An Economic Impact Analysis of the TCC StartUp Cup About the TCC StartUp Cup Former Mayor Kathy Taylor and an entrepreneurial committee established the Tulsa Entrepreneurial Spirit Award in 2007 to emphasize the importance of local entrepreneurship. This initiative was predicated on the fact that entrepreneurial and smallbusiness ventures account for 82 percent of Tulsa s business community, generating more than $3.1 billion for the local economy each year and comprising more than 55,000 local jobs. The initiative was launched in 2007 by Mayor Kathy Taylor along with Tulsa entrepreneurs and TCC President Dean VanTrease. Originally supported by Spirit Bank, the competition is now in its eighth year and is the TCC StartUp Cup powered by the Lobeck Taylor Family Foundation. The competition is open to any type of business idea, as past winners have included businesses in the service, technology, oil and gas, fitness and health industries. Participants in the competition learn how to turn their idea into a viable business model, go to market quickly, test assumptions and ultimately modify their business model as they move through the competition. The competition is structured as follows: Firstly, the business must have been in operation fewer than five years. While there is no requirement that the business is based in Tulsa, they must agree to expand their operations to Tulsa if they win. If a business satisfies these two requirements, they are eligible to enter their application by the April deadline. Upon doing so, the hundreds of applications are dwindled down to 25 by June. At this point the remaining contestants enter their business plan as well as present a short seven-minute pitch to a panel of judges, who will narrow the competition down to 12 semifinalists by mid-july. Over the next two months, the remaining 12 contestants receive coaching and mentorship from the judges, who assist them in revising their pitch before the next round of presentations in September. After this round, the judges narrow the competition down to 7 finalists, who receive further coaching before their final presentation in November. The final presentation requires that the contestants present their final elevator pitch. Upon doing so, the three winners are announced a few weeks later at the Awards Celebration, which typically occurs during Tulsa Global Entrepreneurship Week. The first, second, and third place winners are awarded $30,000, $5,000, and $2,500 respectively. After seven successful years, it is time to analyze the impact of the competition. At the beginning of the competition there was no question that I had a great product, I just had no idea how to move it. However, the incredible feedback I received from the judges and their personal mentorship throughout the competition was truly invaluable The Galley Sink wouldnʼt be near what it is today if it wasnʼt for the TCC StartUp Cup. Roger Shollmeir, Founder of the Galley Sink
Methodology While the direct impact that the City of Tulsa has experienced as a result of the TCC StartUp Cup s formation is easily quantifiable, the indirect and induced effect of the competition s presence can often be overlooked. The overall social impact that has resulted from the companies involved in the TCC StartUp Cup extends far beyond the individual success of the companies themselves, as their operations can significantly and unknowingly intertwine with a number of other industries at the local level. While these additional effects may seem superfluous in theory, said indirect and induced effects often result in an economic impact greater than 50% of the easily identifiable direct effects. To quantify the indirect and induced economic impact of the presence of the TCC StartUp Cup, we have employed the use of economic multipliers. Multiplier Models are the framework for building impact analysis questions. Derived mathematically, these models estimate the magnitude and distribution of economic impacts, and measure three types of effects. These are the direct, indirect, and induced changes within the economy. Direct effects are determined by the event as defined by the user (i.e. $1 million in company revenue is a $1 million direct effect). The indirect effects are determined by the amount of the direct effect spent within the study region on supplies, services, labor and taxes. Finally the induced effect measures the money that is re-spent in the study area as a result of spending from the indirect effect. Each of these steps recognizes an important leakage from the economic study region spent on purchases outside of the defined area. A questionnaire has been developed based upon the IMPLAN data requirements as well as previous studies that have been conducted using the same format, such as the Kaufmann Foundation study of the total economic impact of alumni entrepreneurs from the Massachusetts Institute of Technology. The data drawn from this questionnaire is primarily concerned with discerning a company s fundraising, revenue, and expense history. These metrics coupled with further information around a company s specific industry, legal structure, and record of employment allow for maximum utilization of the IMPLAN system. Furthermore, the IMPLAN system contains historical data around 445,844 local jobs across 340 industries in Tulsa County. Such data includes historical information around companies salary expenditures, tax expenditures, property expenditures, and more. This historical record of data has enabled us to build models that sufficiently represent the economic impact of all relevant firms that have competed in the TCC StartUp Cup; even that of the individuals and companies that we were unable to come into contact with. Above: TCC President Tom McKeon (left), former Mayor Kathy Taylor (right), and Elizabeth Frame Ellison (3 rd from right) present the CleanNG team with the $30,000 grand prize for the 2013 TCC StartUp Cup The aforementioned questionnaire has been distributed to 46 of the competition s past finalists and experienced a response rate of 74%. A copy of this questionnaire has been provided in the appendix of this report.
TCC StartUp Cup Impact Amount Invested $254,000 Follow-On Investment $11,617,000 300 Full-Time Jobs Created Since 2007, TCC StartUp Cup and Spirit Award Participants Have Created 300 Local Jobs With an Average Annual Income of: $48,847 2X 300 Full-Time 2,000 + Part-Time and Contract All Created in Tulsa Statewide Per Capita Annual Income
TCC StartUp Cup Impact The Competition 656 Startups Applied 84 Startups Coached 21 Cash Recipients The Participants 70% Finalists Still in Operation 71% Prize Winners Still in Operation 86% Champions Still in Operation Companies By The Numbers $14,654,248 Added to Payroll $52,984,760 Direct Economic Impact $85,155,346 Total Economic Impact
For Every Dollar Invested, LTFF Has Generated: TCC StartUp Cup Impact Bang For The Buck $45.74 $208.60 $335.26 In Follow-on Investment In Company Revenue Bang For The Buck In Total Economic Impact Since 2007, no other organization has assisted as many entrepreneurs both locally and statewide
Opportunities For Improvement Over the course of the study, three-dozen entrepreneurs were interviewed either over the phone or in person. Extraordinarily, the competition received positive feedback from 92 percent of the past contestants. Fortunately, we were able to garner a great deal of constructive criticism from the meager 8 percent of past contestants that expressed a negative competition experience. The most commonly cited benefit of the competition was the coaching that the participants received. The majority of the teams involved expressed that the access to quality mentors that the competition has been able to provide over the last seven years has been immensely beneficial. As a result, the most commonly requested change to the competition is that it should place greater emphasis on pairing competing entrepreneurs with coaches and mentors. The solutions proposed consist of: workshops that bring in subject experts, an additional round to the competition that would provide time for additional mentorship, or further coaching sessions beyond the contest to ensure the progress and success of the participants. However, it is important that we do not discount the feedback received by those who expressed a negative experience with the competition. While the individuals who were displeased generally fared well in the competition, they were unhappy with the total amount of time that they committed to the competition, as well as the scope of the competition. These individuals felt that the competition could benefit from fewer rounds and cutoffs, as it would require less time from the entrepreneurs and would provide them with more time to build and develop their companies. Furthermore, the aforementioned individuals expressed skepticism around the competitions openness to early-stage ventures. One participant in particular, who has gone on to raise a significant amount of equity capital since the competition, felt that the competition was geared more towards traditional businesses, and less towards potentially disruptive innovations. To combat this issue, they have suggested that a structure be employed similar to that of the Governor s Cup, a business plan competition for college students in Oklahoma, which divides the competition into a high-growth and smallbusiness division. In addition to the primarily positive feedback that the competition received, we noticed an interesting trend among the past participants. While we expected to receive mixed feedback from the entrepreneurs whose ventures have since failed, that has not been the case. Said individuals were immensely grateful for the presence of the competition, as they felt that the process provided them with the skills and education needed to excel in other future endeavors. Such individuals have gone on to experience tremendous success in the legal, private wealth management, energy, and tech space. Most importantly, all of the described individuals have experienced this newfound success in Tulsa. While the competition can make improvements in a number of areas, most importantly in promoting the development of early-stage ideas as well as providing entrepreneurs with maximum access to support, there is no question that its presence has been widely felt and appreciated by the entire entrepreneurial community in Tulsa.