Lexington, KY - The U. S. economy may be in recession, but entrepreneurship in Lexington is in growth mode.
That's the good news the Lexington Venture Club, supported by an encouraging set of statistics, shared with members at their January 29 annual celebration of entrepreneurs. The special event, entitled "Where Ideas Take Flight," recognizes outstanding entrepreneurial contributions to Lexington.
The organization presented awards to ATMI, Davis Marksbury of Exstream Software, Randall Stevens, Chris Jaynes and Steven Webb of Mersive Technologies and Berkely Lofton and Joe Wyse of Coldstream Labs.
Data compiled by the Venture Club showed a total of more than $68 million invested in entrepreneurial enterprises during 2008, a 7 percent increase over 2007. The 55 early stage companies that received funding produced revenues of $37.8 million, an 18 percent increase over 2007.
There were 230 jobs added during the year, up from 160 the previous year. The total number of full- and part-time jobs was 422 in 2007 and 532 last year. The average salary rose from $61,000 to $65,000.
"More people are following the entrepreneurial impulse now than ever for a list of reasons," said Patrick S. Powell, director of the Lexington Innovation and Commercialization Center (ICC). "When the economy is in recession, people dust off their ideas and rethink them."
Lexington was recently named 13th of the "Best Cities for Riding Out a Recession" by BusinessWeek magazine. For Lexington specifically, BusinessWeek stated, "Lexington, home to dozens of major companies, the University of Kentucky, and horse farms, is a diverse economy with a mix of agriculture, government, health care and education."
Lexington is also among the top 10 most creative small cities, according to the Creativity Index developed by author Richard Florida.
Start-ups may also be attracted to locate in Lexington due to funding availability, Powell said. The Lexington Venture Club is like an extended arm of support, he said, connecting those having good ideas with interested investors.
According to Venture Club statistics, funding for entrepreneurial businesses in 2008 was derived from seven sources: 1) founders/family/friends; 2) state funds; 3) federal funds; 4) angel investors; 5) venture capital; 6) strategic partners; and 7) all other sources.
Started in 2002 through the joint efforts of The Von Allmen Center for Entrepreneurship, The Kentucky Science and Technology Center and Commerce Lexington, The Lexington Venture Club is dedicated to encouraging business and investment opportunities in the region.
Its mission is "to create networking opportunities for investors and entrepreneurs. We seek to continue the development of new business and investment opportunities."
"There are a whole host of services out there to help develop businesses in the Bluegrass," said Gina Greathouse, senior vice president, economic development, for Commerce Lexington. "That's another reason why the number of people starting businesses is up."
Greathouse said that in January 2007, Mayor Jim Newberry recommended an increase in funding to help entrepreneurs. The city has worked to create a supportive climate for new companies to develop, she added.
An important part of that support is also the University of Kentucky and their stated goal to be a "catalyst for growth and development." The Von Allmen Center for entrepreneurship and the Lexington Innovation and Commercialization Center are units of UK's Office for Commercialization and Economic Development. Their purpose is to foster the development of high performance companies and accelerate the commercialization of research at UK.
"It's important to note the (value) of the UK partnership with business development and growth," said Dean E. Harvey, director of the Von Allmen Center. "Many, many companies have started as a result of research that was done at UK."
Mersive Technologies, honored at the event for "Most Money Raised," is among the entrepreneurial startups tracing its roots to UK. Randall Stevens, president and CEO at Mersive, said Chris Jaynes and Steven Webb, while at UK, developed the original technology for the company. The three then formed Mersive and spent two years developing a product based on that technology. Mersive software is used for high-end simulation with customers ranging from Disney to Lockheed.
Mersive's first round of financing in 2006 got the company $1.5 million, Stevens said. In December 2008, it received a second round of $4.6 million. As a result, the company plans to triple its current work force of 10 employees, adding sales, marketing and finance personnel as well as additional engineers.
"Organizations like the Lexington Venture Club are very important," Stevens said. "In addition to helping with investors, they are a resource for all the infrastructure needs, like accountants and attorneys, that entrepreneurs need."
Lexington's ability to fulfill the infrastructure needs of its entrepreneurial community is another reason why start-ups are on the rise.
"One of the wonderful things about Lexington is that we have an incredibl strong sources for helping to handle intellectual property," Powell says. "We have a number of firms that have this expertise, and that makes a difference."
A study entitled "Building High-Tech Entrepreneurship," funded by the Bluegrass Business Development Partnership (BBDP) and the UK Institute for Workplace Innovation (iWin), listed three reasons for the success of start-up companies in the Bluegrass. In addition to acknowledging the importance of proximity to research universities and the support of the business environment in the region, the study also pointed to the high quality of life. Low crime rates, good schools and a low cost of living were mentioned as features that make the region attractive to businesses.
The Venture Club receives a wide range of ideas from entrepreneurs seeking funding, said Greathouse. The proposals have ranged from software to high-tech healthcare devices. They have also included animal products, a monitor for a baby's car seat and a film company. Entrepreneurs range from college students to experienced business executives, she said.
Even with its success, Lexington still needs to develop in some areas in order to attract more entrepreneurs, Harvey said. "We used to say that we lacked money, but now it's better than we knew," he said. "Perhaps one of the greatest needs right now is for experienced managers."
While regional universities have produced excellent business talent, individuals have often been lured out of the area, he noted. "You have to create a critical mass of entrepreneurial companies in an area in order to attract talent for these types of companies," he said.
Lexington is becoming more successful at doing that, Powell added. Even with the economic downturn, the number of people starting businesses is up and there has not been a decrease in the number of investors, he said.
"We are hopeful that Lexington will become the center point for venture capital between Chicago and Atlanta," Powell added. "We are telling a success story - that opportunities are here."