Entrepreneurship: The Appalachian Regional Commission Approach

Entrepreneurship in the 21st century is vital to economic growth, especially in rural America. Supporting entrepreneurial growth is a challenge, which often requires regional planning and local partnerships. Regional funding enables regional development organizations to plan and organize the local partnerships needed to spur and support the growth of rural entrepreneurships. Despite its rural challenges, the Appalachian region has been increasing the number of homegrown businesses with help from the Appalachian Regional Commission (ARC).

Despite its rural challenges, the Appalachian region has been increasing the number of homegrown businesses with help from the Appalachian Regional Commission (ARC).

ARC was established in 1965 by Congress to support economic and social development in the Appalachian region. The commission is comprised of 13 governors from the Appalachia states (Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia. and West Virginia) and a Federal Co-Chairman who is a presidential appointee. Seventy-one local development districts (LDDs) cover all 406 counties in the program. In 1997, understanding the challenge of encouraging local support of entrepreneurships, the ARC launched a $15 million regional initiative to build entrepreneurial economies. ARC, working with regional development organizations, funds entrepreneurship programs designed to build local support networks. According to ARC Federal Co-chairman Jesse L. White Jr., “The Entrepreneurship Initiative seeks to broaden and deepen the culture of entrepreneurship throughout Appalachia.”

Since 1997, ARC’s Entrepreneurship Initiative has funded over 133 projects. The 25 completed projects have created approximately 198 new businesses and retained and created 529 jobs. The 108 ongoing programs are projected to create 342 more new businesses and create or retain 2,951 more jobs in the region, offering employment opportunities for Appalachia’s 519,691 unemployed persons (Data compiled by ARC, June 1999).

The initiative focuses on five key support areas of entrepreneurial economies: 1) Entrepreneurial education and training; 2) Technical and managerial assistance; 3) Access to capital and financial assistance; 4) Entrepreneurial networks; and 5) Technology transfer efforts. ARC has advisory committees, in each area, composed of regional practitioners and state partners. Selected projects are required to obtain a 50 percent match in funds and services in-kind.

New York Ceramics Corridor
The Entrepreneurship Initiative has proven it can foster local partnerships through a regional approach. For example, the Ceramics Corridor Cluster Project in Appalachian New York began receiving ARC funding in 1998. The project goal was, and still is, to create a network of entrepreneurial partnerships within the region’s ceramics industry. The Southern Tier West Regional Planning and Development Board, an Economic Development Administration (EDA) funded district and LDD, designed the project’s strategic plan to build local partnerships. The partnerships were, in large part, developed to meet the ARC funding matching funds criteria.

Over a period of two years, the project has created a venture development corporation to support ceramics industry start-ups, developed a student internship program, and established a Research and Development Center for Advanced Ceramic Technology. The Ceramics Corridor Cluster has teamed up with a state funded Ceramics Corridor Innovation Center to provide marketing, Internet communications and productivity enhancement services. ARC Entrepreneurship Manager Ray Daffner, remarked, “The project holds a lot of promise and is a very innovative concept in the region’s key industrial sector.” The Ceramics Corridor is continuing implementation for a third consecutive year with funding from ARC.

Ohio SEED
The Successful Entrepreneurial Enterprise Development (SEED) program, another ARC-funded program, has helped start-up businesses gain access to venture capital. ARC granted $45,000 for SEED to the Ohio Valley Regional Development Commission (OVRDC), an EDA funded district. SEED offers local entrepreneurs the chance to receive legal, financial, marketing and engineering assistance for 25 percent of the actual cost of services or up to the maximum of $5,000.

One business start-up resulting from SEED’s legal fee subsidies is a temporary agency for nurses. The temporary agency serves local and out of area health care facilities with fill-in staff who are critical to providing quality health care services. John Hemmings, III, OVRDC’s Economic Development Director, commented, “The temporary agency is very innovative and the workforce is there. They just needed a simple process to gain access to venture capital.” SEED continues to receive applications for assistance and is currently considering an application for an oil and gas distribution entrepreneurship, which is critical to enhancing the local economy.

South Carolina Rural RLF Support
ARC’s Entrepreneurship Initiative, according to Co-Chairman Jesse White, creates true local wealth and allows communities to control their own destinies. The Entrepreneurship Initiative accomplishes this by funding several programs that provide access to loans and seed capital on a regional basis.

Whetstone employees working on the paddles.

The South Carolina Appalachian Council of Governments (COG), an EDA funded district, received ARC funding for its program, Outreach to Rural Entrepreneurs—Revolving Loan Fund (RLF) Support. The program exemplifies how providing access to seed capital on a regional basis addresses the uniqueness of regional geographic challenges and facilitates partnering.

The program reaches out to entrepreneurs in six transitional, remote counties. The counties receive priority access to $425,000 in RLF support. Applicants may request funding of up to 40 percent of their business budget. Partners from the local small business development centers, community colleges, chambers of commerce and county development offices are involved in the outreach activities.

One example of entrepreneurial growth resulting from the Outreach RLF Support program is Whetstone, Inc. Whetstone produces lightweight kayak paddles. Recently, Whetstone enhanced its marketing on the Internet. Production of the paddles has increased and the number of employees has also grown. The 8,000 square foot manufacturing facility now also produces technical kayaking clothing and gear.

The outreach program’s new RLF Vice President and Director, Dave Mueller, noted that he has hosted three seminars on business basics, lectures at the local college, and advises on a one-on-one basis. Mueller reported that word has gotten out and even banks are referring loan applicants to him. Often the program’s 40 percent seed capital is just enough to make the entrepreneur eligible for bank loans.

Appalachia is just one region that has already identified the need to support entrepreneurs. ARC’s approach enables regional development organizations to create local partnerships needed to support entrepreneurship.

By Kelly Novak, Research Manager

For more information, contact Ray Daffner of ARC at (202) 884-7777 or daffner@arc.gov; John Hemmings, III of OVRDC at (740) 947-2853 or jhemmings@ovrdc.org; Tom Barnes of Southern Tier West Regional Planning & Development Board at (716) 945-5301; Dave Mueller of SC Appalachian COG at (864) 242-9733 or mueller@sacorg.org.

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