How to Create a Thriving Startup Ecosystem: 5 Tips for Leaders and Feeders of Entrepreneurial Communities
A lot has been written about entrepreneurs and what makes them successful.
A lot has been written about startups and why so many of them fail.
Less has been written about entrepreneurial communities and what it takes to create a thriving startup ecosystem.
I’d like to bridge these topics and share with you five very important drivers of entrepreneurial success, which I believe are often overlooked or misunderstood, by startups and the communities that support them.
To be clear, when I say entrepreneurial communities, I don’t mean towns, or cities, or even counties. Entrepreneurial communities are not defined or limited by geographical boundaries. They are a collection of interconnected organizations, programs, people and resources that collaborate and support innovations and startups within the community. South Florida is an entrepreneurial community in the same way that Silicon Valley is an entrepreneurial community. No one can say precisely where those boundaries start and end.
There are communities within communities, like those that are university based, or main street based, or organized around a particular sector, like retail or life sciences. Some of these communities are open and some of them are closed. But I am getting ahead of myself. Back to the five important drivers of entrepreneurial success. What are they, why are they important, and why do I believe they are overlooked or misunderstood?
The first driver is…
Most Entrepreneurs know how important speed is – they are indoctrinated with the notion that speed is everything. It’s a race…be first to market…when you get a lead, stay ahead of the pack. Run! Run! Run! “It’s not a marathon,” they chant, “it’s a sprint!”
Entrepreneurs and their mentors like to recite the parable of the Gazelle and the Lion. They hang it up as a poster in their offices; they post it as a meme on social media.
You are no doubt familiar with this famous parable:
Every morning in Africa, a gazelle wakes up. It knows it must outrun the fastest lion or it will be killed.
Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve…
…it doesn’t matter whether you’re a lion or gazelle – when the sun comes up, you’d better be running.
Run! Run! Run!
Speed! Speed! Speed!
Eat or be eaten! That is the law of the jungle and a rule of the entrepreneurial community.
But speed alone does not determine whether the startup will eat or starve. When the Lion is just as fast as the Gazelle, another critical factor comes into play. During the chase, speed being equal, what determines if the Lion will catch the Gazelle, or if the Gazelle will get away?
Driver number 2…
In the heat of the chase, if the Lion zigs when the gazelle zags, the lion will lose his footing; he will break his stride, and the gazelle will get away. At the critical moment when the Lion pounces, it only has one possible trajectory once it commits…once it is in the air. If the gazelle zigs or zags at that critical moment, the lion will miss its mark and the gazelle will live another day.
The entrepreneur is obsessed with speed, but often fails to account for timing.
Back to the marathon vs sprint analogy. Even if you are running a marathon, not a sprint, if you break out too soon you will run out of wind and lose the race. If you wait too long to make your move, you won’t catch your competitors and will lose the race.
In my humble experience, every startup should be run like a marathon, with intense focus, a sense of urgency, and a well-honed instinct for timing.
So, we see that both speed and timing are crucial drivers for entrepreneurial success; for whether you will live or die as a startup.
Now, what shifts the speed-time paradigm? What is the game changer in any startup scenario?
Driver number 3…
Neither the Gazelle or the Lion can outrun a bullet fired from a high-powered rifle with a good scope.
It does not matter whether you are the predator or the prey, the chaser or the chased, when technology comes gunning for you, you will lose no matter how fast you are and how good your timing is. You’re a lion or a gazelle, a corporation or a scrappy startup, technology does not discriminate. You are just out there one day prancing on the plains, enjoying the weather, nibbling on some bushes, frolicking with your mates…and…zippppt! A Bullet rips through your heart. You’re still walking, but you’re dead and you don’t know it.
You were oblivious, you probably didn’t even see it coming, but even if you did, you dismissed it. You saw it and concluded, “that doesn’t pose any threat to me…it’s irrelevant, it’s too far away.” You underestimated the unrelenting pace of change. You can’t outrun change, and it’s damn difficult to time if you are on the wrong side of it.
Technology is the game changer. It shifts every paradigm. Every startup and every entrepreneurial community needs to be on the right side of technology — and more specifically, adopting the right innovations. They need to embrace and leverage technology. They need to put it to work for them, not let it be used against them.
If you are not on the right side of technology, you will be road kill.
Take Uber for example. They created an awesome platform, but they did so by adopting and leveraging the innovations and technologies pioneered by others – smart phones, cloud infrastructure, high speed bandwidth, GPS and Geo-fencing technologies. It is the combination of leading edge, best-in-class innovations, PLUS a startup’s own unique adaptations of those technologies – that make a startup successful…that give it lift and momentum.
And here’s the crucial thing….
…after the startup finds a market, after it gets traction, it must have the courage to keep on innovating; keep on embracing the right trends and technologies. This is where many successful entrepreneurs eventually go wrong. Every successful startup becomes a successful business – a corporation. The entrepreneur matures into a corporate executive. He ceases to be an innovator and becomes a fortifier – driven to protect the franchise he built. He stops becoming the change he created and starts defending against further changes. He stops innovating. He gets lazy. He takes his position for granted.
Ask anyone who leads a corporation, and they will tell you they are under assault. And it is NOT from other corporations of their own size or makeup, or from government regulation, or overseas competitors. Those threats are predictable and manageable. They are under assault from a never-ending stream of aspiring entrepreneurs who have joined entrepreneurial communities; who are collaborating in co-work spaces; who are out innovating them – who are intent on replacing them…on becoming the next generation of corporations.
In the 20th century, the average Fortune 500 company was expected to stay on the list for 60 years. Today, their life expectancy is less than 15 years. There are companies on the F500 today that did not exist 10 years ago and will not exist 10 years from now. This combination of speed, timing and technology has dramatic implications for every startup, the people they employ, and the communities that host them.
So, to be a successful entrepreneur, you must master speed and timing, but you must also master technology – you must embrace continual innovation. You must be willing to tear down what you have built, disrupt yourself, put your own products and services out of business, in favor of all new products and services.
Why is Apple still in business today, when so many other computer and software companies have come and gone? How is it that Apple is still here?
· Elegant, modern design
· Non-stop Innovation
· Creative destruction
· The courage and ability to reinvent themselves over-and-over…
…to kill-off their own products and services and place bets on all new lines of business; to capitalize on the latest innovations.
Don’t be the entrepreneur buying out your neighbor’s farm, so you can expand your horse and buggy business, when Henry Ford is in town building automobiles — and an assembly line to mass produce them.
This leads me to the fourth driver of entrepreneurial success…
Every startup must be designed to scale, or it is doomed to fail. We can all debate what scale means, but we can all agree the essential ingredient is growth. Life is wired that way. It’s in the cosmos and in our DNA. Like the universe, great startups are born with a BIG BANG, and they keep expanding. You are either growing, or you are dying. A startup is constantly learning and improving and pushing itself to get better, or it is in a state of atrophy.
The problem with some startups is they don’t scale. The problem with some entrepreneurial communities is that they spend all their time and resources on caring for those in atrophy – who are dying a slow and miserable death – instead of empowering the accelerators and startups that are designed for growth. You can’t do both well.
If your entrepreneurial community wants to be a hospice for startups, it will die caring for them.
In Silicon Valley, the community is merciful. They call it “Fail Fast.” When I was raising venture capital for my startups there, they never asked me about my successes. They wanted me to talk about my failures and what I had learned from them. They wanted to know how I was going to grow my new startup. In fact, most VC’s will not invest in an entrepreneur who has not had some failures. Experience and growth through failure is the entrepreneur’s calling card. It’s a badge of honor.
In my humble opinion, most communities don’t fail their startups fast enough – and they punish them when they do fail. Instead, most communities nurse them along, keep them on life support. That is not mercy, that is cruelty! The entrepreneurs in some communities have been taught not to fail, or the community will banish them. Some of the organizations and programs in the community are afraid to have failures, because they think it will tarnish their reputations and threaten their funding. Neither the entrepreneur nor the community can win with that mentality.
You may say, Mike, that is unfair. Every startup deserves our care and feeding, even though they haven’t proven their value proposition or ability to execute. Every main street business is worthy of our attention, even though no one wants to patronize them anymore and they don’t scale. After all, it is the duty of every community to support all businesses equally, especially local businesses.
To which I say, “Nothing will suck the life out of an entrepreneurial community faster than startups and main street businesses that don’t scale.” A bullet has already ripped through their heart. They are the walking dead.
Every business today, even the main street business, is a scalable business by default. We live in interconnected economies – some are regional, and some are global, but NONE are local. The local restaurant that has a secret recipe for a great barbeque sauce, sells that barbeque sauce in every Publix in Florida. The local t-shirt shop with its own designs, sells those t-shirts globally on Amazon, Facebook, and their own e-commerce web site.
For example, when I was growing up in Cocoa Beach, Florida, I worked summers at a little local business called Ron Jon’s Surf Shop. You may have head of it. They had one shop. Today, they have a MALL and stores all around Florida and in other states. They sell a ton of product online. I’ve traveled all over the world and it never ceases to amaze me, walking down the streets of Paris or London or Sydney – somebody will walk by me wearing a Ron Jon’s T-shirt. I smile and think to myself with great pride, that’s my home town. You go, baby!
My point is….we cannot nurse dying startups or main street businesses at the expense of fueling the visions and the opportunities which will create the future – the jobs, the growth, the new wealth. And the future belongs to those who scale. It belongs to startups who are creating that future and to the communities that are empowering them.
This leads me to the fifth and final driver of entrepreneurial success…
There is this great myth around the entrepreneur as a lone wolf…a soaring eagle. They are misfits and geniuses and renegades that go it alone. They have no choice but to blaze their own paths. What a bunch of B.S! Nothing could be further from the truth. Just look at Silicon Valley. Why is it so massively successful? Why do they produce so many great entrepreneurs and startups that become household names? Are the entrepreneurs there smarter, and more creative than entrepreneurs in other places? Of course not! They are successful because of the community.
Let me make the point in a different way.
Every week I drive Alligator Alley. I live and work on both the gulf coast and the east coast. I am constantly on the alley – I know every mile like the back of my hand. A few weeks ago I was coming over from the gulf coast to teach for StartupNOW at Broward College. I am cruising along as always, at the speed of traffic, about 80, 85 miles an hour. All of a sudden, I’m blowing by the other cars. The other cars that were pacing me start falling back. Naturally, I brake to match their speed and fire up my Waze app to see what’s going on.
Sure enough, Waze tells me there are troopers running a speed trap about 10 miles ahead. Most of the other cars on the road obviously know it as well. This is the community – the wisdom of the crowd – the users of data and technology – empowering each other. We all slow down to the speed limit. We are informing one another of imminent danger.
Right about then a car goes whizzing by me – like 90 miles an hour. He’s a lone wolf…a soaring eagle…blazing his own path…not a member of the community. Sure enough, 10 miles down the road the troopers have him pulled over and are giving him a speeding ticket. We all wave to him as we drive by.
Entrepreneurs who are not part of the community go nowhere fast. They run into a lot of speed traps and most of them eventually hit the wall. Smart entrepreneurs use startup WAZE. And startup Waze is about leveraging the wisdom, the data and the support of the community.
So, how do thriving startup communities structure themselves? What role do they play?
1. First, and I’ve already touched on this – a tolerance for failure and access to best practices. Good communities put stupid startups out of their misery, but don’t kick out the entrepreneur. They invite the founder back…to get smarter, to pivot…to get it right. Kill the startup, save the entrepreneur! Show me an aspiring entrepreneur who has never failed, and I will show you someone who has never had a successful startup.
2. Second, affordable creative spaces. Whether in universities, on main street, or abandoned old buildings on the outskirts of town, good communities give entrepreneurs a place to come together – to collaborate, to collide with one another, and to find serendipity. Entrepreneurs slaving alone in isolation will find it difficult to succeed. They must have places to band together, online and offline, to build on each other’s ideas, and feed off their respective energies.
3. Third, access to talent. Good communities build match-making systems and host networking events that help startups fill their talent gaps. A good community catalogs all the technical, creative, marketing, operational and financial human capital it has — and matches it with the startups that need it.
4. Fourth, access to capital. Good communities mobilize investment sources and create incentives for investors to place high-risk bets in early-stage ventures. They help educate those investors and minimize their risk by spreading the risk. They also help their startups access that capital in a way that they won’t be taken advantage of.
5. Fifth, good communities create and recycle entrepreneurial leaders. When a successful startup is born in the community, that community grooms and recognizes the founders of those startups. They enroll them as leaders, they don’t let them leave the community. Good entrepreneurial communities are like Hotel California: You can check in, but you can’t check out. A really smart community will track down the leaders who came out of other entrepreneurial communities – who retired there with their knowledge and their wealth – and enroll them as leaders in their community.
A good entrepreneur never really retires, he or she becomes an investor and mentor for other promising startups. A good example is the VMT – the Venture Mentoring Team — that has recently been organized in Florida to assist and accelerate aspiring entrepreneurs running the most promising startups. It is up to the community to properly engage these leaders.
6. Sixth, good communities break down silos and weed out bad actors. As @BradFeld writes in his book, “Startup Communities,” every entrepreneurial community is comprised of leaders and feeders. The leaders are serial entrepreneurs and accomplished business people who had successful careers. They want to give back. They enjoy helping the next generation of entrepreneurs in the community.
The feeders are the organizations and programs chartered by some funding source to help startups, presumably by providing the resources listed above. The problem with some feeders is they see it as a zero-sum game. They think they are the ecosystem, when they are just one of the species in it. They become territorial. They tend to be closed communities. They build walls, they don’t play nice with other feeders, they try to keep the leaders and other precious resources all to themselves and within their little click.
A good community will spurn those feeders. It will also ostracize bad actors – those that are running scams and trying to take advantage of startups and preying on the good programs and people trying to build an all-inclusive community. A productive and healthy ecosystem will cleanse itself of invasive species trying to infect or control the ecosystem.
A thriving and vibrant entrepreneurial community is open and all-inclusive. It maintains a symbiotic relationship with all parties. It supports the entrepreneurs and protects itself against insidious outside influences, or those that may emerge from within the community to try and hijack it.
So, there you have them, the FIVE drivers of entrepreneurial success for startups and the communities that support them. Remember, startups will come and go, but the legacies of entrepreneurial visionaries live forever. It is up to the community to nurture those visionaries. For all their ups and downs and risks and disappointments, startups are still the best way to create jobs, wealth, and healthy communities. Entrepreneurs are the future of our community, and the best hope for America and the world. May you have an amazing journey and enjoy great success and prosperity!