Trey Anastasio is the guitarist and frontman for Phish—a jamband originally from Vermont that has been going strong since 1983. Phish’s trademark is its improvisational style and unique sound that ensures each show is different from the next. This approach has led to an adoring fan base that follows the band from city-to-city each tour. I’m one of them. My time with the band dates back to 1997 when I was still in high school. I believe that Phish is the greatest rock band in history and Trey is the greatest living guitarist. But my love of Trey and Phish is not what this post is about.
5 Questions with Ian Hathaway, co-author of The Startup Community Way
01. What is “The Startup Community Way”?
The Startup Community Way is a book I co-authored with Techstars cofounder Brad Feld. It’s a collection of frameworks, principles, and action points that guide and inform practitioners and observers about the key characteristics, behavioral patterns, and basic function of startup communities and entrepreneurial ecosystems. Our thinking is supported by the science of complex adaptive systems, which explains the behavior of inherently unpredictable, emergent phenomena. We apply insights from systems thinking and community-building across many contexts to enable better engagement and more productive outcomes for entrepreneurs.
The Startup Community Way: Five Lessons for U.S. Policymakers
This article originally published on the Center for American Entrepreneurship Ideas Blog
My new book with CAE Advisory Board member Brad Feld published yesterday. The Startup Community Way: Evolving an Entrepreneurial Ecosystem is essential reading for entrepreneurs, community leaders, policymakers, and other key stakeholders looking to entrepreneurship as an engine of innovation and economic growth. As more cities, regions, and nations embrace entrepreneurship, it is widely recognized that the environment in which a startup operates plays a role in the likelihood of its success. For this reason, the topic of “entrepreneurial ecosystems” has begun to play a bigger role in many economic policy agendas.
The Startup Community Way: Evolving an Entrepreneurial Ecosystem
After three eventful years, I’m excited to say that my new book—The Startup Community Way: Evolving an Entrepreneurial Ecosystem, with Brad Feld—is officially available to the public today! It’s my first book, so this is a new feeling. It’s hard to put into words how grateful I am for the experience. I learned so much in the process and developed a large number of meaningful relationships along the way that will last a lifetime. It wasn’t always fun; writing a book of this nature is really hard work. But it was worth it.
I believe that Brad and I have created something that will be useful to many people, not just in entrepreneurship and community-building, but far beyond. Our book is not the final say on the topic of startup communities; it’s the beginning of a conversation. There is more work to do and many other voices to hear from. Like with startup communities, the work is truly never finished. But, I believe we have provided a solid foundation from which many people can benefit and build upon for years to come. I’m proud of our work.
Art
This is a photograph of my dear friend Ray Foote. He’s a bit of a personal hero. Ray pulled me through a difficult time. I did the work, but Ray was my guide. He helped me see what I couldn’t on my own. I’m in a much better place today because of him. The lessons he taught me are timeless. I continue to benefit from them and so do the people I share them with.
Acceptance and The Narrative Fallacy in the Times of COVID-19
In the last week, I’m witnessing an acceleration in what I’ll call “The COVID Struggle,” or more simply, “The Struggle.” Many people are having a hard time dealing with and accepting the reality of life under a global pandemic, and are lashing out against this constrained way of living in ways big and small. They desperately want things to go back to the way they were before, so they pretend that everything is fine—that life as we knew it can resume with minimal further disruption.
But life is nowhere near returning to normal anytime soon. I’d say at best, we’re a quarter of the way through this thing. This is unsettling, which is why people are rejecting reality. Without strong leadership in place as a check on human impulses (selfish, short-term), the situation worsens and the whole episode drags on. The suffering elongates. It’s a self-reinforcing feedback loop.
The Measurement Trap
Mariana Mazzucato is one of my favorite economic thinkers. She’s an academic economist who rejects market orthodoxy and presents her arguments, persuasively, to the masses—a gift that many in her field don’t possess. Mazzucato’s overarching argument is that (a) the state’s role in driving innovation, and therefore economic growth, is much larger than is reflected by market reward mechanisms, and (b) a primary reason for this lopsided arrangement is the flawed way we value a range of inputs to production.
On this latter point, Mazzucato argues in a recent New York Times Op-Ed:
Essentially, only something with a price is valuable. This approach overvalues goods and services with a price tag — which in turn make up a country’s gross domestic product, the driver of public policy. This has perverse effects. A coal mine that spews carbon into the atmosphere increases G.D.P., and so is valued. (The pollution it causes is not taken into account.) But the care given to children by their parents at home doesn’t carry a price, and so is not valued.
Since I have the topic of entrepreneurial ecosystems at top of mind, I immediately went there after reading this quote. It reminds me that what gets valued in entrepreneurial ecosystems tends to be the tangible factors that can easily be counted, like the amount of investment capital or the number of startups, instead of the intangible factors that more fundamentally drive system value, such as social capital or tacit knowledge.
Fatherhood
Sleep
On Friday night, I got eight consecutive hours of sleep. It’s been a long time since that last happened—months and possibly longer. I woke up feeling great. The stressors I’ve had stemming from Covid-19 related fallout and a bunch of other things were washed away immediately. I was full of energy and had an incredible weekend with my family. All from just one night of great sleep.
I have two wonderful sons. I love everything about them. The problem is, they’re both terrible sleepers. That fact, combined with some conscious choices my wife and I make about how to parent, means that we have been experiencing sustained sleep deprivation for nearly four years. I’ve probably slept as well as I did on Friday no more than a dozen times since my oldest was born in 2016.
The impacts of my lack of sleep are piling up. I’m exhausted and it’s taken a toll. It took just one night to wake me up to the reality of how badly I need to get better sleep (see what I did there?). Now I wonder: is much of my stress reducible to this one problem of not getting enough sleep? Maybe so.
The Geographic Concentration of Venture Capital(ists)
Last week, The New York Times published an article arguing that a “wave of venture capitalists is heading to quieter, less-expensive locales, where they are helping fund start-ups.” The article supported this claim by pointing to three venture capitalists who left Silicon Valley and launched funds in other places. One of them, Mark Kvamme, left Sequoia Capital to found Drive Capital in Columbus, Ohio; but that was back in 2013.
I don’t doubt that some venture capitalists have left The Valley to start funds elsewhere. However, The Times is massively overselling the reality. It is already well-advertised that venture-backed startups (the recipients of venture capital) are highly concentrated by geography. However, venture capitalists (the ones investing in startups) are concentrated by geography even more. Let’s take a look at the data.
Call for Input: Local Policies to Support Economic Development via Entrepreneurship
This is a call for input for a brief survey on local policies or programs to support startup community development. I use the term "policy" loosely to mean actions not just by governments, but also by additional actors involved in provisioning "public goods" or funding for local entrepreneurship (e.g., economic development agencies, foundations, chambers of commerce, non-profits).
The New Business Preservation Act and the Tradition of U.S. Federal Government Support for Entrepreneurship and Venture Capital
Earlier this month, a group of U.S. Senators led by Amy Klobuchar introduced the New Business Preservation Act to incentivize venture capital formation around the country. The Act, which allocates $2 billion to states under the “Innovation and Startups Equity Investment Program,” enables investors in undercapitalized regions to leverage federal dollars into startup investments. It avoids two well-known traps for government-sponsored venture programs by requiring that public funds are matched with private dollars and that capital is deployed by professional investors.
Then, All at Once
Last Sunday I hit send on my first book manuscript for review by the publisher. It’s been nearly three years in the making, full of twists and turns, a roundtrip Transatlantic move with my family, tens of thousands of discarded written words, and two hiatuses totaling twelve whole months in length. It’s been a long time coming and damn does it feel good to finally see the light at the end of the tunnel.
If you don’t know already, it’s a book on entrepreneurial ecosystems co-authored with Brad Feld. We use the concept of complex adaptive systems to explain the behavior of startup communities and entrepreneurial ecosystems. A defining characteristic of complex systems is a process known as emergence. This occurs when the “parts” of a system interact in a way that produces value in novel and unexpected ways. Nobody is in control and the ultimate outcome is difficult or impossible to predict in advance.
The Myth of the Young Startup Founder
In February 2004, Mark Zuckerberg famously launched Facebook from his Harvard dorm room at the age of 19. By that summer, Zuckerberg moved himself and the company to Silicon Valley and never looked back.
Over the next eight years, Facebook would attract half a billion users and nearly $7 billion in venture capital investment, on its way to a May 2012 IPO that valued the company at more than $81 billion. Today, Facebook has more than one billion users and is worth more than $500 billion. Zuckerberg is still CEO, and at 35 years old, has an estimated net worth of $65 billion—making him the eighth richest person in the world.
It’s a fascinating story. So fascinating in fact that Hollywood made a feature film about it called The Social Network. And while the story of Mark Zuckerberg and Facebook has undoubtedly inspired an entire generation of young entrepreneurs and reshaped their imaginations about what’s possible, people too easily forget that a big part of what makes the story compelling is that it’s so unusual. Mark Zuckerburg is not only an outlier—he’s an outlier among outliers.
How to Tell if You Have Product/Market Fit
This is a debate that will never be settled. Plenty has been written about how to define product/market fit. The consensus seems to be: (a) it’s generally easier to identify when you don’t have it, and (b) when you do, it’s hard to objectively point to why. It’s just a hunch. A feeling.
But, let me propose another way of thinking about it, which comes from my good friend Nicolas Colin of The Family. Nicolas takes a very different approach to helping people thinking about when product/market fit is or isn’t happening, using a story from politics.
What Does Your City Say?
This morning a friend reminds of a Paul Graham article from 2008 titled Cities and Ambition. It’s excellent. For those of you who don’t know, Paul is the outspoken founder of Y Combinator—a prominent early-stage startup investor in Silicon Valley.
The general thesis of Paul’s article is simple yet elegant. Cities speak to us. They influence our behavior. They shape who we are. It matters where you live. A lot I would argue.
A Second Nobel Prize in Startup Communities
Last year, I wrote about Elinor Ostrom, an American political economist, who was awarded the 2009 Nobel Prize in Economic Sciences for her work on cooperation and collective action. Ostrom studied how rural communities self-organized to sustainably share scarce natural resources in the absence of formalized governance structures. In her Nobel acceptance speech, she described her work in the following way:
“Carefully designed experimental studies in the lab have enabled us to test precise combinations of structural variables to find that isolated, anonymous individuals overharvest from common-pool resources. Simply allowing communication, or “cheap talk,” enables participants to reduce overharvesting and increase joint payoffs, contrary to game-theoretical predictions.”
In other words: we tend to cooperate with people we know, trust, and frequently engage with, while we find it easier to defect or play zero sum games with people we don’t. This thinking is central to building healthy startup communities (or ecosystems), where the flow of ideas, talent, and capital are made possible by informal norms and relationships built on trust, reciprocity, and stewardship. For that reason, I awarded her the Nobel Prize in Startup Communities (credit goes to Victor Hwang for originally connecting Ostrom’s work to startup communities/ecosystems).
Platforms versus Pipes
One of the biggest challenges facing startup communities (or ecosystems if you prefer) is the inability of “feeder” organizations—such as governments, economic development authorities, corporations, and universities—to engage with an entrepreneurial mindset. The reason is simple: startups and startup communities are organized through networks. Feeders are structured around hierarchies.
If You Want to Better Understand Startup Communities, Read These Three Women
I’m working hard on The Startup Community Way this week with my co-author Brad Feld. As we’re polishing up the meaty part of the book—which draws on a wide range of theory, empirics, frameworks, and just some really brilliant thinking on the part of the many impressive shoulders this work stands upon—a few names keep coming up in the references we’ve assembled.
Three of these names I want to talk about today are intellectual giants in the areas of entrepreneurship, geography, and cooperative social systems. Their work collectively intersects in a way that explains a lot about why startup communities exist. If you want to understand startup communities, you should know their work. Two of them I consider friends, so not only do I get to benefit from their insightful work, I also know there’s a kindness and generosity behind their ideas. The third is not someone I knew, and sadly she’s already passed. But, I think a lot of her work and I’ve written about it already.
All three are women.
Why Content-Driven Strategy is Smart Business
My friend Nicolas Colin has an excellent new article out titled “Content-Driven Strategy,” in which he makes a convincing case for thoughtful content as a means of demonstrating and shaping the strategic direction of businesses. Nicolas would know: a robust content-driven strategy has been foundational to the success of The Family—the early-stage investment firm he co-founded with Oussama Ammar and Alice Zagury in 2013. What started out in Paris, The Family is expanding rapidly throughout Europe, with offices in London, Berlin, Brussels, and more surely to follow.
I am a strong believer in content as a means of more fully developing thoughts, stimulating discussion, and attracting potential collaborators. Some American entrepreneurs and investors do take content seriously, but many more don’t. That’s a big missed opportunity. The Family has something to teach us Americans on this front, and Nicolas’s article lays out the many reasons why producing content adds value. I encourage you to read the whole article yourself (as well as The Family’s Scaling Strategy series), but here is a summary.