Startup Ecosystems

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.

How to Build a Successful Startup Ecosystem in your City

Techstars recently launched a Startup Ecosystem Development offering, which is designed to work alongside of communities around the world to help them build a more vibrant environment for entrepreneurship. The program has been in an R&D/beta-launch phase the last couple years, but the first official program will take place in Buffalo, New York over the next three years.

Yesterday, to introduce the program and answer questions about what they’re up to, Chris Heivly (who leads Ecosystem Development at Techstars), Brad Feld (author of Startup Communities and a Techstars co-Founder), and Eric Reich (chairman of 43 North, the startup support organization in Buffalo that is partnering with Techstars to lead the effort) participated in an hour-long segment on Crowdcast.

I embed the event below and encourage anyone interested in the topic to give it a listen—it’s definitely worth your hour and is full of wisdom and insights from these three.

Startup Communities Are Not Like Recipes, They are Like Raising Children

I’ve often heard people say “building startup communities (or startup ecosystems) is not about the ingredients, it’s about the recipe.” What they mean is that a focus on the individual people, institutions, and resources will provide only limited insight or success, and that what matters most is how these things all come together. While integration versus elements is the right concept, a recipe is the wrong analogy.

How the Geography of Startups and Innovation Is Changing

We’re used to thinking of high-tech innovation and startups as generated and clustered predominantly in fertile U.S. ecosystems, such as Silicon Valley, Seattle, and New York. But as with so many aspects of American economic ingenuity, high-tech startups have now truly gone global. The past decade or so has seen the dramatic growth of startup ecosystems around the world, from Shanghai and Beijing, to Mumbai and Bangalore, to London, Berlin, Stockholm, Toronto and Tel Aviv. A number of U.S. cities continue to dominate the global landscape, including the San Francisco Bay Area, New York, Boston, and Los Angeles, but the rest of the world is gaining ground rapidly.

Solving Canada’s startup dilemma

Canada, we increasingly hear, is becoming a global leader in high-tech innovation and entrepreneurship. Report after report has ranked Toronto, Waterloo and Vancouver among the world’s most up-and-coming tech hubs. Toronto placed fourth in a ranking of North American tech talent this past summer, behind only the San Francisco Bay Area, Seattle and Washington, and in 2017 its metro area added more tech jobs than those other three city-regions combined.

All of that is true, but the broader trends provide little reason for complacency. Indeed, our detailed analysis of more than 100,000 startup investments around the world paints a more sobering picture. Canada and its leading cities have seen a substantial rise in their venture capital investments. But both the country and its urban centres have lost ground to global competitors, even as the United States’ position in global start-ups has faltered.

Startups Rising in the Middle East

Startups Rising in the Middle East

Last week my friend Chris Schroeder published a highly engaging article on the state of technology entrepreneurship in the Middle East. If this topic interests you, I encourage you to check him out. Chris is a successful American internet and media entrepreneur turned global startup investor. He’s easily one of the most knowledgable people on the planet about startups and venture capital in the Middle East specifically, and emerging markets more generally.

The article, “A Different Story from the Middle East: Entrepreneurs Building an Arab Tech Economy“, appears in the MIT Technology Review. It highlights some recent successes in the region—including Amazon’s $600 million acquisition of e-commerce platform Souq.com in March, and the $1 billion valuation placed on ridesharing app Careem a few months earlier—and the psychological impact these breakout companies have had on entrepreneurs there.

Chicago's Startup Ecosystem: Some Reading

Chicago's Startup Ecosystem: Some Reading

I'm going to Chicago tomorrow to attend the wedding of an old friend over the weekend. Chicago has always been a special place for me—I lived there for a few years after college and received a first-rate education on the city's south side. Chicago is awesome.

A lot has changed in the city since then, including the development of a booming tech and startup scene. Some of this I've learned about through conversations with active participants in the startup community there, and some has been through a series of research that has been published in the last few months.

As such, I'll use this opportunity to share some of these items with readers who might be interested. The collection of readings—which span academic working papers, analytical blog posts, and business case studies—are all great. They are informative, well-written, and resourceful. And please, if you know of others, add them to this thread in the comments section. Enjoy.

Restart America: Startup-Friendly Policies in the “Third Wave”

If you haven’t done so already, I highly recommend reading The Third Wave: An Entrepreneur’s Vision of the Future, a New York Times Bestseller by Steve Case that published one year ago. Steve is back in the news, with an expanded version (in paperback) out this week that adds a chapter on startup-friendly policies in the post-election environment.

Startup Communities and Saturday Morning Coffee

A recent article in 5280 Magazine caught my attention. It profiled the economic vitality of the Boulder-Denver region, dubbing it “The Most Exciting and Innovative Tech Hub in the Country.” While I expect every local publication to champion its own hometown, this one happens to be on stronger footing than most others. You see, at least in terms of innovation and startup activity, Boulder is unique among its peers.

The article—which is excellent by the way—couldn’t have come at a better time for me personally. A few days ago, I moved myself and my family to Boulder to work on a book about startup communities. Not only did I come here to work closely with my friend and co-author Brad Feld, I also wanted to experience first-hand what makes this place so special. I came here to learn… and to contribute.