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By Charles McHesney | cmcchesney@cnybj.com
SYRACUSE – Holding a green marker, Nasir Ali makes two strokes to explain how the world works today.
One stroke starts near the left bottom of the white board and rises towards the center. The second starts where the first stopped and curves down towards the bottom right.
It is a pyramid and at the top are the giants of today’s economy, Apple, Amazon, Facebook and Google. At the bottom are thousands and thousands of small startups that hope to be “the next Amazon.”
In between are companies that navigated the obstacles faced by startups. Their annual revenues reach $5 million to $10 million for a broad swath of companies, nearer the bottom than the top.
Moving up are companies that have sales 10 times greater, the pyramid is narrowing.
Above are the businesses that are doing $1 billion in annual sales and the pyramid is very, very narrow.
Ali, co-founder and CEO of Upstate Venture Connect (UVC), says that as companies climb the pyramid they help create workers and managers able to lead in today’s economy. The pyramid narrows as it rises, reflecting that companies disappear, either because they’ve been purchased by someone bigger, or they fail.
But even if companies fail, Ali says, the people within the firms still have the knowledge and skills they built up.
And if a company is sold, then the founders and others granted some ownership, are in a position to spur further growth. That healthy ecosystem gives other entrepreneurs access to capital and to advisers who can help them move beyond the startup phase.
Central New York isn’t there yet, he says, but it is moving in that direction. He points to fast-growing companies such as TCGPlayer.com, Terakeet, SpinCar, and Plowz & Mowz in Syracuse as well AIS in Rome, and Cheri Bundi in Geneva as key prospects for leading the region forward economically.
The goal is no longer to build a company that lasts decades, with factories and skyscrapers, he explains. Instead, fast-growing businesses build capabilities and gain value from the people within — largely college-educated workers.
When the company is bought or fails, what goes away may be the name, but what remains are the skilled workers. “You don’t buy the letterhead,” Ali says. “It’s the people.”
Those workers go forward or split off and add their skills to other companies, other companies that can grow quickly and create more jobs. “People that are working on the staff are totally capable of coming up with the next great thing,” Ali says.
What about those workers who don’t have the skills, education, aptitude, or the resilience to be part of a fast-changing, high-growth company?
There is good news for them, Ali says. High-performing, high-tech companies help drive economies by creating not just high-growth jobs, but what he calls “secondary jobs.” Think of those who work at companies that provide services to high-growth companies — delivery people, for instance. Ali says studies have shown high-growth companies create five secondary jobs for every direct hire while traditional manufacturing businesses only create two secondary jobs per direct hire.
Since 2010, Upstate Venture Connect has been seeking to connect entrepreneurs with resources to build high-growth companies. “We believe the isolation of Upstate communities from each other is a major barrier for startup founders seeking access to advice, talent, connections and early stage investment,” the organization says on its website.
That helps explain why upstate New York, with a population roughly equal to New York City’s, sees only a small fraction of the venture capital. Ali says New York City attracts about $1 billion to $2 billion in venture-capital investment every quarter. All of Upstate, he says, sees less than $50 million during the same period. “We’re basically a decimal point.”
Venture capital is a vital ingredient to high-growth companies, Ali notes. So are entrepreneurs who invest in and advise others. “They engage with other entrepreneurs as they are on the rise,” he says. “They instill a sense of paying it forward.”
Ali adds that while Upstate isn’t there yet, “the trajectory is definitely up.”
A recent survey conducted by UVC found that more than 100 business in the region were building scalable companies, that is, operations that can serve customers nationally or globally.
Survey respondents reported that scalable companies planned to triple their workforces in the next five years, and that most of the jobs they expected to fill would require a college education.
The survey also showed that scalable companies pay much better than those limited to local markets. “Average pay for scalable firms was $66,000 per full time employee (compared to $38,000 for firms with a local customer base),” according to a UVC news release earlier this year.
The prosperity that a successful entrepreneurial economy can create isn’t limited to dollars, Ali adds. Successful entrepreneurs not only invest in other growing businesses, they can help fund museums and symphonies and other social goods, Ali says. They also bring their experience to not-for-profits, creating “social good.”
“Entrepreneurs,” he says, “are our most precious resources.”