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Entrepreneurship Initiative Program Development and Design Program Development—Early Planning

In a speech delivered at the Development District Association of Appalachia's 1996 annual meeting, the ARC federal co-chair challenged the Commission to develop an entrepreneurship initiative. Subsequently, the full Commission authorized the formation of the initiative at the Governors' Quorum Meeting in the spring of 1996. The Commission had just adopted a strategic plan focusing on five goal areas required for Appalachia to fully participate in the national economy, and the new entrepreneurship initiative would directly address the implementation of Goal Area Four—building dynamic local economies.

ARC's Policy Development Committee (PDC) directly oversaw the development of the initiative. The PDC is composed of the ARC federal co-chair and the governors' designated representatives to the Commission—key economic development policy makers in their respective states. In addition, each state's ARC program manager and representatives of the Region's local development districts participated in all major policy discussions. This unique collaboration between the region's 13 state governments, the federal government, and local officials in the formation of the Initiative ensured that the resulting program addressed a range of the Region's development concerns and had broad support among state and local leaders.

To assist the PDC in shaping the initiative, Commission staff, ARC Federal Office staff, and governors' representatives conducted extensive planning and development activities over a 15-month period, including such activities as convening a consultation with regional and national leaders in the field of rural economic development, conducting targeted regional research, and holding regional focus groups to gain insight and support from local communities. Input from these sources led to spirited policy debates and contributed to the development of a thoughtful and effective program.

To mine the field of rural entrepreneurship, ARC brought together economic development experts, and state, local, and nonprofit practitioners for a rich discussion focused on building a stronger entrepreneurial base in the Region. The discussion helped identify the critical elements of an entrepreneurial economy, describe the current landscape of entrepreneurial activity in the Region, and articulate the most effective and appropriate roles for ARC and other federal, state, and local partners.

Next, ARC commissioned several original research studies to inform policy and program development and provide baseline data. The four major research projects include: Capital and Credit Needs in the Appalachian Region; An Inventory and Analysis of Appalachia's Entrepreneurial Capacity; An Assessment of Entrepreneurship in Local Appalachian Economies 1989–1994; and Business Start-Up Data in Appalachia.

Finally, ARC held four state-level focus groups in representative areas of the region to gather input from a broad range of state and local practitioners, policy makers, and businesspersons. The focus groups yielded valuable information on available resources, current practices, and gaps in the region's entrepreneurial infrastructure. The sessions informed ARC about variations in the availability of the financial and technical resources throughout the region, and local capacity and demand for these resources. ARC was well-served by input from a variety of perspectives about the most appropriate role to play in increasing entrepreneurial activity in the Region.

In an April 1997 meeting, the PDC recommended, and the Commission adopted, the Entrepreneurship Initiative. The initiative was launched in June 1997.

Program Design and Implementation

Engaging institutional partners and national best practice organizations has been critical to the success of the initiative. On its own, ARC could invest millions in grant monies to assist specific communities, but long-term sustainable impact would not be assured. To build these partnerships, the Commission invited institutional partners to sit on four advisory committees in the areas of education, technical assistance, capital access, and sectorally targeted efforts. These committees assisted in planning for educational conferences, jointly producing publications, and collaboratively funding local programs. Since 1997, the Commission has hosted over a dozen conferences and workshops attracting more than 2,000 persons to discuss best practice in the four programmatic areas that support entrepreneurship. The Commission has provided more than three dozen scholarships to local leaders to attend important training events outside of Appalachia. And the Commission has produced publications and online resources to inform local leaders about options and opportunities in the field.

Entrepreneurship Education and Training. ARC's Entrepreneurial Education and Training Advisory Committee is composed of regional practitioners (including representatives from the U.S. Department of Education, Appalachian College Association, and the Community Colleges of Appalachia), ARC governors' alternates, and state program managers. The committee helps to shape activities to promote and support entrepreneurial education and training efforts in the Region. At the committee's recommendation, ARC contracted with the Corporation for Enterprise Development (CfED) to provide 38 scholarships to regional applicants to attend the 16th Annual Entrepreneurship Education Forum, held November 1, 1998, in Nashville, Tennessee. Each scholarship recipient was required to hold a local informational meeting to share the information gathered at the ICEE event with potential partners in their community. Scholarship recipients have submitted to CfED and ARC both an agenda and participant list that document the local sessions. Some of the outcomes of these sessions include a local college creating a special entrepreneurship unit, a high school turning over a local store to run as a student enterprise, and the hosting of a 120 student five-county conference on entrepreneurship. (Summary of scholarship activities.)

In order to address the strong interest in entrepreneurial education and training programming, the committee recommended that ARC provide $60,000 to support three sub-regional conferences. The target audiences for these conferences include teachers, principals, superintendents, school board members, county commissioners, state education department officials, and college professors, deans, and presidents.

A request for proposals (RFP) was issued in the spring of 1999 to a broad range of potential applicants to undertake these conferences. ARC received six proposals from six states in response to the RFP. Three members of the Entrepreneurship Education Advisory Committee volunteered to be members of a selection team. After review, three sites were selected for these events. More than 340 persons attended the following regional conferences:

  • Broom Community College
    Owego, New York
    October 21–22, 1999
  • Southern Rural Development Center
    Birmingham, Alabama
    November 18–19, 1999
  • NC REAL Enterprises/Haywood Community College
    Clyde, North Carolina
    April 10–11, 2000

In addition, ARC contracted with the Consortium of Entrepreneurial Education (CEE) to develop the Entrepreneurship Everywhere education resource guide that was distributed at the regional conferences. This guide provides summaries of hundreds of regional and national entrepreneurship education products and training programs and is available online at

ARC, acting with several foundations, has also provided support for the efforts of the Corporation for Enterprise Development (CfED) to convene a series of sessions of national leaders in the field of youth entrepreneurship education. This group held several meetings over a two-year time period and has developed Criteria for Youth Entrepreneurship Education, which seeks to present a common approach to developing quality youth entrepreneurship programming. These criteria are available at the Resource Guide Web site, noted above.

In 2001, in partnership with the U.S. Department of Education, ARC launched the Springboard Youth Entrepreneurship Education Awards to recognize best practice programs in rural communities throughout the region. Six winners were selected and brought to Washington to receive their $2,000 awards and were asked to make presentations to policy makers at a Capitol Hill luncheon sponsored by the National Commission for Entrepreneurship. This program is being continued as an annual competition by ARC. In addition, a publication highlighting these winners—and focusing on national best practices in youth entrepreneurship—is being jointly produced by ARC and the Kauffman Foundation.

ARC extends a special thank-you to the advisory committee for all the time and hard work spent in reviewing proposals and crafting programs, and to Brian Dabson, CfED President, who has provided substantial support for these activities.

Sectorally Targeted Development. The Sectorally Targeted Development Advisory Committee is made up of regional practitioners, ARC state program managers, and local development district representatives. The Committee developed a variety of activities to support target industries with unique competitive advantage to the region. As an introductory event, ARC hosted a conference on sector-based development, Building on Our Strengths, in Lexington, Kentucky, on January 12–13, 1999. More than 220 persons from all 13 Appalachian states attended this sold-out conference.

At the conference, ARC announced an RFP to fund projects that encourage strategic sectoral interventions in regional economies. The three main objectives of this RFP were: 1) to develop innovative approaches that strengthen competitive, potentially competitive, or strategically important sectors; 2) to support entrepreneurs to create jobs in, or add to the wealth of, distressed counties and the regions in which they are located; and 3) to involve the private sector in meaningful and sustainable ways. At the recommendation of the committee, ARC earmarked $238,000 from the Entrepreneurship Initiative for these awards.

ARC received 24 proposals from 10 states in response to the RFP, which closed on April 1, 1999. Four members of the Advisory Committee volunteered to serve as members of the RFP selection team, and a well-defined review and scoring process was developed to rank proposals. In June, the selection committee met with six RFP finalists to review responses to questions that the committee had developed in earlier review sessions. The six finalists proposed to work in three sectors—value-added food products, furniture, and house boat manufacture—and finalists were encouraged to partner with each other, if appropriate, to undertake project activities. After a thorough review, the selection committee made recommendations to fund four projects:

Projects Recommended for Funding Award Sector
Framestock Products Inc, KWPCC, KY $70,000 furniture
Specialty Food Cluster, ACEnet, OH $50,000 value added ag.
Value-Added Agricultural Products, Appalachian Sustainable Development, Virginia $51,000 value added ag.
Southeast Kentucky Wood Products, Center for Rural Development, Kentucky $65,500 houseboats

Twelve proposals that were not selected for support as part of this RFP were recommended for consideration to other funding sources, and six proposals were evaluated as not recommended for funding. ARC state program managers were forwarded proposals from their state that were recommended for consideration, and several states have provided subsequent support for these proposals. Additionally, several foundations were forwarded copies of selected proposals for consideration.

ARC is pleased that the RFP process and the Building on Our Strengths conference generated such interest in sector-based development strategies. More importantly, however, ARC states are now considering implementing sector-based strategies as part of their economic development approach, and more than 24 sector-based projects have now been funded through the Entrepreneurship Initiative.

ARC extends a special thank-you to the selection committee members for all the time and hard work spent in reviewing these proposals and a special thank-you to Dr. Stuart Rosenfeld, principal of Regional Technology Strategies, who has provided substantial support for these activities.

Innovations in Development Finance. Capital and credit gaps for rural businesses have been identified as a significant regional problem in research conducted by the Federal Reserve Board, ARC, and the Economic Research Service of the U.S. Department of Agriculture. These studies reveal that, while the availability of capital for fixed-asset financing appears to be readily available, significant gaps exist in the availability of equity capital for start-up firms and for certain types of working capital financing. ARC convened an Innovations in Development Finance Advisory Committee to help shape activities in this area. Members of the committee include a range of regional practitioners, including microenterprise lenders, revolving loan fund representatives, state development finance authorities, bankers, and others.


The committee has underscored that gaps in the provision of equity capital for growing firms is the most significant capital barrier in the region, and it has developed a series of recommended interventions to address these gaps. The committee's specific recommendations focus on four activities to promote the development of community development venture capital funds in the region:

  • Build partnerships with foundations and financial institutions to assess interest in investing in equity funds.
  • Improve management capacity in the field.
  • Expand existing institutions or support new institutions to develop these funds.
  • Support capitalization of these funds.

These recommendations build on the interest expressed by the region's governors at the February 1999 ARC Governors' Quorum meeting and on discussions held at the April 1999 ARC White House meeting on the New Markets Initiatives. ARC believes the implementation of these committee recommendations helped to ensure that entities in Appalachia were well-positioned to take full advantage of the pending New Markets Initiative programs.

In support of these activities, ARC co-sponsored an introductory workshop on Community Development Venture Capital (CDVC), hosted by the national trade association, the CDVC Alliance. This program was held on June 23, 1999, in Pittsburgh, Pennsylvania. To initiate partnership-building activities, ARC held a series of workshops entitled, Equity Capital for Rural Communities, October 25–27, 1999, in Pittsburgh and Charlotte, North Carolina. These workshops were held in partnership with the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, the Federal Reserve Bank of Cleveland, and the Federal Reserve Bank of Richmond. More than 130 persons from financial institutions, philanthropies, and economic development entities attended the three programs. ARC views these three sessions as a good starting point for creating partnerships to support new development finance institutions in the region.

A publication, Capitalizing on Rural Communities—Emerging Development Venture Capital Funds in Appalachia,(PDF:5.7 MB) was produced with the support of publication partners—the Federal Housing Finance Board, the Federal Reserve Bank of Cleveland, and the Federal Reserve Bank of Richmond. This publication outlines the need for development venture capital funds in rural and distressed communities, explores how these funds differ from traditional venture capital funds, and presents several specific investment opportunities within Appalachia.

With the launch of the $15 billion U.S. Department of Treasury New Markets Tax Credit Program, ARC hosted two training workshops in 2002 to promote this new financing opportunity in the Region. The workshops featured presenters from the IRS and Treasury and were held in Huntsville, AL and Pittsburgh, PA. Over 250 banks and development organizations attended these sessions, which were jointly sponsored by the FDIC, the Federal Home Loan Banks, and Treasury.

To encourage private financial institutions to take advantage of the New Markets Tax Credit program, ARC entered into a partnership with the Federal Home Loan Bank of Atlanta. ARC has provided $200,000 for a New Markets Opportunity Fund, which will be leveraged by $1.8 million in private capital from the Federal Home Loan Bank and their member institutions. ARC anticipates that a minimum of four Appalachian development finance entities (New Market Funds) will receive investments through this new fund.

And, to support new and existing institutions in this field, ARC has directly invested over $3 million in nine rural equity programs that serve the Region, providing support for business planning, structuring, operations, and capitalization of these funds. To date, these funds have raised over $160M in investment capital from a range of sources, including private capital, Treasury's New Markets Tax Credit Program, and SBA's New Markets Venture Capital program. These funds have made dozens of investments in rural Appalachia and helped create hundreds of jobs. ARC has approved Application and Operating Guidelines to guide these current and future investments in development venture capital funds.

ARC extends a special thank-you to the members of the advisory committee who have been very active in planning these activities.

Strategic Support for Business Incubators. The Business Incubation Advisory Committee is composed of business incubator managers and ARC state program managers. Business Incubators can provide crucial technical assistance to growing firms, and several states are interested in developing or expanding networks of business incubators. This advisory committee has identified ways to bring "best practices" from business incubators around the nation to the ARC region, facilitate the creation of a regional business incubation network, and implement region wide technical assistance workshops.

The Committee recommended that ARC compile a comprehensive survey of business incubators in the region and host a region wide best-practices conference targeted at rural incubator managers, local economic developers, and other important decision makers. Four best-practice Business Incubation for Rural Communities workshops have been held, all co-sponsored by the National Business Incubation Association. These workshops have been held in 2000 - 2003 in North Carolina, Tennessee, and Virginia, attracting over 900 persons from more then 25 states.

ARC has developed and distributed a comprehensive survey of business incubators in the Region and published the survey, Business Incubation at Work, in January 2001. ARC also has supported a business incubation mentor program, managed by the National Business Incubation Association, which enables seasoned incubation managers to act as mentors to new and emerging facilities throughout the region. For more information on this mentor program visit:

ARC extends a special thank-you to the members of the advisory committee, who have been very active in planning these activities.

Project Approval Process. The Commission works through local communities and governors' offices to identify projects for funding. Projects are developed locally by nonprofits, educational institutions, and other entities, often in conjunction with local Development Districts. Grantees are required to provide matching funds to support activities, ensuring local commitment now and enhancing local ownership in the future.

Each state uses a selection process that best fits its local infrastructure. Alabama, Ohio, Virginia, and West Virginia use a competitive RFP process to select Entrepreneurship proposals. New York and Pennsylvania require approval by local development districts for project submission, while North Carolina and Tennessee prefer to identify large regional projects for multi-year support. Entrepreneurship projects are then vetted through a state review process that includes approval by that state's governor. Finally, the project is forwarded to the Commission for technical evaluation and approval by the Federal Co-Chairman.

Obstacles Encountered

The most significant obstacles encountered by the Initiative are the need to build institutional capacity in the region to credibly support entrepreneurs and the ability to overcome local commitment to the traditional development strategies of recruitment and attraction.

Building institutional capacity. Institutions in remote rural communities often do not have the capacity to help entrepreneurs successfully grow enterprises. Training programs, private-sector partnerships, and mentoring relationships with successful organizations from other communities can help bridge this gap. Through the Initiative, the Commission undertook a range of activities to enable community leaders to bring best practices into the Region and to build partnerships with leading associations, consultants, and mentors to assist in developing local entrepreneurship efforts. Although these efforts to create important institutional linkages are ongoing and have positively affected local programs, they require sustained effort to overcome the skill deficit the region faces among its local leadership.

Commitment to traditional development strategies. The training and education activities noted above have encouraged state and local policy makers to view entrepreneurship strategies as additive and not as replacements to traditional industrial recruitment strategies. Many states and localities have incorporated entrepreneurial approaches into their development toolkit. However, this stage of the Initiative lacks the scale to ensure that local communities maintain the commitment to entrepreneurship strategies that can lead to a permanent change in the economic landscape.

Critics of the Initiative note that significant gaps remain in Appalachia's basic physical infrastructure—the water, sewer, and roads needed to stimulate and support commerce. These critics argue that we cannot effectively develop and retain entrepreneurs if homes straight-pipe their waste into streams, if businesses cannot obtain clean water, and if transportation barriers increase the cost of commerce and make our firms uncompetitive. Further, some believe that investment in fixed assets represents long-term tangible benefits to rural communities, as opposed to support for programs that dissipate when funding shrinks.

Other criticisms of the Initiative question the ability of entrepreneurship strategies to have a significant impact on rural economies. Some perceive that the significant job creation benefits of recruitment and attraction outweigh the risks of small business failure associated with entrepreneurial strategies.

Program Shortcomings

Though this initiative has laid the groundwork for achieving significant scale, it shares the shortcomings of other demonstration programs. It is unable to ensure that a successful start will lead to permanent change. First, without assured continued funding, there is uncertainty about the degree to which local communities will retain entrepreneurship strategies, along with traditional strategies of recruitment and attraction, in their development toolkit. Secondly, the flexibility of the state-based implementation framework, while important in securing state buy-in, has led to uneven results, and thus varying degrees of local support. And lastly, community development issues outside the scope of the Initiative pose significant challenges to achieving lasting change in the Region's entrepreneurial infrastructure.

Significantly affecting rural economies with a new approach to economic development requires long-term sustained effort. The Commission has taken several steps to address this challenge. The Commission has invested in extensive outreach to educate state and local policy makers to view entrepreneurship strategies as additive and not as replacements to traditional industrial recruitment strategies. Additionally, the creation of this multi-year special grants program to support entrepreneurship has encouraged local developers to take risks and test innovative new approaches. The absence of continued targeted resources, however, raises the real possibility that local economic development officials and state funders will prioritize traditional infrastructure projects—the development of industrial and retail sites, extension of water and sewer lines, and new highways—at the expense of newer entrepreneurial approaches. A continuation and expansion of funding for the Entrepreneurship Initiative would allow these strategies to both mature and demonstrate impact, and thus become better integrated in the economic mainstream of the region.

The Commission has employed a flexible implementation framework that allows states to use diverse project development and selection strategies. While important to securing state buy-in and support for the initiative, this flexible implementation has led to uneven results. Some states have supported numerous community-based programs, which have strong local leadership but are often less strategic. Other states have invested in large multi-year strategic initiatives that could have benefited from stronger linkages to local partners. These differing approaches have produced uneven results in local communities and, thus, varying degrees of local support.

Lastly, there are challenges that lie outside the scope of the Initiative that can limit the effectiveness of these interventions. ARC, state, and local leaders must ensure that our rural communities provide quality schools, clean environments, and the other amenities needed to make rural communities attractive and competitive. Otherwise, our investments in entrepreneurship could result in the same exodus of successful firms seen with the Region's best and brightest high school graduates. Leveraging other strategic community development activities can help keep successful entrepreneurs in the communities that supported their birth.


ARC believes the Entrepreneurship Initiative can be replicated in rural communities throughout the nation. Two critical elements for replication are: 1) the program design—a partnership-based approach that builds local commitment, and 2) the implementation strategy—the education of state and local policy makers to foster strategic partnerships.

Program Design. The Commission works through local communities and Governors' offices to develop partnerships to ensure the implementation and continuation of effective programming. Projects are developed locally by nonprofits, educational institutions, and other entities, often in conjunction with local Development Districts. Grantees are required to provide matching funds to support activities, ensuring local commitment now and enhancing local ownership in the future. Entrepreneurship projects are then vetted through a state review process that includes approval by that state's governor. Finally, the project is forwarded to the Commission for technical evaluation and approval by the Federal Co-Chairman. This bottom-up development process ensures that local leadership leverages strategic partnerships to result in long-lasting projects of sustained impact.

Implementation Strategy. As the Entrepreneurship Initiative was implemented, the Commission presented a range of information through workshops, publications, and high-level meetings to inform both policy makers and potential grantees. These activities helped to build a climate and culture supportive of entrepreneurship—an ingredient of the entrepreneurial infrastructure essential to success. In addition, these resources helped ensure that local communities leveraged best practices as they developed programming. Grantees were encouraged to purchase seasoned entrepreneurial education curriculum, leverage the resources of private financial institutions to create new credit vehicles, involve industry leaders to address challenges facing strategic sectors, and use the skills of experienced incubator managers to support new facilities. These partnerships with national leaders in the field and key institutional investors helped improve the chance for the long-term sustainable success of local activities. In addition, through each year of the Initiative, the Commission raised the bar for project funding, expecting states and communities to better understand what constitutes an effective program.

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