Innovation and Entrepreneurship in Rural America (cont.)

The Innovation Centers are the first step in fostering entrepreneurial opportunities, by assisting with the application of appropriate technologies and providing access to a statewide network of capital, Web-based resources, and technical guidance. The four centers in the east of the state – one of the poorest regions in the country – are based in educational institutions, whereas the two in the west are collaboratives of local governments, development districts, small business development centers, chambers, banks and private companies. Each center is managed by a person with strong local ties and knowledge with a background in entrepreneurship, finance and business. An understanding of local institutions and local culture has been critical in gaining the trust of entrepreneurs who normally would not consider engaging with a public program.

Kentucky’s entrepreneurship support system differs from small business centers in three respects: they focus on high-growth opportunities based on technology; they provide comprehensive stage-by-stage services from concept to prototype to commercialization and capital raising; and they embrace community involvement. One example of the latter has been the ability to stimulate the formation of four local venture capital groups across rural Kentucky to provide equity capital to businesses that progressed through their commercialization process.

The Innovation Group manages a Rural Innovation Fund designed to help small, rural firms convert their inventions and ideas into investment-quality ventures. The Fund has been active for just over three years and in that time has received 227 applications for funding in excess of $3.7 million. One hundred and nine awards have been made to the value of $1.6 million. The Fund makes investments in proof-of-concept development or early-stage prototypes at two levels: an initial level of up to $7,500 and a higher level of up to $100,000 over two years. So far, four of the awards have been at this higher level. As experience has grown about how the Fund operates and is used, the Innovation Group is now considering ways of raising the initial bar so the quality of applications increases and a higher proportion can be funded.

Jim Clifton believes that the purpose of the network of statewide, regional and local innovation supports is to provide the talent to make objective assessments of business needs and the capital by introducing entrepreneurs to the private equity markets. In this way, he sees the possibility of creating an entrepreneurial culture across the Kentucky landscape.

The manager of the Innovation and Commercialization Center in western Kentucky, Pat Powell, points to two examples of how this talent and capital strategy works in practice. Hoyt Choate and his wife Renee are farmers who have created a venture, AgForest Partners, Inc. in Murray. They have developed the hardware, software and information technology services to allow farmers and others in agriculture-related industries to keep track of soil preparation, crop treatments and harvesting using hand-held devices linked to a central server, and to prepare appropriate reports for a variety of federal and management purposes. As Powell notes, this is the 21st century version of the spiral notebook and shoebox approach to keeping tabs on what goes on down on the farm.

He describes the Choate’s venture as “leveling the knowledge management playing field” for small farms and firms in rural America, and the same applies to Profile Systems Design Group based in Madisonville, Kentucky. Two brothers, Jon and Jim Love, started a software business that has developed a very sophisticated point-of-sale tracking system for hardware stores and other retail outlets with large or complex inventories. This brings affordable technology to smaller operations that enables them to better compete with the big box retailers.

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