It’s all about “scalability” when it comes to creating new businesses in Memphis, and that means creating ones with a reach beyond the city to customers in other places – customers that more often than not are other businesses, not consumers.
Late this summer, the Greater Memphis Chamber will open its EPIcenter effort – short for Memphis Entrepreneurship Powered Innovation Center – with a goal of creating 1,000 entrepreneurs and 50 new companies locally in the next decade.
The effort is backed by the chamber’s Chairman’s Circle of more than 100 business leaders who are putting up funding to hire EPIcenter staff and create a business accelerator specifically for logistics.
“Logistics is an area where people come from all over the world and look at Memphis as a place to be,” said Memphis Bioworks Foundation President Steve Bares on the WKNO-TV program “Behind the Headlines.” “But yet from a startup ecosystem, we are really underserving that sector. The food services and sustainability sector is also an area that we are very strong in, and the underlying business-to-business IT infrastructure and support for those sectors is critical.”
The program, hosted by Eric Barnes, publisher of The Daily News, can be seen on The Daily News Video page, video.memphisdailynews.com.
Bares and Bioworks are taking the lead in the EPIcenter effort, for which Bioworks is also launching a capital campaign. They are leading because of Bioworks’ experience and success with its Innova venture capital effort, which since 2009 has helped form 60 companies and manage $53 million in equity investments.
Early stage venture capital is what Bares sees as the hardest part in creating an “entrepreneurial ecosystem.”
“Venture capital follows great ideas and great teams. The first step is you’ve got to come up with a portfolio of companies that are really coming through the ecosystem and looking for it,” he said. “A small fraction of those companies actually get that early stage capital and then move through the process, ultimately creating jobs and growing and becoming something the community looks at as part of the ecosystem of small businesses and ultimately large businesses.”
Memphis has a rich history of ideas that have made that transformation, which means the EPIcenter effort should have the mentors needed to help entrepreneurs with ideas but no capital as well as venture capital firms seeking some assurances.
“Doing great entrepreneurship requires the corporate community at the table. The corporate community has ideas. They have purchase orders. They can tell you what they really want,” Bares added. “They say there is nothing that validates a new business like a purchase order, and the people who can give a purchase order are the corporate community.”
Bares compares the city’s medical device industry to a large tree that began as the work of Dr. Willis Campbell, founder of the Campbell Clinic.
“You see this tree that emerges of growth and spinout and vibrancy and ecosystem. … Right now, we have a portfolio of great little companies that are supplying the major companies with manufacturing support, with new products, new ideas. That becomes the feeder system to the efforts that we are doing,” he said. “If you look at the tree, you see this whole range of companies that came from this original entrepreneurial spark.”
Bioworks’ experience with Innova shows that a first business plan from an entrepreneur usually doesn’t make the cut with those looking to invest early stage venture capital.
“I don’t think I’ve ever seen a startup go with the business plan that was originally conceived of,” Bares said. “Part of what you do in the whole entrepreneurship process is you take a concept and you validate it with customers. Unless you have an unbelievably good crystal ball, the fact is that customers tell you what they really want. That changes your thinking.”
And while many of the startups may not make the cut for venture capital or may ultimately fail, that isn’t a calculation or something to plan for.
“You’ve got to look at every company as a chance for success. In order to do that, you have to be cautious and thoughtful and methodical about how you bring companies in,” Bares said. “Most really great early stage venture capital funds and venture capital processes invest a small amount of money. What you really want to do is fail early. And you want to say, ‘Is this business plan going to work?’ If it doesn’t work, the entrepreneur can pivot and move and turn before you invest way too much money and you can’t go back.”