Startup Ecosystems

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The Geographic Concentration of Venture Capital(ists)

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Last week, The New York Times published an article arguing that a “wave of venture capitalists is heading to quieter, less-expensive locales, where they are helping fund start-ups.” The article supported this claim by pointing to three venture capitalists who left Silicon Valley and launched funds in other places. One of them, Mark Kvamme, left Sequoia Capital to found Drive Capital in Columbus, Ohio; but that was back in 2013.

I don’t doubt that some venture capitalists have left The Valley to start funds elsewhere. However, The Times is massively overselling the reality. It is already well-advertised that venture-backed startups (the recipients of venture capital) are highly concentrated by geography. However, venture capitalists (the ones investing in startups) are concentrated by geography even more. Let’s take a look at the data.

Call for Input: Local Policies to Support Economic Development via Entrepreneurship

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).

A Second Nobel Prize in Startup Communities

Last year, I wrote about Elinor Ostrom, an American political economist, who was awarded the 2009 Nobel Prize in Economic Sciences for her work on cooperation and collective action. Ostrom studied how rural communities self-organized to sustainably share scarce natural resources in the absence of formalized governance structures. In her Nobel acceptance speech, she described her work in the following way:

“Carefully designed experimental studies in the lab have enabled us to test precise combinations of structural variables to find that isolated, anonymous individuals overharvest from common-pool resources. Simply allowing communication, or “cheap talk,” enables participants to reduce overharvesting and increase joint payoffs, contrary to game-theoretical predictions.”

In other words: we tend to cooperate with people we know, trust, and frequently engage with, while we find it easier to defect or play zero sum games with people we don’t. This thinking is central to building healthy startup communities (or ecosystems), where the flow of ideas, talent, and capital are made possible by informal norms and relationships built on trust, reciprocity, and stewardship. For that reason, I awarded her the Nobel Prize in Startup Communities (credit goes to Victor Hwang for originally connecting Ostrom’s work to startup communities/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.

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.