As a mentor to aspiring entrepreneurs, I often feel the frustration of someone trying to build a startup in the wrong place and time, and wrongly attributing their struggle to personal limitations. It may not seem fair, but passion and commitment alone are not enough to make your startup successful – every business needs critical resources and favorable location-specific conditions.
Many of you are convinced that it’s all about finding investors, but my experience indicates that the critical resources needed go far beyond money. I saw these addressed well in a recent book, “The Startup Community Way,” by Brad Feld and Ian Hathaway. These guys have been building startup communities like Techstars for over 30 years, so they know what works and what doesn’t.
I support their summary of the seven capital assets that are the core required to create a thriving entrepreneurial ecosystem, and produce real economic value for your startup and the rest of us:
- Intellectual capital – ideas, information, technologies. Contrary to popular belief, innovative new ideas don’t often spring from a single mind. You need to be stimulated by easy access to many sources of learning and leadership, including universities, research, and other businesses. The best ideas evolve iteratively, and are tested by the ecosystem. Many successful entrepreneurs, including Bill Gates and Mark Zuckerberg, admit to reading many books a year, as well as participating in panels and forums on national and global challenges. A commitment to constant learning will raise your intellectual capital.
- Human capital – talent, knowledge, skills, experience. I believe the best way to be successful in business is to surround yourself with people smarter and more experienced than you. Building a startup is not a solo operation. You need partners, mentors, and investors who can complement your own resources to make it a win-win for all involved. Most people I know credit Steve Job’s success to his ability to attract top technical talent, starting with Steve Wozniak who designed the first Apple computer. Apple has since capitalized on the top technical talent in Silicon Valley to stay ahead of the competition.
- Financial capital – revenue, equity, debt, funding. Key sources of financial capital for any startup community must include friends and family, local angel investors, and venture capital access. Despite the reach of the Internet and cold calls, there is no substitute for warm introductions. Of course, ultimately you must appeal to real customers to survive. Good entrepreneur communities learn from each other, and from advisors, how to acquire and manage financial capital, through organizations such as EO. Others look for more elusive sources of funding in the infrastructure, such as grants and bank loans.
- Network capital – relationships, connectedness. Networking events create opportunities for like-minded and supportive people to build partnerships. Cocktail party networking is not enough. Look for business-oriented and industry conferences, hackathons, and Startup Weekends, with outside speakers and experienced leaders.
- Cultural capital – mindset, behaviors, history. Vibrant startup launching communities have a buzz around entrepreneurship, where founders are role models, leaders, and even local heroes. People look to entrepreneurship as a viable career path, with a supportive view, an understanding of risk and reward, and a tolerance for failure.
- Physical capital – infrastructure, density, place quality. Startup neighborhoods develop more readily in larger cities, like Boston, New York, London, or the San Francisco Bay Area. These areas also have the diversity of genders, races, and points of view to encourage innovation and be productive as teams in a complex environment.
- Institutional capital – markets, system of laws, stability. While these factors may be less of a problem in advanced economies, I hear regularly from aspiring entrepreneurs around the world who are struggling with the lack of a supporting infrastructure. While the opportunity there may be large, it sometimes pays to relocate to a more friendly locale.
If entrepreneurship is your dream, it pays to look beyond your personal drive and location for the capital to make your chosen lifestyle fun and successful, rather than a constant struggle against huge odds. If you are already there, it’s time to help us all by gathering the right assets creating a viable startup community for the rest of us. All our futures and the next generation depends on it.