Blog: Jan Gensheimer & Gerry Roston (NEF)

Many have seen Ralph Waldo Emerson’s overly optimistic quote which states, “build a better mousetrap and the world will beat a path to your door.”

Many first time entrepreneurs, even those who may not be familiar with the quote, believe this is the key to their success. A truer, more important, and actionable, quote which should be on the lips of all entrepreneurs, is “It's not what you know, but who you know.”

Who you know, and who you need to know, both play a critical role in entrepreneurial success.

Serial entrepreneurs get it. They know an investor, a first customer, or a great executive, or can find one with a few phone calls. When they set out to launch a new venture, they are able to quickly assemble a team by picking people with whom they have worked before, know personally, or have been recommended by word-of-mouth for their previous and relevant success.

Investors get it. They join angel groups and venture funds, and talk business investments with people they know. They invest in deals that are referred to them by someone they trust.

Seasoned professional service providers get it. The lawyers, accountants, consultants, and insurers with established practices get returning business from their previous clients and referrals from their clients and their networks.

So why don’t novice entrepreneurs and newly established service providers get it? And how is it that these really smart people do not know how critical it is to put down your work and go meet other people?

Part of the answer might be that networking is not magic. It takes time, and effort, to build up a network of contacts. Additionally, a person who approaches networking solely as a means for resolving their current challenges is not likely to meet with sustainable, long term success. Networking is about building relationships and giving as much (if not more) than taking. This takes time.

It’s especially important to get “out” and network when you are starting out. For instance, by sharing her idea at a networking event, an entrepreneur may find an impassioned first employee, a customer who needs the solution and will test or buy the new product. She may find an investor willing to support the business, or another smart person who can help build the business faster. More importantly, as the entrepreneur’s network grows, the network itself will help spread the word, extending the reach far beyond that of the entrepreneur herself.

At the New Enterprise Forum (NEF), we’ve been hosting networking events for 23 years, bringing the entrepreneurial community together once a month around a topic of interest, all in the name of providing a forum for networking. Dozens of other organizations are active in our region and across the state. If you’re an entrepreneur with an idea or a service – put down your work and find an appropriate networking venue for your growing business. Register to attend. Put it on your calendar – in pen. Take your business cards. Have a clean and crisp 30-second “pitch.” Introduce yourself to people you don’t know. The networking season is upon us – and you need to run – not walk – to a networking venue near you. The future of your business depends on it. 

In Michigan, we have the good fortune to have a host of programs that provide encouragement and resources for entrepreneurs – business plan competitions, training, networking, and early funding. These programs grant or loan or award money to start-up teams to accelerate their growth.

While the ideas are often novel, the underlying requirements for growing profitable businesses are pretty standard and there is an impressive group of professional service providers – consultants, lawyers, and accountants – that work diligently with start-up companies to accelerate their growth. These pros know that things are done a little differently with entrepreneurs in their earliest days as opposed to later on when there are lots of customers, employees, and money. Unlike entrepreneurs and investors, who own a share of the company and receive a share of the profits, these service professionals are generally paid for their time and expertise.

How do we reward that expertise? We ask them to provide their services for free – especially consultants. We ask them to reduce their rates. We honor their expertise by devaluing it in the economic infrastructure of entrepreneurship in Michigan.

And, believe it or not, many of these service providers line up to do the work.

Why?

Some have established practices and contribute a portion of their time to supporting start-ups, either as a way of giving back or to find and nurture long-term clients. Some of the service providers are setting up their own business and earn credibility by doing this early development work. Others are subsidized to consult and are paid by various government-funded or grant-funded support organizations. These groups underwrite professional services for early entrepreneurs in recognition of the fact that the start-ups are short on both cash and specialized expertise. The grant-funded and government-funded groups are run by service professionals who also trade high incomes for meaningful work in the entrepreneurial eco-system.

For the most part, however, service providers offer their time because they love the entrepreneurial spirit – the enthusiasm, creativity, and attitude of the people who are founding companies and have a vision for the future. And boy do these people give of their time. Over the past twelve months, volunteers associated with New Enterprise Forum (NEF), a 23-year old, all-volunteer, not-for-profit organization whose mission is “linking entrepreneurs to resources” gave more than 750 hours of time working directly with entrepreneurs. The entrepreneurial spirit is contagious and refreshing, and keeps service professionals involved for all the right reasons.

However, as a business community, we need to be very careful. We are teaching new entrepreneurs that these important services can be obtained for free or nearly for free. When state funding and other grants to support these efforts dry up, and when we move on past the economic crisis, we will be dependent upon this pool of entrepreneur-wise professionals to support companies in their earliest stages – without subsidy.

Let’s hope that by then we have built a Michigan entrepreneurial eco-system that can also support the service providers. 

In the early 1900’s, Michigan was the entrepreneurial center in this country, attracting risk-takers from all over the United States to create an explosive new industry. The “old” entrepreneurs in the automotive space founded and grew one of the largest, highly technical, and most successful industries in the world. Today, Michigan is in dire straights economically and the very real question is whether we have the gumption and drive to do it again. Have we lived off the auto industry for so long that innovation in Michigan is now impossible, or are there new entrepreneurs here who can help drive a new economy for Michigan?

We are here to tell you that there is a whole new breed of “knowledge” industry entrepreneurs in Michigan – and they are real. We’d like to argue that Michigan is launching real new businesses in real new industries, driven by a whole new generation of entrepreneurs. Who are these risk-taking business people and where have they come from?

We are officers of New Enterprise Forum (NEF), an organization that exists to help connect entrepreneurs to resources. NEF has helped hundreds of high growth, investable companies over the course of the last 23 years. In many ways, NEF has a window into the future, as the types of entrepreneurial activity seen in one year evolve into sustainable businesses a few years later.

So, who is new? The entrepreneurs we see today are more diverse than ever before, with novel ideas for automating services, medical information and devices, green technologies, and energy plays, to name but a few. It is this very diversity of endeavor that is particularly exciting – what we appear to be seeing is a new culture of entrepreneurship that cuts across multiple industries.

We are seeing refugees from the corporate world – some who still have jobs and many who do not. They have been incubating ideas and have remarkable knowledge about their own industries and customers’ pain. They have looked to the future and believe that they have more control and more growth opportunities as owners than they do as employees. So, they are founding businesses that bring new and better solutions into their industry.

We have seen a marked increase in owners of existing businesses with novel ideas, new inventions, and services that solve problems in their industry. These leaders realize that a down economy is the perfect time to position themselves for the impending recovery and a chance to grow their dream. They are launching new side businesses and new product lines.

The other thing we’re noticing is that there are many people who want to join entrepreneurs. They don’t necessarily have the novel idea, but do have other necessary skills – sales, management, marketing or finance – that are needed to make a business succeed.

Most important is the number of young people who are choosing entrepreneurship as a career. We’re seeing more of these young entrepreneurs touting their new business ideas – and they are impressive ideas – in entrepreneurial forums across the state. They are launching from our schools, which are growing their entrepreneurial studies activities faster than we can track them. 

The University of Michigan recently created a new deanship for entrepreneurial programs, Eastern Michigan University has an entrepreneur program, Central Michigan University offers a major in entrepreneurship, and ALL of Michigan’s public colleges and universities offer entrepreneurship classes. Why is this so critically important? Because building a new generation of entrepreneurs begins by keeping these young people here in Michigan, where as entrepreneurs they will build one business after another, recruit employees, and drive the culture shift that makes entrepreneurship a career of choice.

At the New Enterprise Forum, we are seeing all of these kinds of new entrepreneurs, and expect to see more successes as business and industry are reinvented here in Michigan. What the new entrepreneurs have in common is a commitment to hard work, determination, and the belief that success is a possibility. We believe that their enthusiasm is contagious, and that the new Michigan is the place for tomorrow’s diverse new entrepreneurs.