Maintaining the momentum of the United States’ Innovation Economy will be crucial to the post pandemic Renovation process. Over the last two decades, and in certain pockets of the United States for a lot longer, American innovation has flourished.
One constant to the flourishing of American innovation has been an ample and abundant supply of risk or equity-based capital. Equity capital allows investors to make long-term investments into startup Small businesses. Equity capital has led to the great startup economies in Silicon Valley, New York City, The San Francisco Bay Area, etc. Unfortunately, the pandemic will drastically reduce the amount of available risk capital for entrepreneurs. This could set American Innovation back years, if not longer. How can American entrepreneurs maintain this momentum without congressional intervention in the form of bailouts? While more bailouts are likely, it is unlikely that capital will be given to investors to continue investing so heavily in the innovation economy.
The post pandemic renovation process will rely on the private sector tapping its own ingenuity to develop innovative strategies and business models to weather the storm. One innovative strategy, and this is the beauty of the equity economy, is that collaborators can come together to share responsibility, common tasks, and equity within a project.
This is how many startups originally formed among co-founders, even before they’ve received their first cash investment infusion. Co-founders, often on the back of the napkin, will write down a new business plan and discuss the responsibility of implementing that business plan over time. One co-founder, who has a technical background, will decide to become the chief technology officer within the newly formed company. Another co-founder who possesses the right communication ability and skill, lays claim to the chief advertising officer. All of this can happen in an instant and shapes the lifetime of a company, just ask Steve Woznick.
Many entrepreneurial support organizations exist across the world. They assist entrepreneurs with preparing business plans and raising capital. These entrepreneurial support organizations should begin to help entrepreneurs think in a higher-level business capacity. Most entrepreneurial support organizations will help an entrepreneur complete the tasks, in their opinion, of starting a new business.
These tasks can range from preparing a slide deck to pitching to investors. The support organizations will put them in the room with the investors and give them the modern business parlance to communicate with these investors.
What entrepreneurial organizations often fail to teach young entrepreneurs is a higher level of business acumen. The modern corporation, for example, may have hundreds of business entities associated underneath its umbrella period. So too must entrepreneurs, even at the early stages of their career, begin to think, not in terms of delivering a one-dimensional product, but in terms of seeding the longer term success of their personal and corporate brand.
Take licensing, for example. An entrepreneur who develops a new product line, and wants to begin distribution, may be able to maximize their total customer audience by exporting this product to a different country. There are virtually no entrepreneurial support organizations, with the exception of those serving the manufacturing base, that help entrepreneurs strategically position their company to acquire multiple trademarks in multiple countries. This process is not as expensive as you think.
In today’s world, entrepreneurs can develop equity partnerships with no upfront capital across the world. An entrepreneur with intellectual property in America can develop an equity partnership with an entrepreneur who might produce and distribute a product in France.
This type of business arrangement happens all the time in the technology world. Using the example above those who possess certain skills take on certain roles within the company. At a higher level of business, let’s say business conducted with established players, the same type of partnerships occurs with one exception. Established players have money to burn, while young entrepreneurs do not.
Entrepreneurial support organizations should be teaching and encouraging young entrepreneurs to develop equity partnerships with multiple individuals across multiple businesses. Ideally, we would have an economy that capitalizes each business based on its merit. However, due to the unfortunate economic circumstances brought on by the Coronavirus, capital for startup entrepreneurs will likely decrease in the near-term. If you are an entrepreneur out there today, don’t be shy to reach out on LinkedIn, AngelList, or the many other social media platforms available and ask to strike up an equity partner with somebody who could further your business objectives.
This change in culture is something that the private sector can do to maintain the momentum of America’s innovation economy.