What is an entrepreneurial ecosystem?
An entrepreneurial ecosystem is the interconnected system of social and economic factors within which individual builders interact in their community.
Entrepreneurial ecosystems are complex, and this is one of the reasons they are poorly understood. Many economic developers, policymakers, and even entrepreneurs think that a single change or tweak is enough to transform a region into an entrepreneurial powerhouse. This is simply not true. Instead, ecosystems require the cultivation of many elements at the same time.
After studying ecosystems for the last fifteen years, Chapman and Company has created a simple ecosystem visualization. This visualization illustrates both the complexity but also the shape of an entrepreneurial ecosystem. We believe that it applies beyond entrepreneurship, but is a useful way to consider building a systematic improvement in the environment for entrepreneurship.
The most important aspect of the entrepreneurial ecosystem is the entrepreneur. Again, this is often misplaced or not included in the map. We believe that at its heart, human economies are just that – HUMAN. This means that considering the entrepreneurial ecosystem without the entrepreneur is flat out wrong. However, many organizations attempt to place themselves in the middle of the ecosystem or attempt to re-direct ecosystems through them. Again, this is wrong.
By its very nature, entrepreneurial ecosystems are decentralized meaning that no organization is “in charge”. The goal, instead, is to help identify areas where improvement is needed and then to intervene with as light a hand as possible to help that section improve.
How to help build your entrepreneurial ecosystem:
1. We believe that every ecosystem should have a strong mechanism to tell stories. Currently, with the degradation of many local newspapers, this area is greatly hampered. Thus, we often recommend the creation of a blog, podcast, or Youtube channel to profile the entrepreneurs. This helps the entire community see their heroes and understand their businesses. It is important to spread the word and to ensure people consider the role of entrepreneurs in their community as forces for positive economic regional determination. For example, Silicon Prairie News helped jumpstart Omaha’s entrepreneurial ecosystem development efforts in 2008-09.
2. We believe that every ecosystem should have mechanisms for early-stage entrepreneurs to deploy capital without endangering the entrepreneur’s personal stake in the company. Many times this is filled by angels or through instruments, such as a SAFE agreement. However, there are also times when communities have created programming that helps deploy grants or forgivable loans. For example, Arch Grants in St. Louis have helped jumpstart that community.
3. We believe that big companies have a critical role to play in ecosystems – that of the first customer. We have interacted with hundreds of communities and companies over the last fifteen years, and shockingly, most big companies want entrepreneurial ecosystems to work. Usually, this is because they are seeking a better environment for attracting talent or innovation directly spurred by an ecosystem. But, regardless of the desire, the large company should try to be a customer first and everything else second. For example, Nelnet, in Lincoln, consistently buys software from the companies in which they invest. This makes them more than just a silent investor, but an engaged counterparty.
4. We believe that it is important for networks to build within ecosystems AND without. Thus, connecting activities, such as one-off introductions, meetups, and events, are critical in the long-term development of an entrepreneurial ecosystem. The goal should not be to win with each event, but instead create events that draw entrepreneurs together with other people that can help their networks and opportunities to find talent, customers, and capital. Events, such as SXSW, fill this gap on a national scale, but smaller events populated by people that rarely see each other are oftentimes more useful.
In short, there are many ways parties can impact their entrepreneurial ecosystem. We try to find ways that are simple and straight forward…and usually inexpensive. The point is not to build an entire structure of costs, but to build a working model of human relationships around the entrepreneur. When, we have done this, entrepreneurs win. And we believe in the entrepreneurs ability to establish their own success.