With most companies having to go remote as a result of the COVID-19, this year’s pandemic has resulted in a more interconnected ecosystem. Entrepreneurial ecosystems are less defined by their geographical backgrounds but more by the quality of interaction of the people within them. Founders are the source of ideas in the ecosystem while talent are the bees that help pollinate and grow the ideas, funders provide the money needed to water the ideas to fruition. Government agencies, institutions, and legacy organizations are elements of fertile soil, air quality as well as sunlight that allow startups and ecosystems to flourish. The pandemic, along with other global events that have taken place this year, have highlighted great deficiencies in what people previously theorized as thriving ecosystems. The Kauffman Foundation defines a thriving entrepreneurial ecosystem as one where “its people and the culture of trust and collaboration allows them to interact successfully…. [one] that allows for the fast flow of talent, information, and resources [to] help entrepreneurs quickly find what they need at each stage of growth.” This definition should be expanded to include some of the lessons learned from the events of this year. All of the participants must work together to ensure that the ecosystem emphasizes equitable practices.
“An inclusive and equitable entrepreneurial ecosystem leads to non-discriminatory distribution of resources which in turn maximizes the area’s economic potential. More importantly, it could increase the standard of living of historically marginalized demographics in the country.”
The presence of a thriving ecosystem poses many benefits to the economy at large. Apart from potentially providing sustainable solutions to societal problems, it leads to job creation, wealth generation, and increased economic participation. Ideally, an inclusive and equitable entrepreneurial ecosystem leads to non-discriminatory distribution of resources which in turn maximizes the area’s economic potential. More importantly, it could increase the standard of living of historically marginalized demographics in the country.
Entrepreneurial ecosystems are diverse and are defined not only by prominent industries in the region but also by cultural norms. This culture must resonate with all participants in the ecosystem. These ecosystems include direct and indirect participants. Direct participants can include but are not limited to, startup founders, funders, talent, institutions of knowledge, onramps such as accelerator programs, legacy organizations and industries. Indirect participants include but are not limited to government and government agencies, support organizations. That being said it is important to understand the different roles that these participants play in a thriving ecosystem.
Direct Participants
Founders are the face of the entrepreneurial ecosystem. This comes with a great deal of pressure, oftentimes founders bear the majority of this burden alone. They are frequently judged by the quality of their business ideas, leadership skills, number of products shipped, number of exits and valuations, and other factors. Although the aforementioned are important, founders are human beings too that are not solely defined by the positions they hold or their job duties. This pressure could lead to founders neglecting their wellbeing for the sake of the growth of the company. A healthy ecosystem must value the mental and physical well being of all participants, founders including, as much as they value successful exits.
As capital is needed to grow a business, availability and accessibility of capital is essential to an entrepreneurial ecosystem. Capital could come as equity financing, debt financing, grants, and other alternatives to equity. Historically, minority demographics in the U.S. have been marginalized from access to funding via discriminatory socio-economic practices & policies. To maximize the potential of an ecosystem, access to capital and other resources must be equitably allocated.
The development of ecosystems are catalyzed by the talent that is available in those cities. Traditionally this has been measured by the concentration of college graduates in the area. For example, the talent pool available for startups in Silicon Valley is large and highly competitive as a result of their proximity to Stanford University, U.C. Berkeley and so on. With more people exploring non-university paths, talent pools should expand to include those that do not possess college degrees.
Universities serve as sources of knowledge, facilitators of information exchange, innovation hubs as well as leadership and culture builders. However, students can begin to develop the entrepreneurial spirit at an earlier age. High Schools, other online education platforms, libraries, after-school programs and extracurricular activities are crucial in students’ development of technical and entrepreneurship skill sets. That is to say, knowledge centers are not strictly limited to higher institutions; entrepreneurial culture can be nurtured at a younger age.
Equally as important to a thriving ecosystem as knowledge centers is the presence of onramps such as accelerators, incubators, venture competitions, and other networking events, etc. Like knowledge institutions, accelerator programs and incubators facilitate information transfer and are efficient networking opportunities. Furthermore, members of the ecosystem are allowed to celebrate one another. This often enhances the spirit of camaraderie amongst participants in the ecosystem.
“Legacy organizations are pivotal to the development of thriving entrepreneurial ecosystems.”
In the same light, legacy organizations are pivotal to the development of thriving entrepreneurial ecosystems. Innovative startups can benefit from locating near legacy companies. A great example is the Boston Biotech startup ecosystem. Massachusetts, known for having some of the best universities in the world, is also home to top hospitals in the country. Biotech firms like Moderna, Vertex and others have benefitted from their proximity to the medical services industry in the state. Incumbent industries, and startups can lead to a mutually beneficial relationship and co-exist in an entrepreneurial ecosystem.
Indirect Participants
Indirect participants in the ecosystem include the government and its agencies. Their fiscal and monetary policies in addition to the taxes can foster a better, more sustainable ecosystem. Government agencies can be viable sources of funding for small & medium scale enterprises. Their investments in social amenities improve the liveability and attractiveness of a city and could potentially attract more talent to that area. Conversely, government policies that are unfriendly to entrepreneurial development can have dire consequences on the trajectory of an ecosystem. In short, the government’s actions can both enhance and damage the growth of an ecosystem.
Another strong indication of a thriving entrepreneurial ecosystem is the existence of support businesses such as printing businesses, media services, cafes, co-working stations, and so on. These businesses often provide spaces for entrepreneurs to share ideas, share the story and culture of the entrepreneurial ecosystem. Workers in these industries are often the unsung heroes of ecosystem prosperity. They deserve to be treated with the same amount of respect as other members of the ecosystem.
To conclude, a thriving ecosystem can be categorized as a community of people driven by a common passion for solving societal problems bounded by a culture of respect, where:
The mental and physical wellbeing of participants are valued
Access to capital is equitably distributed
Fair talent sourcing practices are upheld
Entrepreneurial spirit is developed from a young age
Favorable governance policies together with
The presence of supporting business and appreciation and fair compensation for the employees of those firms
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