Nurturing small businesses
Longtime adviser urges unusual measures
Aug. 31, 2003 12:00 AM
Editor's note: Republic columnist Jon Talton asked prominent business leader Francine Hardaway about the problems facing Arizona businesses. Here are her answers, along with her suggested solutions.
Q. What's missing from the Arizona business community?
A.True support for business.

I don't mean big business, I mean support for those businesses that employ most Arizonans and that contribute most to the community: small businesses.

Although everyone says they are reaching out to "small business," almost nobody cares about its real issues. What happens to the ones on Central Avenue when the light-rail project tears up the streets? How do we make sure small businesses can afford health insurance for their employees? How can we help a laid-off techie get his new idea to market?

Small businesses in Arizona are starved for capital. We talk a lot about the need for venture capital, but do you have any idea how few businesses are appropriate for a venture capital investment? Very few. Yet all businesses need money. If we focus completely on attracting venture capital, we will find that it has nothing to invest in.

Our companies don't grow quickly enough to the level a venture capitalist would look at. They either die an early death or grow at a snail's pace by bootstrapping themselves. In the few cases that attract venture capital, it is usually with the proviso that the company move to Silicon Valley or wherever the venture capitalist lives. In other states, money for small businesses comes in several flavors. It can be from a microloan fund for start-ups, a seed capital fund or a public-private partnership. In Arizona, there's one small microloan fund, no private seed capital fund and no public-private partnership. Maybe I'm exaggerating, but not by much.
Q. How can we fix that?
A.We can call 10 commercial real estate developers, home builders or land investors into a room and tell them that if they don't start seeding entrepreneurial efforts with capital, they won't have buyers for their homes or occupants for their office buildings. We can lock them in the room until each one volunteers to allocate $100,000 to a seed capital fund that will be used to make $50,000 to $150,000 investments in a portfolio of start-ups.

Although they are not big players in the entrepreneurial community, real estate people are known as big contributors to charities. Maybe we can configure this fund as a foundation to which they contribute, so they won't expect a return.
Q. Any other clever ideas?
A.This summer, I became a facilitator for a program called FastTrac, offered by the Ewing Marion Kauffman Foundation in Kansas City. I went to Kansas City with a group of trainees and saw the resources of the foundation, which spends millions of dollars on research into what constitutes true entrepreneurship and how to make entrepreneurs successful. I'm bringing the program back to Arizona, because there are national resources out there to which our entrepreneurs do not yet have access. Only entrepreneurship creates true self-sufficiency. But all businesses need help as they are starting.
Q. If you are so frustrated by Arizona, why do you stay?
A.For the same reason everyone from California is coming here. Lots of bang for the housing buck. A small pond in which to make a big splash. And a Pollyanna-ish optimism about the area's potential to change for the better. Every summer, I go to Silicon Valley to visit my daughters, who bailed on me for high-paying jobs that don't exist in Arizona, and I contemplate moving there. But then I look at houses and tally up the cost of gas to commute, and I head home.

My good friend Dick Mallery told me 30 years ago that Arizona was a meritocracy, and that's still true. You can come into this community and make a difference if you want to. You don't have to be some kind of Daughter of the American Revolution.
Q. What's your take on the next few years of business in Arizona?
A.Having been through the downturn of the late '80s and early '90s, I know that Arizona stirs itself only in downturns. But then it gins up a lot of activity, and some of it amounts to something. Unfortunately, the "something" from the last downturn was to become the Call Center Capital of the Universe. This time, we have to do better than that. I hate to pin all our hopes on TGen and IGC, because every state is trying to be a biotech center, but I believe if we understand the relationship between those initiatives and our current strengths - health care, semiconductors, software and tourism - we can make something happen.