurs in the manufacturing sector through its programming. From there, tour-goers got a quick view of the former Allentown Metal Works property highlighting AEDC’s efforts to remediate industrial brownfield sites across the city.

Part two of the tour was a walk-through center city Allentown’s Neighborhood Improvement Zone highlighting the PPL Center arena, along with the various mixed-use buildings that have been constructed over the past three years. The entire tour was a testament to the importance of the many factors of economic development.

“Economic Development, particularly in urban areas, involves all aspects of the community,” explained Unger. “This includes workforce availability, education, and land use patterns along with less tangible things like sense of place and an entrepreneurial environment.”

AEDC’s expertise across the various economic development disciplines was highlighted through staff participation in several conference sessions. Anthony Durante, program manager, was part of a four-person panel on “Fostering a Culture of Entrepreneurship.” The panel included Lisa Getzler of Lehigh University, Mike Krajsa of Penn State Lehigh Valley, Wayne Barz of Ben Franklin Technology Partners Northeast, and was facilitated by Jeff Boerner of Northampton Community College.

Program Manager David Dunn was part of a four-person panel that discussed “Strategic Collaboration: Leveraging Diverse Programs for Small Business Development” and was joined by John Kingsley of LVEDC, Sherwood Robbins of Seedcopa, and Chris Hudock of Rising Tide Community Loan Fund.

Scott Unger filled the role of facilitator for the “Employers’ Perspectives on 21st Century Downtowns” session, leading a discussion with Jarrett Laubach of City Center Allentown, Dr. Brian Nester of Lehigh Valley Health Network, Rolf Schlake of Applied Separations, and Doug Pelletier of Trifecta Technologies.

AEDC staff members walked away with several insights in addition to sharing their expertise. “Economic development is not just financial in nature, it has a large social component that helps drive the economics,” said Dunn.

Skopp summarized the PEDA Fall Conference well; “Through conference venues, sessions and tours, we were able to showcase the Allentown community and its many successes in a way that fulfilled local stakeholders’ vision, while providing opportunities for attendees to share best practices that enhance the professional dialogue and support local, regional and state economic development initiatives.”

Why startups need to focus on generating sales and less on fundraising

I had the pleasure of escorting Kirstie Chadwick, CEO of the International Business Innovation Association, around the greater Lehigh Valley during Global Entrepreneurship Week. During her trip, she got to visit nine entrepreneurship centers from Scranton to Philadelphia including the Bridgeworks Enterprise Center in Allentown and Ben Franklin TechVentures in Bethlehem. At two of the three stops for which I joined her, well-meaning economic development folks ask her for guidance:

“How do we help our entrepreneurs raise venture capital or angel funds? How do we create an investment community in our area?” they asked.

Kirstie graciously provided some guidance, encouraging us to engage and try to organize the high net worth individuals in our respective regions, as well as to approach existing groups in and around our regions to broaden their scope of potential deals as well as being accepting of our potential investors. There was no reason to reinvent the wheel if there were already angel networks and venture capital firms close by doing deals.

At the same time, Kirstie dropped a couple of bits of data, almost as an aside, that may have been missed by those not paying full attention but which were quite sobering:

  • Only 0.05 percent of startups receive venture capital
  • Less than 1 percent of startups receive angel investment

Let that sink in for a minute.

The Hype

So how did we get here? Why do entrepreneurship centers, university programs, and the various grassroots startup programs like Startup Weekend spend so much energy focusing on pitching investors? The answer, despite how unproductive it might be, is that it’s the sexy part of startup culture.

No one wants to open their favorite entrepreneurship magazine or click their way to their favorite tech blog and read about how the founders are on a midnight call with their overseas developers for the fifth time this month because the code is six months behind schedule and still buggier than picnic in a swamp (and about as user friendly). Who wants to read about how the manufacturing equipment is down again and the repair manual only comes in a foreign language that no one can read? Much less discuss how you can avoid the landlord for another week because the rent is late and the last of grandma’s retirement funds that she invested in your “sure thing” are just about all used up and you need every cent you can scrounge up to complete this next prototype of your product.

That’s not sexy.

What’s sexy is how the college dropout spent a month holed up in his apartment jacked up on Red Bull while he coded the coolest app ever to share cat videos, got a million users “overnight” (hey… c’mon… they’re cat videos!), sold it to “Instatwitbook” for $2 billion, and is now Richard Branson’s next door neighbor.

Maybe I’m being a bit snarky. Okay, okay… maybe more than a bit.

But our Shark Tank startup culture has glorified these deals where anyone with any idea can get on TV, pitch an idea in 60 seconds, take some abuse from a few “professional investors,” and walk away with $100,000 for just 75% ownership in their company. By the way… no one takes that deal… NO ONE! But it makes for great television.

Show me (grandma’s) money!

So, if angel investors and venture capitalists are funding less than one percent of the startups out there, where does the money come from? Even traditional financing like bank loans only make up about 1.4 percent of the funding capital in startup ventures.

The reality is that the founding teams provide much of the capital to launch their companies, be it by draining their savings and retirement funds, mortgaging the equity in their homes, or in many cases running up the balances on their credit cards. About 57 percent of startups are funded by the personal savings and credit of the founding team.

Another 38 percent get funding through friends and family. So, my joke about grandma’s retirement money isn’t that far from the truth and not all that funny when it comes down to it.

This is what keeps entrepreneurs up at night. I see it as I walk through the halls of our incubator each day. They’ve gone all-in on their ventures. They’ve convinced their friends and family to take a chance on them. Many of them aren’t drawing a paycheck or if they are, it’s less than minimum wage while they work 60-70 hours per week. Others are still working their day jobs just to keep food on the table. And that’s a whole lot of pressure to live with.

Sell, sell… and then sell some more!

At Bridgeworks, we consistently preach to our clients that they need to get their revenue engines running as quickly as possible. Sales generate cash and you don’t need to be an entrepreneur to know that cash is king. Sales revenue is the only thing that offsets the steady burn of cash that occurs in the early days.

Does this mean startups should sell at all costs? Of course not! Selling a product or service that is of inferior quality will quickly have a negative impact on the company’s reputation and considering that this is probably the company’s first impression with customers, if it gets screwed up they’re like not going to get a second chance. And sleazy sales tactics certainly won’t win you loyal customers in the long term.

However, that doesn’t mean the product needs to be perfect before you go out and try to sell it. The product may not have every feature that you want to include in it. It may not come in every color or size that you’d like to offer. But if it has the basic features and requirements that your customers need, a “minimum viable product” in startup jargon, just get out there and sell it to them.

Selling that minimum viable product will do a lot for an early stage company. First, it obviously starts to generate incoming cash flow. Second, it gets the founders over the hump of making that first sale which boosts their confidence exponentially. Third, it gets the product out into the market where the founding team can start generating some feedback. They may learn that certain planned features are not needed while others should be bumped up on the implementation schedule. They’ll also learn a lot about the sales cycle such as that the end user may not be making the buying decision and that they need to craft their sales pitch differently for each.

Putting it all together

Angel and venture investing is certainly the sexy part of the startup world and depending on what type of company you’re trying to launch, it may even be a necessary step. However, that doesn’t mean every ounce of energy should be focused on identifying those folks and making pitches. In fact, for 99 percent of startups, it’s not the right thing at all.

Get your product or service packaged up and ready to sell, and then get out there and sell it. Sell it as much as you can to everyone you can. Hey… maybe even grandma needs one.

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