Lessons learnt from listening and watching expert practitioners in the field of inclusive ecosystem building.
In recent years, entrepreneurship ecosystem building has become somewhat of a fad in the world of small business support. It is because of other socioeconomic factors that started two decades ago. Books like Thomas L. Friedman’s “The World Is Flat: A Brief History of the Twenty-first Century” outline the impact that technology has had on the ability for people to start businesses that can effectively compete with large corporations. This paper does not serve as an exhaustive guide to how ecosystems are built, and its primary purpose is to spark your curiosity to seek out and learn from best practices we mention throughout. Most ecosystem builders are lifelong learners and some of this work takes decades to manifest its impact. Moreover, entrepreneurship ecosystem building is still considered an emerging field, so thought leadership and best practices are work-in-progress. Articles such as these are meant to start the conversation and help bring this field to the forefront.
Starting a business that can quickly scale is now easier than ever before. Because of this notion, we’ve seen the rise of the auxiliary industries that both support and benefit from new business formation in a symbiotic relationship. Some examples are popular television shows such as Shark Tank, an increase in startup accelerators, and to some extent, co-working spaces. There are also support services that have a more formal structure with government and non-government backing like CDFIs (Community Development Financial Institutions).Others help disburse capital, provide business consulting services, and mentor small businesses like SBDCs (Small Business Development Centers) and SCORE (Service Corps of Retired Executives).
Finally, there are the economic development organizations focused on improving the economy. These organizations exist at the local, state, and national level. These organizations primarily focus on driving job creation, business attraction and retention, and fostering entrepreneurship and small business growth. According to the IEDC (International Economic Development Council, https://www.iedconline.org/), the four pillars of economic development include “prosperity, skills, innovation, and livability.” With a mandate this broad, entrepreneurial activity is supported at various levels based on awareness and understanding of the impact it can have on economic development.
Let’s now take a look at some of the best practices exhibited by a thriving entrepreneurship ecosystem. This is not an exhaustive list and should instead be considered a beginner’s guide to entrepreneurship ecosystem building. A couple of books I would recommend for those looking to become practitioners are:
- “The Rainforest: The Secret to Building the Next Silicon Valley” by Victor W. Hwang and Greg Horowitt.
- “The Startup Community Way: Evolving an Entrepreneurial Ecosystem” by Brad Feld and Ian Hathaway.
I will also recommend listening to our new podcast, “Breaking Down Barriers – A Podcast for Entrepreneurship Community Practitioners”. You can listen to it here: https://startupspace.captivate.fm/
The Seven Ingredients Needed to Build a Successful Entrepreneurial Ecosystem
Before we begin, please note that vision supersedes the building of any entrepreneurial ecosystem. Vision serves as the one key ingredient that provides the “why” for any ecosystem practitioner and must be big enough that it can set the wheels in motion and create early momentum that is critical to the long-term success and viability of an entrepreneurial ecosystem blueprint. This “why” can come from the depths of a crisis, or it can come from something as simple as a desire to better support the community, increase the standard quality of living, and create generational wealth for families within that community.
Once you’ve discovered the vision, then it’s time to tackle the seven remaining ingredients.
- Network
- Capital
- Execution
- Risk Taking
- Innovation
- Inclusivity
- Data and Insights
Network
Networking often involves bringing together a group of organizations within the community that already support small businesses, but currently operate in silos. These organizations often understand the power of networking and recognize that no one can accomplish this important work on their own. Mature organizations usually acknowledge the power and benefit that rallying together can bring; however, new or emerging entrepreneurial ecosystems might struggle with this step. Established ecosystems understand that by joining together, their community has a competitive edge and is better suited for funding and resource opportunities. These ecosystems thrive because they don’t have a “fixed pie” mindset (i.e. when one organization wins, another organization loses). Instead, these entrepreneurship support organizations (ESOs) benefit from sharing best practices, communicating more clearly, participating in each other’s events, and creating an impact bigger than the sum of all the organizations within the network.
Capital
Money makes the world go ‘round. To compete, most practitioners either become expert fundraisers or hire someone who already is an expert to help them raise money.
There are several sources of money available to entrepreneurial ecosystems, including the government, which is probably the best source for investments into any community. There are several government agencies that offer open applications for grants and funding applicable to entrepreneurial ecosystems. A few of those agencies include:
- Small Business Administration (SBA)
- Small Business Innovation Research (SBIR)
- National Science Foundation (NSF): See example here
- U.S. Economic Development Administration (EDA): See example here
Each administration or foundation will have specific criteria that has to be met for funding eligibility. These guidelines will be clearly listed on their websites, as well as within the application documents. State and local governments also provide funds for building the programs needed.
Execution
Leadership and accountability drive execution. Clear goals need to be set, and milestones should serve as stepping stones to reach those defined objectives. Very often, leaders who are great fundraisers are unable to execute on the investments they win because of their inability to put together a strong team. At Startup Space, we focus a lot on execution because it creates trust with our clients.
As a profession, ecosystem building can be hard to train or teach because many of the skills take years to master. Navigating politically charged scenarios or managing large groups of stakeholders become more manageable tasks when there are experienced individuals on the team who can assist with execution.
Risk-Taking
If you don’t take risks, you are not going to achieve anything notable for your entrepreneurship ecosystem. Sometimes, risk-taking will be backing startups in the community who do not have proven track records. Other efforts might include trying out new programs that haven’t been around for very long. And finally, risk-taking also involves who you partner with in your ecosystem. Taking risks is at the heart of entrepreneurship. Ecosystem practitioners who take calculated risks create a culture of strategic risk-taking within their communities, which can result in some major breakthroughs.
When you make these bets, you have to make sure you communicate clearly with your board and stakeholders the reasons for these decisions and have them back you or it would lead to miscommunications and distrust.
Innovation
Like risk-taking, innovation is also at the heart of entrepreneurship. Crises like COVID-19 show us how resilient entrepreneurs are and how they are constantly pivoting to look at new market opportunities. Likewise, ecosystem practitioners must foster a culture of innovation within their communities. Innovation might come in the form of adopting new technologies and new processes, as well as exploring new ways of doing business.
Innovation needs infrastructure, so practitioners will need to invest in makerspaces, technical colleges, and a support network that can teach and mentor innovative startups. These startups will also need access to capital to prototype or test, which can come from government grant programs like SBIR that specifically fund new innovations.
Innovation is fostered by creating a local culture within the business community that is willing to serve as customers and early adopters of homegrown technology. Some of the hardest steps in starting a business are customer discovery and feedback from pilots. A business community that is receptive to new innovations and serve as test subjects can go a long way in speeding up the lab to the commercialization process for new innovations.
Inclusivity
Every aspect of an entrepreneurial ecosystem’s design should be guided by inclusion and diversity. Collectively, these terms are known as DEI, or diversity, equity, and inclusion. DEI should serve as the foundation for an ecosystem that truly represents and advocates for underserved and underrepresented populations. This foundation begins with how the team of practitioners is built and should continue throughout every aspect of programmatic support.
The people an ecosystem serves should be reflected in the people hired to serve them. An inclusive ecosystem will recognize that not everyone starts at the same place and some will need more help than others. DEI applies not only to direct discrimination on the basis of race, ethnicity, gender, sexual orientation, age, and other cultural and personal differences, but also accidental or indirect discrimination that occurs through the upholding of systems and policies that harm at-risk populations and communities.
When practitioners build out programmatic support with purposeful intention, they serve and elevate entrepreneurs who might not have had the same starting point for their businesses and who will face other socioeconomic and cultural barriers, including access to broadband and digital tools.
Most grants and investments require specific DEI metrics that must be continually tracked and reported back to the funders. As stewards of entrepreneurship, ecosystem practitioners must do their best to make sure that these metrics are taken into consideration when designing programs for their communities.
Data and Insights
What cannot be measured cannot be improved. Measurement has to be an intrinsic part of the design of the programs offered within the community.
What gets measured also matters. Any data collection should be used the same way a startup would use data: for customer discovery. Practitioners need to fully understand the customers they serve, what those customers are working on, and how they feel about the program offerings. Is the programming useful? Inclusive? Is it helping them take the next step in their entrepreneurial journey? Are the mediums in which the programs delivered effective?
Data measurement can help with understanding the socio-economic status of the entrepreneurs you serve. This can help you apply for grants that are specifically designed for underserved or underrepresented demographic audiences.
Insights from engagement can serve as an early indicator of what is working and what needs to be tweaked with new programs. This can save valuable resources and make sure the impact is felt as per the design of the program. You can find out more about our work here.
Finally, entrepreneurship ecosystem building is a long game. It takes decades to see impact in communities and so I would encourage you to become life-long learners of ecosystem building and mentally prepare yourself for several missteps along the way. In the end, it will be very rewarding to look back and see the transformative work you will have done to help entrepreneurs and small businesses get started and grow to be successful.
Sources
- https://en.wikipedia.org/wiki/The_World_Is_Flat
- https://www.iedconline.org/news/2016/05/10/default/explore-the-pillars-of-future-economic-development
- https://www.score.org/
- https://americassbdc.org/
- https://www.cdfifund.gov/Pages/default.aspx
- https://therainforestbook.com/
- https://www.eda.gov/funding-opportunities/