Posts Tagged ‘Eco-System’

Start-up Community Culture

March 11th, 2014

Recently I had the chance to listen and participate in a discussion regarding an entrepreneurial ecosystem embedded within a particular culture. The point was made that there is a need to separate start-up culture from the larger culture. I believe this to be true as you consider start-ups and entrepreneurs in the business of creating new social institutions. The larger culture isn’t used to new things and so you need a different kind of environment that is supportive. Basically, entrepreneurs are responsible for convincing the world and the people in it that the start-up has the right to exist and that what it does is valuable enough to support with various forms of legitimacy. It helps to have a subset of that world to help ease into the larger one.

The conversation got side tracked with what to do about it (what entrepreneurs move straight to action?). But I believe we jumped too quickly to supposed solutions without fully understanding the problem at a deeper level (also not an uncommon thing for entrepreneurs to do).

A culture is a bunch of shared underlying beliefs about what is important and appropriate that shows up as norms or practices. In a start-up culture I feel like how failure is seen and handled is the gauge for how supportive a culture is to entrepreneurial growth. In healthy start-up cultures failure is valued experience or a badge of honor. Other entrepreneurs recognize that failure is the expected result for most of us. The individual entrepreneurs celebrate the effort and courage regardless of the outcome.

In the talent market of a successful start-up culture it means employers or better yet other start-ups recognize that an incredible set of skills has just come available that can crush it for the next little while. Unhealthy start-up cultures avoid hiring former entrepreneurs for fear that they’ll leave again.

In the right kind of culture that is exactly what you want anyway. You want that entrepreneur to leverage those costly lessons and contacts in the next venture as soon as possible. The measure of a successful entrepreneurial ecosystem may very well be how quickly an entrepreneur becomes a part of another start-up.

Unfortunately, if that isn’t something we are currently looking for and so what happens is a gradual and often silent departure from the community to avoid the shame of failure and the awkwardness of no longer belonging. If we continue to have more entrepreneurial events as our solution to building a start-up culture then at least take the time to scout for talent and ways to help each other. As we make that our focus in our respective start-up communities we’ll begin to focus on the important things that underpin a great start-up culture.

Startup America: The Good, The Bad, and The Missing-Part 2

April 26th, 2011

In the continuing saga of Startup America: The Good, The Bad, The Missing– I bring you Part 2-this time it’s personal (not really, it just sounded fun to say).

The Bad

 Startup America has no concrete goals only intentions. How do we know what we’re aiming for or when we’ve achieved what we set out to do? “Get a man on the moon” gives us a unifying and actionable goal. Instead we have a fuzzy mission statement: “Startup America is the White House initiative to celebrate, inspire, and accelerate high-growth entrepreneurship throughout the nation.” The intentions found on the White House website are:

  1. Unlocking Access to Capital
  2. Connecting Mentors
  3. Reducing Barriers
  4. Accelerating Innovation
  5. Unleashing Market Opportunities

Good intentions right? It seems to make sense- If entrepreneurs have more access to money, more people to coach them, fewer barriers, and even access to new technology then people are more likely to start companies. The government then hopes that leads to more jobs and in turn a healthier economy (GDP, Price Stability/CPI, High Employment).

However, there are a few hang ups with those assumptions. The money in the hands of VC’s and Angels are focused on higher returns; which means only high-growth companies receive funding which are a very small percentage of new businesses. David Rose, creator of Angel soft, threw out some numbers in a talk within the past year or so saying that of the 600,000 US companies created in a year only about 1000 received VC funding. Though the National Venture Capital Association said VC’s did 3,277 deals in 2010 though the 600,000 new businesses get started each year is pretty close.  Almost every entrepreneur thinks they should be funded but the reality is they won’t for two main reasons. One, there are only so many deals that will get funded and two; their business isn’t built to get 10 times the return in productivity or investment that is required for a high-growth company. Yet they will probably produce the majority of the jobs. The point is the other 596,000ish new businesses had to get money from somewhere else.

The other money such as SBIR or small business loans (collateral?) are run with requirements that large business struggle to meet and with delayed timelines (at times there is a 6 month delay between SBIR Phases and you’re not allowed to save any of the money). I don’t really see that the Startup America initiative has really unlocked access to the capital. Bottom line: Creating more jobs isn’t really a criterion used in the money world.

I’m not blaming the VC’s or Angels, they’ve got their own problems to worry about-of the 10 companies they’ve got in their portfolio probably only 1 is going to result in a big success from their perspective. They’re constantly on the lookout for better deal flow.  One of the ways they’ve found to improve their chances is to take graduates from mentor-driven accelerators like Tech Stars (check out Tech Stars success stats).

 This is where the Startup America Partnership has helped the VC’s and Angels by extending the TechStars model by supporting the creation of the Tech Stars Network. This can further the high-growth enterprise creation assuming that mentors know what to do and are the right fit for the personalities of the entrepreneur. Many times mentors either come from a corporate world or have a certain domain expertise that may not fit a startups current situation nor needed expertise.

 However, even if the mentors do know how to advise this select group the system doesn’t necessarily drive more deals or investment flow but just a higher quality resulting in a better return for the investors and founders. The founders’ success is what the economic growth hinges on because they are more likely to start another company in the future.

Reducing barriers is probably the best approach that government policy should take but again goes back to the problem of knowing which barriers are the right ones to remove. For example, whether or not I have to pay capital tax is not going to determine whether or not I start a company but a faster and less expensive patent process may speed up the idea to market.

 I do have to applaud the government’s efforts to understand the problem and utilize crowdsourcing to problem solve. If you want your voice to be heard and want to share your view about how to reduce barriers go to one of the round table meetings they’re conducting across the country or visit the reducing barriers website and let them know your thoughts. Don’t whine when you’ve got a platform for generating and nominating solutions to a problem.

However, there is quite a bit of angst that when it comes time for a decision about what to do that is still being made without entrepreneurs in the room. So even though there is The Bad or flaws with the current product it is encouraging that they know it and are asking for feedback to identify The Missing things that will drive real change. After all, isn’t that what startups do too?

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