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 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.
Student Loan Debt is Killing American Entrepreneurship
Ethan Mollick, a professor at the Wharton business school, Tweets about a paper that causally links student loan debt with declining entrepreneurship in America (including in high-growth, high-tech activities). By exploiting two “exogenous shocks” to the student loan system (public policy changes that are unrelated to entrepreneurship), the authors demonstrate that student loan debt not only causes individuals to start fewer businesses (especially in the high-tech, high-growth segments), but when they do, they are (a) less likely to be successful, and (b) experience greater hardship from the (already more likely) business failures. These are not exactly the type of conditions that encourage people to start new ventures, particularly when competing in a harsh competitive environment of increasing market power, raising incumbency advantage, and expanding wage opportunities at larger companies.
Colorado is for Founders
Virginia may be for lovers, but Colorado is for doers, creators, and founders. I was reminded of that again today on Twitter by this photograph of Jared Polis and Phil Weiser—respectively, the Governor-Elect and Attorney General-Elect of the state.
The Gift of Global Talent
Talent is to a knowledge-based economy what oil and steel were to an industrial-based one—it’s most important asset. And while agglomeration was important in the past too, it pales in comparison to the type of economic concentration we see playing out right now in major cities across the globe—talent wants to be around other talent. In fact it needs to be.
For decades, the United States has been the world’s biggest beneficiary of global talent flows by a long shot. But the United States risks squandering its long-held gift of global talent, due to changing economic conditions abroad and series of missteps at home. That’s the main message of an excellent new book from Bill Kerr of the Harvard Business School: The Gift of Global Talent: How Migration Shapes Business, Economy & Society.
Hedge
I recently had the pleasure of meeting Nicolas Colin. I’ve been an admirer of his writing in the past, and we had a delightful conversation at one of my favorite breakfast spots in London. For those of you who don’t know, Nicolas is a co-founder of The Family, an early-stage investment firm started in Paris and now operating in London and Berlin.
He is also the author a new book Hedge: A Greater Safety Net for the Entrepreneurial Age, which I’m happy to have completed just this week. Hedge hits three important notes for me: it is meticulously researched (527 references! 😍), very well-written, and has a point of view that stands out from the others.
Will Generation Z save our country and the economy?
Will Generation Z, which has lived through the Iraq war, the financial crisis, police brutality, mass shootings, rising cost of education, and Donald Trump, be a generation of entrepreneurs? Will they use their creative instincts, technological savvy, and a distrust of the established order to bring radical change to our business and social sectors? These are the right conditions for creativity, innovation, and entrepreneurship to flourish.
High-growth firms of the Inc. 5000
Today, I have a new report out at the Brookings Institution titled "High-growth firms and cities in the US: An analysis of the Inc. 5000." The Center for American Entrepreneurship generously provided funding for the study and Inc. Magazine provided the data.You can read the entire report in more detail with the link above (it's a 15 minute read, max), but here are some takeaways.
Microdistilleries on the rise
Yesterday I wrote about the exponential growth in microbreweries during the last decade. The trend toward small business activity in the brewery industry is an interesting case study because the rest of the economy is moving in the opposite direction—with industry consolidation is on the rise and the rate of business formation near record lows. That got me to thinking: what other industries are experiencing a similar trend of substantial rises in small business activity over a short period of time? I crunched the numbers, and one industry noticeably stood out—distilleries
Craft breweries buck the monopoly trend
Mounting evidence of widespread industry consolidation has many worried about the future health of the American economy. Excessive industry concentration can have negative effects on innovation, job creation, wages, and productivity—hallmarks of competitive markets with many startup companies. But, there is at least one intriguing exception to this trend: microbreweries. I dug into Census Bureau data to find out the magnitude of this trend—looking at brewery industry business counts and employment by firm size.
Immigrant-owned businesses are fundamental to American cities
Earlier this week I read Tech and the City: The Making of New York's Startup Community, by journalist Maria Teresa Cometto and venture capitalist Alessandro Piol. Among many other things, they describe how a preponderance of immigrant-run businesses is attractive to foreign-born high-tech entrepreneurs coming to the United States. Immigrant-owned businesses are one of my favorite things about New York—or any city really. That got me thinking, just how concentrated is New York with foreign-born business owners? What about other American cities? So, I dug into U.S. Census Bureau data to find out.
Almost half of Fortune 500 companies were founded by American immigrants or their children
The Center for American Entrepreneurship, a non-partisan policy and advocacy organization, published a study today on the founders of America’s most valuable companies—those in the Fortune 500. The results are striking—43 percent of companies in the 2017 Fortune 500 were founded or co-founded by an immigrant or the child of an immigrant, and among the Top 35, that share is 57 percent.
Democrats Want To Shutdown The Government To Protect DREAMers--Here's An Economic Case For Doing So
The Innovation Blind Spot
In The Innovation Blind Spot: Why We Back the Wrong Ideas and What to Do About It, a book released just last week, social entrepreneur and venture capitalist Ross Baird discusses how our blind spots affect how, whether, and to what extent we support the ideas of tomorrow. In it, he describes how mental shortcuts, biases, and funding models prevent us from tackling our most pressing social and economic challenges, instead opting to solve problems that are familiar, and where investment returns are more predictable.
Is America Encouraging the Wrong Kind of Entrepreneurship?
Last month, economist William Baumol passed away at the age of 95. His death was universally mourned by the economics community, many of whom shared the view that he had passed before receiving a much-deserved Nobel Prize. One of us had the great privilege of working with him, befriending him, and being able to regularly witness his economic wisdom, even in his later years.
Among his many contributions to economics, Baumol is most famously known for his “Cost Disease”, which explains why high-productivity industries raise costs and therefore prices in low-productivity industries. This insight is particularly relevant now, as economic activity has shifted into low-productivity services like healthcare and education, where price increases are devouring public and household budgets, and whose continued low productivity has weighed down U.S. productivity growth overall.
However, a lesser-known work of Baumol’s is equally relevant today, and may also help explain America’s productivity slump. Baumol’s writing raises the possibility that U.S. productivity is low because would-be entrepreneurs are focused on the wrong kind of work.
The Third Wave of digital technology meets the Rustbelt
Much excitement has been building over what feels like the beginning of an era of immense technological advance, the central role that entrepreneurs will play in its development, and the potential for a wide range of regions to reap the rewards. But progress won’t come easy. Significant challenges are likely to follow as digital technologies expand into relatively untapped areas of the economy.
Two excellent books out in as many months—and a quick data analysis here—persuasively drive these points home.
What Startup Accelerators Really Do
Accelerators are playing an increasing role in startup communities throughout the United States and beyond. Early evidence demonstrates the significant potential of accelerators to improve startups’ outcomes, and for these benefits to spill over into the broader startup community. However, the measurable impact accelerators have on performance varies widely among programs — not all accelerators are created equally. Quality matters.
Better Late Than Never: Creativity, Inc.
Although it's been out for nearly two years, I finally managed to read Creativity, Inc.—the first hand account of Ed Catmull, the genius behind Pixar, about his journey in building the company. While the book contains engaging stories behind some of the most commercially successful and entertaining animated films of all time, it's really a book about managing a fast-growing, innovation-driven, entrepreneurial, creative enterprise.