November 3, 2011
“Entrepreneurship and its Appearance in Lexington”
It’s a universal constant that for any case, before anything is to be finished, there needs to be starting parameters. There needs to be an allotted time to begin work, the required resources to initiate the business that needs taken care of, a location to base operations for the endeavor. For some, these needs are self-sufficient, but others may be lacking in some of the aforementioned requirements, although time is probably not an issue for most. For the city of Lexington, Kentucky, Awesome Incorporated is where many go to meet those needs and start their own businesses. Awesome Inc. rents out space and develops technology to get smaller businesses on their feet along with advancing their own company through innovations that help the people in the city of Lexington.
From the About page of their website, Awesome Inc. was founded in 2009 and “exists to establish and grow high tech, creative, and entrepreneurial companies and communities. Awesome Inc. serves as a co-working space for creative and technical professionals,” (awesomeinc.org). A lot of the first part has to do with the creative and technological possibilities they host. Awesome Labs, a company that Awesome Inc. owns, exists as a place for undergraduates from the local universities to turn design products for class into things that can benefit societies, while helping them become stronger entrepreneurs through providing a place to work, mentors, and early opportunities to advance future business ventures (awesomelabs.org). Another of their brands is Awesome Touch. AT has provided large format touch screens to many places in the city of Lexington, and reaction has been largely positive. Gina Greathouse, Senior VP of Economic Development, says “The touch screens have been a great asset for downtown Lexington,” (awesometouch.org). For many of their recipients, they have provided nothing but convenience to the public. In the case of the Hilton hotel, it shows what downtown Lexington has to offer, for when they were used in the Alltec Games, they gave information on when and where events were happening, among others. They recently also provided some of this technology to the University of Kentucky. Here, they gave us the AwesomeWhiteboard, which they claim “is a collaborative tool that seamlessly connects students and teachers to the sum of human knowledge now available on the web.”
It is clear that Awesome Inc. has a large amount of influence in the downtown area and it is not something that they are doing by themselves. Right now, there are fifteen total companies; some being brands of Awesome Inc. their selves, the aforementioned Awesome Touch and Awesome Labs, which are renting space to work. Done In Sixty Seconds is one such business. They specialize in video production for a variety of purposes, such as advertising. Another is APAX Software, who focuses on mobile application development, creating an appropriate app for what the customer asks. APAX was actually started at the same time that Awesome Inc., but these are completely separate events according to Accounting Executive Therese Henrickson. These are all rather narrow scopes and it would be difficult for them to otherwise find a place to host their services because of that. This is why Awesome Inc. exists. Their tenants are not large businesses and probably do not need to rent out a whole building to stay in business. abetteroffice is probably the best example of that as their purpose is to provide a way to get people offices in the places they want by acting as a middleman and getting into contact with those whom they can speak to. Not many businesses are going to be able to get a space to their selves if that is their prime focus. I realize that I sound rather critical of them, but I am not trying to be. I am merely saying that without Awesome Inc., these companies would probably still be in the project stage. For those that are successful enough to escape the project phase, they would likely still be struggling to make ends meet because while they aren’t so niche that no one wants their services, they haven’t hit that mark that allows them to be a profitable business. Another possible unfavorable outcome would be being absorbed into a larger business, which defeats the purpose of the entrepreneurial goals that these companies have. While it would not be the worst thing that could happen if things start to fail, this is still not something to be desired unless one was pitching the idea to specifically be absorbed into a larger corporation. However, this is currently of no concern to the firms that are already doing well at Awesome Inc because of the funds they’ve received.
The reason that Awesome Inc can even get these smaller businesses started is that they are a specific type of company. I have mentioned that they provide start ups for these firms, but there is a reason for that. Awesome Inc is a type of investor known as an angel investor. What an angel investor does is invest money from their own funds to smaller companies in order to help them get started. They separate their selves from venture capitalists, who have similar ends, but instead invest money from a pool. Regardless, they aren’t doing this purely out of the goodness of their hearts as they expect a high return on their investment from the firm they just invested in. In fact, most expect to make ten times their original investment over a four to five year period. Although “current ‘best practices’ suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period” (wikipedia.org). Luckily, as a report by William R. Kerr, Josh Lerner, and Antoinette Schoar discovered, angel investments are less likely to lead to failures than other methods of initial financing (Harvard Business School). To summarize, firms that are funded by angel investors are “significantly more likely to survive at least four years and to raise additional financing outside the angel group.” They are also “more likely to show improved venture performance and growth as measured through growth in Web site traffic and Web site rankings. The improvement gains typically range between 30 and 50 percent.” While it isn’t actually stated what those other initial financing options are, two that can probably be assumed are loans from banks or just paying out of pocket, both of which have major drawbacks. Paying their own way is a major risk for them. Failure to make a profit will directly hit the entrepreneur’s personal funds and leaves him or her worried about whom to go to when such an occasion rises. Bank loans are no less forgiving. If the companies fails to make ends meet, not hey can only is it going to be difficult to keep their business open, they have to contend with paying back the loan, which may not be possible if the money they spent outweighs the return the firm gets. That’s even assuming that they are not denied a loan because of business size and age. Angel investing just seems to be the most efficient option, even with the risk because it means that small businesses are guaranteed the funding that they need as well as any other resources like office space.
Mentioned above, angel investors make these investments to get a massive return from the company they pay. Some may argue that this may seem a little unethical, that the larger company is extorting money and getting paid far more than it deserves to. Others may think that the benefits for both the large and small business outweigh many of these hypothetical drawbacks which may not even come into play at all. I believe in the latter statement. Yes, they invest expecting to get a lot more money than they spent starting up this company. However, one should consider that a company suddenly just doesn’t have someone invest in them in order to get them started right from the get go. There are agreements and negotiations that have to be made about what money will go in to the beginning firm and how much will come back to the investor. If the numbers aren’t proportional and fair, there’s very little chance that the contract will be signed with those parameters and it will stay unsigned until a fair agreement is reached. Also, I’ve spoken to Awesome Inc and seen who they host. If they were actually exploiting these smaller businesses, I doubt that so many would be currently renting space there. If they are for whatever reason, then there are some very unhappy entrepreneurs in those offices. They also seem to be well off enough from the business they get from Awesome Labs and Awesome Touch so it’s not as if it were a financial issue on the investors end. The idea that Awesome Inc is actually exploiting these people is laughable at best.
Back to focusing exclusively on Awesome Inc as a standalone group, there’s a question that needs to be asked in regards to their continued success. Why is innovating so integral for Awesome Inc and are they not fine where they are currently at? The answer is yes they are fine in their current economic state, but no, it is not a favorable option to ignore innovation and stagnate. They are doing well right now in terms of success, but that is not a valid reason to plateau their growth. Similar to how Robert Janson argued that America needs to innovate and improve technology in order to stay competitive in the global economy in his article in the International Journal of Productivity & Performance Management (Janson), While I do not know of anyone that they would be in competition with, innovation is a large part of their business and being able to churn out new ways to improve daily life is a good source of income. Imagine if there were no longer any innovation and everyone was up to date on all of the products they could possibly have. Awesome Inc. would lose half of its purpose, relegating itself to space rental and startups for other companies. Since everyone would already have all of Awesome Inc’s brand products, distribution would not be an option either. Pushing beyond what they already have, which in itself is already impressive in terms of the technology they have come up with (see the screens that Awesome Touch has distributed), would allow them to stay relevant in a world that does not stop improving or slow down. To go along with that, one of the founders of the company, Nick Such, describes himself as an entrepreneur. The French economist J.B. Say defined the entrepreneur as someone who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield,” (economist.com). The book Innovation and Entrepreneurship takes that farther, denoting the entrepreneur as someone shifts those resources but does so by providing new satisfactions and demands, using McDonald’s and General Electric as examples of both new and pre-existing enterprises (Drucker). That is what Awesome Inc does. The obvious satisfaction and demand would be tenant space for smaller companies, as few others in the Lexington area do just that. However, this also includes their constant innovations in technology, like the aforementioned screens and other resources they provide through Awesome Labs and the companies they host. Innovation is a strong aspect of their business, one that is vital to its success and continuous growth.
Entrepreneurship is more complex than simply innovating, even though it is a major portion of it. A rather literal definition of an entrepreneur is “The capacity and willingness to undertake conception, organization, and management of a productive venture with all attendant risks, while seeking profit as a reward” (businessdictionary.com). To even begin the journey to become a successful entrepreneur and obtaining that profitable award, according to Therese Hendrickson of APAX Software and Awesome Inc., a focus is necessary. I think where Awesome and APAX have set their focuses are rather solid bases. Awesome focuses on innovating technology and business start ups, as has been exhaustively repeated, and APAX focuses on software, which has been again repeated. Figuring out these focuses is one of the major obstacles that a budding company needs to overcome before it can come into its own. Both Awesome and its brands as well as APAX Software, abetteroffice, Done In Sixty Seconds, and the other entrepreneurial companies took risks to get where they are at today and the fact that they are still in very good business and are not too worried about the future is a testament to their successes.
Awesome Inc. is certainly a large part of what has brought many companies and others success and satisfaction in Lexington. Without them, some of the smaller companies that are renting space there, such as APAX and abetteroffice, would likely not become full-fledged businesses, and instead would either remain in the idea stages or the owners would be working struggling to make ends meet. The students at the University of Kentucky would likely not have the benefits of bringing their projects onto a bigger scale and thus be missing a perfect opportunity to reach early success. Not only that, but many of the goods and services they have provided to the community would clearly not exist. The touch screens that provide so much convenience for the Hilton hotel and the ones that were in use at the Alltec games would be something to be missed. Yet because Awesome Inc. is there, these small businesses can grow, innovate on their own, and become successful ventures. The people who take advantage of the things that they create are benefitting because of what they do. Lexington would likely be different for the worse if this company was not there to provide support.
If you would like to have a little more information on Awesome Inc itself, my partner for this essay, Ryan Clark, has an essay on his blog. It can be found at .
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