Grassroots Startup Barriers

Grassroots Startup Barriers: Determined rural entrepreneurs will make it, whatever barriers stand in their way. More than 68 per cent of people in the US think it’s easy to start a business (GEM Monitor), even though half of new ventures are unlikely to survive more than 5 years. However, local communities can make the chances of success much greater.

My researches into community supported business and running rural development workshops have reinforced my observation of what may be getting in the way of grassroots startup in rural communities and small towns across the United States.

People in cities most frequently on the ‘top 10’ lists of the best cities for startups, like Austin, Denver and Seattle, take for granted their access to things that people in small rural communities are lacking.

10 Barriers to Startups in Small Rural Communities

1. Limited availability of seed money locally—71% of rural startup founders use personal savings;
2. Lack of interaction with other visionary entrepreneurs;
3. Absence of accessible business incubators and accelerators;
4. There are few startup mentors in rural communities with wide entrepreneurial experience;
5. Support services like bookkeepers, or marketers may be far away;
6. Access to the best skills of the information age tend to be only online or in urban centers;
7. Business friendliness and culture in the community is often missing;
8. Inadequate broadband access away from major population centers;
   
9. Local government has few resources or desire for supporting new ventures;
10. Negative impact of boarded up Main Streets and abandoned factories.

The determined entrepreneur is not daunted by the absence of any of the things on this list. Many people who have an idea for a new business may not even be aware that such things might help. However, the urban entrepreneur probably takes them for granted and there is ready access to help and support.

Creating a grassroots startup in rural America can be a lonely road to travel. It helps to surround yourself with others who have “been there, done that” and help you take shortcuts and avoid unnecessary expenditure. Cash has a way of slipping through your fingers and cash is the blood your startup body needs for survival. You may have come across the ‘lean startup’ movement and the term ‘financial bootstrapping’, if you’ve read anything about starting a business. Both concepts are about being parsimonious with money at the early stages of business.

A grassroots startup does not have to be only a restaurant, hairdressing salon, or another service business. A grassroots startup can be anything, including hi-tech, app development, or rocket science. What it takes is the urge and commitment to create a viable venture.

So, here is the reason why you’ll want to find ways to fill the lack of each of the things on the ‘barriers’ list, if you are starting a business in a rural or small town environment.

Access to Seed Money

Seed money comes in many forms. Most of the seed money in your business is likely to come from your own resources, or from people immediately around you, but chances are high that at some early point you are going to need more money. The first port of call is always the bank, but banks, naturally enough, want security and collateral, and yours may already be stretched to the limit.

Banks won’t hand out money unless they are convinced that the venture is viable. The loan officer will want to see some track record, not only of the founders, but of the actual venture producing revenue. Personal relationships count in loan decision making and, if yours is a rural startup, chances are high that the bank lending officer will not be local.

Outside seed capital will typically come from angel, or angel-like investors, who back you, not because you pledge your house, but because your idea meets a need and your ability is convincing. But such investors are very few and far between out in the countryside. However the internet can help to find angels further afield.

Grants are another frequent source of seed money, or money with moral, rather than financial strings. While not super abundantly available to budding rural businesses, there are a growing number of local, regional or ‘minority’ grant giving bodies. Small Business Development Centers can often be a good source of information to State sources, or funding for women-owned businesses, for example. Women and minorities are more specially catered for, even in rural areas.

A lot of rural entrepreneurs may have heard of loan and equity crowdfunding, but the reality is that only 3% of rural entrepreneurs get crowdfunded. Nonetheless take a look at the Venture Founders page on Equity Crowdfunding Platforms.

You may want also to take a look at:

• Rural and Small Town Startups,
• Funding the Benefit Sector,
• Funding for Female Founders,
• Loans from Family and Friends,
• Bootstrap Finance,
• Mission Driven Capital,
• 30 Sources of Finance. 

Visionary Entrepreneurs

Why would someone else with a business outside your intended field of activity, be of any importance to you? Such people will likely inspire you and give you ideas that had not entered your head, especially if you are building a grassroots startup. One way to encounter such people is through community involvement. Find out what’s missing in your local area and see if there are ways that you might help to fill the gap. In this process you are more than likely to encounter other bright business sparks.

Another way might be to find out if there are groups in your local economy who face special barriers to employment. Then consider if they might make good employees for your own business. The process will probably take you towards social nonprofits and educators who have been providing support. Such ‘movers and shakers’ are likely to introduce you to others who seek to improve the community.

Collaborate with Other Rural Startups

There are most likely business people and others who need services or facilities which they cannot afford on their own—just like your own rural startup. Seek out ways in which you could work together to mutual benefit. It might be, for instance, that 3-D printing could do something for your business, but is an investment that you could not justify, but with other businesses locally sharing such a facility, it could benefit all.

Maker and hacker spaces, as well business incubators and accelerators are generally in urban locations. One collaboration possibility is setting up a hoffice—a room in your home where facilities can be shared to mutual advantage. Maybe just by sharing information with other small businesses, you could find opportunities for mutual learning and data gathering.

Guidance

In rural places you may be lucky enough to find guidance from experienced entrepreneurs, but chances are high that this will not be the case. Working as a mentor to many entrepreneurs, I have learned that an old gray hair like me can save startups loads of time, money and wasted energy. Apart from that, sometimes encouragement from someone who knows the ropes can reduce stress of decision making.

In rural areas, there is simply a much smaller pool of knowledge to draw upon, but that should not deter people wanting to start a business or a nonprofit from seeking a mentor or coach. The entrepreneurial road can be very lonely, even with a co-founder, and to have someone who can give feedback will reduce risk of failure. A mentor can share knowledge and will not have a vested interest in outcomes in the same way as a banker, for instance. You can reach out to almost anyone these days via the web, but you might do better to find someone in your field, or someone whose business you admire in the locality. A couple of places to look: Benefit from Your Startup Mentor and beware of the Dangers of Startup Mentors.

Sophisticated Services

The grassroots startup is less likely to have access to the sophisticated services than her urban counterpart. Some will not even know what they don’t know or have never experienced. So make a point of researching the latest techniques of marketing, for instance.

Venturing into new territory, you will make mistakes (I still do), but you can experiment. If you learn about a new marketing technique, you can probably find someone to help you at low cost; try fiver.com, where each job will cost just that—five dollars.

Information Technology

Probably the fastest changing area of business is in information technology. It is worth making regular searches for the latest apps that can ease the problems of running your grassroots startup, or maybe open up, say the field of big data and the advantages it might bring.

ClearStory Data for example, works by combining your business’s internal data with publicly available information to help you make better business decisions. These insights are displayed using the StoryBoard feature, which lets you create graphs, story lines and interactive visuals right from the ClearStory dashboard.

Lack of rural broadband access continues to be a disincentive to rural startups. However there are a growing number of examples of how smaller providers are changing the situation. If you are in an internet desert, take a look at these 19 small rural broadband companies are responding.

Business Culture and Local Initiatives

There are a growing number of communities where there is a real attempt to develop and encourage an entrepreneurial mentality. A nonprofit example of this is HotDesks (Eastern Shore counties of Maryland) that offers a network of coworking spaces, entrepreneur and innovation training, and access to capital for high-growth, scalable startup and growth businesses.

If your own local town is not very startup-friendly, look at surrounding towns that seem to have a more enthusiastic approach to business. Maybe a run down community just down the road has vacant buildings and would be prepared to help you occupy one at favorable terms either with rent or lower taxes.

It may seem like a diversion for the budding entrepreneur, but contact with both elected officials and local government staff members are likely to produce results favorable to startups. Many of them will see opportunities for economic development and the enlargement of the business tax base. If you are unsure where or how to make a pitch, there are many sources of inspiration. One I particularly like is the Environmental Protection Agencies site on Smart Growth in Small Towns and Rural Communities.

Small B School is an online training center where small businesses and small towns can learn how to start, revive, grow and thrive. Many small towns across the country have ‘home grown’ initiatives to get the local business community ‘back on its feet’. These efforts are most frequently spurred by business owners, as well as other local actors. Brattleboro is a small town in southern Vermont where I used to live and it has long had such an organization, the Brattleboro Development Credit Corporation. BDCC is a private, nonprofit economic development organization dedicated to creating and retaining a flourishing business community that supports vibrant fiscal activity and improves the quality of life of all its residents. It is but one example of many, each one responding in a different way to entrepreneurial deprivation.