Investing in South Dakota Angel investment and venture capital are known in parts of South Dakota, but not all parts. or example, businesses in the Mitchell, SD region are not as familiar with the term ‘angel investing’, but have heard or read about venture capital. Few businesses have actually dealt with venture capitalists, according to Bryan Hisel, Executive Director, Mitchell Area Development Corporation. The focus of the Mitchell Regional Investors LLC, which was just started in 2010, is to invest equity capital into local businesses in the Mitchell area that have the potential for a return on investment and growth potential to help build the regional economy. “One of the best opportunities for regional economic growth is to retain local ownership of successful companies in the area,” Hisel states. “Local entrepreneurs often sell their business, at some point in time, to new owners that have no direct connection to the region or the community.” Hisel adds that building systems for more business equity investment versus leveraging young businesses through loans seems to be the key for impacting the future growth of the local economy. Since the Mitchell Regional Investors started in 2010, there is no track record of local equity investments at this point. However, not all ventures are successful. Dakota Ventures was hoping to generate between $5 million and $10 million but was only able to raise just over $1.5 million. “We believed strongly that South Dakota suffers from an acute shortage of risk capital. This shortage means that
F
some very good business concepts never see the light of day or that they are put together with financial baling wire – a poorly structured hodgepodge of debt and equity,” says Don Frankenfeld of Rapid City, SD, one of the prime organizers. “We believed that addressing that shortage would allow us to identify and invest in numerous worth businesses, and to make a profit besides.” Despite Dakota Ventures not being successful, Frankenfeld still believes that South Dakota offers wonderful opportunities for growth. “This is partly because we have a comparatively well-educated and highly motivated labor pool and salaries that are too low,” he says. “So precision manufacturing and value-added agriculture present prime opportunities. Moreover, one of South Dakota’s traditional deficiencies, its geographic remoteness, is disappearing owing to the advent of the Internet. More and more people are living in South Dakota and working in New York or other places where skilled labor is scarce and wages are high.” The investment between a potential business and an angel investor or venture capitalist can be both fractious and fruitful, Frankenfeld states. “Generally, the kind of entrepreneurs we encountered, although they had many compelling virtues, were often lacking in one or more departments necessary to achieve business success,” he adds. “This might include a need for financial expertise, marketing, manufacturing policy, and human resources.”
SDPB Alan Van Ormer - avanormer@prairiebizmag.com
BRYAN HISEL Executive Director Mitchell Area Development Corporation
South Dakota
SD CEO is the only SBA Women’s Business Center in South Dakota. South Dakota’s small business owners and entrepreneurs will find a wealth of services in the South Dakota Center for Enterprise Opportunity (SD CEO) housed at Black Hills State University in Spearfish.
n addition to one-on-one counseling, comprehensive training, management and business assistance, SD CEO offers training seminars and annual events to provide educational and networking resources. “We have a special focus on women, Native Americans, socially disadvantaged, youth entrepreneurs, and women veterans,” Helen Merriman, SD CEO Director, says. “However, we don’t discriminate or limit our services to just those groups. Any South Dakota resident can obtain services through our office.” SD CEO was established in October 2009 after receiving a five-year grant under the auspices of the SBA’s Office of Women’s Business Ownership (OWBO) to fund the office. The Small Business Association has established 110 Women’s Business Centers offices across the U.S. Their main purpose is to strengthen existing small businesses and provide assistance for emerging entrepreneurs to develop new businesses. SD CEO is the only SBA Women’s Business Center in South Dakota. “We initially worked with BHSU’s College of Education to devise a needs assessment for business training,” Merriman says. “At training seminars participants received a survey asking what areas they needed assistance with. Some areas identified included how to write a business plan, how to develop a marketing plan, and manage cash flow. That information helped us develop our future training programs.” In individual counseling sessions, SD CEO clients
I
HELEN MERRIMAN SD CEO Director
Carmen Schram, Director of Chamber Services, Yankton, SD is working with SD CEO to identify and address needs of small business owners in Yankton (photo by Loretta Sorensen)
2 SDPB
September 2011
receive assistance with a variety of topic areas, including reviewing their new business ideas, referrals to SBA’s Small Business Development Center for market research, and business plan development. “Many printed and online resources are free,” Merriman says. “We help existing and startup businesses identify other organizations they might partner with. We’ve worked with the Chamber of Commerce in many South Dakota communities to identify specific training needs for those communities.” Currently, just over 1,000 participants have participated in SD CEO programs. Nearly 50 strategic community partners such as Chambers, university colleagues, and SBA partners work cooperatively with SD CEO. Between October 2010 and June 2011, SD CEO provided a total of 32 training sessions, seminars, events, counseling sessions, and/or collaborative opportunities across the state. “We’ve had business owners from 18 different communities attend our training sessions,” Merriman says. “One of our projects has involved BHSU’s marketing students. They’ve collaborated with businesses in four different communities to develop a marketing plan tailored to that business. Businesses in Spearfish, Lead, Deadwood, and Belle Fourche participated in the project.” Through Red Cloud Indian School, SD CEO offered Personal Finance and Money Management training. SD CEO participated as judges in the Youth Business Adventure (YBA) sponsored by the SD Chamber of Commerce and Industry, aimed at helping high school students and teachers to better understand the American private enterprise system and how businesses operate within it. YBA is structured to help students learn through a variety of speakers and interactive activities. Peg Austin of Vanilla Bean Bakery in Spearfish has found SD CEO’s networking services very helpful. “It’s so important for small business owners to know what resources are available,” Austin says. “I found it mind boggling to realize the resources that are out there. Every aspect of your business can benefit from the services SD CEO offers. Just being known and getting to know other business owners in my community has been very valuable.” More information about SD CEO is available at http://www.bhsu.edu/sdceo/Resources/tabid/9205/Default. aspx. SDPB Loretta Sorensen, Owner, Prairie Hearth Publishing, LLC. sorensenlms@gmail.com.
South Dakota News STATE HISTORICAL SOCIETY ANNOUNCES FALL DEADWOOD FUND GRANT APPLICATIONS Applications for the Deadwood Fund grant program are due to the South Dakota Historical Society in Pierre, SD, by Oct. 1. The program is designed to encourage large-scale restoration or rehabilitation of historic properties by individuals, organizations or public agencies, according to Jay D. Vogt, director of the State Historical Society, whose historic preservation office administers the program. Grants for work beginning Jan. 1, 2012, will be awarded in amounts ranging from $1,000 to $25,000. The grant amount must be matched on a dollar-for-dollar basis from nonfederal and nonstate sources. Nonprofit organizations will be allowed to use in-kind services for one-half of their match. In 2010, more than $138,000 was distributed among 10 projects. Funding for the program is from Deadwood gaming revenue earmarked by state law for historic preservation projects throughout the state and distributed by the State Historical Society. The next round of applications will be due on Feb. 1, 2012. For more information on the South Dakota State Historical Society’s Deadwood Fund grant program, contact the State Historic Preservation Office at the Cultural Heritage Center, 900 Governors Drive, Pierre, SD 57501-2217; telephone (605) 773-3458. Grant forms are available online at ttp://history.sd.gov/Preservation/FundingOpps/Funding Opportunities.aspx.
STATE BOARD OF EDUCATION APPROVES NEW NURSING PROGRAM AT SOUTHEAST TECH, PIERRE The South Dakota Board of Education approved a new program today that will give students at Southeast Technical Institute in Sioux Falls an opportunity to obtain an associate in applied science degree in Registered Nursing. Currently, Southeast Tech offers a diploma program in Licensed Practical Nursing, and many of the graduates of that program go on to obtain their RN certification elsewhere. The cost to add the RN option at the technical institute will be minimal due to the already robust LPN program. “With strong health science programs already in place, and two of the state’s largest health-care systems based right in Sioux Falls, it’s a very natural fit for us,” said Southeast Tech President Jeff Holcomb. “As health care becomes more specialized, we’re finding that employers often encounter a shortage of Registered Nurses in particular. This will give our students another option to make themselves even more marketable.” The new RN program will begin in spring 2012. The state Board of Education also received updates about facility and construction projects at each of the state’s four technical institutes: Lake Area Tech in Watertown, Mitchell Tech, Southeast and Western Dakota Tech in Rapid City.
DID YOU KNOW
South Dakota and region will get a 10 billion economic boost in the first five years of operation from the startup of the Northern Beef Packers processing facility in Aberdeen, SD. $
Source: Aberdeen Development Corporation
4 SDPB
September 2011