In 2020, EntryPoint had great conversations with 40+ thought leaders across the country on The Cackle and we all want more! So in 2021, we are continuing the conversation with those guests to dig a little deeper into topics that matter. Like supporting scaleup companies.
Keep Cackling with Diana M. Callaghan from Endeavor Detroit
In 2007, on one of my daily walks to work, I saw a long line emerge outside of the iconic cube-shaped Apple Store on Manhattan’s 5th Avenue. People were camped out—with actual tents and camping gear—to buy the first release of the iPhone. Day after day, I would watch that line grow, with young techies anxiously awaiting this new innovation that would inevitably transform our lives.
A decade and a half later, people all over the world have smartphones, giving them access to unlimited amounts of information—and misinformation. People can WhatsApp or facetime with grandma across the world instantaneously, order goods online that can be delivered to their doorsteps within minutes, and even track their heartrate and snoring patterns. Many people living in poverty in remote areas across the globe can now access banking and informal education, becoming self-taught experts in subject matters of their choosing.
Apple become one of the biggest job creators, responsible for over 2 million jobs in the states alone. The impact from this one company is astounding and has been transformational to our lives and our global economies.
I talked about the impact scaleup companies can have on our communities with Emily on an episode of The Cackle, but let’s dig deeper into the potential of scaleup companies.
When I joined Endeavor in 2019, Endeavor’s U.S. presence had still been relatively new, but growing. Despite the organization’s rich global history, I am asked at least once a week: “what does Endeavor do?” The short answer is that in 39 markets/60 cities around the world, Endeavor selects, mentors, and accelerates entrepreneurs leading scaleup companies with the most potential to transform economies.
Scaleups are similar to startups, but are at an advanced stage of maturity, already structured, and have proven their business model. They grow continuously, and fast.
Why do we focus on scaleups? Because it works. And the long answer to “why” is backed by some of the largest studies on entrepreneurship ever conducted worldwide. Our method involves developing a selective network of 2,100+ high-growth scaleup founders worldwide and giving them access to national and global markets, mentors, capital, and leadership development support.
A significant body of research demonstrates that U.S. metropolitan areas with the greatest economic productivity growth generate more “scaleups” of a certain type — locally-owned, entrepreneur-led companies in high-value industries with 50 or more employees.
Supporting scaleup companies can transform economies.
A 2008 study found that the fastest-growing 2-3% of companies accounted for nearly 100% of the net new jobs in the U.S. between 1994 and 2006.1 In Southeast Michigan, about 10% of the scaleups create more than 74% of the jobs in the community.2
Supporting scaleup companies can transform communities.
Successful scaleups create new jobs that can spark opportunities for growth across sectors, fueling an engine of job creation that helps tackle unemployment in under-served communities. Furthermore, research has shown that earlier stage scaleups are more likely to hire diverse groups of people, such as those without college degrees or formerly unemployed individuals.3
Supporting scaleup companies has a multiplier effect.
In cities around the world, successful entrepreneurs who build scalable companies multiply their impact by reinvesting their financial, intellectual, and social capital into the next generation of entrepreneurs.4 This increases local access to funding, talent, and customers — the three most important resources for growing companies. When Endeavor’s research arm mapped the tech ecosystem of Buenos Aires, it found that over 20 years, three Endeavor Entrepreneurs influenced more than 80% of the ecosystem. Endeavor has conducted similar research in markets around the world with similar results.
How can we better support the growth of scaleups?
While economic growth in Southeast Michigan has accelerated in recent years, the region continues to experience talent shortages, workforce development gaps, high job concentration in shrinking industries, and continued over-dependence on automotive manufacturing. The COVID-19 crisis has further exposed Southeast Michigan’s continued dependency on the automotive industry.
Endeavor’s research and policy arm, Endeavor Insight, has identified four ways decision makers in both the private and public sectors can support the growth of scaleup companies:
1. Avoid myths of quantity.
While relocation incentives and support for new and small businesses play useful roles in local economic development, the ability of each to have a significant impact on Southeast Michigan is limited. Simply doing more of these activities is unlikely to dramatically improve job creation
or increase economic growth. Rather, decision makers should consider the importance of quality as they develop economic growth strategies. This can help ensure that limited resources for local economic development are dedicated to the companies that will offer the greatest results for the region.
2. Focus on scale.
Entrepreneurs who are scaling their businesses can significantly improve the local economy, but they are not well-supported. In 2019, The New Economy Initiative conducted analyses of more than 200 entrepreneurship-focused organizations, revealing that while there is broad support for ideation and early stage entrepreneurs in Southeast Michigan, few local organizations are currently assisting the founders of growing and scaling companies.
3. Follow the lead of successful local founders.
Local entrepreneurs who have built large companies are among the most valuable sources of economic development data in a community. Therefore, Civic leaders can learn a great deal from experienced founders of scaling companies, but in order to do this, they must create forums for open dialogue and work to better understand their needs.
4. Build networks around the best local entrepreneurs.
When entrepreneurs who have built companies that reached scale support earlier stage founders, it increases the likelihood that those businesses will succeed. Influencers should build networks around successful founders to help them share their knowledge, social connections, and financial capital with up-and-coming entrepreneurs.
These strategies around entrepreneur-led economic development are discussed in-depth in Southeast Michigan’s Competitive Advantages in Entrepreneurship, a report Endeavor developed in 2019.
If we can work as a region to successfully identify, support, and accelerate the growth of high-growth companies, we can transform our region, and make our Woodward Avenues the new 5th Avenues. Developing a robust network of leading founders will create momentum that can propel innovation forward. We can increase the diversification of our economy, attract and retain top talent at our innovative companies, create greater equity in our region, and increase our region’s global visibility.
About Diana Callaghan & Endeavor Detroit
Diana Callaghan is the managing director of Endeavor Detroit, a movement that selects and supports high-growth entrepreneurs across the Great Lakes region. Diana has over 15 years of experience working locally, nationally, and globally serving innovative companies and impact organizations. She specializes in strategy design and implementation, operational efficiency, performance improvement, financial and impact sustainability, business intelligence solutions, and financial analysis.
- 1 High Impact Firms: Gazelles Revisited (Washington: Small Business Administration Office of Advocacy, 2008).
- 2,3 Michigan’s Competitive Advantages in Entrepreneurship: Regional Solutions for Creating a More Diversified Economy. (Endeavor Insight, 2019); 4 Fostering Productive Entrepreneurship Communities (Endeavor Insight 2018).