Startup businesses are the life blood of every region they operate in. They create new jobs. They replenish jobs lost to technological and economical changes, and to the retiring work force. They attract talent into the region. They keep youth from leaving the region and provide opportunities for them to return to it.
Startups are the instrument of innovation and vision, and the engine for growth and prosperity in every region where they flourish.
So why then do so many startup communities struggle? From my experience, the main reason is because the participants have no common vision; no guiding principles of a healthy and sustainable startup community.
To address this shortcoming in full, I encourage you to read #BradFeld’s book, Startup Communities, and his new book, #GiveFirst: A New Philosophy for Business in The Era of Entrepreneurship. My purpose here is not to duplicate those works, but to summarize and build on the core principles Feld espouses, based on my own experiences working in startup communities in different regions of the United States.
My startup journey started in the coastal plains of Virginia, then took me to Eastern North Dakota, the Twin Cities of Minnesota, Seattle, Silicon Valley, South Florida, and now…the Gulf Coast of Florida. Yes, startup communities flourish everywhere — even in North Dakota.
Over three decades I started (or joined) nine startups and affiliated with hundreds of others as an angel investor, board advisor, accelerator mentor and startup resource provider. I’ve learned a thing or two about healthy startup communities versus those that are indifferent, or even hostile, to startups.
For those not steeped in Startup Community dynamics, allow me to first define what a Startup Community is and what it is not.
A ‘Startup Community’ is not a town, a city, or even a county. A Startup Community is not defined or limited by geographical boundaries. A Startup Community is self-selecting by the practicing and aspiring entrepreneurs that live in and around it. It usually includes multiple counties and is connected by interstate corridors like I-29 in Eastern North Dakota; I-95, I-75 and I-4 in Florida; I-5 and I-405 in Seattle; and the 101 and I-280 in Silicon Valley.
For example, when most people read or hear about the South Florida Startup Community, they think Miami. Some national publications even refer to this community as the ‘Miami Entrepreneurial Hub.’ In practice, the South Florida Startup Community extends to Fort Lauderdale and Boca Raton and all the smaller towns and cities that surround those larger cities – connected via the I-95 and Florida Turnpike corridors. The participants, especially the entrepreneurs and angel investors, do not limit themselves to one city or county.
Therein lies part of the problem because some participants in the startup community, like those affiliated with a university or municipality, do indeed try to limit participation to their geographic or institutional domains. That can cause friction and is one of the reasons why some Startup Communities struggle. Those within the community are trying to compete with one another and are working at cross purposes. This is much less of a problem in South Florida today than when I first arrived there in 2013 — thanks to good leadership.
A healthy Startup Community is a collection of interconnected organizations, programs, people and resources that collaborate and support innovations and startup businesses within the community, without regard to specific geographical or institutional boundaries.
With that foundation, allow me to suggest 10 Guiding Principles for a Healthy and Sustainable Startup Community:
1. No one owns or controls the community.
A healthy Startup Community is not controlled by city or county economic development agencies, university entrepreneurship or innovation programs, co-work spaces, independent accelerators, Meetup groups, venture capital funds or angel investors. Communities struggle when well-meaning but shortsighted people and organizations violate this principle. Startup entrepreneurs and those who invest in them do not want to be restricted or beholden to any one group. The community spurns those who have a zero-sum, ‘winner take all’ mentality.
2. The community is open to all who want to participate and contribute.
A healthy Startup Community welcomes all who want to participate in a positive and constructive manner. It does not exclude or discriminate on any level – gender, age, education, income, industry, profession, type of business or idea. Everyone has their superpowers. Note, there are smaller communities within the larger Startup Community that are “closed” or exclusive to a specific segment of the population, such as those that are university based, or main street based, or focused on a particular industry – like aerospace, retail or life sciences. But those mission-focused communities readily collaborate and share best practices with the larger Startup Community around them. They strive to support the missions of other groups. Communities struggle when the smaller communities within seek to operate in lieu of, or at the detriment of, other smaller communities trying to help startups.
3. The community is horizontal, not vertical.
A healthy Startup Community provides inspiration, support and resources across the spectrum of ideas, innovations and industries. Communities struggle when they have a bias for a certain sector or type of entrepreneur or startup. This usually plays out when a certain agency, business lobby or investor group pushes the community to give attention to some types of startups at the expense of others. This is a bad idea because it’s impossible to know where the good ideas are going to come from. A healthy Startup Community feeds all ideas and goes where ever it wants to go. It does not need to be told or directed where to go or who to support.
4. Entrepreneurs lead the community.
A healthy Startup Community is led by practicing entrepreneurs or those who cashed out successfully and are now investing in the next generation of entrepreneurs. Communities struggle when they are led by bureaucrats, non-profits, academics and retired corporate executives with no significant entrepreneurial experience. As Feld writes, “There are leaders and there are feeders.” The feeders are very important to the community, but the community must have leaders who know how to start, finance, build and sell a business – because they have done it – preferably at least twice. You can always tell a struggling startup community by its lack of participation by successful entrepreneurs.
5. Mentors and supporters are altruistic first, invested stakeholders second.
A healthy Startup Community embraces the people and talent who are first and foremost motivated by the desire to selflessly assist entrepreneurs and see the entire community thrive, not just benefit themselves personally. Communities struggle when they are surrounded by people who are there to line their pockets. It’s fine for people to make a living helping startups, or to see a return on investment from investing in them, but those motivations can not be the main thing that drives their participation. For example, in South Florida, the Venture Mentoring Team (VMT) pairs successful entrepreneurs with startup entrepreneurs and prohibits the mentors from getting paid or taking equity for the duration of the mentorship program. As Feld outlines in his new book, #GiveFirst and you’ll get much more later in many ways.
6. Failures, pivots and restarts are celebrated, and the entrepreneurs recycled.
A healthy Startup Community sees failure as an inevitable path to success. Very few entrepreneurs hit a home run on their first time up to bat. Communities struggle when they discard the entrepreneurs who failed to launch or get traction. In fact, most venture capitalists rarely invest in founders who have not failed before. Most startups need to pivot and/or return to square one – sometimes three or four times. A healthy Startup Community helps entrepreneurs to fail fast; to discard bad ideas but recycle the founders. Fail the startup, save the entrepreneur.
7. Seed capital is entrepreneur-friendly, not predatory.
A healthy Startup Community educates both entrepreneurs and angel investors on how to wisely fund startups. The community connects entrepreneurs with experienced startup company legal and financial advisors who have the entrepreneur’s long-term interests at heart. Communities struggle when startup financing is predatory and takes all the spoils or forces the founders into indentured servitude. While ‘Shark Tank’ may be the popular perception of how startups are financed, the most successful communities help structure deals and incentives that handsomely reward investors but don’t take advantage of the entrepreneurs.
8. Service providers are properly engaged and not allowed to be pushy or trivialized.
A healthy Startup Community properly engages the local service providers in a manner that is good for their businesses but not a waste of time or a distraction to the entrepreneurs. Communities struggle when they are dominated by local service providers more interested in “milking” startups instead of nurturing them. Communities also struggle when the opposite is true. Local entrepreneurs so fearful of being preyed upon by every service provider in town, refuse to engage with them at all and ban them from participation. Many service providers are themselves startups and small businesses. Startups need them to grow. A healthy balance between selling and giving is required for the community to thrive. See number 5 above, #GiveFirst. This balance can usually be achieved with the assistance of good mentors.
9. Innovation and disruption are valued as much as job creation or retention.
A healthy Startup Community supports potential disruptive innovations and value creation even if they may be contrary to some of its local interests. The fact is, some startups may kill-off some local jobs. They may indeed put some local businesses out of business in time. That’s a process known as ‘creative destruction’. In the long run, those startups usually end up creating major economic windfalls for the greater community. Communities struggle when they see those startups as a threat and prioritize short-term job retention over long-term value creation. Likewise, some startups don’t create jobs at all, or may create them overseas. A Startup Community that only wants to support local job creation or retention will eventually lose out to communities that embrace the future instead of the status quo.
10. The community prioritizes acceleration over incubation and weeds out do-nothings and bad actors.
A healthy Startup Community prioritizes acceleration over incubation; scalability over stagnation. Communities struggle when they drain resources on ideas that incubate for years without results and prop up dying businesses at the expense of those prepared to scale. When too many businesses are on life support, the community becomes stressed. If the community is pushed or seduced into being a hospice for sick startups, it will die caring for them. A healthy community will separate the talkers from the doers. It will also weed out the bad actors who are taking without contributing or preying upon the startups. A healthy community will cleanse itself of invasive species trying to infect the ecosystem.
These 10 principles have been proven to create and sustain healthy startup communities throughout the world. They are not mine or Felds or any champion of entrepreneurs. They belong to the community…every community. If you don’t like them, or they don’t apply to the community you are working to build, then by all means put forth your own principles. Then articulate them to all who want to participate. It’s important for all the participants in your startup community to know what it stands for.
May you create a healthy and sustainable Startup Community!