Recession Recovery and Beyond
Study Committee Meeting
Duval County February 9, 2011
Clanzenetta “Mickee” Brown JCCI Study Planner mickee@jcci.org
In attendance: Meeting Attendees: Elaine Brown (Chair), Guy Anderson, Sarah Boren, Sandra Brooks, Elaine Brown, Lee Brown, Jeane Chappell, Jim Crooks, Logan Cross, Mick Cuthbertson, Lad Daniels, John Edwards, Marilyn Feldstein, Nancy Garcia, Robert Hawkins, Andre Higgins, David Johnson, Bill Larson, Tresa Maples, Conrad Markle, Penney O'Donnel, Tom Patton, Granville Reed, Clive Ricketts, Maurice Rudolph, Kathy Sandusky, Justin Sims, Beth Slater, Michelle Tappouni, Deborah Thompson, and Valerie Williams, [If your name does not appear, but you were in attendance, please let us know.] Staff Members: Mickee Brown, Skip Cramer, Molly Wahl, and Steve Rankin Meeting Time: Noon – 1:30 PM Chair, Elaine Brown welcomed the study committee, thanked the group for their committed participation, and asked for extra effort in staying on task. Committee members were asked to review the forum decorum and refrain from filibustering and asking more than one question of the speakers during the Q&A. Staff also asked the committee to allow the speakers to clear the room so that the group discussion could begin immediately after the Q&A period. After reviewing the February 2nd group process check results, the committee approved the January 26th meeting summary. The chair introduced the day’s speakers: John Haley, Senior Vice President of Business Development for Cornerstone; Dr. Carlton Robinson, Director of the First Coast African American Chamber; and Al Rossiter, President of Springboard Capital LLC. The speakers were asked to address the following questions. 1. What short term strategies (12-18) month would you recommend for reducing unemployment in Northeast Florida? 2. What kinds of jobs should Northeast Florida attract to resolve the unemployment crisis? What types of jobs and industries should the community attract to build wealth and promote growth? 3. What are the strategies in place to ensure that businesses remain in Northeast Florida? What more needs to be done? Are you aware of any business retention best practices? 4. As a strategy for job creation, what is the role of entrepreneurship in creating new jobs in Northeast Florida? 5. What are your thoughts on how we can best position ourselves to become a more economically competitive region? Describe how government, private enterprise, and individuals should be involved. John Haley Presentation John Haley’s PowerPoint presentation is available at the Recession Recovery website, http://jccirecoverystudy.blogspot.com/p/meeting-handouts.html. The Chamber/Cornerstone is focused on long term economic development efforts that affect the future of the region. Target industries, which are assessed every 5-6 years, provide a framework for business development. Developing the targets includes use of the Location Quotient analysis and a SWOT analysis to make sure the targets are a good fit for the community. [LQ analysis looks at how far above or below national averages you are in percentage of population employed in specific fields.] With limited resources, taking a shotgun approach to attracting businesses is inefficient.
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The current set of target industries for the region are advanced manufacturing, aviation and aerospace, finance and insurance services, headquarters, information technology, life sciences, and logistics and distribution. Each of the counties tweaks the regional targets or focuses on one or more based on their resources and assets. Headquarters are very sought after because that is where all corporate decisions are made. Case studies of various companies that located or decided to forgo the region are provided below. o Adecco: The management was concerned about where employees would live and being able to attract quality employees. o Fidelity National: Bias against Jacksonville and the South in general and the availability of air service was an issue. o Web.com: The Company grew in size after acquiring an Atlanta based firm. The Ponte Vedra based CEO could locate the headquarters anywhere, but decided to remain local because of the expertise in the local workforce. o Deutsche Bank: The IT division of the company eventually moved to Raleigh. The local Deutche Bank office asked that Jacksonville be considered, but it was too late in the process. If there was more time to compete Jacksonville might have won that bid. o Saft: Northeast Florida was not on the list of possible locations, however one of the members of the site selection team was from Jacksonville and had the area included for consideration. One of the cited disadvantages of the area was high electric rates. o Spirit: These 900 jobs were lost to North Carolina, because the state gave the company a $100 million cash grant – Florida simply could not compete. The Jacksonville region competes with different cities/regions based on the industry sometime there is overlap, but not always.
Dr. Carlton Robinson Presentation Dr. Robinson’s PowerPoint presentation is available at the Recession Recovery website, http://jccirecoverystudy.blogspot.com/p/meeting-handouts.html. Ninety percent of all businesses (roughly 130,000) in the region are at the stage 0 – 1 level (nonemployer firms with 3 or less employees), yet local and state infrastructure focuses on stage 2 businesses. Support for early stage (0-1) businesses that lead to the hiring of ½ to 1 employees would have a profound affect on unemployment. Many of the hurdles faced by early stage small business owners are socioeconomic. The support systems for these business owners are being defunded, which decreases their chances for business success. Relocating businesses receive government incentives; however there is not an incentive structure for early stage businesses. Using African Americans as an example, consider what would happen if that population’s small business potential were maximized. The Jacksonville MSA should have 9,000 non-employer firms owned by African Americans. On average these firms earn $57,000 in revenue annually, therefore approximately $500 million in gross revenue is untapped. At present there are approximately 10,000 minority owned firms in the MSA and that includes disadvantaged minority and ethnic groups as well as women. Private sector participation and social entrepreneurship are the major components needed to drive the combination of entrepreneurial activity, workforce development, and education. It is particularly important that entrepreneurship be considered a workforce development strategy for underserved populations. [Staff note: Social entrepreneurship is the art of simultaneously pursuing both a financial and a social return on investment (the double bottom line). The triple bottom line that Dr. Robinson mentioned is defined as the simultaneous pursuit of return on investment in three areas - financial, social and environmental. Institute for Social Entrepreneurship www.socialent.org. ] 2434 Atlantic Boulevard
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Al Rossiter Presentation Springboard Capital is the region’s only venture capital firm left; there were 4-5 previously. We are not an economic development agency, but a group of investors seeking a good return on the investments we make. Springboard has 53 members and operates like an investment fund; firms typically receive $350,000 to $750,000 in exchange for equity in the company. Venture capital firms help to foster the creation of new business entities. The affect on the economy is additive – new establishments, new jobs, and new dollars, which work to grow an economy. Springboard looks for high growth firms across all industries when considering investing. The only exceptions are pharmaceuticals and biotechnology. Springboard reviewed 300 opportunities last year. To be considered the firm must have two-years of cash flows and $10 million in revenue with the potential to grow to $30+ million in 5 years. Investments have been made in firms as far away as Maryland. In Florida, the greatest VC activity is in Orlando, Tampa, Melbourne, Ft. Lauderdale, and Miami. California, North Carolina (Raleigh-Durham), and Massachusetts (Boston) are three of the country’s most active VC areas. Entrepreneurs attract more entrepreneurs. North Carolina has twice as many VC firms as Florida. State of Florida does invest in entrepreneurial work but at very small levels. Florida is considerably less friendly to entrepreneurs than the surrounding states. Jacksonville is far less supportive than the other Florida cities mentioned previously. This is important because entrepreneurial activity attracts more such activity, plus venture capital. Government investment in and support of VC is a really tough, almost impossible sell because the payoff may not come for ten or more years. Contrarily, politicians have to run for reelection every two to four years. Not being able to show an immediate return on investment can be politically costly. Question and answers with speakers Q. Is there an advocacy group for local entrepreneurs to address some of the concerns raised? Haley: The Chamber of Commerce’s Entrepreneurship Center (formerly the Small Business Center) headed by Sandy Bartow, provides assessment services, offers technical assistance, mentoring, and access to capital. [Staff note: More information is available at www.opportunityjacksonville.com.] Q. Can the Civic Council’s downtown redevelopment proposal with a request for an annual $29 million investment create momentum downtown? Robinson: The goal to create a city center is admirable; however the region has multiple centers (multiple downtowns) at this point including the St. Johns Town Center and the Oakleaf Town Center situated between Clay and Duval Counties. These successful efforts present an obstacle to revitalize downtown Jacksonville Haley: Great communities need a focal point. Downtown Jacksonville needs a vision and viable businesses. That vision should be based on what people want to do in the downtown community and the creation of appropriate synergies. Q. Are the region’s prospects diminished by a lack of community pride? Haley: In 1994 the community seemed to be very proud having acquired an NFL franchise, which was capped by Jacksonville hosting the Super Bowl in 2005. Since then the community’s pride has diminished to a great degree. Q. What can be done to attract VC firms to Northeast Florida? Rossiter: It requires an environment where many different groups come together, starting with major universities. Take a look at what has happened in Tampa and Orlando. The University of Central Florida is one of the most cutting edge entrepreneurial universities anywhere. While incubators are not the end all/be all they do provide an opportunity for entrepreneurial collegiality that can not be provided 2434 Atlantic Boulevard
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www.jcci.org
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by the government or a chamber of commerce. In Jacksonville, the University of North Florida, VC firms, and others would need to be involved in a coordinated plan. Haley: We should claim the University of Florida as Jacksonville’s research university. It is not that far away. Q. If a university made a commitment to advanced research, how long would it take to for the surrounding community to become appealing to VC firms? Rossiter: This is a lengthy process that does not revolve around one project. Focusing on technology transfer and creating an aura of entrepreneurial activity are the critical elements. At Georgia Tech with its obvious focus on research and development even the business school students are focused on entrepreneurship. Years ago there was a survey of the nation’s graduate business school students that makes the point. The University of Florida’s graduate students were looking forward to becoming CEOs; Stanford’s students were contemplating their first IPOs (initial public offerings). Robinson: The region does not have a local business doctoral granting institution and the community is therefore lacking the scholarly outputs that would serve to improve the region’s business climate. Q. Are there entrepreneurial trends that mimic the region’s target industries? Rossiter: The target industries are right on point. VC firms are looking for the next innovators and such products/services can easily come from within any of those areas. Q. Is Springboard a private equity firm or an angel investor? Rossiter: Springboard can best be described as an angel investor because our deals range from $350,000 to $750,000. On larger projects we work with other angels in a syndicate. Q. Does Springboard work with UNF, UF, and JU to with regard to technology transfer? Rossiter: Springboard supports the efforts of the region’s local universities; however commercialization of that technology is usually 2 to 3 years away from hitting the mark for VC investment. Q. Does Springboard make local investments? Rossiter: In the Springboard II fund, no local investments were made. Investments have been made primarily in Raleigh and a few in Gainesville. Q, In your opinion, what is the role of government in job creation? Haley: The City of Jacksonville invests in Cornerstone’s marketing efforts - $200,000 in 2010. Rossiter: VC firms address job creation in a less direct manner by investing in the growth of new enterprises. Should those firms be successful then jobs may be created. Q. How would you define entrepreneurship? Robinson: Small business owners and sole proprietors willing to engage in entrepreneurial activity. Rossiter: An innovative enterprise that has an additive affect on an economy: It can be the next Facebook or a lawn service. Haley: It is a work ethic and the determination to get the job done. Entrepreneurs are not necessarily the founder or owner of a business; they bring ideas to the market and improve productivity. [Staff note: Many people use the terms entrepreneur and small business owner synonymously. While they have much in common there are significant differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from the small business in these ways: Amount of wealth creation – rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit. Speed of wealth creation – while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid, within 5 years for example. Risk – the risk of an entrepreneurial venture must be high, otherwise, with the incentive of sure 2434 Atlantic Boulevard
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www.jcci.org
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profits many entrepreneurs would be pursuing the idea, and the opportunity would no longer exist. Innovation – entrepreneurship often involves substantial motivation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. The innovation may be in the product or service itself, or in the business used to deliver it. www.quickmba.com]
Group discussion comments Jacksonville appears to have abundant resources for small businesses like the Beaver Street Incubator, UNF’s small business development center, Springboard, colleges and universities, but there is no coordinated effort. Jacksonville seems to have a rich entrepreneurial spirit. You can see it in the shops and restaurants that have opened, even during this recession. VC firms are not interested in these types of businesses however. Access to capital still remains an issue. Carlton mentioned the need for accountability several times, but it is not clear what he meant by this or who could be accountable. Al mentioned that the states surrounding Florida were more entrepreneur-friendly, but he did not say what is being done differently. The chair reminded the committee to attend next week’s meeting and asked them to complete their group process check forms. The meeting was adjourned at 1:35 PM.
2434 Atlantic Boulevard
Jacksonville, Florida 32207 904-396-3052 Fax: 904-398-1469
www.jcci.org