Starting Up Down on the Farm is a Communal Effort

While Silicon Valley is awash in stories of fresh-faced innovators tinkering to success in their garages, what kind of start-ups are springing up in family barns?

On a recent drive to Dulles International airport, I began reminiscing about the many farms that dotted the landscape 25 years ago, when my parents used to drive the family to the airport from our Arlington, Va., home. I loved being able to look at all the horses and cows.

But now that the drive to the airport is a paved, high-tech corridor I wondered: what's the state of rural entrepreneurs? Where are they? And what are their challenges?

I found the Center for Rural Entrepreneurship and spoke with Deborah Markley, who manages the group and oversees its research.

Deborah Markley, shown here at a training session, studies rural entrepreneurship in America. (Photo courtesy of Deborah Markley)

The center, founded in 2001 with headquarters in Lincoln, Neb., is focused on understanding and encouraging entrepreneurship in rural places, she said. It conducts outreach through a Web site, the Energizing Entrepreneurship, which provides a training program and technical assistance. The center is also a part of the Rural Policy Research Institute, a national research and policy center.

The following is a report from our conversation:

Cultural Issues a Factor for Startups

"We don't necessarily focus on individual entrepreneurs. We're working with communities, regions and sometimes states to help them develop strategies," Markley said. "We work with groups like nonprofits at the county level up to folks at a state economic development department. We want to create a stronger state commitment to entrepreneurship."

She said many people think high-tech growth is the answer to turning a region around, but the odds of that are much less than finding that innovative business owner or that person with a dream who is doing something creative in their garage or barn.

And of course, there are cultural issues. "If you are a young person raised in a farming community and you want to do a software business in dad?s tobacco barn, there's an element of 'what the heck are you doing, why don't you get out in the fields with the rest of us.'"

The center's research has found that many rural areas have been frustrated after seeing young people leave to urban areas while traditional revenue bases disappear like textiles in the Northeast and tobacco farming in the South.

Markley, who works out of an office in North Carolina, notes that there are definite cultural differences between rural and urban entrepreneurs. In many rural areas, she said, there's a conflict between frontier-rugged individualism -- which one would think would encourage entrepreneurial attributes -- with a conservative agrarian background that is afraid to take much risk.

"In rural places you tend to have social capital that brings people together and being an outsider, moving outside the norm, doing something a little difference isn?t always viewed very positively, but we know that entrepreneurs are different and are willing to think outside the box."

Isolation in a low-population area is also a problem. "While the Internet has cut that challenge, many of these places are still using dial-up Internet and having to rely on satellite communications," she noted.

A perennial problem for rural folks is one experienced by entrepreneurs across the nation: raising capital.

"The banks are doing a bang-up job of lending to small businesses but they don't do startup lending and very little character-based lending any more. Plus, living in a rural location can make it hard to find a venture capital firm," Markley said.

Luring Big Firms Isn't the Answer

The federal government is giving a hand to rural entrepreneurship. For example, in 2006, the Labor Department awarded a $15 million WIRED (Workforce Innovation and Regional Economic Development) grant to a region covering parts of Alabama and Mississippi with the goal of creating a creating a 37-county regional development strategy.

The RUPRI center is involved as a technical advisory, helping to make the region "enterprise ready."

When Markley and her group talk to officials within rural communities, "the first thing we try and do is to establish a definition of entrepreneurship," she said. The term can cover "survival entrepreneurship, which means that's the only way to put food on the table like in many cases in the Appalachas or a high-tech, high-growth 'gazelle' entrepreneur or more traditional, Main Street businesses."

She met with one pharmacist in a small community in Nebraska who realized that his business wouldn't be there in 20 years. So, he began to turn his firm around by also serving the growing market of continuing-care facilities.

Eight-six percent of the nation's net new jobs in 2003 and 2004 were created by firms with less than 20 employees, she said, adding that most firms on the Inc. magazine's 500 list started small, were home-based, didn't start with venture capital and weren't in the high-tech field.

"We use that example as a way to say that we don't know and we don't have good predictors of who has the next great idea and who is producing it in a barn in Kansas."

What is tedious and challenging for a community that wants to turn things around is identifying who is in their community right now. She recommends that town leaders build a team that asks service providers like banks who has approached them with a business idea. "It's also about talking to people in small business development centers, churches and youth groups, the [local chamber of commerce], a 4-H homemakers group, and to actually sit down and talk to those entrepreneurs."

A major problem is that small business starters "don't have a clue as to what resources are out there," she said. "Rurally, you're often isolated from service providers and your biggest resource is small business centers. However, many of them are just open during the day when people are working their regular jobs."

The other important issue is networking, which can be tough when you're 50 miles away from another entrepreneur. In really rural communities, you?re probably not going to just bump into another entrepreneur at a Starbucks and start chatting. It's also less likely that you?ll find a manufacturer like you or someone who does a similar craft," said Markley.

Washington Wish List

RUPRI has an office in Washington that tracks policy initiatives that have a rural impact whether it's the farm bill, welfare reform, education or healthcare.

Although Markley said she leaves it to RUPRI's Washington office to do the heavy lifting when it comes to tracking policy initiatives, she did offer a "wish list" of what lawmakers should do to aid rural businesses.

"There's a tremendous need to build capacity in rural regions to better serve entrepreneurs and we don't have really good ways of getting information, resources or money to rural entrepreneurs," she said.

She supports a proposal to create a national technical assistance service to create a place that rural communities could come to and gain access to resources, seed investment for revolving loan fund.

She also wishes there was a greater push for better high-speed Internet access to rural areas, and better health coverage.

"The most significant barrier that we hear from people to starting their own company is that they can't afford to quit their job because they'd lose health insurance," Markley said.

Also on the list is a more funding for the Small Business Development Centers.

"Nobody is helping those startup entrepreneurs and small [businesses] that are struggling as well as the SBDC," she said. "They're not perfect and not very performance-driven, but it's an infrastructure in every state. In every budget the programs are zeroed out and then we have to go back and argue for their existence. It's time that could be spent helping out elsewhere."

By Sharon McLoone |  March 11, 2008; 12:50 PM ET
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