At first glance, a recent study by Emergent Method on the status of Baton Rouge’s entrepreneurial ecosystem could be relegated to the category of tell-me-something-I-didn’t-know.
That’s because the study basically iterates what every local entrepreneur, frustrated failed startup, and economic development professional already knows too well: Baton Rouge’s entrepreneurial “ecosystem” is about as healthy as the water table at a Superfund site, and what resources, programs and institutions do exist in the entrepreneurial “space” are fragmented, inefficient and failing to live up to their potential.
But even though this may not be new news, there are plenty of little devils in the details of the Emergent Method study that make it worth the $50,000 it cost to produce, and well worth a careful read by anyone who cares about the future of the local economy and how public dollars are spent.
The study looked at the two major entrepreneurial entities in the market to determine if they can work more closely together to better serve the entrepreneurial community. They are the Research Park Corporation—the Bon Carré-based nonprofit organization best known for its business incubator, the Louisiana Technology Park—and LSU, which has its own business incubator, the Louisiana Business and Technology Center, at the recently rebranded Innovation Park on Gardere Lane.
The confoundingly similar names of the two incubators, alone, suggests dysfunction and hints at some sort of long-simmering rivalry rooted in the feudal way we do everything in Louisiana.
The study didn’t get into any of that. But its conclusions speak to the problems the siloed system has created, namely:
• The structure of the current ecosystem leads to duplication of services while failing to address service gaps.
• The absence of ecosystem-wide and outcome-oriented performance measures make it difficult to assess success.
• The fragmented nature of the ecosystem results in a disjointed understanding of available resources on the part of entrepreneurs, creating unnecessary and complex challenges.
Again, this is not an epiphany. Since the 1980s, Baton Rouge’s business community has been aware of the pieces missing from this puzzle. Attempts to fill in those gaps led to the creation of the RPC and LSU’s LBTC.
But more than 25 years later, there’s relatively little to show for the time, effort and millions of dollars in public money that have gone to the institutions. As the study points out, over the past two decades, just 170 businesses have graduated from the incubators, 30 from the RPC and 140 from the LBTC. That averages to fewer than seven per year.
To be fair, LSU has made significant improvements in the past five years in licensing its technology, measured by invention disclosures, patent applications files and issued, and licenses executed. But it still lags behind its SEC peers in all categories except one, and there was actually a slight decrease in license income from 2012-2016 that seems to correlate with a nearly 50% decrease in industry-sponsored research at the university.
This was not the case at other SEC institutions, where income from licenses grew during the same period along with expenditures from industry-sponsored research.
A different statistic tells an equally disappointing story. From 2010-2018—an eight-year period that saw healthy economic growth in the region—the number of new startup businesses parishwide decreased by nearly 25% from 2,951 to 2,231.
What are we doing wrong?
Duplicating services and operating inefficiently for one thing, according to the study, which points out that staff expenses at the RPC have averaged 2.5 times its annual operating revenue in both 2016 and 2017. Thankfully, depending on one’s perspective, the RPC is subsidized by the parish hotel-motel tax and a dwindling endowment that was gifted to it by the state many years ago. Were it not for those dollars, the study notes, the combined operating deficit of the RPC and LSU’s entrepreneurial entities would be $4.2 million annually.
Another key ecosystem deficiency, the study notes, is the lack of an active angel investor network. Additionally, we don’t have a formal business accelerator within the ecosystem. But if we’re short on accelerators, we’re long on incubators, compared to peer markets. Besides the LBTC and tech park, Southern University’s Innovation Center also has one, though, as the study gently notes, “It appears to have significant capacity for further defining and building upon this use case,” which is a really nice way of saying it exists in name only.
The study goes beyond pointing out the deficiencies in the ecosystem and lays out a road map for real change. It suggests a joint venture between the two that would allow for better management of expenses across the ecosystem and help attract more paying tenants to better utilize existing facilities. This, in turn, would enhance the financial stability of each organization, thus creating greater certainty in the future of the ecosystem, which would allow more funds to be invested directly into services or assistance for entrepreneurs—which is the way it’s supposed to work, right?
The study even lays out an 18-month timeline with detailed steps of how the two organizations could gradually integrate, collaborate on services, eliminate waste and dedicate resources where they’re most needed.
It’s not just a good idea, it’s an imperative, as the study notes, saying: “As a recipient of public funds directed towards entrepreneurship, both RPC and LSU have an obligation to ensure those funds are utilized with maximum efficiency and effectiveness.”
It would be shame to let this study sit on the shelf. The entrepreneurial community deserves better. So do taxpayers.