Problem: Rural entrepreneurs face substantial disadvantages vis-à-vis those in urban and suburban areas. They have had trouble attracting a skilled workforce, they have had issues with “business building blocks” such as investment capital and broadband, and they have been omitted from key Federal funding designed to spur clusters of innovation.

Rural vs. Urban Entrepreneurship Promotion

Rural areas face different circumstances compared to urban and suburban environments. Rural areas tend to be more constrained in terms of social and physical infrastructure, and to face depopulation, particularly of younger workers who foster innovation and are familiar with technological developments. Like urban areas, some rural residents live in food deserts, but they also face other deserts such as for healthcare, broadband, and affordable quality childcare. In addition, investors are more likely to provide funding for firms in areas they know, which tend to be urban tech centers. Finally, many rural residents are more dependent on the USDA than their urban counterparts, and that agency’s remit does not always allow focus on entrepreneurship, particularly for underserved rural communities.

Policy Recommendations to Strengthen Rural Entrepreneurship

• Business Building Blocks
  • Private Sector Lending
    • Remedy #1: Expand lending into rural areas, building on recent cooperation between USDA and SBDC
    • Remedy #2: Promote rural lending by fostering better functioning of collateral (especially real estate) mechanisms so the “math” behind rural lending works better
  • Broadband
    • Remedy #1: Expand public/private partnerships as was done to promote rural electrification in the previous century
    • Remedy #2: For truly remote areas, consider Federal subsidies towards satellite reception, rather than landline
  • Market Access
    • Remedy #1: Foster linkages between rural areas and suburban/urban markets
    • Remedy #2: Promote links with online or remote service providers such as accountants, lawyers, etc.
  • Sources of equity capital: VCs, PE, angel
    • Remedy #1: Foster regional VC funds (example: Sequoyah fund, which invests in Cherokee-owned businesses in North Carolina)
    • Remedy #2: Leverage or team up with nearby urban clusters receiving NSF funding to promote agglomeration economies (Regional Innovation Engines or NSF “engines”)
  • Entrepreneurs
    • Remedy #1: USDA program to train innovation-minded rural veterans to start businesses
    • Remedy #2: Conduct a survey of rural residents to discern regional variation and suggest remedies for rural business creation barriers (could use current USDA survey infrastructure, but less about crops and more about business education)
    • Remedy #3: Foster community-based innovation centers for traditionally underserved communities

• Labor Market Considerations: Three “deserts”
  • Healthcare
    • Remedy #1: Work with medical associations (AMA, nurses, midwives, etc.) to foster rural healthcare delivery
    • Remedy #2: Foster online healthcare delivery, including broader application of forward-triage, tele-intake, and tele-ICU
    • Remedy #3: Promote regional cooperation to reduce rural hospital closure
  • Child care
    • Remedy #1: Ease licensing requirements for childcare while maintaining quality standards
    • Remedy #2: Federal subsidies for child care centers far from urban agglomerations
  • Nutrition and food
    • Remedy #1: Foster partnerships between local farmers, grocery stores, and farmers markets
    • Remedy #2: Subsidize creation of public/private partnerships and food nonprofits to eliminate retail grocery deserts

• Tweaks to existing government programs
  • Remedy #1: Expand USDA RPIC “placemaking” efforts
  • Remedy #2: Improve SBDC performance in rural areas, such as better use of metrics for rural populations, offer face-to-face consulting for rural SBDC clients, expand SBDC outreach (beyond typical social media marketing towards in-person attendance at rural fairs, markets, and events), expand SBDC training of technologies such as Square and Quickbooks as well training in how to use them, have SBDC foster rural participation in startup accelerators
  • Remedy #3: Amend the Department of Commerce’s $1 billion regional industry clusters effort to promote regional entrepreneurship by setting some money aside for truly rural (sparsely populated) areas as opposed to medium-sized cities