As North Carolina strives to foster small business and entrepreneurial activity, there are other state models worth paying attention to.
One innovative approach is Network Kansas with its emphasis on rural economic development, creative public-private partnership model and bipartisan history.
Network Kansas was created in 2004 – a time when Kansas had a Democratic governor, Kathleen Sebelius, and a strongly Republican legislature. As Kansas politics have shifted right, Network Kansas has not only survived but flourished.
Created as an independent nonprofit organization, Network Kansas is dedicated to fostering entrepreneurship and small businesses statewide by connecting business owners with expertise, education and economic resources to help them grow and create jobs.
One of the signature programs is Startup Kansas, a matching loan program for start-ups and existing underserved small businesses, including those in rural communities, distressed urban communities, woman- and/or minority-owned, or businesses serving underserved communities (through location, employment, product/service focus, etc.).
Eligible businesses get up to a $45,000 loan that they must match with at least 40 percent of private funding. For example, if a business needs $50,000, then $30,000 can come from Startup Kansas and $20,000 comes from a public or private match.
To help increase its reach, Network Kansas has launched a network of qualified entrepreneurship communities. The “E-Community” initiative is a partnership that allows a town, a cluster of towns or a county to raise a local loan fund based on the Startup Kansas model through donations from individuals or community businesses.
To start and grow their fund, E-Communities are able to sell state tax credits through the Kansas Entrepreneurship Tax Credit. For every $1,000 donated, donors receive a $750 credit directly off of their state income tax with a maximum annual tax deduction of $50,000. To help sweeten the pot, donors may also be eligible for additional federal and state tax deductions.
Each year, eligible E-Communities are told how many tax credits they are able to sell. All money received through the sale of these tax credits then goes into the local revolving loan fund.
Since its launch in 2007, the E-Community Partnership has grown from six communities to 59 in 2017. During the first 10 years of activity, more than $10.3 million has been loaned to 372 companies leveraging almost $50 million of additional private capital and creating hundreds of jobs.
E-Community partners also participate in a peer-to-peer learning coalition, get invited to relevant conferences, and can engage with a curated network of experts and consultants. They also receive priority access to certified technical assistance and programs such as the Youth Entrepreneurship Challenge Series, featuring 21 competitions across the state including more than 450 students. Winning teams have received more than $15,000 over the last two years.
Network Kansas has also launched a Kansas Capital Multiplier Loan Fund – a fund that loans up to $250,000 and matches up to 9 percent of private investment for businesses in rural or distressed urban communities or larger businesses with significant local investment. In parallel, a Minority and Women Business Multiplier Loan Fund has been created that matches up to 20 percent of the private equity invested into qualified businesses.
While North Carolina is trying similar efforts, they don’t go far enough.
Through efforts like the N.C. Community College Small Business Center Network, there is an array of growing businesses across our state but there is not a corresponding statewide loan fund that can help accelerate their growth. We had the One N.C. Small Business Matching Grants program for businesses competing for federal grant dollars to help them develop new technologies. In its first six years, it created nearly 500 high-paying private sector jobs and got a 9-to-1 return on state dollars by attracting more than $85 million in external investment and $73 million in follow-on federal funds. But the program received no funding from the legislature in the most recent budget.
The N.C. Rural Center has partnered with the Center for Rural Entrepreneurship to transfer parts of the E-communities model to North Carolina. The Rural Center has seeded locally-led loan funds in seven small towns across the state and is about to begin working with six more communities in eastern North Carolina to help rebuild their small-business economies after Hurricane Matthew.
While these are all promising, we can and should do more. Outside of the Triangle and Charlotte (and a surging Triad), our state is well behind on a set of innovation indicators, according to the most recent N.C. Innovation Index. As Kansas demonstrates, it’s possible to take creative and sustained approaches that build more companies, create more jobs and earn broad political support.
Christopher Gergen is CEO of Forward Impact, a founding partner of HQ Community and author of “Life Entrepreneurs: Ordinary People Creating Extraordinary Lives.” Stephen Martin is deputy chief of staff at the nonprofit Center for Creative Leadership in Greensboro. They can be reached at email@example.com and followed on Twitter through @cgergen.