Let’s start it up: Today’s entrepreneurs

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In a scene from Philly’s entrepreneurial ecosystem, Drew Devitt, founder and chief technology officer for New Way Air Bearings, makes his two-minute elevator pitch at a “speed-dating” event early this month at the Angel Venture Fair, where entrepreneurs wooed angel investors. (Steven M. Falk / Staff photographer)

"RETHINKING PHILADELPHIA" was Russell Byers' idea.

In 1997, the columnist for the Daily News came to then-editor Zack Stalberg with the idea of doing a special column on the potential of Philadelphia as a major tourism destination - there was so much potential, he thought, yet not enough public discussion about how to capitalize on it. Back then, we were a city that was proud of not always recognizing or celebrating our own potential.

That first column idea turned into a 12-page section, which launched "Rethinking" as a regular series in the newspaper, designed to challenge assumptions about the city's future; along the way, the Chamber of Commerce became our partner in the project, gathering civic leaders to discuss each topic we raised.

Through the years, most recently as an annual special section, "Rethinking Philadelphia" has explored many aspects of the city's potential, and elevated those ideas into urgent public conversations about tourism, neighborhood development, urban policy, gaming, job development, the role of the universities, the Ben Franklin Parkway and more. Many of the extraordinary transformations around the city have resulted from conversations sparked by "Rethinking Philadelphia" among the city's civic, social and political leaders.

When we met with the Chamber a few months ago to begin planning this year's section, its president, Rob Wonderling, began with a radical suggestion: Isn't it time to recognize that we no longer need to "rethink" Philadelphia? That, in fact, many of those big ideas have been adopted and are now a reality? Also a reality is a much healthier acceptance of new ideas. We are now better at dreaming big.

And so, this year, we introduce "Big Thinking Greater Philadelphia," a name change that recognizes the successful evolution of Russell Byers' original idea - and the natural evolution of our city.


 

Last year's Rethinking section was called "The Metropolitan Moment," and described the convergence of forces - from a new presidential administration, to shifting energy policy, to a new focus on sustainable communities - that positioned the city for new growth. (See box on next page for what has happened in the last year.)

This year, we're talking about another Big Moment.

This big moment is born of great turmoil: the economic meltdown, which has caused the loss of 7 million jobs since 2008; the aging workers who lost not only jobs but their retirement savings; entire industries, like Big Pharma, which, as a result of megamergers and consolidation, have squeezed out tens of thousands of workers; suddenly frozen credit markets that have been slow to thaw.

But, a funny thing happened on the way to disaster: the number of business start-ups throughout the region has remained remarkably stable, according to the Kauffman Foundation, which studies entrepreneurial activity.

And that's great news, not only for job creation and economic growth, but for anyone who's dreamed of turning his or her idea into a business. In fact, this has become the moment for entrepreneurs.

Every month, in fact, about half a million people in the country create their own opportunities by starting up their own business.

It's fitting, then, that this year, we look at this new "E-Class" and see how it is rebuilding the economy and the city.

 

Who is the new "E-Class"?

We've identified four big categories of business start-ups.

Over the past few years, industry consolidation, particularly in the life sciences, has created a big and growing E-Class that civic leaders see as a key to the region's economic future. (See Page P-7)

Of course, those industries aren't alone in experiencing change. Since the economic meltdown, the country has shed millions of jobs across all sectors, and Americans have lost trillions in net worth as 401(k)s and home equity plummeted. People who are clawing back represent another huge class of entrepreneurs and a different set of challenges. (See Page P-4)

Young entrepreneurs represent an especially interesting growth curve, and, as you'll see, they are having some of the biggest impact on the culture of business in the city. (See Page P-10)

And, finally, there are the traditionalists: those people whose dreams have always included not working for anyone but themselves. (See Page P-13)

These are large categories, and by no means an exhaustive census of the new E-Class. But whoever they are, or whatever their motivation for starting their business, all members of the E-Class share challenges and benefits unique to this region.

 

First, the bad news

Philadelphia has the lowest rate of entrepreneurship of the 15 largest metro areas. Among states, Pennsylvania is also at the bottom, according to the Kauffman Foundation, which creates an annual index of entrepreneurial activity.

The city's tax structure is most often mentioned as a big obstacle to startups. So are the the city's cumbersome regulations - navigating the red tape can be as costly as high taxes.

Steven Wray, executive director of the Economy League of Greater Philadelphia, makes a point echoed by many: Cultures that encourage entrepreneurship are also cultures that know how to embrace failure. The Philadelphia region doesn't rank high in either. We are traditionally slow to embrace risk, especially compared to other places.

Wray also thinks that early-stage funding is harder to come by here, and he sees this as crucial because "it's not just about startups, but growth. Creating a growth mode is a crucial step for this region."

But, he says, we also need to do better to celebrate success, especially the success of growing businesses.

"We've also got to do better keeping up with the times," he adds. "People need to realize that incubators may be a Starbucks or a corner coffee shop. How do you help people make the connections they need?"

And Wray means that literally: He smartly points out that we shouldn't overlook what we can do to increase the speed of connections between Philadelphia and other cities, "like getting the train ride between here and New York down to an hour, or opening up more direct air connections."

Mike Levinson, who started DreamIt Ventures with two friends, agrees that the region doesn't have the same kind of entrepreneurial ecosystem to support new ventures as that found in other cities, like Boston.

 

Now, the good news

But DreamIt is already changing that. After launching and then selling his own business, Levinson, along with Steve Welch and David Bookspan (both of whom had started and sold businesses), launched DreamIt to provide coaching, mentoring and expertise to other startups: "We were fortunate to get where we did. We wanted to try to help others achieve the same success."

This summer will be the third time they've hosted entrepreneurs for an intensive season-long boot camp; those behind 15 startups will get coaching, connections and exposure to capital sources, as well as the spirit of shared experience.

Levinson's venture is a leader in another striking characteristic of the new E-Class: the emphasis on collaboration, driven in part by young people. Their embrace of technology's social networking, after all, may just be an extension of their preference for the face-to-face networking and collaborative mindset that the older generation hasn't quite grasped. This collaborative mindset has spread into some surprising places, and many long-term observers approve.

That includes Therese Flaherty, who runs the Wharton Small Business Development Center, one of three such centers locally designed to provide training and expertise to start-ups.

"The whole atmosphere and culture of the area has become more and more collaborative," she says. "Seven years ago, it was more likely that people wouldn't play well with others. Now, even legislative leaders are bringing people together. Look at the Science Center. That kind of collaboration didn't exist before."

That may explain the last piece of good news about the new E-Class: Help is everywhere.

The "granddaddy" of small-business help is, of course, the Small Business Administration. Regional Director Dave Dickson gets "a gazillion calls a month from people seeking help." Getting work from the government is a big area of growth, he says.

Also good news from his office:

He's got money. The SBA doesn't do outright loans, but guarantees loans. Before the Recovery Act, lending had all but stopped. But small and midsize banks are lending more than ever, and he saw lending for the first quarter of 2010 as only slightly less than that during their best year: $114 million for the first quarter alone.

Money is only part of the equation, though. Throughout this section, you'll find scores of resources that can help. In many ways, there's never been a better time to join the E-Class.