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  • 01.10.17

Entrepreneurs–Not Coal Or Factories–Will Save The Middle-American Economy

But not entrepreneurs looking for a big IPO. The trick is revitalizing local economies with hundreds of small businesses.

Entrepreneurs–Not Coal Or Factories–Will Save The Middle-American Economy
[Photos: Louis Moncouyoux via Unsplash, Samuel Zeller via Unsplash, David Keegan via Unsplash, mahmoudmahdy/iStock]

Despite his promises, Trump can’t bring back millions of basic manufacturing jobs when robots can do the same work cheaper. And coal jobs–which have been declining for decades–are unlikely to come back when natural gas and renewables are also now cheaper. Some investors are betting on something else to rebuild the rural and small-town economy: small startups.

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“I think our entrepreneurs see far too much employment in rural areas being dominated by a few large players,” says Ross Baird, CEO of Village Capital, a D.C.-based venture capital firm and nonprofit that invests far outside Silicon Valley. “So when a manufacturing or coal plant shuts down, a large, large number of people lose jobs.”

Rather than attempting to attract four large, 1,000-employee companies to a small town, he says, many people are starting to see the value in the opposite: 1,000 small businesses that each employ four people.

At an accelerator called Co.Lab in Chattanooga, Tennessee, startups include a tiny house company, a bike fabrication shop, and a chocolate maker, along with higher-tech offerings like a telehealth startup and a gadget that pairs with smartphones to precisely match colors.

Some startups in smaller towns are focused on digital tech, like Bit Source, a coding company in Kentucky that hires former coal miners. Gigamunch, an app incubated at Biz Foundry in Tennessee, sounds not unlike something dreamed up in San Francisco. (It matches home cooks with hungry people nearby.)

But many of the companies have nothing to do with digital platforms. “The most interesting thing about the incubators and accelerators is they look very, very different than your Y Combinators, TechStars-like accelerators,” says Baird. “They have a big focus on what they call major big businesses. So energy, food, agriculture–businesses that are not going to create the next billion-dollar-on-paper company but are profitable, can be profitable from day one, have interesting margins.”

ATP, a company based in Charleston, West Virginia, has developed a process to plant certain crops on contaminated sites to clean them up, and then use the biomass for energy. Sweetgrass Natural Foods, from Berea, Kentucky, creates snack food from local crops like sorghum, hemp seeds, and pecans. Spensa, from West Lafayette, Indiana, makes a smart monitoring station for farm fields that can help reduce pesticide use.

“I think that the kind of business people are really, really interested in growing in Appalachia look a lot less like Instagram, which gets acquired for a billion dollars and employs 12 people, and more like New Belgium Brewery, which set up its East Coast operation in Asheville.”

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New Belgium, unlike most traditional factories, is employee-owned; some janitors at the company will retire as millionaires. The brewery was originally launched by two entrepreneurs in a basement in Colorado.

One of the companies in Village Capital’s portfolio is Fin Gourmet, which works with fisherman to catch Asian carp, an invasive species in the U.S., and processes it in a Kentucky facility. As it helps manage the overpopulation of the fish, it provides new jobs.

Other startups focus on adapting the skills of workers who have lost jobs in factories or coal mines. Upower, which makes small wind turbines, is one example. “They’re making small-scale renewable installations with the goal of having these incredibly technically competent workers in the coal industry or the manufacturing industry now installing renewables,” says Baird.

All of these startups are either creating jobs, or have the potential to do so soon. And, like other new small businesses, they’re part of the most critical piece of the economy. New businesses are responsible for almost all new net job creation, and around 20% of gross job creation.

“I don’t think anybody knows what the new administration will do,” says Baird. “But my advice is the future of the rural economy is going to be much more stable and robust if the emphasis is on small businesses and entrepreneurs than if the emphasis is on large industries.”

About the author

Adele Peters is a staff writer at Fast Company who focuses on solutions to some of the world's largest problems, from climate change to homelessness. Previously, she worked with GOOD, BioLite, and the Sustainable Products and Solutions program at UC Berkeley.

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