Iowa Public Television

 

John Pappajohn on Iowa's Economic Climate

posted on June 3, 2004

FROM THE STUDIOS OF IOWA PUBLIC TELEVISION, THIS IS "IMAGINE IOWA: A CONVERSATION WITH DAVID YEPSEN." THIS EVENING'S GUEST IS VENTURE CAPITALIST JOHN PAPPAJOHN. HERE IS "DES MOINES REGISTER" POLITICAL COLUMNIST DAVID YEPSEN.

Yepsen: HELLO, I'M DAVID YEPSEN. FOR THE LAST THREE EVENINGS, WE'VE BEEN EXPLORING THE PROSPECTS FOR IOWA'S FUTURE FROM DIFFERENT VANTAGE POINTS. MONDAY WE LOOKED AT THE STATE'S ENERGY AND COMMUNICATIONS INFRASTRUCTURE. TUESDAY WE EXAMINED INNOVATIONS IN LOCAL GOVERNMENT. LAST NIGHT THE FOCUS WAS ON THE POTENTIAL OF THE STATE'S AG ECONOMY AND ITS RURAL COMMUNITIES. AND TONIGHT WE'LL EXAMINE THE ECONOMIC CLIMATE IN WHICH ALL THESE SECTORS MUST FUNCTION. BUT FIRST, MORGAN HALGREN PROVIDES THIS PROFILE WITH AN EFFORT TO GENERATE AN ELUSIVE MARKET FORCE THAT CAN ALTER AND ENHANCE THE IOWA ECONOMY.

Carter: IF YOU LOOK AT THE HISTORY OF THE STATE, IN REALITY IOWA WAS BUILT ON ENTREPRENEURSHIP. BUT IF YOU LOOK AT MEASURES OF THE ECONOMY TODAY, PERFORMANCE OF THE ENTREPRENEURIAL SECTOR, IOWA LAGS BEHIND THE UNITED STATES SIGNIFICANTLY.

Halgren: ACCORDING TO THE PROGRESSIVE POLICY INSTITUTE, IOWA RANKS 42ND OUT OF 49 STATES IN TERMS OF THE AMOUNT OF VENTURE CAPITAL IT INVESTED AS A PERCENTAGE OF GROSS STATE PRODUCT. SEEKING TO REVERSE THAT TREND IS THE IOWA STATE UNIVERSITY PAPPAJOHN CENTER'S MISSION. IOWAN AND VENTURE CAPITALIST JOHN PAPPAJOHN HELPED FINANCE FIVE ENTREPRENEURSHIP CENTERS THROUGHOUT THE STATE. IN ADDITION TO IOWA STATE, CENTERS OPERATE AT THE UNIVERSITY OF IOWA, UNIVERSITY OF NORTHERN IOWA, DRAKE, AND NORTH IOWA AREA COMMUNITY COLLEGE. THE CENTER HOPES TO INCREASE THE ENTREPRENEURIAL CAPACITY OF THE STATE BY PROVIDING ASSISTANCE TO NEW BUSINESSES AND EDUCATIONAL OPPORTUNITIES FOR STUDENTS. THE GOAL IS TO DEVELOP A NEW GENERATION OF ENTREPRENEURS. THE PAPPAJOHN CENTER ALSO PROVIDES STUDENTS OPPORTUNITIES WITHIN NEW VENTURES. THE CENTER PLACES STUDENTS AS INTERNS WITH START-UP COMPANIES. THE EFFORT HELPS THE NEW BUSINESS, AND THE EXPERIENCE OF WORKING ON THE GROUND FLOOR OF A START-UP IS INVALUABLE TO THE ENTREPRENEURIAL INTERN. FOR EXAMPLE, STUDENTS ARE FINDING OPPORTUNITIES THROUGH INTERNSHIPS AT PROPLANNER, A PROCESS ENGINEERING SOFTWARE COMPANY. PROPLANNER HAS GROWN FROM JUST TWO EMPLOYEES TO TWENTY SINCE IT BEGAN IN 2002. A SUCCESSFUL ENTREPRENEUR, PROPLANNER PRESIDENT DAVE SLY SOLD HIS FIRST BUSINESS, SIMM TECHNOLOGIES, FOR $6.5 MILLION IN 1997. DAVE IS ALSO AN ADJUNCT LECTURER AT IOWA STATE UNIVERSITY. AS PART OF ITS EFFORT TO CREATE A CLIMATE CONDUCIVE TO THE FUTURE GROWTH OF NEW BUSINESSES, THE PAPPAJOHN CENTER IS SEEKING TO CULTIVATE A YOUNGER GENERATION OF ENTREPRENEURS. SIXTH GRADERS AT GILBERT ELEMENTARY SCHOOL ARE CREATING THEIR OWN BUSINESSES.

Eyles: YOUTH MARKETPLACE PROGRAM IS ONE OF THE FIRST PROGRAMS WE HAVE FOR A YOUNG ENTREPRENEUR. WE TEACH THEM ABOUT WHAT AN ENTREPRENEUR IS AND WHAT THEY DO, WHAT IT'S LIKE TO DEAL WITH RISKS STARTING A COMPANY, CREATING SOMETHING FROM SCRATCH, AND THEN SELLING AT A PROFIT.

Halgren: THE GILBERT STUDENT ENTREPRENEURS WRITE BUSINESS PLANS, TAKE OUT LOANS FROM U.S. BANK, AND WILL SELL THE PRODUCTS THEY MAKE ON MARKETPLACE DAY AT NORTH GRAND MALL IN AMES. AFTER PAYING BACK THEIR LOANS WITH INTEREST, STUDENTS WILL GET TO KEEP THE PROFITS FROM THEIR SALES.

Byriel: I CAN MAKE MY OWN BUSINESS. I CAN GO OUT INTO THE WORLD AND JUST START SOMETHING.

Yepsen: GOING INTO THE WORLD AND JUST STARTING SOMETHING IS PRETTY MUCH WHAT OUR GUEST THIS EVENING HAS BEEN DOING FOR MOST OF HIS LIFE. JOHN PAPPAJOHN IS IOWA'S MOST PROMINENT VENTURE CAPITALIST. HE'S HELPED LAUNCH SCORES OF COMPANIES. AND IN RECENT YEARS, AS WE'VE JUST SEEN, HE HAS TAKEN ON THE CHALLENGE OF GROWING A NEW GENERATION OF ENTREPRENEURS. MR. PAPPAJOHN, WELCOME. THANKS FOR BEING WITH US.

Pappajohn: THANK YOU. THANK YOU, DAVID.

Yepsen: YOU ONCE SAID THAT YOUR DREAM WAS TO MAKE IOWA THE MOST ENTREPRENEURIAL STATE IN THE COUNTRY. WHAT MORE DO WE NEED TO DO TO MAKE THAT HAPPEN?

Pappajohn: WELL, I THINK THE PROCESS IS ONGOING AT THE PRESENT TIME. WHEN MY WIFE AND I FINANCED THE ENTREPRENEURIAL CENTERS, THAT WAS THE BEGINNING. I THINK IT TOOK A LITTLE SEED CAPITAL. AND YOU HAVE TO CHANGE THE MIND-SET, AND I BELIEVE THAT THE PROGRAMS THAT ARE GOING ON AT THIS TIME IS DOING THAT. I THINK THAT I SAW A RECENT STATISTIC THAT WE HAVE TRAINED NOW OVER 35,000 STUDENTS THAT HAVE TAKEN ENTREPRENEURIAL COURSES AT THE FIVE INSTITUTIONS, WHICH TEACHES THEM SOME BASIC FUNDAMENTALS ON HOW TO RUN A BUSINESS AND WHAT TO DO AND WHAT NOT TO DO.

Yepsen: WHAT IS THE MIND-SET WE NEED TO CHANGE?

Pappajohn: PMA... POSITIVE MENTAL ATTITUDE. EVERYBODY HAS TO BELIEVE THAT THEY CAN DO SOMETHING GREATER THAN WHAT'S SITTING IN FRONT OF THEM AT THE TABLE. A POSITIVE MENTAL ATTITUDE AND A CULTURE COMES WITH IT.

Yepsen: WHAT IS AN ENTREPRENEUR?

Pappajohn: A ENTREPRENEUR IS A PERSON WHO IS WILLING TO TAKE RISK, WHO IS WILLING TO WORK HARDER THAN HIS FRIENDS AND ASSOCIATES, AND WHO WANTS TO REACH OUT TO ESTABLISH A VERY SUCCESSFUL LIFE AND CAREER AND "MAKE MONEY." HE OR SHE WANTS TO BE SUCCESSFUL, AND THEY ARE WILLING TO PAY THE PRICE.

Yepsen: WHY DON'T WE HAVE A MORE ENTREPRENEURIAL CULTURE IN IOWA? DO WE NOT TOLERATE FAILURE SO WE DON'T TAKE RISKS? WHAT'S OUR PROBLEM HERE IN IOWA?

Pappajohn: WELL, I GO BACK TO -- MY FIRST ENTREPRENEURIAL COMMERCIAL VENTURE WAS THE GUARDSMAN LIFE, WHICH I STARTED IN 1962, WHICH IS FORTY-TWO YEARS AGO. AT THAT TIME THE ENTREPRENEURIAL SPIRIT WAS REALLY QUITE GOOD, BUT I WENT THROUGH A SERIES -- WE WENT THROUGH THE FARM RECESSION. WE WENT THROUGH A SERIES WHERE THE MEDIA WERE NEGATIVE, AND IT AFFECTS THE MIND OF THE PEOPLE THAT READ AND TALK ABOUT THIS AS A RESULT. IT TAKES A WHILE FOR US TO GET MORE POSITIVE, AND I THINK THE ENTREPRENEURIAL SPIRIT AT THIS TIME IS AS GOOD AS IT HAS EVER BEEN. WE ARE NOW ON OUR WAY.

Yepsen: WHAT DO YOU SAY? YOU'VE TAKEN A LOT OF RISKS IN YOUR LIFE. YOU'VE HAD SUCCESS. YOU'VE ALSO HAD SOME FAILURES. WHAT DO YOU SAY WHEN A DEAL GOES BAD?

Pappajohn: WELL, IT'S PART OF MY BUSINESS RISK. AND YOU KNOW, WE QUANTIFY -- WE THINK WE CAN QUANTIFY THERE'S A RISK/REWARD RATIO. WHEN WE'RE WRONG, WE MADE A MISTAKE; AND WHEN WE'RE RIGHT, WE THINK WE'RE SMART. SO THAT'S THE DIFFERENCE.

Yepsen: TELL US A LITTLE BIT MORE ABOUT THESE ENTREPRENEURIAL CENTERS THAT MORGAN MENTIONED IN THE SETUP PIECE. HOW ARE THEY WORKING? WHAT ARE SOME OF THE RESULTS? I KNOW YOU'VE STARTED A HIGHER EDUCATION CENTER IN DOWNTOWN DES MOINES. WHAT'S THAT ALL ABOUT?

Pappajohn: WELL, EACH ONE OF THE SCHOOLS, ONE OF THE -- WHEN WE GIVE THEM MONEY, MY WIFE AND I GIVE THEM A MILLION DOLLARS A YEAR. AND WE HAVE NO CONDITIONS BECAUSE EACH OF THE SCHOOLS OPERATES A LITTLE DIFFERENTLY, AND I'LL START WITH, LET'S SAY, IOWA STATE UNIVERSITY. IT'S ONE OF THE TOP FIVE ENTREPRENEURIAL CENTERS, IN MY OPINION, IN AMERICA. THEY HAVE A FABULOUS INCUBATOR. THEY HAVE A WONDERFUL MANAGEMENT TEAM WITH STEVE CARTER, JUDI EYLES. THEY'VE STARTED OVER 50 BUSINESSES THERE, AND THEY HAVE WONDERFUL TECHNOLOGY. SO WHAT HAS HAPPENED IS THEY'VE BEEN ABLE TO TAKE AN IDEA, INCUBATE IT, HELP BRING IT TO THE NEXT LEVEL, BRING IN SOME RISK CAPITAL, AND MANY OF THESE COMPANIES HAVE GONE OUT AND HAVE SUCCEEDED. UNIVERSITY OF IOWA RECENTLY WON AN AWARD AS THE TOP ENTREPRENEURIAL TEACHING INSTITUTION IN AMERICA. THEY WERE PICKED BY THE NATIONAL COMMITTEE AS NUMBER ONE TEACHING. THAT'S TEACHING... AND THERE'S A DIFFERENCE THERE. UNI, THE UNIVERSITY OF NORTHERN IOWA, WHICH DOES NOT HAVE A LOT OF TECHNOLOGY, IS DOING A WONDERFUL JOB NOW. THEY'RE WORKING WITH SMALL BUSINESSES AND THEY'VE JUST RECENTLY RAISED A MILLION, I THINK, FIVE HUNDRED THOUSAND VENTURE FUND OF THEIR OWN THAT THEY CAN HELP SUPPORT THEIR OWN BUSINESSES THAT THEY START THAT COME RIGHT OUT OF THE COLLEGE, OUT OF THE UNIVERSITY.

Yepsen: WHAT ARE YOU DOING AT THE DES MOINES CENTER?

Pappajohn: WELL, WE'RE BUILDING A NEW HIGHER EDUCATION CENTER, MY WIFE AND I. AND IT'S GOING TO BE A CENTER THAT IS GOING TO EDUCATE THE PUBLIC. WE'RE GOING TO TEACH CLASSES FROM BEGINNING ENGLISH FOR IMMIGRANTS ALL THE WAY TO MBA -- IOWA STATE IS GOING TO HAVE THEIR OUTREACH BUSINESS MBA PROGRAM IN THE CENTER. WE'LL BE DOING SOME Ph.D. COURSES. MY DREAM THERE IS WE'LL START OUT WITH ENTREPRENEURIAL COURSES, AND WE'LL TRY TO BLEND AND TELL PEOPLE TAKE THE POSITIVE APPROACH, POSITIVE MENTAL ATTITUDE. YOU CAN DO IT. WE'LL HELP YOU THROUGH COURSES AND WE'LL HELP YOU WITH ASSIST. AND WE'RE EVEN TALKING, AS SOON AS OUR CENTER BECOMES POSITIVE CASH FLOW, WE'VE ALREADY TALKED TO THE ARCHITECTS ABOUT BUILDING AN ADDITION WHICH WOULD BE BIGGER THAN OUR CENTER. AND IN THAT ADDITION, IT IS MY IDEA THAT WE WOULD PERHAPS BUILD AN INCUBATOR THERE SO WE CAN START BUSINESSES AND TAKE MANY EVEN OF THE IMMIGRANTS, ONCE THEY LEARN THE LANGUAGE, TO HELP THEM GET TO THE NEXT LEVEL.

Yepsen: MR. PAPPAJOHN, YOUR PERSONAL STORY IS ONE THAT STRIKES ME AS ONE THAT A LOT OF IOWANS COULD LEARN FROM. TELL ME A LITTLE BIT ABOUT YOURSELF AND HOW YOU CAME TO BECOME AN IOWAN.

Pappajohn: I WAS BORN IN GREECE. MY FATHER WENT TO GREECE. HE WANTED TO GET MARRIED. THEY LINED UP 20 GIRLS IN HIS HOMETOWN, AND HE PICKED MY MOTHER OUT OF A LINEUP. HE WAS MARRIED IN A MONTH, PREGNANT IN THE FIRST MONTH -- THAT WAS ME. I WAS BORN THERE. MY FATHER CAME BACK; HE HAD A LITTLE CORNER GROCERY STORE. AND MY MOTHER AND I CAME OVER TO THE STATES WHEN I WAS NINE MONTHS OLD. I WAS CITIZEN BY BIRTH BECAUSE MY FATHER WAS A U.S. CITIZEN. I'VE ALWAYS BEEN AN ENTREPRENEUR. I GREW UP IN A VERY MELTING POT NEIGHBORHOOD.

Yepsen: IN MASON CITY.

Pappajohn: IN MASON CITY, IOWA. WE HAD ALL THE AFRICAN-AMERICANS, THE HISPANICS, RUSSIANS, SERBIANS, GREEKS. WE ALL LEARNED TO GET ALONG VERY WELL. IT WAS A WONDERFUL LEARNING EXPERIENCE. AND I'M OLD ENOUGH, I GREW UP IN THE DEPRESSION AND I REMEMBER WELL THE TOUGH TIMES. WE HAD PEOPLE THAT WOULD COME TO OUR STORE TO STEAL A POTATO OR AN ONION TO EAT. AS A RESULT, YOU KNOW, YOU GAIN SOMETHING FROM THAT. BUT I'VE ALWAYS BEEN AN ENTREPRENEUR. I STARTED OUT, I WAS A RAG COLLECTOR. I DID EVERYTHING TO MAKE MONEY. I THINK I'VE BEEN INDEPENDENT ALL MY LIFE. AND WHEN I GRADUATED FROM IOWA, I NEVER INTERVIEWED FOR A JOB. I ALWAYS WANTED TO WORK FOR MYSELF, SO THAT'S SOMETHING THAT WAS JUST ENGRAINED IN ME.

Yepsen: I READ WHERE AS A TEEN-AGER IN 1930, YOU WOULD GO AROUND THE SCRAPYARDS OF MASON CITY PICKING UP METAL SCRAP AND SELLING IT AND MADE A DOLLAR A DAY.

Pappajohn: THAT'S RIGHT. I WAS TOLD BY THE JUNK DEALER THAT I WAS HIS BEST CUSTOMER.

Yepsen: DID THE FACT YOU'RE AN IMMIGRANT -- SORT OF, OF GREEK ANCESTRY, DID THAT MEAN YOU HAD TO HUSTLE MORE HERE IN IOWA?

Pappajohn: WELL, I'LL MAKE THE STATEMENT, DAVID, THAT ADVERSITY IS A BLESSING IN DISGUISE. THE PROBLEM TODAY IS THAT MANY OF THE YOUNG PEOPLE, IT'S JUST TOO EASY. IF YOU NOTICE, MANY OF THE IMMIGRANTS THAT ARE COMING IN, THEY'RE JUST DOING TERRIFIC. THEY WORK HARD, THEY WORK AS A FAMILY UNIT. THEY'RE ENTREPRENEURIAL. I GO TO THE FARMERS MARKET AND I SEE THESE FAMILIES, ASIAN FAMILIES, THEY ALL WORK TOGETHER AND, YOU KNOW WHAT, BECAUSE THEY HAVE TO. AND THAT'S WHY ADVERSITY IS A BLESSING IN DISGUISE.

Yepsen: YOU KNOW, ONE THING I NOTICE YOU'VE DONE IS INVEST A LOT IN ENGLISH TRAINING LANGUAGE FOR LATINOS. AND I'VE HEARD YOU TALK ABOUT YOUR MOTHER HAVING TO LEARN ENGLISH IN HER MIDDLE AGE BECAUSE YOUR FATHER PASSED AWAY. TELL US ABOUT THAT.

Pappajohn: WELL, MY FATHER DIED WHEN I WAS SIXTEEN YEARS OLD, AND I HAD TWO YOUNGER BROTHERS. MY MOTHER COULD NOT SPEAK ENGLISH. AS A RESULT, SHE HAD TO GO TO ENGLISH SCHOOL TO LEARN THE LANGUAGE. AND I MIGHT ADD THAT I'M PROBABLY THE ONLY PERSON YOU'VE INTERVIEWED, I HAD TO GO TO KINDERGARTEN FOR TWO YEARS BECAUSE I COULD ONLY SPEAK GREEK. WE ONLY SPOKE GREEK IN OUR FAMILY. AS A RESULT, YOU KNOW, I CAN RELATE TO THOSE PEOPLE, AND THAT'S WHY WE HAVE TO HELP THEM LEARN THE LANGUAGE, SO THEY CAN GO OUT AND DO BETTER IN THE REAL WORLD.

Yepsen: DO YOU THINK THAT THIS STATE SPENDS ENOUGH ON ENGLISH LANGUAGE TRAINING, OR DO WE NEED TO BE DOING MORE?

Pappajohn: I DON'T KNOW WHAT THE STATISTICS ARE, BUT THE POINT IS I THINK WE HAVE AN OBLIGATION TO HELP TRAIN AND TEACH THOSE PEOPLE TO BECOME SELF-SUFFICIENT.

Yepsen: A LOT OF PEOPLE ARE CONCERNED THAT WE HAVE TOO MANY IMMIGRANTS IN IOWA TODAY, THAT THEY'RE COMING IN WAVES THAT ARE FAR LARGER THAN THE WAVE YOU WERE A PART OF. WHAT DO YOU SAY TO THAT?

Pappajohn: I THINK IT'S NOT CORRECT AT ALL. I THINK WE NEED IMMIGRANTS. THERE ARE MANY OF OUR PEOPLE WHO JUST WON'T DO THOSE MENIAL JOBS THAT HAVE TO BE DONE. AS A RESULT, NO, I THINK WE NEED -- I THINK WE NEED IMMIGRANTS. AND I NOTICED RECENTLY THE UNEMPLOYMENT RATE IS NOW 3 POINT SOMETHING. IT'S VERY LOW. SO WE CAN'T SAY THAT -- WE NEED THOSE IMMIGRANTS TO COME IN TO DO THAT WORK.

Yepsen: HOW DID YOU GET INTO THE VENTURE CAPITAL BUSINESS?

Pappajohn: WELL, THAT'S A GOOD QUESTION. MY FIRST BIG VENTURE WAS I STARTED THE GUARDSMAN LIFE INSURANCE COMPANY IN DES MOINES. AND I RAISED SOME MONEY AND I WAS THERE FOR ALMOST SEVEN YEARS. AND IT WASN'T EXCITING ENOUGH FOR ME. I DIDN'T THINK THE FUTURE OF THE BUSINESS WAS THAT GOOD, AND I WAS ACCURATE IN MY ASSESSMENT. AND I LOOKED AROUND FOR A BUSINESS, AND I HEARD ABOUT A NEW INDUSTRY CALLED VENTURE CAPITAL. THERE WERE VERY FEW VENTURE CAPITALISTS AT THE TIME. THERE WAS THE ROCKEFELLER FAMILY, THE J.H. WHITNEY FAMILY, AND THEY WERE JUST VERY WEALTHY FAMILIES. AND SO I SAID THAT SOUNDS GOOD TO ME, SO I SAID I'M GOING TO BE A VENTURE CAPITALIST. SO I SAVED UP A LITTLE MONEY, AND I WENT INTO VENTURE CAPITAL BUSINESS REALLY NOT KNOWING WHAT TO EXPECT, BUT WORKED HARD AT IT AND GOT LUCKY.

Yepsen: WELL, IT'S MORE THAN LUCK. TELL US WHY YOU SUCCEEDED WHERE MANY OTHERS HAVE FAILED.

Pappajohn: WELL, I WOULD SAY THAT HARD WORK HAS AN AWFUL LOT TO DO WITH IT. I'M A WORKAHOLIC AND I WAKE UP 4:45 EVERY MORNING. I WORK SEVEN DAYS A WEEK. I HAVE A GOOD INSTINCT FOR PEOPLE AND ENTREPRENEURS. I'M VERY SUPPORTIVE. MY GOOD BUSINESS EXPERIENCE AND BACKGROUND IS HELPFUL SO THAT I DON'T JUST INVEST MONEY. I GET INVOLVED AND I HELP PEOPLE RUN THEIR BUSINESS. AND IT'S NOT EASY TAKING A CONCEPT OR IDEA OF A LITTLE BUSINESS AND MAKE IT GROW. SO WE -- WE CALL OURSELVES COMPANY DOCTORS, BUSINESS DOCTORS. WE KNOW HOW TO FIX PROBLEMS BECAUSE ULTIMATELY YOU GET PAID FOR FIXING PROBLEMS.

Yepsen: LET'S BROADEN THE DISCUSSION A LITTLE BIT TO IOWA. YOU DO A LOT OF BIG DEALS IN YOUR BUSINESS. LET'S TALK ABOUT SOME OF THE SMALLER ONES. WHAT DO YOU THINK WE CAN DO TO HELP PEOPLE IN IOWA WHO WANT TO START A SMALL BUSINESS, TO HELP THEM GET STARTED? HOW DO YOU GO ABOUT HELPING SOMEONE FIND A FEW THOUSAND DOLLARS MAYBE TO START A BUSINESS?

Pappajohn: WELL, WE MAKE OUR MONEY WITH BIGGER DEALS, AND WE HAVE MADE A COMMITMENT TO ASSIST SMALL BUSINESSES TO GET STARTED AND PROSPER IN IOWA. RECENTLY THE LEGISLATURE AND THE GOVERNOR HAVE PROMOTED SOME BILLS THAT ARE BEING VERY HELPFUL. FOR INSTANCE, APPROXIMATELY TWO YEARS AGO THE GOVERNOR SIGNED A BILL THAT REDUCED THE INSURANCE PREMIUM TAX FROM 2 PERCENT TO 1 PERCENT. AND THE INSURANCE INDUSTRY PLEDGED APPROXIMATELY $60 MILLION TO GO INTO VENTURE CAPITAL. NOW, THAT'S A LOT OF MONEY AND PRINCIPAL, FARM BUREAU, BLUE CROSS/BLUE SHIELD AND OTHER COMPANIES IN THE STATE PARTICIPATED, AND THEY HAVE BEEN VERY SUPPORTIVE, VERY SUPPORTIVE. AND I THINK IT TAKES -- IT TAKES A POSITIVE MENTAL ATTITUDE. IT TAKES THE GOOD CONCEPT OR BUSINESS OR PRODUCT. IT TAKES SEED CAPITAL. IT TAKES MANAGEMENT. IT TAKES ADDITIONAL CAPITAL AND, ULTIMATELY, IT TAKES -- IT TAKES MARKETING. BUT I THINK WE'RE REALLY WELL ON OUR WAY. I THINK WE -- SOME STATISTICS AT OUR CENTERS THAT WE JUST PUT TOGETHER IN THE LAST WEEK, I THINK WE STARTED OVER 1,500 BUSINESSES IN SEVEN YEARS IN IOWA. MANY OF THEM ARE SMALL BUT IOWA IS AN ENTREPRENEURIAL STATE. YOU START A LITTLE BUSINESS AND IT GROWS. I REMEMBER WHEN WINNEBAGO STARTED, JOHN K. HANSON. AND IT'S A BIG COMPANY TODAY. I REMEMBER BACK WHEN DANILEE STARTED. YOU HAD SIX OR SEVEN LIFE INSURANCE COMPANIES. YOU HAVE A LOT OF SUCCESSFUL STORIES, BUT THEY ALL STARTED SMALL. AND I THINK THAT'S HOW IOWA IS GOING TO BECOME MORE ENTREPRENEURIAL IS TO SUPPORT THE SMALL COMPANIES AND THE START-UPS.

Yepsen: DO WE SPEND TOO MUCH TIME SMOKESTACK CHASING IN THIS STATE, GOING AFTER BIG ESTABLISHED BUSINESSES, GETTING THEM TO MOVE HERE, AS OPPOSED TO FINDING THE GUY WHO'S NAMED JOHN DEERE STARTING IN A BLACKSMITH SHOP MAKING PLOWS? ARE WE BETTER OFF FINDING ENTREPRENEURS AND INVESTING IN THEM, OR ARE WE BETTER OFF CHASING SMOKESTACKS?

Pappajohn: WELL, I THINK, DAVID, YOU PROBABLY NEED SOME OF BOTH. MY PREFERENCE IS TO CREATE HOMEGROWN BUSINESSES BECAUSE THEY STAY WITH YOU. THEY GROW UP. THEY'RE PART OF THE CULTURE. THAT'S MY PREFERENCE BUT IT DOESN'T HURT -- I NOTICED RECENTLY THE WELLS FARGO PROJECT, WHICH IS EXPANDING IN DES MOINES. I THINK THAT'S GOOD FOR DES MOINES SO I THINK THE BLEND -- I THINK THE BLEND IS GOOD. ULTIMATELY -- ULTIMATELY FINANCING AND ASSISTING THE START-UPS PROBABLY FOR THE LONG TERM IS BEST FOR THE STATE. THE ONE AREA THAT I'M NOT REAL EXCITED ABOUT IS TO PAY COMPANIES MONEY TO COME IN FROM OUT OF STATE, BECAUSE YOU DON'T KNOW WHETHER THEY'RE GOING TO STAY AND WHETHER THEY'RE GOING TO SUCCEED. AND THAT'S AN AREA THAT I THINK WE HAVE TO BE CAREFUL WITH. BUT I THINK MIKE BLOUIN HAS DONE A VERY GOOD JOB AS THE HEAD OF THAT DEPARTMENT. AND THEY'VE BEEN VERY SUPPORTIVE TO MANY OF THE COMPANIES THAT WE WORK WITH.

Yepsen: WHAT SHOULD IOWANS AND SMALL COMMUNITIES BE DOING TO HELP THAT LOCAL ENTREPRENEUR OUT THERE, THAT GUY IN HIS GARAGE WITH THE NEXT GREAT INVENTION?

Pappajohn: MORAL SUPPORT, NUMBER ONE. NUMBER TWO, FINANCIAL SUPPORT. I THINK THAT THEIR ANGEL INVESTING CAN HELP THESE SMALL COMPANIES TO GROW AND TO PROSPER.

Yepsen: WHAT'S THAT?

Pappajohn: THAT'S FRIENDS AND RELATIVES AND NEIGHBORS WHO ARE CALLED ANGELS, PEOPLE WHO HAVE MONEY WHO ARE WILLING TO RISK SOME MONEY TO HELP A SMALL COMPANY GET STARTED. AND MANY OF THE COMMUNITIES DO SUPPORT THEIR START-UP BUSINESSES.

Yepsen: I'M TOLD WE'VE GOT ENOUGH VENTURE CAPITAL ANGELS TO GET BUSINESSES SPROUTED IN THIS STATE. YOU'VE DONE OVER 1,500, CORRECT? BUT WHERE WE HAVE A PROBLEM NOW IS IN GETTING THOSE YOUNG TOMATO PLANTS TO REALLY TAKE OFF. NOW, IS THAT A FAIR ASSESSMENT?

Pappajohn: WELL, IT IS BUT THE PROBLEM IS THE MONEY IS ATTRACTED TO THE SUCCESSFUL OPERATION. AND WHEN IT IS ONLY MODERATELY SUCCESSFUL OR NOT SUCCESSFUL, IT WON'T ATTRACT SIGNIFICANT CAPITAL BECAUSE THERE ISN'T A RETURN. AND EVERYBODY QUANTITIES THE RISK/REWARD RATIO WITH THE RETURN.

Yepsen: WE TALKED ABOUT SOME OF THE THINGS GOVERNMENT IS DOING. SHOULD GOVERNMENT BE DOING MORE OR IS THIS SOMETHING THAT THE PRIVATE SECTOR HAS TO DO?

Pappajohn: I THINK BOTH. IN THE CASE OF GOVERNMENT, I THINK THE STATE SHOULD BE VERY SUPPORTIVE AND THEY HAVE BEEN. I THINK THEY HAVE BEEN. I THINK HOPEFULLY WE CAN GET A LITTLE MORE SUPPORTIVE, BUT I THINK THE NEW VALUES FUND HAS INVESTED SOME MONEY IN SOME OF THE COMPANIES THAT ARE AROUND. AND IT GETS VERY JUDGMENTAL AND VERY SUBJECTIVE, BUT I THINK THEY'RE DOING A GOOD JOB.

Yepsen: BESIDES FOSTERING ENTREPRENEURSHIP IN IOWA, YOU'RE A BIT OF A FUTURIST. YOU LOOK AHEAD. WHAT DO YOU THINK WE OUGHT TO BE DOING TO MAKE A BETTER FUTURE IN IOWA? ANYTHING ELSE?

Pappajohn: WELL, I THINK SUPPORTING THE STRENGTHS THAT WE HAVE, DAVID. OUR STRENGTHS ARE A WONDERFUL WORK FORCE. WHEN I GO TO NEW YORK AND I TELL THEM I'M FROM IOWA, THEY LOVE IT. THEY LOVE IOWANS BECAUSE WE HAVE A REPUTATION FOR BEING HONEST, HARD WORKING. THAT'S THE STRENGTH THAT WE HAVE. SOMETIMES, YOU KNOW, WE CHASE -- EVERYBODY CHASES -- I USE AS AN EXAMPLE BIOTECHNOLOGY. IT SOUNDS SO GOOD AND IT'S SO DIFFICULT TO MAKE WORK. AND I DON'T -- I'VE BEEN INVOLVED WITH SEVERAL BIOTECH COMPANIES, BUT WE WILL NOT FINANCE ONE NOW BECAUSE THE RISK/REWARD RATIO IS VERY FINITE. IT'S VERY DIFFICULT TO GET A RETURN. SO I THINK YOU TAKE THE STRENGTHS THAT WE HAVE AND SUPPORT THESE LITTLE COMPANIES AND HELP THEM TO GROW. IN THE STATE UNIVERSITIES, TECHNOLOGY TRANSFER, WHICH WE'RE WORKING ON AT IOWA STATE, AT THE UNIVERSITY OF IOWA, BOTH -- GREG GEOFFROY AT IOWA STATE HAS BEEN VERY AGGRESSIVE. HE JUST STARTED A BRAND-NEW INCUBATOR CONCEPT WHERE THE STUDENTS ARE MOVING IN AND THEY'RE GOING TO LIVE THERE AND RUN THEIR BUSINESSES THERE, WHICH IS A GREAT CONCEPT. THE UNIVERSITY OF IOWA JUST TOOK A FRATERNITY HOUSE AND THEY BUILT A WHOLE INCUBATOR IN IT AND THEY SET UP, I THINK, 21 SEPARATE FACILITIES FOR NEW BUSINESS START-UPS. AND THEN YOU HAVE TO GO BACK -- THESE SUMMER SCHOOLS FOR THE KIDS, JUNIOR HIGH KIDS, THEY CAN GO AND SAY, GEE, I LEARNED HOW TO RUN A BUSINESS. THEY CAN GO TO SCHOOL FOR A WEEK, AND THEY GET THE POSITIVE MENTAL ATTITUDE. IT'S SO IMPORTANT THAT PEOPLE BELIEVE TO THINK THAT THEY CAN DO -- AND I'M A DREAMER. I LIKE TO FANTASIZE. IF YOU DON'T -- IF YOU DON'T, YOU'RE NOT GOING TO GET THERE. IN OTHER WORDS, IF YOU DON'T THINK ABOUT THAT, YOU'RE GOING TO BE CONTENT WITH WHAT YOU HAVE. AND THAT DOESN'T CREATE SUCCESS AND THAT CERTAINLY DOESN'T FOSTER ENTREPRENEURIAL ACTIVITY.

Yepsen: WHAT DO YOU SAY TO THE IOWAN WATCHING US TONIGHT WHO HAS AN IDEA FOR A BUSINESS THAT THOUGHT ABOUT IT A LONG TIME, THEIR DREAM OR TWO, WHAT SHOULD THEY BE DOING TO GET IT STARTED?

Pappajohn: NUMBER ONE, GO FOR IT. GO FOR IT. NUMBER TWO, DON'T LET -- DON'T LET NO -- DON'T BE DISAPPOINTED BECAUSE SOMEBODY THAT DOESN'T LIKE IT. THERE WILL BE SOMEBODY THAT DOES. JUST KEEP CALLING ON PEOPLE FOR HELP, I DON'T KNOW, WHEREVER THEIR RESOURCE IS, WHEREVER THEY ARE GEOGRAPHICALLY. AND GO TO PEOPLE -- YOU'LL FIND -- IT'S AMAZING TO ME, PEOPLE ARE SOMETIMES RETICENT TO ASK FOR HELP. EVERYBODY WANTS TO HELP IF YOU ASK PEOPLE FOR HELP. AND IT'S ALL PRO BONO; IT'S ALL FREE. I THINK THAT THEY'LL GET MORE HELP THAN THEY NEED, BUT IT'S IN THE MIND, DAVID. YOU KNOW, W. CLEMENT STONE AGAIN: SUCCESS WITH A POSITIVE MENTAL ATTITUDE. YOU HAVE TO BELIEVE THAT YOU CAN DO SOMETHING AND THEN DON'T ACCEPT FAILURE AND YOU JUST DO IT. THOSE ARE THE PEOPLE THAT END UP BEING THE MOST SUCCESSFUL.

Yepsen: TALK ABOUT YOUNG PEOPLE SPECIFICALLY. YOU'RE SPENDING A LOT OF EFFORT IN YOUR PAPPAJOHN CENTERS TRYING TO HELP YOUNG PEOPLE, AS MORGAN'S SETUP PIECE INDICATED. WHAT'S YOUR ADVICE TO A YOUNG PERSON WHO'S MAYBE INTERESTED IN A BUSINESS CAREER? WHAT ARE THE DOs AND DON'Ts?

Pappajohn: WELL, FIRST OF ALL, I WOULD TELL THEM THAT THESE ARE THE BEST OF TIMES AND THE WORST OF TIMES, AND IT DOESN'T MAKE ANY DIFFERENCE. WHEN YOU DECIDE TO DO SOMETHING, YOU HAVE TO COMMIT YOURSELF, NUMBER ONE. NUMBER TWO, YOU HAVE TO BE CERTAIN THAT YOU PICK A BUSINESS WHERE THERE'S A BIG OPPORTUNITY. I USE AS AN EXAMPLE, IF YOU WANT TO CATCH BIG FISH, YOU DON'T GO FISHING IN A LITTLE POND. SO SOMETIMES PEOPLE, DAVID, PICK A BUSINESS THAT HAS NO POTENTIAL. AND THEY WORK FIFTEEN HOURS A DAY, SEVEN DAYS A WEEK, AND EVEN IF THEY DO WELL, THEY'RE NOT GOING TO DO VERY WELL. SO YOU HAVE TO PICK THE RIGHT BUSINESS THAT I THINK THAT -- YOU HAVE TO READ. EDUCATION IS SO IMPORTANT. YOU HAVE TO BE SMARTER THAN ANYBODY ELSE IN YOUR BUSINESS. YOU'VE GOT TO READ. YOU HAVE TO KNOW WHAT'S GOING ON. YOU'VE GOT TO KEEP AHEAD OF THE PACK, AND YOU HAVE TO GET UP EARLIER IN THE MORNING THAN MOST PEOPLE BECAUSE YOU HAVE TO COMMIT TO SPEND THE HOURS AND THE TIME IN ORDER TO SUCCEED.

Yepsen: WHAT SHOULD AN INDIVIDUAL DO IN IOWA WHO WANTS TO BE SUPPORTIVE OF ENTREPRENEURS? HOW CAN THOSE OF US WHO MAYBE DON'T HAVE A BUSINESS OR AREN'T -- DON'T GET UP AT 4:45 IN THE MORNING, WHAT COULD WE BE DOING TO BE SUPPORTIVE OF ENTREPRENEURS?

Pappajohn: THEY SHOULD GO TO ONE OF THE FIVE ENTREPRENEURIAL CENTERS AS ONE OF THE OPTIONS AND, SAY: HEY, I'D LIKE TO GET INVOLVED WITH THE COMPANY; I'VE GOT A FEW BUCKS; I'M WILLING TO SPEND SOME TIME; I JUST RETIRED; I WAS A CFO; OR I DID THIS AT THIS COMPANY, ONE OF THE FIVE SCHOOLS AND ANY OTHER SCHOOL THAT IS SPONSORING ENTREPRENEURIALSHIP AND BUSINESSES THAT SPIN OUT TECHNOLOGY TRANSFER. THEY WILL FIND A DEAL OR TWO AND THEY CAN HELP THAT COMPANY AND THEY PROBABLY CAN MAKE SOME MONEY.

Yepsen: YOU KNOW, WE TREAT OLDER IOWANS OFTENTIMES AS A LIABILITY, BUT THIS STRIKES ME AS A WAY FOR RETIREES AND PEOPLE WHO HAVE HAD SOME EXPERIENCE IN THE REAL WORLD TO GET BACK INVOLVED, TO PUT SOMETHING BACK INTO THE COMMUNITY.

Pappajohn: PERFECT. THEY CAN HELP BECAUSE THEY HAVE THE EXPERIENCE. THEY CAN HELP THE YOUNG MAN OR YOUNG WOMAN FROM MAKING THE MISTAKES THAT MOST PEOPLE DO WHEN THEY GET STARTED IN BUSINESS.

Yepsen: WE'VE GOT LESS THAN A MINUTE LEFT, MR. PAPPAJOHN. WHAT DO YOU HOPE YOUR LEGACY IS TO IOWA?

Pappajohn: WELL, I HOPE THAT I CAN BE REMEMBERED AS MAKING A MAJOR CONTRIBUTION TO THE ECONOMY OF IOWA, THAT I LEAVE THE WORLD IN A BETTER PLACE AND POSITION THAN WHEN I ENTERED, AND THAT ALL OF THE PEOPLE THAT PARTICIPATE, I GUESS, WITH ME WILL HAVE BENEFITTED MORE THAN I DO. WE DON'T DO THIS FOR THE MONEY, DAVID. WE DO THIS IN IOWA TO ASSIST IOWA. THAT'S WHAT MY WIFE AND I ARE DOING, AND I'M VERY PLEASED, SO FAR, WITH THE RESULTS.

Yepsen: MR. PAPPAJOHN, THANK YOU VERY MUCH FOR SPENDING YOUR TIME WITH US THIS EVENING. I APPRECIATE IT.

Pappajohn: THANK YOU.

Yepsen: NOW, TONIGHT'S PROGRAM WAS THE FOURTH OF IPTV'S WEEK-LONG EXAMINATION OF WHAT LIFE COULD BE LIKE IN IOWA. THAT WILL ALSO BE THE FOCUS IN OUR FINAL PRESENTATION THIS FRIDAY EVENING. TODD MUNDT IS HOST AND MODERATOR OF A SPECIAL LIVE BROADCAST FROM THE IOWA PUBLIC TELEVISION STUDIOS. TODD WILL DISCUSS THE FUTURE WITH A PANEL OF NOTABLES FROM A VARIETY OF PERSPECTIVES, INCLUDING FORMER GOVERNOR TERRY BRANSTAD AND MICHAEL GARTNER. THAT'S FRIDAY EVENING LIVE AT 6:30. I'M DAVID YEPSEN OF "THE DES MOINES REGISTER." THANKS FOR JOINING US TONIGHT ON STATEWIDE IOWA PUBLIC TELEVISION.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA


Tags: entrepreneurs future Iowa