Startup Status

Recent Tulane study quantifies the entrepreneurial landscape

Illustration by Tony Healey

Keith Twitchell spent 16 years running his own business before becoming president of the Committee for a Better New Orleans. He has observed, supported and participated in entrepreneurial ventures at the street, neighborhood, nonprofit, micro- and macro-business levels.


 

The New Orleans startup scene has received much national acclaim and high rankings, with data generally indicating a strong entrepreneurial sector. Overall, though, our collective sense of the landscape is more anecdotal than truly informed.

Stepping into this void last fall was the Tulane University Albert Lepage Center for Entrepreneurship and Innovation, which conducted the first-ever large-scale study of the entrepreneurial ecosystem in our region.

The study’s findings mostly support the optimistic view of local entrepreneurism, albeit with one major issue that could seriously threaten continued growth. We’ll get to that momentarily, but in the meantime, some other very interesting information emerged.

According to the study:
• Health care is the top industry, representing 17% of the region’s startups, followed by food and beverage (10%), hospitality (10%), media (10%), marketing (8%) and real estate (8%). However, the energy and finance sectors, though not among the top fields, project the most revenue growth.
• Nearly two-thirds of the region’s startups (defined as companies in existence for fewer than five years, with less than $60 million in revenues) are small businesses. About 54% have two employees or fewer, and another 18% have three to five employees. Fewer than 4% have 50 employees or more.
• Similarly, almost two-thirds of the more than 200 startups surveyed were founded by millennials. This certainly rebukes the notion of millennials as apathetic and is even more striking given how many in this age group emerge from college with heavy student loan debt.
• Our local startups are optimistic, with 81% planning to hire at least one more employee in the next year.

This last item is crucial. In speaking with Rob Lalka, the Lepage Center’s executive director, he pointed out that data from the Ewing Kauffman Foundation suggests “all net new jobs come from startup companies, and these are well-salaried jobs.” Consequently, the thought is that “this should drive city and state economic policy.”

Which leads us to that one major issue identified in the study: Access to venture capital for startup businesses is a significant challenge. According to Lalka, “nearly 80% of startup businesses are depending on their own resources,” meaning they put up their own capital, are depending on revenues to survive and grow, or both. He suggested that “we need much more early-stage risk capital, from both the private and public sectors.”

A major purpose of the study was to gather information to inform public policymaking, and here, Lalka had some specific recommendations.

“We need more low-interest loans and outright grants, directly to small businesses and also to the entrepreneurial incubators,” he said. “We also need to examine where local private sector investment really is going, and what we can do to direct more of it to startups,” he added, noting that real estate is currently the largest area of investment. “We need to ask how we can get more money flowing into the entrepreneurial stream, and what policies and incentives will support that. We still have a lot of people in our city who still don’t have access to opportunity.”

The Lepage Center plans to conduct similar studies on an annual basis as a way to track whether the entrepreneurial climate is improving, stagnating or declining. One interesting aspect of the methodology is that, along with the quantifiable data are profiles of individual entrepreneurs. Future studies will also follow them and their businesses. This will provide more personal and subjective information to augment the objective data.

Sustaining and growing the entrepreneurial ecosystem is essential to the economic future of our region. This kind of data enables us to define the opportunities and the challenges, and this will help allow us to be successful in keeping greater New Orleans at the forefront of innovation and entrepreneurship.

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