Building Startup Communities - Generating and Harnessing Entrepreneurial Potential
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Silicon Valley is the epitome of the idea of a start-up ecosystem. So ingrained is it that Israel’s own startup ecosystem is now gaining fame as ‘Silicon Wadi’. In January 2011, Barack Obama held forth on the importance of the entrepreneurial spirit – he is reported to have said, “entrepreneurs embody the promise of America: the idea that if you have a good idea and are willing to work hard and see it through, you can succeed in this country.” Four years later, India’s Prime Minister likewise spoke about the importance of entrepreneurship, particularly in the context of manufacturing.
As important as state encouragement is, such ecosystems require extensive collaboration on the part of stakeholders and other citizens. How do these start-up ecosystems come to be founded?
Location clearly matters. Regardless of the promises of the advent of the internet and New Media, the importance of face to face, in person meetings is hard to root out from human nature. Furthermore, given that the rise of civilisation itself is closely tied to the intense interactions of minds situated densely close to each other, this should not be a surprise. The first reason comes from Marshallian economics – due to the economies of scale of inputs (suppliers, infrastructure, labour) and services (legal, accounting, consultancy) that emerging companies need, it makes better sense to hub together in a specific area, or at least such selection ensues.
On a related note, as the concept of ‘network effects’ illustrates, bigger is better – the pooling together of resources enables multiplication of value generated. But this is not enough – a culture of openness, willingness to exchange and exploring opportunities must also exist, as the work of AnneLee Saxenian shows. As Richard Florida in his The Rise of the Creative Class shows, creative types tend to want to live together with others like themselves, thus providing a further boost.
As Brad Feld describes in his Startup Communities, there are four stages for a successful entrepreneurial culture to emerge from a city:
1. Entrepreneurs must lead the startup community: this is importantly linked to the sustainability; people who have already founded or co-founded a company are most eligible – those coming from a profession, be it government or academia or someone who’s been an investor or service provider, may lack the insight and ability of entrepreneurs.
2. The leaders must have a long-term commitment: the leaders that thus emerge must be committed, on a moving horizon of twenty years at least; the best startup communities tide over the bulls and bears.
3. The startup community must be inclusive of anyone who wants to participate in it: including those who are changing careers, those wanting to work for startups, or even those who are intellectually interested in startups.
4. The startup community must have continual activities that engage the entire entrepreneurial stack: by encouraging initiatives like accelerators, hackathons, tech meetups and open club meetings.
Feld also points to the importance of having a non-zero-sum game paradigm. Constant talk of winners and losers sets up communities to expect such dichotomous outcomes and leaves out untapped talent and opportunities in the bargain. Mentoring is also very important, not only in its traditional role likened to imparting knowledge but also in terms of a peer relationship built on mutual sharing.
Among the numerous problems that emerge as leaders set out to forge entrepreneurship into the heart of a community is what Feld calls the Patriarch Problem. In a hierarchical, context-driven culture the leaders (typically old white males) hold on to their powerful positions as it were, contrasted to flatter and more robust communities where position and background don’t matter as much as what one simply does. Such communities also have the advantage of opening up to ‘random’ visitors, newcomers or other interested people, rather than bureaucratising contact through a chain of command.
Another problem many cite is the apparent lack of capital. But it must be kept in mind that it is hardly likely that there will not be an imbalance between supply and demand for capital. As Feld says, real businesses are led by entrepreneurs who focus on solving the problem central to their business plan rather than worry about funding, which often does match up over time to the demand. Entrepreneurs may also get reliant on the government a little too much – for whatever reasons, there is a huge gap between expectation and availability of funds on the part of the government. Not only is government slower than other providers, it may also not have entrepreneurially trained people on board to take decisions.
Entrepreneurs also occasionally face the obstacle of feeders masquerading as leaders. VCs and other funding agencies whose job it is to ‘feed’ rather than ‘lead’ (which is the job of the entrepreneurs) are especially prone to seeking control. Entrepreneurs also often find themselves victims of changing political climates (and ensuing supply of funds and resources).
In order for the entrepreneurial spirit to truly percolate, it is necessary that changes in belief system also occur concurrent to socio-political changes. Across all major successful startup communities, following a policy of “give before you get” has reaped rich rewards. It may not have been verbalised as such, a fundamentally altruistic approach builds goodwill in the community. Needless to say, bounds are to be established on a personal level as to how much is okay, but instead of a jealous or even cautious sense of sharing, an open-minded attitude works wonders.
The second element of attitude required is that of learning from everybody – i.e. everyone is a mentor. A related theme is that of honest and open acceptance of ‘difference’ – which may occasionally manifest itself as eccentricity. The third and final but possibly the most key element is that of the feeling of togetherness that emerges through informal human interaction. Be it going for a walk instead of sitting at a table for a meeting, or waiting around for the ‘after-party’ after the party to truly open up with others, such practices have been key to deep relationships that have led to a sense of solidarity that is so key to the formation of communities in this space.
In the final analysis, the startup community is a set of people working together with common interests in mind tiding over personal differences.
This article has been authored by Akshay Peshave from SIMSR
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