Across this country, unbeknownst to many, there is a growing proactive effort to create and develop “entrepreneurial ecosystems” in order to dynamically drive innovation, economic development, and massive wealth creation. These ten syllables pack a strong economic punch and are also propelling us head long into the future at an accelerated rate.
Entrepreneurial ecosystems can be looked at as an interconnected network of organizations, institutions, individuals, and resources that support the development and growth of entrepreneurs and their new companies in a specific region. They provide a supportive and nurturing environment where startup founders can access the necessary resources, talent, knowledge, and networks they need to launch and scale their business ventures.
These ecosystems are comprised of entrepreneurs, mentors, investors, educational institutions, corporations, local/state government agencies, and specialized resources and organizations all under the banner of ESOs – entrepreneurial support organizations. They provide roadmaps and knowledge that help startup founders find what they need at each stage of their growth and act as catalysts to help make things happen.
As Linda Olson, CEO/President of Tampa Bay Wave – a purpose-driven nonprofit tech accelerator that helps entrepreneurs transform their innovative ideas into real-world solutions and scalable businesses – further explains:
“It takes a village to build a startup. Emerging businesses cannot thrive on their own. They need capital at every stage of their growth. They need customers and they need educated employees. Academia - either a single university or a network of universities – in active partnership with the local community can help a region look attractive to capital and provides a ready pool of talent. You also cannot underestimate the value of startup peers and mentors to help these startup leaders to operate effectively and learn how to scale quickly. And then there are a wide range of ESOs to round out the specialized resources, access, and knowledge needed to compete. So, at the core is the entrepreneur, and the entrepreneurial ecosystem is made up of all the organizations and support resources around them to help grow and scale.”
Components of an Entrepreneurial Ecosystem
Here are some of the major components of an entrepreneurial ecosystem that cultivates a fertile ground for entrepreneurs to succeed and scale:
Entrepreneurial Support Organizations (ESOs) – a diverse set of organizations that includes accelerator, incubators, co-working spaces, and other startup development programs.
Innovation Enablers – include law, accounting, and consulting firms offering specialized training, mentorship, and business guidance to entrepreneurs.
Funding sources – offer critical financial capital and include venture capital firms, angel investors, crowdfunding platforms, and banks to provide capital to start and grow businesses.
Government – local/regional/state financial and support programs that include economic development boards (EDCs), U.S. Small Business Administration, and government grants.
Educational Institutions – provide for the development of skilled individuals and, along with some universities also offering incubator and research transfer programs.
Talent – represents a local workforce with the necessary knowledge, expertise, and entrepreneurial mindset needed to innovate and compete in a dynamically changing business environment.
Corporations – help foster the development of startup company activities working on new solutions in areas that can benefit their competitive positioning, growth potential, and industry leadership.
Entrepreneurs – are the center of this ecosystem driving the diverse network around them and providing a powerful source of mentorship and support for each other.
Data and Reconnaissance
These ecosystem firms are also leading the way to collecting local/regional data and finding patterns to help define and determine the scope and needs of their specific entrepreneurial community and thereby can become instrumental in building and shaping the ecosystem to the needs and goals of the region at large. This kind of detailed intelligence on entrepreneurial ecosystems is also being used to inform government legislators where they can be concentrating some of their efforts that will have a bigger impact. It's based on the thesis that, while you can have a macro view, economic growth starts at the local level. If we do not have healthy local economies and ecosystems, it's really hard to grow a national economy.
As Claudia Duran, Managing Director at Endeavor Miami – a high-impact entrepreneurship movement to drive economic growth and job creation in Florida – further explains:
“We are gathering data, developing research, and bringing that research out to the world. Once you have the critical mass of startup companies, you are able to analyze data, determine successful trends, and share those resources with everyone. It's so powerful to have real data to understand what economic or market areas are actually thriving. FinTech? Healthtech? Why are all these SaaS (software-as-a-service) companies here? It helps explain the nature of your ecosystem and its business potential. And, most importantly, then shining a light on the high-impact entrepreneurs and startup companies that are leading the way in those markets for insights and leadership.”
Assessing and Accelerating Your Startup Ecosystem
Startup Genome and their annual Global Startup Ecosystem Report is a good place to go for further understanding of these ecosystems as all they do is measure entrepreneurial ecosystems. They are the world-leading policy advisory and research organization for public and private organizations advising more than 145 clients across 50+ countries that are committed to accelerating the success of their startup ecosystem. Through surveys and substantial collection of data sources, they built a scoring system to compare and contrast the state and health of different ecosystems. This scoring system allows you to assess where you are and what are the next crucial things that you, as an ecosystem, can focus on that will help move the needle for your entrepreneurial ecosystem.
As an example of some of their criteria, to go from Stage 1 to Stage 2 you need at least a thousand startups in your ecosystem universe and strong connections to global firms and resources to support companies thinking about doing business internationally. The latter usually signals a much higher acceleration of business growth and the need for a thickening of the connectivity within an ecosystem. In general, they found the stronger the connectivity, the healthier the ecosystem. Their website gives you free access to explore the current size and state of a number of startup ecosystems across the U.S. and globally to better understand the nature and scope of entrepreneurial ecosystems.
Context and Application for Financial Services
This discussion on entrepreneurial ecosystems is important for financial services leaders and financial advisors as part of their proactive client and community engagement efforts. Advisors, RIAs, and family offices need to be aware that everywhere in this country, no matter how large or small an area or region, there exists at least the beginnings of local/regional entrepreneurial ecosystems. They need to be supported, not just with money, but with participation - investments of time, mentoring, and sharing of your financial expertise and community networks.
Understanding and deliberately mapping out your local/regional entrepreneurial ecosystem could be of great value to a financial services business model and competitiveness by being able to point out new local community-supporting investment opportunities, providing financial wealth management and business guidance through the unique cycle of startup company growth leading to liquidity events, and helping your business clients plug into and participate in what may well be one of the single largest catalysts for wealth creation happening right around them. All in all, participation can further strengthen the positioning of financial advisors as local business leaders and wealth managers for small business owners.
We will be developing this article into a series of deep dive interviews with these community ecosystem leaders to help guide advisors on where/what to look for, gain a better understanding of the business growth dynamic happening around them, and learn how best to practically engage with these vital component parts of their local entrepreneurial ecosystem.