By J.F. McKenna
As the sage says, “the hardest ship to float is a partnership.” And what of the good ship Entrepreneur?
Is it reasonable to assume the hardest ship to launch is an entrepreneurship? It appears to be so. And the recent kerfuffle surrounding the economic-development group JumpStart lends credence to this aphorism.
Plain Dealer reporter Michelle Jarboe recently crafted a detailed feature story headlined “JumpStart facing heavy criticism.” The article focused on Cleveland entrepreneurs’ complaint that six-year-old JumpStart “spends more money serving businesses than creating them.” Jarboe reported that JumpStart had funded 53 companies. “Of those,” she wrote, “one has been acquired by another company; a second repaid JumpStart’s investment. Four have failed. Out of the remaining 47 companies, JumpStart says 66 percent are living up to expectations.”
Now, factor in the “equivalent of” 471 full-time jobs created to date and the non-profit, grant-funded JumpStart’s overall $52.3 million spending. The ROI—even with the most intense squinting through a green eyeshade—is poor when compared against private-industry standards.
Which prompts yet other, even more critical, questions: Does entrepreneurship, by its very nature, really lend itself to extra-market stimuli? However well intentioned, are JumpStart’s efforts akin to altering the very DNA that makes entrepreneurship exactly what it is?
The late Peter Drucker, who retains the undisputed title of “the father of modern management,” would probably argue against entrepreneurial interventions a la JumpStart. “‘Planning’ as the term is commonly understood is actually incompatible with an entrepreneurial society and economy,” he said. “Innovation does indeed need to be purposeful and entrepreneurship has to be managed. But innovation, almost by definition, has to be decentralized, ad hoc, autonomous, specific and microeconomic.”
In short, the good ship Entrepreneur needs to launch itself onto the free-market waters and find out if it will float or sink. Artificial ballast, such as non-market investment, will keep the craft seaworthy only so long.
Back when I was covering business issues for Northern Ohio Live magazine, I talked to a lot of champions of entrepreneurship. Many of them told me that business adventurers need to have lofty dreams matched with hard thinking. And hard thinking must precede seeking out assistance, be it guidance on business plans or non-profit investment dollars.
Phil Bessler, a veteran of industry and a Baldwin-Wallace business professor, shared his thoughts with me six summers ago. Long before an entrepreneur scratches out a business plan, Bessler said, he or she must fashion a feasibility study, “a simple test many entrepreneurs do on the fly.”
”I use this analogy: If you build it, will they come?” Bessler said. “You need to test if there is a viable market for what you want to do. The second test is financial: Is the profitability reasonable? Can you cover your investment? The third question is about resources: about skills, about the individual, about support mechanisms. You go through it quickly, and it’s a go/no-go kind of thing.”
In the marketplace, feasibility is typically weighed against what Warren Buffett calls “skin in the game.” When that skin is not off the entrepreneur’s own back, but rather is a funded transplant, decision-making can get skewed.
Which brings me back to the controversy surrounding JumpStart. Questions about the organization’s executive salaries and brand extensions aside, JumpStart must take a hard look at its own feasibility as a market actor. Do the current returns justify the investments? Is it truly possible to commoditize innovation and entrepreneurship?
Drucker would say no. “Innovative opportunities,” he wrote in Innovation and Entrepreneurship, “do not come with the tempest but with the rustling of the breeze.”
Yet a tempest is what seems to have formed.
Jarboe’s article quoted an e-mail from JumpStart critic Ron Copfer, himself a high-tech entrepreneur, to JumpStart CEO Ray Leach:
“The kind of growth we need to have happen in this region can only be produced organically, Ray, from the ground up, by taking chances, experimenting and risking. Something that JumpStart is clearly not doing!”
J.F. McKenna is a veteran business journalist and communications specialist. Reach him at email@example.com .