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Turning Innovation Into Enterprise

TCWV in the News

Connecting Small Business Innovation to Capital

Column in the Charleston Daily Mail, December 23, 2014

Anne Barth, TechConnect West Virginia, and Jen Giovannitti, Federal Reserve Bank of Richmond

Successfully matching small business innovation with capital is at the heart of community and economic development.

According to the Small Business Association, small businesses currently make up 99.7 percent of U.S. employer firms and employ most of the workers in the United States. One of the biggest challenges faced by an entrepreneur with a new business idea is obtaining early stage and seed capital funding. This challenge is even harder when startups are located in areas that are under-served by traditional sources of early stage capital.

The TransTech Energy Business Development Conference recently held in Morgantown attracted 21 entrepreneurs from nine states and the District of Columbia to pitch their ideas for new products and technologies to a panel of funders who could offer startup investment and technical assistance. TransTech, which is in its third year, showcases the many business opportunities that are growing in our region today. Whether these ventures can become profitable enterprises — and create jobs and revenue for West Virginia in the process — will hinge in part on their success in securing startup capital.

The landscape of startup capital and small business lending is more diverse than it may seem.  Community banks and traditional financial institutions are the mainstay of financing resources, but other innovative and collaborative financing partners also play a critical role.

For example, organizations such as the West Virginia Growth Investment, LLC and the West Virginia Angel Investor Network are building capacity to support early stage business investments. Community Development Financial Institutions (CDFIs) – which are mission-driven, non-depository lending organizations – are helping small businesses throughout the state with financing and technical support. Other community loan funds, many with decades of experience, are finding niche opportunities in their communities to lend to small businesses. Often, these types of startup lending deals are made in partnership with traditional banks.

But more can be done. State and federal level policies can be very effective in accelerating and supporting small business growth. One example is the New Markets Tax Credit Program (NMTC Program), established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities.

The Federal Reserve Bank of Richmond has analyzed and mapped the distribution of NMTCs throughout the Fifth Federal Reserve District (Maryland, Virginia, West Virginia, North and South Carolina and the District of Columbia) between fiscal years 2003 and 2011. The results are featured in the July 2014 issue of its publication 5th District Footprint ( and shows West Virginia was the only state in the Fifth Federal Reserve District to have more non-real estate NMTC projects than real estate projects. This shows that more NMTCs are being spent on businesses in West Virginia than on real estate development, which leads to greater job creation.

West Virginia also leverages programs such as the West Virginia Jobs Investment Trust’s Capital Access Program, which makes funds available through the U.S. Treasury Department’s State Small Business Credit Initiative (SSBCI). The Capital Access Program has created or retained nearly 1,000 jobs in West Virginia.  As importantly, nearly 96 percent of the SSBCI loans nationally, two-thirds of the loaned amount, and nearly two-thirds of the jobs created or retained have all occurred in companies with 50 or fewer employees.

During the TransTech Energy Conference, Dr. Lee Todd, former president of the University of Kentucky, discussed UK’s effort to advance innovation. The University established an “entrepreneurial leave” policy for faculty, entrepreneurial clubs for students, and created matching funds for Small Business Innovation Research grants. Strategies like those shared by Dr. Todd, as well as public and private efforts to match entrepreneurs with funding opportunities, will ultimately help foster small business growth and sustainability in the Mountain State.

Jen Giovannitti is a Regional Community Development Manager with the Federal Reserve Bank of Richmond.  Anne Barth is the Executive Director of TechConnect West Virginia.