Small entrepreneurial companies spell big success for Kentucky’s economic development
When the Kentucky Cabinet for Economic Development brought a group of Kentucky entrepreneurs together with journalists recently, the room seemed packed to bursting with ingenuity.
The talk was about sending miniature satellites into space (Teton Aerospace in Morehead)…an injectable substance that can serve as an internal brace for horses with injured tendons and ligaments (Equinext LLC of Lexington)…sheets made from moisture-wicking material that can keep even the sweatiest sleeper cool and dry (Wicked Sheets, Louisville).
This isn’t speculation—these are products they have brought or will soon be bringing to market. It’s just one sign of a new emphasis in the state’s economic development efforts.
[pullquote cite=”Joe Lilly” type=”left”]”Kentucky has spent years going after the next buffalo”[/pullquote]
“Kentucky has spent years going after the next buffalo,” says Joe Lilly, executive director of the Office of Research and Public Affairs in the state’s Cabinet for Economic Development. That’s his metaphor for going after large companies, the ones that will bring hundreds of jobs by building a new factory or relocating an existing one.
While Kentucky continues to roll out the red carpet to attract those “buffaloes,” small business is “where a major opportunity exists now, and it’s the same opportunity that can happen in every county in the state,” says Lilly.
Mandy Lambert, commissioner of the state’s Office of Business Development, talks about “creating a culture of entrepreneurship where thousands of small businesses find success on many levels. “Sure, a company that starts here and turns into a Fortune 500 is great, but a small company with 10 employees that is able to double in size thanks to new export markets is also a huge success.”
The following inspiring Kentucky entrepreneurs—carp exporters and technology start-ups—may not be the next Apple, yet they represent the type of business the state is intent on nurturing and are making a vibrant change to the Commonwealth.
Holy carp: exporting Kentucky white fishThe Asian carp is an obnoxious species. Four species, actually—silver carp and bighead carp, which get the most press, and grass and black carp are lumped together under that name.
After escaping from Arkansas fish farms in the 1970s, Asian carp have begun crowding out native fish in the Illinois, Mississippi, Ohio, and other rivers; they’ve also shown up in Lake Barkley and Kentucky Lake. The silver carp also has the annoying habit of jumping into boats uninvited—and at 70 pounds, it can do a lot of harm when it lands. The result is a looming problem for recreational fishing and boating on the lakes—the base of a $1 billion industry, according to Kentucky Fisheries Director Ron Brooks.
Getting rid of Asian carp isn’t just a wildlife management problem, though—it’s also an economic opportunity. Chinese native Angie Yu was running a fish exporting business in Los Angeles, specializing in lumpfish from Iceland and Greenland, when in 2010 she read an article about the Asian carp problem. Americans don’t like to eat the fish: it’s quite bony, and the name makes people think that, like native carp, it’s a bottom-feeder. (It isn’t.) But Yu knew that Asian carp “is very popular in China”—something families can afford, and a popular dish for Chinese New Year. Her investigations led her to Wickliffe, where the Ballard County Economic and Industrial Development Board offered her a building close to the Ohio and Mississippi rivers as well as the lakes.
Terry Simmons, president and CEO of the Ballard County Economic and Industrial Development Board, said his group was impressed with Yu’s entrepreneurial background. Describing her ambition, Simmons says, “She had a mission and she had an objective. And I’ll tell you—sometimes you have to step out of her way.”
Yu invested $2.5 million in the business. She received a healthy assortment of incentives—a $300,000 grant from the Delta Regional Authority; a $253,000 loan from the Paducah Area Com-munity Reuse Organization; and state performance-based tax incentives that could reach as much as $1 million.
In 2013, Two Rivers Fisheries started processing carp, shipping half a million pounds both that year and in 2014. It looks to more than double that with expanded facilities in 2015, and Yu is already shipping to the Middle East, Bangladesh, and Poland as well. The plant employs up to 26 workers for two shifts during their busiest season and purchases fish from 15 groups of commercial fishermen.
Angie Yu markets the asian carp product as “Kentucky white fish.” She says she has yet to turn a profit, though she’s cautiously optimistic. She faces some challenges in the Chinese market: her fish is frozen, not fresh, and the cost of shipping raises the price. But she also has some advantages. Most of the carp sold in China are farmed, while hers are caught wild, in less polluted waters. “We call it the muddy Mississippi, but compared with Chinese waters, it’s real clean,” she says.
The quality of Kentucky carp has attracted another pair of entrepreneurs to Paducah, where they are hoping to market a carp product to Asian communities in American cities. John Crilly and Lan Chi “Lula” Luu were already working with the fish in New Orleans, but they grew dissatisfied with the quality of the local catch, and made contact with commercial fisherman Ronny Hopkins of Ledbetter, Kentucky. His was “the best fish we had seen,” Crilly says—good enough to cause them to make a 20-hour round trip every weekend. They eventually decided it was more practical to move to Kentucky.
Their chief product is a Vietnamese fish paste called Cha ca. It’s a staple, ready-made protein source widely consumed in Vietnamese households. According to Crilly, Luu’s process for making the product is all-natural, whereas imported forms are made with fish parts and use chemicals such as alum and MSG. Last June, they won the state-sponsored entrepreneurial pitch competition at Murray State University, advancing to the finals at the Kentucky Angel Investors Network Summit Meeting in Frankfort. At press time, they were renovating a building in Paducah, scheduled to open before the end of 2014, to be called the FIn Gourmet Store. It will feature their products and sell fish and other foodstuffs.
Appalachian tech, small-town successThe economic problems facing eastern Kentucky have attracted wide attention in recent years, with such bipartisan efforts as Save Our Appalachian Region (SOAR) focusing on the region’s high rates of poverty and unemployment.
One of the solutions, observers say, is to increase entrepreneurial activity in the region.
“I think eastern Kentucky has to have a focus on entrepreneurship, because the core industries just aren’t there, so we’re going to have to create it ourselves,” says Johnathan Gay, director of the Kentucky Innovation Network’s Morehead office.
One entrepreneur who’s found eastern Kentucky hospitable is Mike Bryant, who’s owned a succession of innovative and productive software companies (most recently, Mill Creek Software LLC). Bryant, a native of Jackson in Breathitt County, attended Morehead, and then moved to Atlanta in 1996 while his wife, Maudie, attended pharmacy school. He worked writing software for a number of companies, among them Autotrader.com. When he and his wife wanted to start a family, they wanted to move back to a more “community-oriented, small-town” kind of atmosphere. Also, Bryant had grown up with a father who owned two businesses, so he had dreamed of being his own boss.
When they moved back in 2005, Bryant started looking for software work and found himself going from “making really good money” to earning “virtually zero.” He found resistance from local companies he’d contact: “There’s this perception that ‘Oh, he lives in the same area as me, he must not be able to do it.'” (Now, ironically enough, Bryant has clients from across the country and abroad.)
A turning point came in 2006, when he got a contract to write software for the internal communications system of a local mental health organization. The job required him to write more software than he could by himself, but didn’t pay enough for him to hire others. His work-around was to devise a code-generation software—an application that would generate another software application, essentially creating the same amount of code as the subcontractors he couldn’t afford. Such programs are common now, he says, but they weren’t then. He applied for and received a $25,000 innovation grant from the state to help in commercializing it. As he was getting ready to bring it to market in July 2007, Voice, Video, and Data Systems (VVDS), a now-defunct company out of Elizabethtown, bought the program from him.
When Bryant talks about the choice he made to strike out on his own, he talks most passionately about the lifestyle it’s given him, “I like to wake up in the morning, before anybody else is up, and drink my coffee, read my Bible, and watch the fog rise. That’s a perfect morning for me. I can go fishing in the river pretty much anytime I want.”
“Driving to work, looking at the mountains and watching the leaves change colors—some people only get to do that once a year, when they go to New Hampshire or drive through the mountains.” His voice jumps to a higher, thrilled register: “I get to do that every day!”
Small-cell technology expands broadband
“Broadband remains the great equalizer of our day,” says Brian Mefford. “When there’s quality access to this kind of technology, it really can put a community, a state, on a level playing field to be able to be more competitive.”
Mefford is the CEO of Connected Nation Exchange (CNX), a Bowling Green-based company that wants to play a crucial role in expanding broadband to places that have hitherto gone without it. CNX has created a software platform to map and place a value on the physical assets in a community that would be useful to telecommunications and Internet providers, then serves as a broker between the two sides. Mefford believes this moment is “an inflection point in how networks are built out and expanded.”
One of the key instruments that makes expanding broadband a more feasible, economically affordable proposition is what’s called small-cell technology. Where older equipment was the size of a small vehicle, requiring a large tower to support it, the small cell transponders can be held in your hand. And they can be mounted on any tall structure: water towers, the sides and roofs of buildings, light poles, stoplights, and billboards.
They also can allow an area to serve the increased data demand from mobile devices such as smartphones and tablets. Another asset CNX maps is so-called “dark fiber,” or underutilized fiber optic cable. The company, which had six employees as of fall 2014, has attracted $2 million in start-up capital from private investors, according to Mefford, and is working in a number of communities in multiple states. Mefford says they expect to have 100 employees in five years. An early project was a 2012 expansion of broadband service in Warren County. The company’s latest project was to map and assess the fiber network in Columbus, Ohio, the 15th-largest city in the country, and will be continuing to work with that city.
Kentucky ranks 4th in entrepreneurshipKentucky has made a dramatic improvement in the State Entrepreneurship Index rankings created by economists at the University of Nebraska—a ranking that takes in such measures of business activity as the number of patents per capita and the rate of business formation.In the 2013 survey, we ranked 49th. In 2014, we finished 4th. According to the Bureau of Labor Statistics, in 2013, Kentucky had the greatest percentage growth of any state in the creation of new businesses.
James Nold Jr. from January 2015 Issue John Crilly