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By Nathan Peck | MiBiz
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CASSOPOLIS — Deep in the farmland of Southwest Michigan, an organization championing small businesses with significant pull in Lansing is preparing to kick its activities into high gear.

The Edward Lowe Foundation, a nonprofit organization, focuses on helping second-stage companies grow and on giving entrepreneurs the tools they need to be successful.

Economic Gardening — the buzzword of Gov. Rick Snyder’s economic development strategy at the Michigan Economic Development Corporation — can trace its lineage in part to the work of the Lowe Foundation. Executive Director Mark Lange, Director of Entrepreneurship Penny Lewandowski, and Entrepreneurship Project Manager Jessica Nelson recently spoke with MiBiz in an exclusive interview at the foundation’s 2,600-acre campus about how the foundation’s message is gaining traction in Lansing and around the country.

What’s on second?

What first leaps to mind when people start talking about entrepreneurs is the startup, the early-stage company. There are myriad issues that foundations and organizations try to assist these entrepreneurs with, including training seminars and the search for financing and markets.

That focus, Lange argues, misses the real opportunity for job creation and growing the nation’s economy: the second stage company. Second stage companies, those that have grown past the startup stage, have needs unique to them separate from startups and later stage companies. These firms have grown past the point where an owner can handle the management and operations alone and the owner may need to add managers, but the companies are not yet at a point where they have a dedicated professional management team.

“Communities tend to focus on early stage startups when thinking about entrepreneurship. What got us interested was when we started looking at the numbers, it was those companies that have huge impact on the economy and job creation,” Lange said. “More so than we realized, more so than communities realize because they still get charmed by early stage startups, which are really critical to entrepreneurship, but there is so much churn and creation and destruction of jobs by early stage companies, when you look at the long term, these second stage companies create sustainable jobs and actually are the really stable source of job creation in the community.”

It is that transition from small business to a second stage company, the time between when a company’s gross receipts break $1 million and when they break $50 million or $100 million, that is fraught with challenges. These firms have significant impact on the state’s economy, making up just 9.6 percent of all the business establishments in the state but providing more than 35 percent of the employment in the state. Nationally, second stage companies represent 13 percent of all businesses, but create 47 percent of the job growth.

“This was something that we believed in first, but the data later backed up those beliefs,” Lange said.

The foundation takes a peer-based approach to its entrepreneurial programs, working to foster a sense of ownership in the solutions with a peer-based approach that pairs entrepreneurs together.

“The big emphasis is that it is not about advice giving, it is about experience sharing,” Nelson said. “It reinforces the accountability. You’re not being told what to do, you’re making that decision based on your peer’s experience sharing.”

Rather than work to help entrepreneurs directly, the Lowe Foundation found that it could broaden its reach by providing services to those who work directly with second stage companies. Through events like the “50 Companies to Watch,” and the YourEconomy.org database, the organization works to bring the importance of second stage companies to economic developers, government agencies and politicians.

Jessica Nelson (at left), Mark Lange, and Penny Lewandowski are working to bring the message to policymakers and economic developers that investing resources in second stage entrepreneurs is a solid investment for the state of Michigan. PHOTO: JEFF HAGE

“All of our programs have to do with working community organizations, helping them understand that aspect of their economy,” Lange said. “When you do that, they ask how do I find those companies? What do I do for them?”

Green thumb economy

Economic gardening is that next step. Economic gardening, Lange argues is both a philosophy and a technique.

“Michigan adopted the philosophy early on as a metaphor for all the right reasons, actually. A lot of organizations in the state were asking how can we do this differently? Entrepreneurship is part of our history in the state,” Lange said. “Everybody got on that bandwagon, especially in Michigan because we were desperate to find something to make it work. The problem is gardening is a very comfortable word. When you say find a company and help it grow — there are a lot of activities that fall into those categories. The problem comes when everyone says we’re already doing this.”

The technique portion of economic gardening started with Chris Gibbons, director of business/industry affairs for Littleton, Colo. Over the last 25 years, Gibbons has developed the concept into one where communities look beyond the traditional economic development strategies of incentives to help keep and attract businesses to a community.

“The traditional way you help companies is more transactional. … Your help is that you open up the books, you look at financial statements, and look at the business model,” Lange said. “Now, the new currency for these growth companies as they pursue markets around the world and around the country is information. Their markets and industries are shifting under their feet.”

Second stage companies lack the resources to get the information that will help them explore new markets, Lange explained.

“We all know you can buy good information,” he said, but what you find is that these second stage companies don’t even realize that information is available to them, much less how they will go about getting it.

If you have an indoor cat, you can thank entrepreneur Edward Lowe for helping bring the cat inside. After his service in the U.S. Navy, Lowe joined his family’s business selling industrial absorbant in Cassopolis, Mich. When a neighbor complained of her cat tracking soot into the house (soot or sand being used for cats’ litter boxes at the time), Lowe figured that fuller’s clay, an industrial absorbant, would make a better alternative as it wouldn’t be tracked through the house. He began marketing the product to others as Kitty Litter, creating a product, a company, and an industry out of his idea. PHOTOS: JEFF HAGE

The foundation has worked to bring Gibbon’s model to the masses, setting up strategic research teams to serve CEOs as they search for growth opportunities and creating an online collaborative workspace, the Greenhouse, where the researcher teams can work with entrepreneurs. The teams work with the CEOs to help him understand his company’s place in the global marketplace and think strategically on how to bring the organization in line with its goals. To that end, the state of Florida contracts with the Lowe Foundation to administer its GrowFL program. The Michigan Economic Development Corporation and the Lowe Foundation are said to be working to set up a pilot program based on the needs of second stage companies. More details were set to be released later this month.

“Companies get into this and realize that, we knew we got into the business with a unique concept, and we spent all our time selling, selling, selling and now all you are focused on is how you reduce your cost and improve your margins instead of innovating,” Lange said. “We find that once you point that out to people … that you’re spending all this time reducing prices, squeezing your margins to compete with these people, we can ask: Is that really why you got into this? When they realize that they have to be re-innovating, that is when they need the information.”

Ultimately, the foundation hopes to create self-sustaining teams in communities around the country. In Michigan, the foundation is working to find the community partners who will help roll out the program, Lewandowski explained.

“This comes down to the buy-in piece. We want to figure out who wants to play and how they want to play. It is so important to figure out how the community gets behind it,” Lewandowski said. “Economic gardening is a really cool thing, but we don’t want it to be a standalone thing. We want it to be really a nexus for a lot of different things. It helps them get very smart about how they help the companies they serve. Help organizations must be very smart about how they serve this audience, which at times has been a hard thing to do.”

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TAGS:

• chris gibbons
• economic gardening
• growfl
• jessica nelson
• lansing
• littleton
• lowe foundation
• mark lange
• michigan economic development corporation
• penny lewandowski