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Improving entrepreneurship in rural communities.

The National League of Cities and other groups are looking at ways rural communities can get a bigger share of the entrepreneurial pie.

Rural counties hold 19.2 percent of all U.S. business establishments, yet only 1.6 percent of all venture capital investments went to rural firms according to a preliminary analysis by Brian Schmitt from the Community Development Venture Capital Alliance.

By contrast, metropolitan firms received 98.4 percent of all venture capital investments, more than 80.2 percent share of U.S. business establishments.

Furthermore, studies on access to capital in rural America have found that venture and equity capital are concentrated in metropolitan areas and that equity investors generally focus on markets that are geographically close or have higher concentrations of high tech and high growth firms--a strategy that does not match the conditions of rural communities.

The problem with access to capital may lie in the ability of rural leaders to encourage the use of local capital for entrepreneurial endeavors.

Rural leaders can identify potential investors in rural communities and differentiate between large and local investors.

Rural communities will benefit more from local investors since they are more interested in the prosperity of their region and might accept lower financial returns and are willing to wait longer for the payoff on their investments.

Larger investors usually participate in traditional venture capital funds that choose from many opportunities around the globe.

Through traditional banks and development financial organizations, there is a growing infrastructure in place that could facilitate a greater flow of resources to rural America.

For example, there are some concerted moves to assist entrepreneurs in rural areas.

* The Small Business Administration (SBA) launched a Rural Initiative as part of an effort to respond to the needs of rural businesses and rural development. The Rural Initiative included a pilot program to speed up the loan approval process and improve coordination with USDA. (

* The U.S. Treasury's Community Development Financial Institution (CDFI) Fund provides capital to community development banks, credit unions, venture capital funds and microenterprise loan funds in distressed areas. Since 1994, the fund has awarded $300 million to community development organizations and financial institutions. (http://www.

* The Appalachian Regional Commission has stimulated and supported rural entrepreneurship. The goal of ARC's Entrepreneurship Initiative is to promote the creation and development of locally owned, value-adding firms that increase local wealth and provide employment opportunities for local residents.

Through November 2000, ARC invested more than $17.6 million, funding 169 educational, business assistance, and capacity building projects that in turn leveraged a further $13.9 million from other sources. (

* The Association for Enterprise Opportunity (AEO) has supplied the Funding Sources for Rural Microenterprise Development due to the obstacles associated with finding sources of funding for rural jurisdictions. This directory provides a brief overview of funding sources as a foundation for funding research. (

Rural economic development is relying more on entrepreneurship. Increasing entrepreneurship and economic opportunity in rural America will require continued effort by the central, municipal and nongovernmental organizations to raise awareness and under standing, identify innovative and good practices and provide opportunities for learning and sharing among public, private and nonprofit organizations.

Successful entrepreneurship efforts can help address the challenges faced by rural communities.

It is also a strategic tool in adding jobs, improving incomes, enlarging the local tax base and generating additional revenue in communities.

Developing home-grown businesses can create a local cluster, which helps attract businesses from elsewhere. Moreover, enterprise development will also promote communities through owners' involvement in schools, civic service, and philanthropy. All of these activities may serve to connect these businesses and communities to the larger, global economy.

Details: For more information about the Linking Rural Communities to Communication Opportunities and best practices that you would like to share, contact LaStar Matthews at 202-626-3177 or e-mail

If you would like to obtain a copy of the publication entitled, "Mapping Rural Entrepreneurship" please visit the W.K. Kellogg Foundation website at
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Author:Matthews, LaStar
Publication:Nation's Cities Weekly
Geographic Code:1USA
Date:Sep 13, 2004
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