Rural Entrepreneurship Post #2

I submitted a Entrepreneurship Support Grant request for this rural entrepreneurship project with the Clinic. In the grant application, I used a lot of the information from Post #1 as support for the need. I asked for the money to support a few things that we think that we can do to support entrepreneurship in rural communities:

1. Make a more explicit outreach to provide Clinic legal services in rural communities. While our Clinic is right at state averages in terms of our clients with respect to the state population in rural communities, that number can (and should be higher) to reflect the need that is clearly there. Second, rural communities don't just need the support to entrepreneurship, but rural law firms (especially in Wisconsin) are being decimated. By bringing law students out to the communities where they can see these communities first hand and meet the entrepreneurs and business owners there, they can see that there is need. Moreover, while we are in the community, we will arrange for students to meet with local attorneys and local community leaders.

2. Provide education around issues that are critical to supporting rural entrepreneurship, namely: (a) implementation and regulations around rural broadband; (b) information and infrastructure to support access to capital for rural entrepreneurs; and (c) more information about business structures that are critical to supporting agricultural businesses such as business transition issues and cooperatives.

Rural communities are being left behind in the "digital divide" (god, it pains me to even write that cringe-y sentence; it is loaded with cliche) - but the short of it, that there is a dearth of access to "broadband" (defined as at least 20mbps down) internet which hampers the capability to do business. Just one example that came up in the Clinic is a farmer that had a piece of machinery that had an electronic control system that took 3 days to update because the internet connection was so slow - three days that the equipment was unavailable. Not to mention, without internet, the people that want to live in rural communities, but hold modern, well-paying jobs that rely on always-on connectivity (eg. programmers) have to leave which draws people and resources out of the community.

The whole point of this post is actually the Access to Capital problem. Namely, how can rural entrepreneurs even succeed without access to the kinds of modern capital structures that power modern entrepreneurship. Not to mention the closing of numerous community banks. But even just looking at entrepreneurial ecosystem funding from accelerators to bridge financing to angel investors and friends and family to seed money to venture capital. It's all hard enough in a large city, but made even more difficult in the rural community. Below are just some of the questions that have come to me as I contemplate how we even begin to solve this problem:

• What kinds of things are rural entrepreneurs doing? How does "rural entrepreneurship" look differently from "city entrepreneurship"?
• Are "city technologists" that create things for the rural context (e.g., agricultural drones being developed on-campus) "rural entrepreneurs"?
• Does the presence of a nearby University or College change? How near does the University or College need to be to make an impact?
• How does the rural context change investment decisions and opportunities?
• Do investors need to change their expectations with respect to rural entrepreneurs? If so, is it in the returns they should expect? The "sophistication" of the founders? The types of technology they should be investing in?
• Does the rural context matter in terms of the kinds of money that needs to be deployed? In other words, do outside investors need to get involved earlier? Is it pre-seed money that is super-important (are ideas falling off the vine before they're ripe?) Is seed stage money more important (they can get the idea developed in a workshop, but initial commercial prototyping and sales need support)? Is early-stage money for scalability and access to markets the bigger problem? Are all of these problems, and if so, what is the priority for these issues?
• Can a typical entrepreneurial ecosystem be fully executed in a non-metropolitan place?
• In other words, assuming that a proper ecosystem involves incubators, accelerators, coworking, maker spaces, pre/early/seed stage capital, business support services (like L&E), etc. Can these things all exist in a non-metropolitan place, let alone a rural town or small (sub-100k) city?
• Are some support services/ecosystem services less important in rural communities? E.g., while 3D printing may not be prevalent, the typical kinds of "shop tools" found in maker spaces may be more readily available.

Madworks and SlowMoney and Food and Beverage

First, the important stuff. If you are a food and beverage startup, Madworks Accelerator's spring cohort will be dedicated to food and beverage. YOU SHOULD APPLY. This Spring cohort is in conjunction with Slow Money Wisconsin; the companies participating in MadWorks will also be invited to pitch at the Slow Money Wisconsin Investor Showcase.

OK; with that out of the way, what's going on here?

I have been peripherally involved in both Madworks and Slow Money for the last ... ummm ... I don't really know to be honest. We'll call it the last "few" years. Both are wonderful programs.

Madworks is a seed accelerator dedicated to nascent entrepreneurship. It has changed focus over time with the changing demands of the Madison entrepreneurial community. At first, it was dedicated to true, brand new, nascent entrepreneurship. Today, it focuses a little further upstream helping companies already in the "pipeline" so-to-speak to better understand nuanced governance issues that are demanded of young CEOs with small teams and limited budgets. In other words, these teams don't yet have a staff CFO to generate financial statements; they don't have a general counsel to call shareholder meetings and record board minutes; they don't have sophisticated brand managers to think strategically about marketing plans. So, Madworks helps to get them up to speed - getting them to at least speak the language and understand the obligations that their companies will need to undertake.

Slow Money Wisconsin is a regional network of the national Slow Money organization. It is a non-profit comprising investors throughout Wisconsin that are "dedicated to catalyzing the flow of capital to local food systems, connecting investors to the places where they live and promoting new principles fiduciary responsibility that "bring money back down to earth." In other words, not every business is unicorn. Indeed, to be a responsible corporate citizen you probably shouldn't be a unicorn. By definition, not every company can be a unicorn. More importantly: not only is it probably bad company policy to want to be one, it is better for society and the environment if you aren't.

In startup ecosystems, not aiming to be a unicorn is heresy. Most cogs in the startup ecosystem machine are built on the fundamental premise of delivering the unicorn to investors. I understand that; I'm OK with that. But, hear me out. Unicorns require growth - and not just steady you're-doing-great profitable growth, but crazy, if-you're-profitable-you're-doing-it-wrong growth. In other words, if you are going to be a unicorn, you are, by definition, losing (a lot of) money.

On the other hand, it's possible to take time and grow a company organically - to design a business model that is cash flow positive relatively early on. You can build a company that not just hires people, but makes a point of hiring diversely from your own community thus building capacity in the local employee base. Interestingly, local hiring also has the effect of keeping the money the company makes in the local economy, thus it builds sustainable economies. Agricultural companies can (and should) use regenerative (or at least sustainable) agricultural practices. The effect of building businesses in a fundamentally sustainable way, though, is to depress profitability at the expense of corporate, economic, and environmental stability. Slow Money recognizes that these companies are as important, if not more important, than the unicorns. Investors in Slow Money want to put their money into companies that build stronger systems for overall economic wealth, not just seek to exploit those systems to build shareholder wealth.

So, Slow Money and Madworks are teaming up for a cohort of food and beverage companies. It'll be a wonderful partnership and I can't wait to work with this next class!

Regenerative Investing

It might seem hippy-dippy, but the new buzzword is "Regenerative Investment." We're not allowed to say "sustainable investing" - we need to move beyond being merely sustainable, to being regenerative.

What does "Regenerative" mean? Ostensibly, it means not only to be sustainable, to sustain, or "to keep things the same" or "the status quo", but to "revert" to "bring back to a more natural state." Regenerative means restoring to a natural order; to work in-line with natural and ecological systems.

Our current food supply suffers from a number of problems that can, more or less, be linked back to agricultural incentives that work counter to, or even worse, actively destroy, natural systems. If left to its own devices, the earth's natural systems, like the body's natural antibodies, will not only keep its own systems in balance, but can even act as "white blood cells" to fight infestation, disease, and contamination. But when its systems are overwhelmed the destruction outweighs the system's ability to auto-correct.

Regenerative Investing is about finding and investing in companies that help to restore the balance. The target company does't just sustain the status quo (which assumes that status quo is a system of inherent destruction), but rather seeks to mitigate the destruction itself.

Below are some links about Regenerative Investing that you might find interesting

http://capitalinstitute.org/wp-content/uploads/2015/04/2015-Regenerative-Capitalism-4-20-15-final.pdf
http://www.marjoriekelly.com/books/owning-our-future/
http://www.naturalinvestments.com/what-is-natural-investing/regenerative-investing/
http://fieldguide.capitalinstitute.org/
http://capitalinstitute.org/blog/beyond-sustainability-road-regenerative-capitalism/
http://www.slideshare.net/NicholasMang/regenerative-investing-viewing