1. Startup Appalachia
Accelerating the Entrepreneurial Economies in Appalachia
What is Startup Appalachia?
The Appalachia Funders Network Steering Committee is exploring Startup Appalachia, a framework for
aligning the efforts of grantmakers, businesses, government, and nonprofits around the common purpose of
accelerating the startup and growth of new enterprises in our region. This partnership between theAppalachian
Regional Commission, the Appalachian Funders Network, and USDA Rural Development offers the
opportunity to deepen the alignment of current efforts while leveraging additional federal resources to
accelerate Appalachia‟s entrepreneurial-based economy. The following offers an overview of Startup Appalachia
and the potential influence of this initiative within Appalachia‟s economic transition.
Why an Entrepreneurial Economy?
It has become well accepted that small firms account for the majority of job growth in the U.S. economy.
However, recent research reveals that net job growthis driven not just by small firms, butprimarily by startup
firms.Data show that firms in their first year of operation add an average of 3 million jobs each year, and ten-
year-old firms generate about 300,000 jobs annually.1
Because startups are the drivers of job growth, public policy and programs that support the launch and
expansion of new firms are essential to developing vibrant economies.In his 2010 State of the Union message
President Obama launched a „Startup America‟ initiative, designed to accelerate high-growth entrepreneurship
throughout the nation. This coordinated public/private effort brings together an alliance of innovative
entrepreneurs, corporations, universities, foundations, and other leaders, working in concert with a wide
range of federal agencies to dramatically increase the prevalence and success of America‟s entrepreneurs. The
goals ofStartup America are to increase the number and scale of new high-growth firms that are creating
economic growth, innovation, and quality jobs.2
1
Kane, Tim, The Importance of Startups in Job Creation and Destruction, E. M. Kauffman Foundation, 2010
2
www.startupamericapartnership.org
1

2. Startup Appalachia
Accelerating the Entrepreneurial Economies in Appalachia
Startup Appalachia Background
The partners of Startup Appalachia all view entrepreneurship as a critical element in the establishment of self-
sustaining communities that create jobs, build local wealth, and contribute broadly to economic and
community development. While Appalachia has many outstanding examples of entrepreneurial organizations,
and possesses many entrepreneurial assets, including the self-reliance of its people, it also faces many
challenges. These shortcomings stem from the region‟s longstanding dependence on extractive industries and
branch plant manufacturing, and the presence of many absentee landowners who have exported wealth from
the region. Furthermore, the culture of entrepreneurship is neither broad nor deep throughout the region,
and evidence suggests that there are many gaps in the infrastructure for supporting entrepreneurship, ranging
from technical assistance to development finance. Appalachia has the opportunity to cultivate resourceful
entrepreneurs who not only create value by recognizing and meeting new market opportunities, but who also
attract national attention and resources to the region.
A Beginning Framework
To continue efforts to build entrepreneurial ecosystems in Appalachia, the Appalachian Regional
Commission, the Appalachian Funders Network, and USDA-Rural Development are engaged in strategic
discussions to develop Startup Appalachia, an effort to link public and private partners for the purpose of
accelerating the startup and growth of new enterprises in the Region. Startup Appalachia isn‟t a new project,
but a framework for stimulating new investment and aligning our collective, yet independent, efforts around a
common set of promising sectors and critical entrepreneurial supports.The Startup framework focuses
around the following areas:
(1.) Food Systems and Entrepreneurship: Appalachia‟s agricultural and food-related assets provide a
foundation on which local communities can build sustainable economic development efforts. Reflecting
regional and national trends, sustainable food system development links many of the Region‟s strengths to the
growing demand for local, healthy, safe food that supports the economies of those who produce it.
Investments will support the expansion of the local Food Systems infrastructure and the provision of
technical assistance to farmers, processors and packagers, marketing efforts, and non-profits throughout the
Region.
(2.) Energy and Entrepreneurship: Appalachia and energy have been closely linked throughout the history
of the nation, from the first discovery and production of oil, to the mining of coal to fuel our industrial
growth, to the development of hydropower to bring prosperity and progress to remote rural communities. By
using its full range of energy resources and staying at the forefront of emerging energy technologies and
practices, the Region has the potential to increase the supply of locallyproduced clean energy, and create and
retain jobs. Support for renewable energy and energy efficiency projects will be provided.
(3.) Health Care: Health Care is a significant industry in Appalachia with opportunities for growing
enterprises and jobs ranging from primary care and hospital services, to the provision of elder care and child
care, mental health and substance abuse treatment, physical and occupational therapies, and dental practices.
These areas of practice are underrepresented throughout Central Appalachia while demand for these services
remains high.
2

3. Startup Appalachia
Accelerating the Entrepreneurial Economies in Appalachia
Examples of Success
The implementation of Startup Appalachia could be modeled after the following successful initiatives.
Appalachian Sustainable Development (ASD), VA
Overview: Between 1999 and 2000 ASD started the Appalachian Harvest social enterprise with the purpose
of aggregating certified organic produce from small Appalachian farmers and selling and distributing it to
regional grocery chains. The initial goal of the enterprise was to provide tobacco farmers with a replacement
crop once subsidies were no longer an option. Now in its 13th season, the enterprise has expanded to include
conventional as well as organic farmers, reaching $1.1M in sales in 2011.
Though the level of subsidies this enterprise requires has dropped dramatically over the last 3 years, it still
requires financial support. Some aspects of the business, such as training new farmers, helping to convert
conventional farmers to organic practices, and helping all farmers to obtain Good Agricultural Practices
(GAP) certification are unlikely to ever be profitable and will have to be treated as nonprofit (not business)
activities, requiring long term financial subsidies.
Funding Partnerships: ASD was able to obtain funding from a wide variety of sources to support
Appalachian Harvest. Funding in excess of $2 million was used for a combination of capital/infrastructure
and operational support. Funders included: Appalachian Regional Commission, blue moon fund, State of
Virginia, Ford Foundation, Mary Reynolds Babcock Foundation, USDA, and private firms.
Impact of Partnerships: Without funding from all of these sources, the Appalachian Harvest enterprise
would not have been possible, as private investment would most likely not have been available (or been
prohibitively expensive). The combination of funding has served to keep the organization and the
Appalachian Harvest enterprise operational. However there have been times when obtaining operating
support was extremely difficult. ASD has also experienced “funder fatigue” due to the length of time it has
taken the Appalachian Harvest enterprise to become self-sufficient. Unfortunately, rural projects such as
Appalachian Harvest often take a long time to reach maturity and, in the case of a social enterprise, self-
sufficiency.
ASD believes that funders and grantees can collaborate to build strategic plans for long term funding
partnerships. Longer term funding helps NGO‟s to focus on making strides in their work, and not on
fundraising.
Mountain Association for Community Economic Development (MACED), KY
Overview: MACED‟s Energy Efficient Enterprises (E3) program promotes commercial energy efficiency
retrofits in rural Appalachian businesses and enterprises, particularly in eastern Kentucky, that result in
meaningful cash flow savings to the business and create employment opportunities. MACED has a multi-
strategy clean energy value-chain effort that includes commercial energy retrofits (E3), a residential energy
efficiency pilot program, in partnership with four rural electric cooperatives (How$mart KY), and the
advancement of a state-based energy policy. MACED provides energy technical assistance, audit support and
access to financing, and over the last two years has been directly involved in 53 commercial or public
retrofits.
Funding Partnerships: The E3 program has received financial support from: The Appalachian Regional
Commission, Ford Foundation, Mary Reynolds Babcock Foundation, Mertz Gilmore Foundation, Surdna
Foundation, and the U.S. Small Business Administration. Direct grants for the E3 program have been as
large as $75,000, with parts of other large multi-strategy grants going to support this work as well. Generally,
these funding sources share the desire to see meaningful economic impact as a result of their efforts.
3

4. Startup Appalachia
Accelerating the Entrepreneurial Economies in Appalachia
Impact of Partnerships: Partnership for the delivery of EE services is critical, particularly in rural
communities. To help business owners and individuals make good decisions, a series of pieces need to be in
place—audit expertise, affordable capital, easy repayment methods, link to contractors and installers and data
tracking. In particular, partnering with utilities allows access to bills, both before retrofits and after retrofits,
to track the results of these efforts.
Even more important than partnerships is when utilities recognize that EE is the least expensive kilowatt-
hour possible. Good regulatory policy is key to ensure that utilities can look at EE as a form of meeting their
basic purpose—providing or ensuring adequate utility service. MACED, the State, and the communities they
serve - have to figure out the best form of partnerships able to make EE easy and scalable, and promote
regulatory reform that allows utilities to be key partners in the expansion of EE efforts.
Natural Capital Investment Fund (NCIF), WV
Overview: The Natural Capital Investment Fund‟s Small Business Energy Loan Program provides technical
assistance and capital to help small businesses implement energy efficiency related best management practices
and green building technologies. Free energy audits are available to help companies identify and quantify
potential energy efficiency savings. To date, NCIF has facilitated energy audits for 24 small businesses and
provided technical assistance and financing for the installation of solar PV systems, energy efficiency retrofits
for grocery stores, a dental office, a green office building, and a solar thermal and PV system design and
installers; as well as local food and meat producers.
Funding Partnerships: The program was launched with the support of the Appalachian Regional
Commission, Claude Worthington Benedum Foundation and U.S. Department of Agriculture. NCIF has
recently received funding from the JP Morgan Chase Foundation and the State of West Virginia.
Impact of Partnerships: One example of an enterprise supported by the partnership is the Salem IGA
grocery. The owner of the Salem IGA was referred to NCIF in late 2010 as a potential energy audit candidate.
NCIF arranged for an energy audit by the West Virginia Manufacturing Extension Partnership (WVMEP).
The cost of the energy audit was covered by a USDA REAP grant. Following the audit, NCIF met with the
owner to review the audit recommendations and discuss next steps (including a review of applicable cost
share and rebate programs). The Salem IGA was eligible for the USDA‟s 25% cost share program. NCIF
staff prepared and submitted a REAP application on behalf of the business to the WV office of the USDA.
Once the application was approved, the business submitted a loan request for $32,000 to upgrade all
overhead lighting fixtures. The loan was approved and closed in 2011. The USDA verified the project was
completed as proposed in October 2011 and disbursed the 25% cost share grant in early 2012.
Program challenges include:
 Limited marketing and outreach support from project partners. All requests to date for energy audits
have been generated by NCIF staff or bank partners. None of the primary project partners actively
promote the program to small businesses.
 Limited capacity of program partners to scale up energy audit services. NCIF currently has over 15
pending energy audit requests but partners can only handle 1 audit per month. NCIF is currently
looking for additional qualified audit providers to meet the growing demand.
Scaling Opportunities: To take this project to the next level, development and implementation of a
statewide campaign raising the awareness of savings from energy efficiency related investment is needed.
Some of the needed features of a statewide program include: additional energy audit service providers with
sector experience; additional resources for marketing and development of targeted educational materials; and
additional resources to provide one-on-one technical assistance to help businesses.
4