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.
New Evidence on Fostering Productive Startup Communities
Last week, Endeavor Insight (the research arm of Endeavor Global) teamed up with the Bill & Melinda Gates Foundation to publish a new report on fostering productive startup communities. The report was authored by Rhett Morris and Lili Török of Endeavor, and I think it is one of the best pieces of empirical work I've ever seen on startup communities.
Make Covenants, Not Contracts
The Other Capital
You hear it in startup communities everywhere: “we don’t have enough capital; if only we had more capital we could achieve X; we can’t grow our company here because there is no risk capital,” and so on. There is no denying that early-stage funding can help startups profoundly. But, let me point to another type of capital that is just as important for a startup community over the long-run. It is also something that local leaders have greater control over. Social capital refers to the set of informal norms and values shared by a group of individuals (a network), which allows them to cooperate and engage collaboratively with greater ease. If it is the network (relationships) that directs vital information and resources (ideas, talent, funding) to company founders, it is social capital—the nature of those linkages—that determines how well information and resources flow through the network.
Feeling Isolated? Build a Diaspora
Talent flight is a real problem. Not just for college towns, but for major cities and regions outside of coastal innovation and knowledge hubs like Silicon Valley and New York. The US Midwest, for example, is notorious for producing high rates of engineering and science graduates from top-flight schools, only to see them flee for the coasts (though, this trend may be changing somewhat).
Over the long-term, city leaders need to think hard about how to make sure that would-be local entrepreneurs and other talented individuals have the resources they need to stay at home. But, let me suggest another course of action that can be taken right away: build a diaspora.