09 Nov Understanding how to improve your startup ecosystem
A startup ecosystem is formed by people, startups in their various stages and various types of organizations in a location (physical or virtual), interacting as a system to create and scale new startup companies. These organizations can be further divided into categories such as universities, funding organizations, support organizations (like incubators, accelerators, co-working spaces etc.), research organizations, service provider organizations (like legal, financial services etc.) and large corporations. Different organizations typically focus on specific parts of the ecosystem function and startups at their specific development stage(s).
Startup founders and investors should be champions of better measurement in their cities. This is a key part of fostering more vibrant ecosystems and stronger companies, and is a way for everyone to contribute to the community.
Ever since the publication of Brad Feld’s Startup Communities book, the idea of “give before you get” has become a key tenet of building startup ecosystems everywhere. This expresses two related concepts.
First, the time-immemorial notion that helping others is not only morally rewarding but also will redound to your own benefit. This is also known as “pay it forward.” Second, less implicit but no less important, is the idea that if individuals live by “give before you get,” the entire ecosystem will be stronger. Relationships, mentoring, peer advice—a virtuous cycle is created that, ideally, results in better companies. The whole—ecosystem growth—is greater than the sum of its individual founders and companies.
There is empirical truth to this idea, too. In our research at Startup Genome, we have found close correlations between overall ecosystem performance and individual startup success. Founders who contribute to improving the health of the startup ecosystem also improve their own chances of success.
To better help their ecosystem, founders and investors and others also need to understand it: assessment and analysis are the first steps toward strengthening the ecosystem and its startups. This idea, however, is not fully accepted in the world of startups.
For some people, no amount of data can ever substitute for their own intuition. This is understandable: we are all human, and humans place disproportionate weight on personal experience, not data. The same dynamic has played out in baseball, where the sabermetric revolution—or Moneyball—has created all sorts of rifts between traditionalists and the new number crunchers.
There have been a handful of efforts to create “Moneyball for Startups,” from using better statistics for private investing to improved ways of recruiting talent. At an ecosystem level, better data assessment can push back against conventional wisdom and intuition.
It might be generally assumed that funding is the major issue for a certain ecosystem, for example, but rigorous analysis could show that the real issue is how few startups sell to global markets. Or, perhaps founders and investors and others are having trouble convincing the local government to reform business creation processes. Better data would buttress their argument.