Friday , September 21, 2018

September 2012

Featured In This Issue

September 2012

BizProfiles

As a kid growing up in Charlotte, all Mac Lackey wanted to do was play soccer—all day, everyday, until it was dark. It was all he cared about and luckily he had talent which took him to Wake Forest on a soccer scholarship and to a year of playing pro soccer as a Charlotte Eagles’ forward.

But Lackey’s obsession with soccer was more than just a passion; it was a clear example of his “all in” personality. He did everything to an extreme.

“For a brief period in college, when I really started to care about my studies,” Lackey recalls, “I went from barely making it to doing quite well, but I didn’t want to just get As—I wanted 100s.”

For Lackey, playing soccer revealed other personality quirks as well.

“Looking back at how I played, it’s clear that I loved taking risks. With two or three seconds left on the clock, there are always players praying that they don’t get the ball. But that wasn’t me—I was the one screaming for it. I wanted to make that last shot to win.”

Lackey, founder and CEO of his sixth startup, KYCK.com, admits that, even as a child, he had personality traits typical of an entrepreneur. But he credits a light bulb moment for starting him on his unconventional career path.

“Out of school, I started working at a software development company,” Lackey remembers. “It was maybe my first or second day on the job when the company president called a brainstorming meeting in his office. Everybody started gathering up their paper and pens but he held up his hands to me and told me to stay out and answer the phone.

“I had such a visceral response to that. I had ideas. I couldn’t figure out why he didn’t want my input. That’s when the light bulb went off and I decided that I couldn’t be in an environment where my ideas wouldn’t be heard or I couldn’t push ideas that are important to me. I resigned six months later and I, and an engineer I’d become friends with at work, decided to start our first company, a software development company we called InTouch Interactive.”

 

KYCK Off

Lackey recounts, “It was a true garage startup with no money, no venture capital and no resources. I had a $10,000 loan from a family member and a one bedroom apartment but no clients, nothing but an idea.

“That was ’95 and most people hadn’t really even heard of the Web then. We were quite early working on the Internet in Charlotte and the Southeast. When we started selling Internet development services but you couldn’t even really call it selling, because we were actually just doing a lot of educating.

“So, there I was, at 22, sitting at the table with mostly older business people trying to explain what the Internet was and why they should care. We left many people scratching their heads.”

Eventually, Lackey says, companies began “dipping their toes in the water.”

“But when Duke Energy ‘dips their toe in the water’, it’s enough to pay your bills,” he quips. “That’s how we got started.”

Lackey sold InTouch Interactive to iXL Inc. in 1998 and served as a senior vice president until the company went public the next year. “I resigned the day after the IPO,” he explains, “but only because I was passionate about my next idea.”

The next idea was InternetSoccer.com, which married Lackey’s entrepreneurial abilities and his love of his favorite sport.

“It was the time when big portals like Yahoo and Excite were becoming one-stop-shops for everything—news, weather, sports,” he explains. “But I had this view that soccer, like music or anything people are passionate about, couldn’t be addressed in some huge, bloated, horizontal portal. Our plan was to build a very deep, focused, vertical network that was a global news site for soccer.”

In the 14 months from the inception of InternetSoccer.com until its $15 million sale in July of 2000 to European TeamTalk Media Group, the company became one of the largest soccer-specific networks in the world.

The sale allowed the InternetSoccer.com management team to remain in place with Lackey as president and CEO of North American operations. But more important to Lackey, the business could remain in Charlotte.

“We’ve had lots of people tell us it would be easier if we moved to New York or Silicon Valley—that it would be easier to find engineers or capital—but we’ve resisted and proven that it can be done in Charlotte.

“Charlotte has advantages,” Lackey points out. “The costs of building a startup here are lower and you can have a company culture where people can focus on their families and have life balance. The biggest disadvantages are access to capital and finding the right talent. There are really talented people here, but if we want someone that has already been successful in driving app downloads on iTunes, they’re likely in San Francisco or New York. We have to be open to remote workers.”

 

Hat Trick

Lackey’s many startups define him as a serial entrepreneur but, because he’s also frequently involved with several ventures simultaneously, he falls under the more uncommon dual category of serial and parallel entrepreneur.

While developing InternetSoccer.com, Lackey also founded ettain group, a software development and technology outsourcing company. In 2001, he segued from chairman to the more active operational role of CEO. During this period Lackey had another light bulb moment.

“The company was doing well,” he explains. “It was about a $14 million operation when one of the ettain board members asked me a question, ‘Do you want to be a CEO or do you want to be a startup guy? If you want to be a CEO, stick around, focus on the operation, focus on the people, add new offices, grow the business and become a more experienced CEO. But if you want to be a startup guy, go start something.’ I thought about that for about a week and then resigned from ettain.

“It was a catalytic moment. I realized I didn’t want to be a CEO in the traditional sense. I love to inspire people but I don’t like managing them.”

Lackey describes the next year as a “hodgepodge”. He did some consulting and acted as interim CEO of a small telecom business. He also evaluated plans for the future with his longtime business partner Ross Saldarini.

“We stepped back and thought about what we wanted to do, what we liked to do and then started working on the vision of that,” Lackey says. “The vision became BlackHawk Equity. The idea behind it was simple. We love to get involved with early stage companies. We like to be active—to think of them, grow them, do everything to make it happen.

“By that point, we had a small group of investors who were supportive and who essentially said that if we invested in something or bought a company or started one they would invest beside us.

“Investors wired money; we put it in the bank, waiting to find something to do with it. That was when Mountain Khakis came along.”

At that time, Mountain Khakis consisted of only a watercolor sketch of a pair of pants and the idea of an entrepreneur living in Jackson Hole, Wyoming, but Lackey loved the concept and Mountain Khakis became the first real investment of BlackHawk.

It was also the first time Lackey’s business involved a physical product. “I could hold it in my hands and see it on people,” he says. “We literally went through the process of laying things on a table and saying, ‘No, that’s no good. Try this, try that. Make more changes. Okay, now put this in the market.’”

Mountain Khakis went on to be picked up by over a thousand retailers, including several major outdoor pro shop chains. The experience also refined the career path of Lackey and his partners.

“It fundamentally changed our view on how we wanted to spend the rest of our entrepreneurial lives,” Lackey explains. “We decided we only want to do things that we’re passionate about.”

 

Goal KYCK

     Lackey’s latest venture, KYCK.com is definitely a product of a passion. Like InternetSoccer.com, its focus is soccer and it has global reach, but KYCK ramps it up by merging content, social media and e-commerce.

KYCK’s name was an inevitability. Lackey owns many domain names he keeps as placeholders for potential future ventures or names he just thinks interesting. “I always liked ‘Kyck’ with the alternate spelling because I thought it would be good for branding and I knew I’d have to do something with soccer again,” he explains.

The idea that he matched to the domain name started bubbling up two years ago when Lackey reconnected with old college soccer teammates on Facebook. “I was friends with these guys purely through soccer but what I saw on Facebook were their backyard projects, a family birthday party or the music they liked. It felt very disconnected,” he says.

The breakthrough came when Lackey was watching the Women’s World Cup Final with his two daughters. “I was on my iPhone talking about the game with friends on Twitter and every fourth or fifth post was something totally unrelated to the game—somebody checking into Starbucks on Foursquare or something like that. I had a massive déjà vu feeling that what was happening to Facebook and Twitter and LinkedIn was exactly what had happened to Yahoo and Excite—these huge platforms were going to fragment into verticals.

“People are going to connect about things they want to talk about. Ultimately, sites that get mind share with people are going to win and backyard projects just don’t get mind share.”

The idea of KYCK became reality in July of 2011. The company has raised $1.3 million in capital prior to its Series A round, which will begin within the next month, and just went through their soft public launch.

Lackey states that the word ‘relevance’ is key to describing KYCK. “The first thing a new member does on KYCK is build a profile,” he explains. “You tell us what teams and players you like and our custom-built algorithm goes out to YouTube and Reuters and even user-generated content to find and deliver exactly what you care about.

“Beyond that, the algorithm applies a social framework. If your friends are all talking about a game or a player, it becomes relevant. And finally, if an item is trending on our network, you probably want to hear about it too.

“The relevancy algorithm ensures that you always get something great that matters to you. But even more significantly, it ensures that every single KYCK user gets a totally different experience. It is customized to the individual level.

“We’ve also introduced media layers to the site which provides a chronological feed of information and then a second, personalized feed of media curated for you. Both feeds run simultaneously on a split screen so you can switch back and forth and still see what’s happening on both. Our team has come up with this to allow a mixture of real time and relevance.”

Lackey foresees the site being used by youth clubs to assist in training and by professional players to build and interact with their fan base. He also sees KYCK’s relevancy algorithm driving e-commerce.

“The same personalization that gives you the content you want will also allow you to purchase the products you want, whether it’s a favorite team jersey or airline tickets to a match.”

Lackey says his biggest wish for KYCK is scale. His goal is for 100,000 members by the end of 2012, and to reach one million by the close of 2013 for a “global fútbol experience.” KYCK already has members from 128 countries.

And while he has big aspirations and vision for KYCK, Lackey won’t discount the option to start something else new in the future. He says, “I love the process of building a company—the adrenaline that comes with it and the satisfaction of taking something from paper and turning it into something real.”

What does a profitable, high growth company do when it sees an exciting new opportunity—whether it be a major new product initiative, a geographic expansion, or a major acquisition—but lacks the capital required to move rapidly?

It might approach Richard Maclean, Andrew Lindner and their experienced team at Charlotte-based Frontier Capital, a 13-year-old growth equity firm formed in 1999.

Growth equity firms such as Frontier provide companies with the capital they need to seize such opportunities. Similar to venture capital firms, but focusing on established companies rather than startups, growth equity firms receive investments from high net worth individuals and institutional investors and then redeploy that capital in profitable, high growth companies. The equity firm and their investors share in the profits as those companies grow and prosper.

 

Institutional Grade

Maclean and Lindner first met when both were working in investment banking for Bank of America predecessor NationsBank. As they became friends, they found their skill sets were complementary and determined they wanted to start a venture together at some point in their careers.

Maclean left NationsBank in 1993, and after obtaining his MBA from theUniversity of Virginia, worked in private equity for four years. Lindner left the bank in 1994, joining Stephens, Inc. in Atlanta, where he advised clients in executing corporate finance transactions and assisted the Stephens family with direct private equity investments. He headed west to Stanford University in 1997 for his MBA, and after graduating in 1999, came back to Charlotte and formed Frontier Capital.

“There was a short window in time when guys like us could raise a private equity fund more easily than we could have historically and certainly much easier than it is now,” recalls Lindner. “We combined our professional chemistry with that market opportunity to go out and raise a small fund.”

That first venture (Frontier Fund I) was a $45 million equity fund, with $15 million from private investors and $30 million of SBIC leverage from a government match program. They invested in 17 companies through Fund I, generating total returns to their investors that ranked in the top 10 percent of all peer group funds in the U.S. started in 1999.

Maclean and Lindner wanted to build a sustainable firm to fill a void they saw in the marketplace for growth capital—that space between early-stage venture capital and buyouts of mature companies.

“We wanted to build something that was institutional grade, not just raise a fund and manage it forever,” says Lindner. “We wanted to grow, add to our people and infrastructure, and constantly improve our processes to make this an institutional business.”

Today, the 12-person firm boasts an average tenure of seven years. There are four partners—Maclean, Lindner, Michael Ramich, and Joel Lanik.

“Even back in 2000, we knew we wanted to manage institutional capital,” adds Maclean. “We managed very little institutional capital when we first started, but today we manage money for leading pension funds and fund of funds from all over the world. We knew if we wanted to be positioned to do that, we had to invest in the business and the team early on.”

Their second fund (Frontier Fund II) raised $115 million in 2006, and their newest fund (Frontier Fund III) closed in June 2012 with $250 million in capital commitments. Both of these funds were fully funded by private and institutional investments.

Frontier’s funds are each separate 10-year partnerships to which investors commit for the full 10 years on the basis of a prospectus and presentations by the Frontier team. The typical investment is between $5 million and $25 million and the commitments are blind, meaning that Frontier retains full discretion on how the money is invested.

“What we do is long term because it takes us about five years to invest the money we raise and then about five more years to actually exit those businesses and return the capital to our investors,” explains Lindner.

Frontier Capital is one of the three largest equity capital firms in North Carolina, but their $250 million fund is still a small niche player compared to larger billion-dollar-plus funds around the country. But according to Lindner, their size is often an advantage.

“Many institutional investors feel that some funds have grown so big that they are no longer able to generate the returns they want,” offers Lindner. “We are big enough to have the resources of a larger firm, but we are still small enough to generate the out-sized returns our investors are looking for.”

“In the $500 million to over $1 billion and up segment of funds, you may have to chase big deals that are inherently more competitive,” adds Maclean. “Because of that, outsized returns are harder to come by.”

 

Putting Capital to Work

After Frontier raises capital, they must put it to work to generate the returns their investors are looking for. To accomplish that goal, they have chosen to focus on technology enabled business services companies with annual revenues between $5 million and $30 million.

A typical target company has around $10 million in annual revenue and is growing rapidly. Frontier will take a large minority or even a majority stake by investing between $5 million and $25 million in each transaction. Lindner says the ideal “sweet spot” is an investment in the $10 to $15 million range.

“Our typical investment is in a profitable company that is growing at over 20 percent per year,” explains Maclean. “It will generally be a company that is less than 10 years old in technology enabled business services.”

Frontier’s investment may be used to buy out early shareholders or provide the founders some partial liquidity so they can diversify their personal financial profile. But much of the invested capital goes onto the balance sheet and is used to fuel growth.

The Frontier team takes what Lindner calls an “active support role” rather than a day-to-day management role. They generally take multiple board seats and assist the management team with strategic decision making.

“We’re not making the day-to-day management decisions; we’re backing good teams to do that,” says Lindner. “We help prioritize and figure out what we’re going to stop doing and what we’re going to do more of.”

“Our real expertise is taking a company that is in the $10 to $20 million revenue range and growing it to $30 million, $50 million, or $60 million,” adds Maclean.

Frontier began Fund I with a southeastern regional focus, but over the years the principals have expanded their footprint to include markets in the mid-Atlantic, Texas and the Midwest. They look at markets like Atlanta, Indianapolis or Charlotte—areas that are a little underserved and where their message resonates best. They avoid places like Silicon Valley, New York and Bostonwhere a lot of capital is already chasing opportunities.

“If we find the right company in Indianapolis, we’re going to invest there because we’re trying to find the best companies to match our profile,” explains Maclean. “We love it when we find great companies in our own backyard, but there are great opportunities in all the markets we cover. Charlotte is still a great jumping off point to cover the regions we cover, and it would be a lot harder to do what we do from somewhere without this kind of airport and transportation infrastructure.”

 

A Growth Portfolio

Frontier classifies the companies they target for investment into four categories: high-value niche outsourcing services, managed services/information services, software as a service (SaaS), and health care IT.

The outsourcing category includes companies like Greenville-based Perceptis, a call center outsourcer serving the higher education market; Viverae of Dallas, a provider of outsourced corporate wellness services; and Atlanta-based Ryla, a provider of call center outsourcing services. Ryla is one of the recent Frontier success stories, as they helped Ryla grow their annual revenue from $13 million to $100 million in just three years.

In managed services, Frontier has invested in LURHQ of Myrtle Beach, a network security monitoring and management service; Azaleos, a managed email and messaging provider with major operations in Charlotte and Seattle; and Peak 10, a very successful Charlotte-based operator of data centers.

The third category, SaaS, includes companies like Daxko of Birmingham that operates software for member-based nonprofits; Dallas-based Lanyon which offers travel and spend-management software; and Social Solutions of Baltimore, a company that markets performance management software for human services nonprofits.

Health care IT is really a blend of two of the other categories—SaaS and managed services—but it is focused on the health care industry. Two examples are Anodyne Health of Atlanta that sells revenue cycle management software, and Healthx of Indianapolis, a seller of online portals to health insurance plans.

These are just a few of the companies in which Frontier Capital has invested since its inception in 1999. Fund I invested in 17 firms and Fund II invested in 11. With Fund III now in place, Frontier will be very active investors over the next few years as they work to deploy the new fund. Eventually, Fund III will likely make around 14 individual investments.

The new fund has already deployed capital in four companies: Healthx; iMapData, a Northern Virginia-based mapping firm that analyzes data for government and large companies; Celergo, an international payroll services provider based in Chicago; and eVerifile, an Atlanta-based employee background check service provider.

 

A Bright Future

Historically, technology and growth companies have taken a back seat inCharlotte because the Queen City was known as a banking and finance town. But Maclean and Lindner are seeing a renewed interest in entrepreneurship and growth-stage companies in the Charlotte region.

“During the dot-com boom it was get rich quick,” says Lindner. “But now, after the financial crisis, it feels like people just want to control their own destiny and not be at the whim of the shifting sands in these big corporate organizations.”

“We went through the dot-com bubble bursting in 2000, the 2001-2002 recession, and now the financial crisis,” says Maclean. “During the 2001-2002 downturn we made some really good investments, and in this latest crisis, we have been very fortunate because our companies didn’t have any leverage. Since they were generally trying to help their clients become more efficient and lower costs, our companies sort of sailed through it all very nicely.”

Looking toward the future, both Maclean and Lindner see great growth opportunities ahead for Frontier Capital. But there are limits to how much they want to grow.

“I think we have as good an opportunity in front of us as we have ever had,” says Lindner. “We have the confidence of our investors on the back end and we’ve identified our real niche on the front end for companies to invest in.

“I do think there is a limit to the size of fund that makes sense for us to deliver returns the way that we do,” he continues. “But all growth opportunities that don’t dilute our commitment to what we do well are on the table, including considering additional product lines that we can offer to our institutional investor base.

“But first and foremost, our future is to continue to deliver industry-leading returns to our investors, while creating growth opportunities within our organization for our people.”

Neilsen’s fourth quarter 2011 survey revealed that 45 percent of Americans who own tablet PCs use them on a daily basis while watching television. A recent study of consumer media habits commissioned by Time Warner’s Time Inc. found that digital natives (20 to 29 years old) switch media venues about 27 times per nonworking hour, or more than 13 times during a standard half-hour television show.

The people behind Charlotte-based OtherScreen understand the implications of these usage statistics for any business or concern—such as television broadcasters—that relies on audience engagement for its success. The company has developed a software platform and service that drives attention back to the broadcast and increases viewer engagement, providing value to the advertiser.

 

In the beginning…

In the beginning, mankind watched television one show at a time, commercials and all. There was no such thing as a remote; it hardly seemed worth the trouble to get up and walk across the room to change the channel. When the sponsor said “stay tuned,” mankind followed instructions.

Then, when the broadcaster took “a short break,” mankind learned it was okay to do the same; leaving the television behind for a trip to the kitchen or bathroom. That’s when all the trouble started.

Ever since, advertisers have sought out more creative and sophisticated ways to capture and keep the viewers’ attention; advancing the art of advertising to a complex social science. Fast forward 60 years and, despite the phenomenal success of broadcasting, the challenges have grown exponentially.

Now, viewers can channel-surf through hundreds of stations while avoiding the commercials that support the shows they seek. Plus, broadcast content is distributed in many different ways—by Netflix, Amazon Instant Video, Apple TV—the list goes on and on.

The problems—or opportunities—don’t end there. For many, young and old, modern life now includes possession of numerous mobile Internet devices including tablets and smartphones, readers and laptops and they are all competing against each other for attention.

“The Internet has dramatically changed television by becoming an ever-present competitor,” says Chris Halligan, CEO and co-founder of OtherScreen along with President Garth Moulton and Vice President, Products, Andrew Gertig.

“Advertisers can no longer count on having a captive audience or even a mildly loyal one,” points out Halligan. “OtherScreen helps retain and drive audience engagement by making the Internet an ally, rather than a competitor.”

While both broadcasters and end users can be considered customers, the company’s revenue comes from broadcasters who obtain licenses to operate the platform. The first customer to sign up was FOX Charlotte. OtherScreen provides companion content to the Wednesday night show called FOX News Edge.

“Prior to visiting, we covered FOX News Edge with 20 of our regular users,” remembers Halligan. “Out of the 25-minute news program, viewers stayed engaged for 22.5 minutes. The team at FOX saw value in the platform and the concept right away.”

 

Turning distraction into engagement

OtherScreen makes watching television more fun—and more engaging—by turning it into a game. The company pushes companion content, via a live DJ, to a player’s laptop, tablet or smartphone.

Moulton explains: “Imagine you’re watching the Panthers play on Monday Night Football. We’ll ask the viewers to predict whether or not Cam Newton will score a touchdown on the opening drive. You make a prediction; you’re in the action.

“If you’re watching the NBA, we’ll ask, ‘Who scores more this half: Kobe Bryant or LeBron James?’ We’ll also ask engaging trivia and opinion questions throughout the event—some for points and some just for fun. Plus, we raffle off Amazon gift cards at many of our events.”

Individuals can play alone or join forces with a group of people to see if they can top the company’s Social TV Leaderboard. It makes television social, fun and funny. It even builds relationships.

“For example, we have a user named Stitt Daddy,” says Halligan. “I’ve never met him but I thoroughly enjoy watching shows with him. He’s smart, he’s funny and I love listening to what he says when I’m OtherScreening (yes, we also use our name as a verb) shows with him.”

In the same manner that OtherScreen draws viewers back into the programming, it draws them to the commercials and miraculously alters people’s perception of advertising.

“Viewers pride themselves at how good they are at ad-skipping,” says Halligan. “But, when we ask, ‘Do you think there will be a McDonald’s ad during this break?’ audience attitudes about ad breaks change. It’s less of an intrusion.”

“It makes watching television more fun because you are doing it with like-minded individuals,” says Halligan, “like you would at your neighborhood sports bar.”

 

Making a production out of it

OtherScreen works with live, unscripted broadcasts. “Live” means not time-shifted (that is, content going to DVR) and includes the advertisements. “This is what television built their industry on and we’re helping them preserve that,” says Gertig.

“We typically cover about five to seven events (usually shows) per week,” says Moulton. OtherScreen covers news, sports, game shows and reality shows such as The Bachelor and The Bachelorette. It covered the Republican Primary debates.

“The things that make you yell at your TV screen are awesome for OtherScreen,” says Halligan with a laugh. “And all you need is a browser, a smartphone or a tablet. It also helps if you have a sense of humor.”

Even the company’s website is designed to look like an application: “Just sign on and you’re at the event and in the chat room.”

The platform, written by Gertig and Chief Technology Officer Jim Van Fleet, utilizes Ruby on Rails for the Web and also features an iOS app for iPhone and iPad users.

The partners are currently focused on building out product to satisfy the market and had closed a round of venture capital as of April of this year. Chief investors include G51 Capital out of Austin, Charlotte-based VCI Partners, and a local angel. Both Halligan and Moulton have invested in the company as well.

Beyond television, there are several possible avenues for growth in the future including education, corporate training, polling, focus groups, radio and the mining and selling of data analytics.

The idea that using Internet devices that might otherwise be considered “distractions” while watching TV could be used to actually enhance focus and engagement came to Halligan as he watched a Cardinals game with his then 14-year-old son.

“I noticed that, despite being an avid fan, he was paying more attention to his phone than the game on television. I decided to see what would happen if I sent him a text.”

Halligan’s text message asked his son to make a prediction as to whether a particular player would touch second base during the inning. After responding, his son put the phone on his chest and started watching the game again.

“It occurred to me that, used properly, a mobile device could increase focus rather than drive distraction,” says Halligan.

OtherScreen has several unique aspects to its program, according to Gertig:

“First, we have a human being pushing our content out. Certainly, some of the elements of the gamification are totally unique. Plus, we’re focusing on local television stations and audiences instead of going out and building third-party audiences like Facebook. And, our platform allows for the broadcaster to integrate our program into their Web property so users never have to ‘leave’ the site.”

 

Unexpected story lines

Halligan expected to follow his parents, both of whom were educators, into an education career by earning a Ph.D. in English literature. He even moved toAustin explicitly for that purpose but then accepted a position with a computer company called Dell.

“I had a great run at Dell,” says Halligan, who completed his 11-year career there by running Dell’s $2.5 billion e-commerce organization in 1999.

Halligan subsequently worked for webMethods in northern Virginia where he was part of the most successful software IPO in history, with opening day starting at 12 and closing at 306. Halligan has also built a few startup companies including Kieden which sold to Salesforce.com in 2006. He moved to Charlottein 2007, while serving as CEO to PokerTek in Matthews.

He is a co-founder of Charlotte Regional Technology Executives Council (CRTEC) which serves as a hub for executives within Charlotte’s growing technology community and awards scholarships to Charlotte area students at UNC Charlotte’s College of Computing and Informatics.

In 2010, Halligan met Moulton while both men were serving as mentors toCharlotte entrepreneurs. They discovered they knew dozens of people in common and decided they wanted to start a company. Shortly thereafter, Halligan met Gertig at a TEDx conference.

“After Chris told me about his idea, I couldn’t get it out of my head,” said Gertig, “so I went home that night, figured out how to do it and showed it to him the next day.”

“He built the prototype in one night!” says Halligan. “It was basic but it showed that it could be done.”

Moulton thought he would ride the tech bubble of the 1990s to career success and wealth.

After graduating Phi Beta Kappa and magna cum laude from BrownUniversity, Moulton successfully worked at several software companies inCalifornia.

“I watched people around me get fantastically, ridiculously wealthy, so my biggest decision was which one of these companies was going to take me to the top.”

Then, the tech bubble burst. Moulton decided it was better to own the means so he co-founded and built a company called Jigsaw, which ultimately sold to Salesforce.com for $175 million.

He came to another decision at this time. He didn’t want to raise his children in California, so he set out to find an east coast city (he’s a Vermonter) that met the needs of his family and career goals. He chose Charlotte.

“It was an on-paper move but we were immediately happy with it,” says Moulton.

Raised in Kingston, Jamaica, the son of missionaries, Gertig returned to the States to attend college at Mississippi State University where he studied electrical engineering and joined the ROTC. After serving as an officer in the U. S. Air Force, Gertig took a job in medical device sales with Medtronic that brought him to Charlotte.

 

Re-upped in Charlotte

“I can’t stress enough that each of us has chosen Charlotte,” says Moulton. “We believe in Charlotte; we can do this here.”

All three say they are glad to be part of the burgeoning technology community inCharlotte. All three are also advocates for startups and appreciate the support and interest local organizations like the Chamber of Commerce and Packard Placeprovide to startups in the city.

“Successful, substantial startups dramatically transform their local economy,” says Halligan. “Look at Dell in Austin and Microsoft in Seattle. Supporting your local startup is enlightened self-interest. Be their customer. Give them advice. If they’re doing something wrong, tell them.”

OtherScreen hopes to be that startup that experiences explosive growth and has a long-term, multigenerational economic effect on the Charlotte economy.

“Audience erosion and fragmentation are happening,” says Halligan. “As the broadcast industry looks for solutions to address and counteract those challenges, we want to be the leading platform to drive audience engagement.”

“We’re friends and we’re in this together; off to a good start,” he concludes.

The disruptive shift in greater Charlotte’s economic landscape, brought on by the Great Recession, has created the climate for a thriving entrepreneurial ecosystem, with conditions favorable for the coveted high-growth companies called gazelles.

The end of the easy years when the region flourished as a banking center has left an opening for the long-ignored, little-understood sector of innovative startups capable of creating hundreds of jobs, including some with the potential for rapid, sustained expansion.

The need for new employers combined with the large-scale layoff of savvy, sophisticated, high-energy workers looking to redirect their talents without leaving the perks of the Piedmont’s quality of life, has left the populace hungry for new opportunities.

“The anecdotal evidence suggests there is more entrepreneurial activity than there has been,” says Brooks Raiford of Raleigh, president and CEO of the N.C. Technology Association that recently opened an office in Charlotte. “There’s a lot of fertile ground here. The ecosystem’s pretty good.

“With the recession and the resulting layoffs—which were sizeable—creative, talented white-collar workers have had to create their own way. A lot of entrepreneurship comes out of that. People who had been comfortably employed on a career path have suddenly found themselves not. They have begun to look more toward themselves and their own networks. All it takes is a small niche of that to create a lot of energy.”

Charlotte’s energy cluster provides an excellent example of what is required to create job opportunities and raise the region’s overall competitiveness as well as its national visibility. Harvard Business School has chosen to featureCharlotte as a role model of dynamic local leadership in its U.S. Competitiveness Project.

The Charlotte energy cluster relies on the concept, first proposed in 1990 by Harvard Business School Professor Michael Porter, that a geographic concentration of related firms and institutions can drive innovation, raise productivity and create jobs as well as competitive advantages for the region.

Already Duke Energy and over 100 highly specific ‘energy cluster’ firms make our city the global hub of electric knowledge and resources in critical industry skills—design, operations, engineering, research and construction.

Just as there are demonstrated synergies from the combination of resources and communication among energy firms, similar and substantial gains can be had from private, public and private-public combinations spurring entrepreneurial growth.

Civic resources from the city’s Chamber of Commerce to various economic development organizations and agencies are rallying to support startups with consulting advice and angel investing, as are private associations of like-minded leaders outside the traditional government and business infrastructure.

Just within the past two years, leaders say, a critical mass of connections and resources has developed to accelerate the evolution.

Bob Wilhelm has been a seminal leader and spokesperson for the combination of public and private resources as UNC Charlotte’s vice chancellor for research and economic development and executive director of the Charlotte Research Institute (CRI). CRI is UNC Charlotte’s portal for business-university science and technology partnerships.

Wilhelm says the accelerated pace of high-impact startups is the payoff for decades of groundwork, including vital research enterprises established at the 60-year-old university since the late 1980s.

“We’ve been in the incubator business for more than 25 years,” Wilhelm says, speaking of the Ben Craig Center, one of the nation’s first university-affiliated business incubators. “We’ve always been a university that looked to connect with the urban region around Charlotte.”

“Charlotte in the last few decades grew and grew rapidly because of the strength of the banking and financial services that developed here,” says Paul Wetenhall, president of Ventureprise, the renamed Ben Craig incubator at the university.

“As a result, Charlotte only recently was confronted with, ‘Oh, my goodness, what are we going to do?’ Places in the Midwest and the Northeast confronted those issues earlier,” he explains knowingly, having come to Charlotte by way ofRochester, where he was involved in entrepreneurial development after the failure of Kodak and Polaroid. He is helping the incubator transition into its new moniker and mission to be a catalyst for entrepreneurial innovation.

“The Charlotte region has many great assets and networks that directly support an entrepreneur’s ability to succeed. Our joint planning with groups across the region identified a gap in strategy, coordination and communications leveraging these resources. That is what the re-launch of the Ben Craig Centeras Ventureprise is meant to do.”

“The whole entrepreneurial community and momentum and drive literally started in 2008,” says Terry Cox, CEO of the Business Innovation and Growth Council (BIG). “The last 18 months to two years is when I’ve seen serious growth, serious increase in activity.”

BIG’s first annual survey this year showed that 94 high-growth companies enjoyed an average revenue growth of 25 to 30 percent for each of the last three years—a rate they expect to maintain this year, projecting revenues eclipse $650 million in aggregate and total employment surpasses 3,000. Cox estimates the total for all Charlotte-area gazelles tops $1 billion.

The goal, of course, is to help launch the next Lending Tree, Yap, Jigsaw or Peak 10, famous local examples of soaring entrepreneurs, the so-called gazelles that show up in about four of every 100 startup companies.

 

Heard of Gazelles?

Gazelles were identified by economist David Birch in 1994 as companies whose sales double every four years—accounting for 70 percent of new jobs despite their relative rarity—in contrast to less agile big-company “elephants” and steadily small “mice.”

“It’s kind of the Holy Grail—everybody wants to support high growth entrepreneurs,” Wetenhall says. “A lot of people associate gazelles with technology because those tend to be the visible examples. In fact, the gazelles span all industry sectors.

“They are not obvious to spot in advance. You can’t look at 100 startups this year and pick which four will become the gazelles. Sometimes it happens early on and companies get traction quite rapidly; sometimes long after the fact when something happens that causes an inflection point. You can’t determine to go out and start a bunch of gazelles.

“You can, however, predict where they’re likely to emerge. When you look at gazelles, in almost all cases they have an innovation component to their business that comes from one of three places.” Wetenhall describes them as:

 

  • Technology innovation, including both tech companies and those that provide technology support for others;

 

  • Business model innovation, such as Staples, which transformed the office supply business by slashing two layers of distribution when it created the manufacturer-to-store process, and Lending Tree, which removed face-to-face meetings with bankers from getting a mortgage loan.

 

  • Business process innovation, such as Paychex that started in Rochester to handle payroll for small companies by collecting their information over the telephone.

 

“When you look at the profile of the Inc. 500, which by definition are all gazelles, what they consistently report is that most of these are not venture capital-backed.” Wetenhall adds, “Most of them are not technology-based, even though they may be technology-enabled.

“What Inc. finds is that a lot of fast-growing companies are in services as opposed to products. It’s more scalable. You can build a fairly big company without hiring a lot of employees.”

Nor is presence or absence of activity of venture capital activity a significant plus or impediment to gazelle hunting, he says, although the traditional reliance on bank loans calls for a learning curve over other types of financing.

“Generally speaking, technology-based companies need a lot of capital up front,” Wetenhall says. “Others need less. They generally need risk capital, not debt capital. That’s an issue in a place like Charlotte, which is a banking town. People think in terms of lending rather than risk investment.”

Research shows that in recent years angel investors, rather than venture capitalists, have been key to startups, with the notable exception of expensive pharmaceutical company deals, Wetenhall continues. He says that although each transaction is smaller, the 30,000 to 40,000 angel deals involved more total dollars than the 3,000 to 3,500 venture capital deals.

“Angels are a key part to that risk capital. We have a spotty history on the angel thing,” he says, including three groups that closed after the dot-com bust.

“We don’t have as much organized angel capital as you would expect in a city of this size,” although Inception Microangel Fund and WED 3 Inc. were started a few years ago. “We’re getting another round of energy on this point.”

The BIG survey showed only one company financed with venture capital, 12 percent with private equity, 22 percent had angel investment, 20 percent were bank-financed and 45 percent were self-funded. Half the companies were less than five years old, and 80 percent were less than 10 years old.

 

Care and Feeding

Greater Charlotte ranks high on many features that foster gazelles.

“When you look at the ecosystem that supports the gazelle dynamic, No. 1, you have all the regular business attractiveness components—good airports, a well-educated workforce,” Wetenhall says. “By definition, high growth entrepreneurial companies cover a broad geography.

“Charlotte also has a substantial presence on the global stage, with more than 4,000 foreign-owned entities in the region that enhance its reputation around the world and help attract energetic international innovators.

“In addition, there’s a highly connected entrepreneurial segment,” Wetenhall continues. “You tend to find a lot of places where people who are part of this entrepreneurial ecosystem come together.

“There is a richness of that sort of network connection; there’s generally a strong research university involved. That’s always the case around technology-driven entrepreneurship. It generates so many ideas.”

Organizations such as Ventureprise, where Charlotte Mayor Anthony is one of the group’s board members, links grassroots initiatives to the city’s highest structures. BIG provides connections for entrepreneurs and is part of the Charlotte Entrepreneurial Alliance, an informal gathering of two or three dozen business owners.

Cox, who started BIG in 2006 with the support of CEO David Jones of Peak 10 and some 15 other high-growth entrepreneurs, moved from San Francisco in 2003 and took over the Metrolina Entrepreneurial Council, which had flourished in the late 1990s but suffered after the dot-com crash.

“Nobody really cared about entrepreneurship to be really honest,” she says. “In San Francisco that’s all there is—high growth entrepreneurship. It was a bit of an education process.”

A partnership with Inc. magazine helped BIG attract interest for the first couple of years, but the Great Recession propelled the agency to bigger success.

“Since 2008, it hasn’t mattered at all,” she says. “We’ve grown on our own. BIG took off when the economy went down.”

The member-supported organization focused on high-growth entrepreneurial companies from startup to revenues of $25 million has some 100 members and more looking to join.

“I put on a lot of events,” Cox says, including old-fashioned social networking where entrepreneurs meet face-to-face. “I try to provide relevant and meaningful content for a high-growth entrepreneur. We’re very deliberate about the content we deliver.”

Jones, an impassioned entrepreneur, has a vision for what Charlotte could be: a regional hotbed for growing companies. As CEO of Peak 10, a data-center company he founded that’s now worth more than $400 million and is one ofCharlotte’s largest success stories, he hopes to help others find similar success.

Other major successes include Yap, a voice-to-text technology company sold to an Amazon affiliate last year; Jigsaw, the business crowdsourcing company sold to Salesforce.com after cofounder Garth Moulton moved to Charlotte; and LendingTree.com, sold to IAC/InterActive Corp. and now returned as Tree.com Inc. to its Charlotte founder, Doug Lebda.

“We became sort of the poster child for a lot of the entrepreneurs,” says Jones, a member of BIG whose 12-year-old company has 24 data centers and 330 employees in 10 cities. “When we came to Charlotte, we were just a small company with 20 employees.

“As we grew as a company, my interest was in helping other people avoid the mistakes I had made. I became engaged with younger entrepreneurs in Charlotte; they were sort of unsung. We were not the type of guys that would go out and beat our chest in a mix of personal modesty and competitive paranoia,” he says.

Jones was convinced that Charlotte is a hotbed of entrepreneurial activity and, as past chair of BIG and a strategic adviser, organized the first annual survey as a means of confirming what he already believed and what was even more evident as a result of the recession, that “business growth comes from small companies.”

“The BIG survey confirmed the role and got the entrepreneurial community much more on the map. Through BIG, we’re able to amass the information; it brought a lot more visibility to entrepreneurs,” he notes.

“There is a lot of activity percolating. There seems to be more structure around it than just talk. I think Charlotte has done a lot more now to give exposure to entrepreneurs,” he says, including ways small companies can do business with large recruits such as Chiquita.

Traditional business-supporting organizations such as the Charlotte Regional Partnership and the Charlotte Chamber of Commerce are encouraging and collaborating with the movement that has grown mostly from grassroots.

Keva Walton, a senior vice president at the Charlotte Chamber of Commerce, says the chamber aims to support the burgeoning entrepreneurial community with services while respecting entrepreneurs’ inherent free spirits.

“An organization like the chamber doesn’t necessarily fit with who and what they represent,” he says. “It’s not about the chamber, it’s about the collaborative spirit of building this entrepreneurial ecosystem. How do we make sure there’s a voice in the room for the entrepreneur or the gazelle?

“They’re creating jobs. They’re attracting new creative, innovative people. They’re reusing some of the talent that has been outplaced. They’re part of our overall economic ecosystem.”

 

New Breed in Town

Walton views the current surge of entrepreneurship in the context of a history that includes the founding of such companies as Lance and Family Dollar and the early initiatives of North Carolina National Bank under Hugh McColl to seize the opportunities of banking across state lines.

“Charlotte has always been entrepreneurial,” he says. “Creativity and innovation come together in Charlotte. It’s not that we’re launching. It’s more like we’re re-launching, or causing a greater awareness of who we’ve always been.”

Charlotte, founded at the intersection of Native American trading paths, has always been a commerce center and, beyond its homegrown banking sector, depended mostly on the harnessed power of the Catawba River to attract industry from outside—first textile mills and, thanks to air conditioning, other Northern businesses in the last 40 years.

But with the state’s textile and furniture and tobacco industries decimated by offshoring, financial services hard-hit by the recession, and business recruiting unable to create the needed number of jobs, attention has turned to entrepreneurial startups at an unprecedented level.

Among other things, UNC Charlotte and Central Piedmont Community College are taking greater roles in the entrepreneurship ecosystem.

Renee Hode, director of Central Piedmont’s Institute for Entrepreneurship, says 80 percent of clients are just starting a company while 20 percent are business owners coming for help with new ideas.

“We’re more of the gateway or the entry block for those who are looking at entrepreneurship as a career option,” she says. “They’re looking for opportunities. We work with them in that startup capacity, honing in on opportunity exploration, developing the process of getting their business launched,” often sending them to the next step at the Small Business Technology and Development Center.

Wilhelm says UNC Charlotte has developed 19 Ph.D. programs since it started the Ben Craig Center in 1986 and expects to have 25 within five years.

“We see that our opportunity is to be the urban research university for North Carolina,” he says, with advanced manufacturing, energy, medicine, computing, information security and informatics, including bioinformatics, among leading research topics.

The university spends $30 million on research, part of a total of more than $50 million including its collaborators—a fraction of the more than $1 billion in the Research Triangle Park Area, but an efficient engine that launched five startup companies just this year.

“We’re very oriented to translation and commercialization,” Wilhelm says. “We put a lot of emphasis on licensing the inventions our students and faculty come up with.”

One success is Digital Optics Corporation, started by electrical engineering Professor Michael Feldman to make a cellphone camera component, which sold to Tessera Technologies for some $60 million in 2006 and still operates inCharlotte.

Today, 15 companies, mostly startups or small businesses, work on campus with faculty, staff and students, and construction is underway for a 90,000-square-foot building that will provide room for many more by 2014.

“We’re looking to attract more companies, larger teams of companies,” Wilhelm says.

Yi Deng, dean of the College of Computing and Informatics, says the Charlotte Informatics Partnership aims to create an informatics industry for the region, a leader in the emerging field of big data with application to such fields as business intelligence, business analytics, health care, financial services and energy.

“We’ve been working on that for about three years. Now it’s become a national movement,” he says. “As we’re doing that, it will naturally stimulate the entrepreneurs, the job growth, the business competitiveness.”

The effort could become the core of an informatics cluster that could serve banking and finance, health care and other sectors. Such clusters, gatherings of businesses within an industry, stimulate a multiplying synergy that benefits the gazelle ecosystem.

Keith Luedeman, who founded goodmortgage.com in 1999, recalls when entrepreneurs were largely an underground movement during the dot-com boom—and gun-shy after the bust.

Today, some of them are sharing space in his 44,000-square-foot building, a diverse collection that includes groups working on telecommunications, commercial bond trading, bamboo cloning, and ancillary devises to enhance television watching.

“I’m just giving back to try to help people get to that next stage,” Luedeman says. “Entrepreneurs are kind of built differently. I like working with them. There’s a lot of entrepreneurial activity going on in Charlotte.”

Adam Hill, executive director of the downtown Packard Place center that helps support startup companies, says an informal Charlotte Entrepreneurs’ Alliance formed last year and meets monthly, sometimes with the mayor.

“Charlotte’s really hit a critical mass,” Hill says. “We meet as a group rather than let it explode in any random direction.”

In addition to influencing public policy, the group is raising two funds—one of at least $1 million to assist not-for-profit entrepreneurial support organizations that help foster gazelles and one for-profit fund of $25 million to $100 million to invest in high-growth startup companies.

Dan Roselli and his wife, Sara Garcés, owners of REDF Marketing, CustmerStream, and TargetPoint Consulting, bought the 90,000-square-foot building that became Packard Place in 2010 order to establish an entrepreneurial hub. The 1928 building was available because its owner, a condominium company, went bankrupt in 2008.

“We host probably 100 meetings a year—startup weekends, chamber events, different networking groups,” Hill says, in free event space that can hold up to 300 people. “About 25 percent of the building we made co-share space, functionally similar to incubator.”

Some 20 companies with one to six workers lease offices in the building, where services and infrastructure are shared. The month-to-month rent accommodates fast-growing gazelles that likely will need larger space before completing a long-term lease.

“Within that space we facilitate groups that have different industry focuses,” he says. “It’s a launching point for different incubators.”

Tenants include Queen City Forward, a spinout of Durham’s Bull City Forward for social entrepreneurs; Joules, an energy incubator seeking to add startups to Charlotte’s well-established energy industry; and RevTech Labs, an early-stage tech community.

In addition to the workforce, facilities and financial opportunities, gazelles look for a high quality of life—a feature that makes Charlotte especially attractive, leaders say.

Winn Maddrey, a communications expert and senior consultant at Fleishman-Hillard, says entrepreneurs who can live anywhere are attracted to Charlotte for its lifestyle features.

“With technology, you’re seeing the ability for ‘place’ to be defined,” he says. “You need a warehouse, a little bit of money and an Internet connection, and people can be anywhere they want. “We’re drawing in 20- to 30-somethings and keeping them.

“Most of them came here from what we saw then without a job but coming to an interesting place to work and play. There’s fun stuff to do. You can get to the beach, you can get to the mountains, it costs a lot less than Boston, New York or D.C. It’s a good place to be a 20-something. It’s a good place to raise a family, it’s a good place to start a business.”

More people who already lived here are making the choice for entrepreneurship, he says, giving up the security of stock options and 401(k)s in big banks, utilities or company headquarters to own their dreams.

“I think in the past, people would be like, ‘Why would you do something stupid like that?’” Maddrey says. “I think that mindset has shifted or is shifting. The security that has been attributed to at least the banks here locally—that got shattered in 2008.

“There are people who are going, ‘I did the corporate thing and I appreciate the corporate thing, but there might be other things out there for me. In the last four or five years, a lot’s changed in the Charlotte market.”

“Charlotte has a lot going for it,” Hill agrees. “I chose to move to Charlotteabout two years ago because I thought it was a great place to live and a great place to possibly start a business.”

“You’ll find that most of the hotbeds of entrepreneurial activity are places that people want to live—places that attract the kind of person that is this hot-shot entrepreneur, places where people who are more reactive, more innovative, more fast-moving want to live,” Wetenhall says. “That’s a thing that Charlotte’s got. Lots of people want to be here.”

Jim Van Fleet, a software development expert and chief technology officer at OtherScreen, says Charlotte’s longstanding attractions are attracting entrepreneurs while its entrepreneurial ecosystem is still developing, although the city is already becoming a regional hub.

“So far, it is that kind of migratory culture that Charlotte has overall that is contributing mostly to the kind of gazelle activity that you see,” he says. “A lot of these business are beings started by people who aren’t Charlotte natives, by and large.

“The ecosystem is not about everybody fitting one mold. There’s different things you need in an ecosystem, and sometimes they get combined together in strange ways. There’s a groundswell in this city to build this climate and this ecosystem.”

BizXperts

A common issue faced by business owners is whether an individual should be considered an employee or an independent contractor. As an owner paying for services for the benefit of your business, you may make payments to individuals who are not considered your employees.

A good litmus test and some key factors to determine whether independent contractor status is valid are listed below. But ultimately the question comes back to whether you have the right to direct and control the worker. If the right to direct and control is there, then more than likely you have an employee. The IRS has put forth 20 factor s important to consider in determining employment status. Each of the factors can impact your decision, but the most significant ones are:

 

  • Do you have the right to say where, when and how the worker is to work, and can you require compliance with your instructions?
  • Do you pay the worker’s business and travel expenses, or provide the worker with the tools, materials, and equipment to do his job?

 

If you answered no to the above questions, you may have an independent contractor relationship.

 

  • Do you have the right to discharge the worker without liability?
  • Can the worker hire his own employees, or delegate his work as he deems necessary?

 

If you answered yes to the above questions, you may have an independent contractor relationship.

 

Another consideration is how you pay the individual. If you pay the individual by the job, again when considered in conjunction with the other relevant factors, this may indicate an independent contractor relationship.

These factors are not an absolute determinate of the relationship, but by considering whether you can direct and control the worker, you should be able to determine whether your position is reasonable.

When an independent contractor relationship does exist, and you pay that person $600 or more during the year, you must provide that person with Form 1099-MISC by January 31 following the end of the year, and send a duplicate copy to the IRS by February 28.

In general, you would not provide benefits to a non-employee, and you would not be required to withhold taxes from your payment for services, or pay an employer portion of Social Security and Medicare taxes. The independent contractor would be responsible for the employee and employer portion of social security and Medicare taxes.

That sounds like a good deal, doesn’t it? Then why wouldn’t you treat all your service providers as non-employees and save the costs of benefits and payroll taxes?

First, there are business considerations. Service providers who are not receiving company benefits will generally not be as loyal to your company; those service providers have the flexibility to provide services to other companies that could use their expertise. Additionally, since you do not have the ability to set their daily schedules, you will lose a degree of control over how and when the services you need can and will be provided.

Second, whether a service provider is an employee is a matter of law, based on the facts and circumstances surrounding the relationship—not simply what you call it. The IRS may challenge your determination and you may end up settling with the IRS or defending your position in tax court. The success of your defense will depend on whether the facts indicate an employee or independent contractor relationship.

Third, unless there is a reasonable basis for treating employees as independent contractors, failing to withhold income and employment taxes from their wages can result in severe penalties and interest, in addition to back taxes (federal, state, Social Security, Medicare) owed. Of course, penalties for intentional worker misclassifications are harsher than they are for inadvertent mistakes.

Your benefit plan may also be in jeopardy if any eligible employees have been misclassified as independent contractors since these employees have been excluded from plan participation. The consequences could be that your retirement plan may lose its tax-favored status.

Still confused? You are not alone. This is admittedly a tricky area, and is often an area that is scrutinized by the IRS upon further examination. If you have trouble making a determination or believe you have made the wrong determination, it may be beneficial for you to have a discussion with your attorney or CPA to see what you can do before the IRS comes knocking.

I want to call your attention to a book entitled, “The Coming Jobs War,” by Jim Clifton. Clifton is the chairman of the Gallup polling organization. In that role, he developed the “Gallup World Poll” to give the world’s seven billion citizens a voice in virtually all key global issues. Beginning in 2005, he started focusing on international unemployment. He reports his conclusions in this book.

In his words, “What everyone in the world wants,” more than anything else, “is a good job. Leaders of countries and cities should focus on creating good jobs because as jobs go, so does the fate of their nations. Jobs bring prosperity, peace, and human development—but long-term unemployment ruins lives, cities and countries.”

Let me share some of his thoughts, findings and conclusions with you.

As of 2010, the world’s total gross domestic product (GDP) was about $60 trillion. The United States’ share of that output was about $15 trillion or about 25 percent. Economists predict that the global GDP will grow to an estimated $200 trillion over the next 30 years. So, an additional $140 trillion will be added to current production and consumer spending. The mix of countries contributing to that growth in GDP will likely be determined by the ability of countries to create jobs that will deliver that output.

Economic superiority in the United States has provided substantial moral authority around the world. Only recently, having experienced the Great Recession the last five years, unemployment levels still linger around at 15 million or about 10 percent and there is an equal number of underemployed in the U.S. As a consequence, economic superiority is being questioned, and, as a result, that authority is eroding.

Significant economic growth in China has raised its authority in the world marketplace. China’s GDP is currently at about $6 trillion. It is followed by Japan at $5.3 trillion, Germany at $3.3 trillion, France at $2.5 trillion and the United Kingdom at $2.2 trillion. What matters most in the long term are growth rates.

GDP growth in the U.S. is about 2 percent per year, while China growth rates are averaging 10 percent annually. If that continues, China will vastly exceed the U.S. economy within the next 30 years. When that happens, China will become the new “leader” of the world. That will change the world order.

It is interesting that similar concerns existed 30 years ago when the economies of Japan and Germany were rising dramatically. Economists projected growth rates consistent with their performance at the time and predicted that both Japan and German economies would exceed the United States by 2010. Fortunately, they were wrong. U. S. GDP soared from $3.8 trillion to its current $15 trillion. The U.S. did not fall to third; its GDP grew at nearly five times the forecasted rate and is still number one.

What was not predicted in those numbers was the quantum leap in entrepreneurial growth in the U.S. that surprised everyone. It turns out that classical economics cannot predict the future. Instead, it was American entrepreneurship that successfully capitalized on technology and the Internet, creating millions of new businesses and new jobs and exporting them everywhere.

Now, we seem to be facing a similar challenge and predictions that we will lose the economic race with China. Similar (classical economic) forecasts haveChina exceeding U.S. GDP significantly over the next 30 years.

To stay ahead in the global economy, the U.S. needs a growth rate of 5 percent of GDP annually. We need 5 million new jobs now and another 10 million jobs over the next 5 years.

How can that be accomplished? We need to focus on a new wave of entrepreneurs…people who can take innovations and commercialize them successfully. The U.S. needs to stimulate entrepreneurship just like it has in the past.

Clifton says that the next big breakthrough will come from the combination of the forces within big cities, great universities and powerful local leaders.

Clifton states that jobs can only be created in cities, specifically the country’s top 100 cities. He says the top 100 universities, along with 10,000 local tribal leaders, represent America’s supercollider for job creation.

Last fall, the Charlotte Chamber Entrepreneurial Summit identified the seven Cs they deemed necessary to create a stellar entrepreneurial environment: capital, connectivity, culture, corporations, competitive advantage, clusters and champions.

From the combination of these forces, our strong allies in CPCC and UNC Charlotte, and powerful local leaders, we have the right mix of talent and resources to nurture entrepreneurs and create a supercollider for job creation.

We can be a global hub for entrepreneurship. Let’s get moving!

Publisher's Posts

Galles Communications Group, Inc., publisher of Greater Charlotte Bizmagazine, opened its Charlotte office just 13 years ago over Labor Day weekend in 1999. After getting settled, hiring staff, developing the initial layout and design of the magazine, and preparing a media kit and rate card, we published the first issue in January 2000 and we have published every month since.

Neither rain nor snow—nor 9/11, the dotcom bust, the telecom bust, the War on Terrorism, the collapse of Enron, the collapse of the banking industry, the Great Recession, nor the sluggish recovery of our economy—has kept us from delivering a new magazine with new faces and new stories every month.

Altogether, we have published 153 issues and written over 800 biz profiles. We have been true to our mission: To help business owners learn about each other and about the abundance of business resources in this marketplace. We take tremendous pride in having introduced so many great stories into our business milieu.

Little did we know when we chose Charlotte that we would be among so many people moving here, making it the fastest growing metropolitan area in the first decade of the 21st century. We are proud to have participated in the community’s business success over such an expansive period. With over 110,000 readers each month in our 16-county Charlotte USA region, we have celebrated business growth and development every step of the way.

With this issue, you will notice some changes in Greater Charlotte Bizmagazine. While our mission remains intact, we want to expand it serve as a medium, a sort of agar, for thought leadership within this business community as it strives to survive and prosper in the increasingly globalized marketplace.

Alongside that expansion of our mission, you may notice some formatting changes—paper size and stock, fonts, layouts, etc.—that hopefully will more readily convey the intent of the information being presented. We have been on a quest to determine how to serve our readers better and would welcome hearing from you as you experience these changes.

Most importantly, we want to discuss important topics, trends, issues, themes and ideas that we hope will provoke your thinking and even your action as business owners, managers and executives. Bob Dylan wrote the song, The Times They Are a-Changin’. And the pace of change gets ever more rapid. We want to contribute to the discussion of change in our community. At the same time, we will remain a feature-based publication focused on area business owners and their entities and their business activity.

In this September issue, we are focusing on entrepreneurship. Charlotte has been spoiled by the growth of the textiles, the power companies and the banks. We are fortunate to continue to attract companies seeking to move to a more favorable location.

Much credit is due to the city leaders who have brought us to today. Most importantly, they created the Charlotte Douglas International Airport that puts our city at the center of the East Coast. Under their leadership, the city offers an exceptional quality of life that attracts talent and young people as well as businesses, conventions and professional sports teams. We even have inexpensive, reliable and quality power and electrical generation for all comers.

In October, we will take an inside look at how Charlotte will become a global hub for distribution with high-tech manufacturing and creative ideations at the same time. In November, we will examine the grasp of digital data, how it is mined, collected, analyzed and then applied for greater profits and/or cost savings.

Our changes reflect our determination to engage our readers in  open discussion about what they are thinking and doing to advance their businesses as the world changes every day. We want to take an active role in promoting thought and thought leadership through discourse and debate so that we can learn more from each other and be constructive and synergistic at the same time.

We can learn together. As Dylan’s song concludes,

 

The line it is drawn, the curse it is cast

The slow one now will later be fast

As the present now will later be past

The order is rapidly fadin’

And the first one now will later be last

For the times they are a-changin’.

 

If we are as successful in capturing thought leadership on how to react to and anticipate the changing world around us as Dylan was capturing the social and political upheaval of the ’60s, we will have accomplished our mission to further the survival to thrival of the Charlotte business community.

We offer thanks to all who have contributed to our success in Charlotte and ask that you continue to let us know your thoughts on subjects you think should be discussed.

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Thank you, John Paul Galles