Networks

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.

Hierarchical organizations exist in a “complicated systems” paradigm, where input-output relationships are linear, outcomes are relatively stable and predictable, and the path to success is illuminated by rigorous planning, tight control, and flawless execution.

Feeders like control. They like plans. They like programs. They like clear lines between cause and effect, and a return on investment that is reducible to one number. Moreover, feeders often want to be the vehicle for change rather than an enabler of the change agents. But these are not the makings of vibrant startups or startup communities.

Startups and startup communities are “complex systems”, which means they are best approached through adaptive learning, an informed intuition, a heavy dose of humility, and a focus on shaping the environment so that the right solutions may emerge from the bottom-up. Change cannot be forced from the top down.

And so, startup communities get stuck in the Systems Trap. Feeders—armed with critical resources for startups and startup communities—apply the wrong framework, tackling complex problems through a complicated worldview. Opportunities are squandered, and progress is stifled in spite of best intentions. The cycle repeats in city after city.

What can be done? For starters, there is a need for a larger body of knowledge around these ideas—establishing key concepts and common language. I hope that my upcoming book, The Startup Community Way, will add substantively in that regard. The continual sharing of ideas between global startup community members will also produce new ways for thinking about, discussing, and ultimately, overcoming the inherent frictions between leaders and feeders in local startup communities.

A recent email exchange with my friend Joe Maruschak—an entrepreneur and startup community leader in Eugene, Oregon—produced an excellent way of framing the issue succinctly. Joe writes (lightly edited for clarity):

Ecosystem development is a 'pipe vs platform' problem. With an ecosystem, one is creating a platform for engagement. However, too many involved with ecosystem development are engaged with ‘pipe’ thinking— their focus is on how to we 'deliver' programming, and offer the services.

He credits the “pipe versus platform” framing to Sangeet Paul Choudary’s book Platform Scale, but the crossover to startup communities is Joe’s brilliant insight.

The role of feeder organizations in a startup community is not to “deliver” the community through endless programs and activities. Instead, their job is to enable and support the startup community as a platform.

Bill Janeway, a venture capitalist and economist, describes the entire digital economy in similar terms in his book Doing Capitalism in the Innovation Economy. About the sizable U.S. federal government role in enabling the development of many of today’s core digital technologies through wartime spending, he writes: “the federal government funded construction of a platform on which entrepreneurs and venture capitalists could dance.”

That’s another helpful way for thinking about how governments or other feeders can engage with startup communities in a healthy way. It’s ok to participate in the creation and ongoing maintenance of the startup community dance floor. In fact, it’s necessary. Entrepreneurs need help. But at the end of the day, you have to let the dancers dance.

Joe Maruschak, Bill Janeway

Joe Maruschak, Bill Janeway

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.

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.