What new businesses to chase and why: these are the fundamental questions that confront community leaders and the executives they hire to implement the hunt. Given the slowdown in US-bound direct investment and the reluctance of many companies to add capacity and jobs, there is increasing interest in incubators and accelerators as ways to help prime the entrepreneurial pump. 

Despite political rhetoric, there is also some recognition that the claims about 'small' businesses creating jobs are more appropriately used to describe 'young' businesses. And, while the small and the young may both benefit from some of the same public policies and services, the young need a special array of services to foster their transition from start-up to growth.

Managing expectations, leaders should recognise that early growth does not necessarily mean jobs. When Instagram was sold to Facebook (for about $1bn!), Instagram employed fewer than 20 people. Twitter employs 2000 people, but they are spread among 25 offices around the world.

Dig beneath the payroll numbers, however, and note that the job impact adds up to quite a few more. There are the usual job multipliers – more core jobs lead to more jobs in a local economy, as demand increases for housing, healthcare, retail, entertainment, etc… But, another kind of multiplier is created and hopefully sustained when start-ups launch and begin to grow. This multiplier is reflected in an ecosystem that includes legal, accounting, IT, facility management, PR, investment and commercial banking and whatever other services are procured on an as needed basis – likely with expertise and supervision that delivers more value than a new hire.

So, when assessing an entrepreneurial support strategy, look past payroll to other outlays, especially when these are helping to sustain a local entrepreneurial ecosystem. An incentive based on payroll or investment alone misses the mark.

Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world's leading companies and served in the US public sector as director of White House operations. E-mail: daniel.malachuk@gmail.com