Just look around, there is so much buzz around “innovation and entrepreneurship”. All over the world, the governments are trying to use entrepreneurship and innovation to invigorate their economies. Even the large company leaders have embraced innovation and “intrapreneurship” to create shareholder value. Of course, innovation is the force causing upheavals in the daily life causing positive disruption (and some unintended consequences).
The entrepreneurial ecosystem
Through this short article, I try to explain which individual institutions and what environmental conditions drive and accelerate the innovation process and what really constitutes a “startup ecosystem”. Also, I briefly touch upon what elements create this “global mindset of startup” at birth and how different ecosystem clusters and nodes can cross-pollinate to accelerate value creation. At the end of this article, you’ll be able to uncover how DueDash will catalyze and harness these unique clusters and nodes in an individual and collective setting.
Note – These clusters should not to be confused with an agglomeration of industrial clusters (even within a digital context) with a vague understanding as an economic cluster that favors formation of startups.
“True innovation often involves destruction, displacement and dismemberment of existing dominant players” – Clayton Christenson
So, what are the key components of the ecosystem.
Universities and academia have a dual function. First off, academia is a source of “operative” talent which fulfills the need of functions in an ongoing business. Secondly, on a disruptive metrics, academia with a higher level of basic research tend to fare well on the innovation scale. The kind of academic infrastructure around you would render peculiarity to the surrounding ecosystem. Corporations (read potential acquirers or customers) are reluctant to finance early stage technologies, research and development backed by universities and academia.
2. Entrepreneurs and stories
People with intrinsic motivations to create and grow businesses for big potential upsides who often “recycle their personal wealth/savings and relationships” in current or subsequent startups. The “professional entrepreneurs” are the core players in the ecosystem. These entrepreneurs are not to be confused with the “owner/operator” protagonists where the endeavor is to create an enterprise with potential lifetime control of the business and, in some cases, even for the subsequent generations.
The level of maturity of surrounding corporations in the immediate vicinity would lend a “strange” peculiarity to the ecosystem. Usually, corporations seek incremental and non-disruptive innovations which do not threaten their existing business models. Often, younger mature corporations with “10-20 year vintage are naturally drawn to collaborate with startups” either through simple contracts or intense equity participation. The existential challenges for startups remain and corporations need special skills (often not present) to make it a true win-win.
4. Private Capital
Entrepreneurship is an intrinsically resource-starved activity. High risk capital availability and intent is extremely important to high potential entrepreneurship. Continuous innovation and overhaul of the underlying private financing infrastructure determines disproportional opportunity for creating powerful global startups with lower capital or geographic constraints. Software-/IT-dependent innovation seems to fare better for their lower capital needs in proportion to “cross-border” outreach.
5. Service Providers
The professions of law, public accountants, influencers, marketeers and other related service providers adapt their offerings to suit the resource-starved entrepreneurial endeavors. Thereby, shedding their payments to more flexible approaches in exchange for future economic rewards through fee concessions and alignment of interest for ultimate success of their clients.
6. Entrepreneurial Management
High growth potential startups quickly outgrow founding teams’ capabilities. The availability of a professional class of “entrepreneurial experienced managers” to manage diverse aspects of business and “red tape” free compensation structures to incentivize and sharing upside through equity arrangements would determine the relative strength of the ecosystem. This excludes professional consultants who “trade their time for money” as they would essentially form part of a “service providers’” grouping.
An active role of the government in enabling and sustaining the local ecosystem which includes providing funding, tax incentives, research support and spaces cannot be undermined. The enforcement of legal and non-bureaucratic capital flow infrastructure and the respect for rule of law cannot be taken for granted. However, bribery is known to stifle the cluster ecosystem; whether direct (often prevalent in emerging economies) or indirect (in form of disproportional share of public money) to private operators.
8. Mobile work and capital
New ventures are constantly being created, and many die. The ability for people and capital to continuously seek newer opportunities with an “intrinsic sense of motion” would permeate a robust innovation ecosystem. The ability to hire and fire with ease differentiates an average from a great ecosystem.
Micro-communities foster and energize the local ecosystem. However, they are characterized with a pursuit of their own agenda which is not necessarily misplaced. These micro-communities, when integrated in regional and global macro-communities, form strong bonds that result in higher outreach and growth of individual components of the community. A guiding structure, which has the flexibility to adapt to local nuances and yet provide a familiar common foundation, will have multiplier effects.
And finally, the impactful, very active and yet in certain ways limiting players are no other than:
10. Accelerators and Incubators
Last decade has seen a 5-7-fold increase in the number of accelerators and incubators. While most of them are fighting to stay relevant, the ones who really have evolved, have differentiated through specialization (either vertical or technology) and internationalization. Unfortunately, most of them suffer an obsession with “super startups” who are often evasive. The business of startups is dealing in failures. If and when they adopt stakeholder focus instead of startup focus and are instrumental in utilizing global linkages, leveraging resources (e.g. capital) and co-creating markets, then they have lasting impact.
Which brings me to a point to ponder…………………..is silicon valley a geographical location or a unique pattern encompassing all of the above?
How can DueDash come in and help?
Imagine demolishing the silos within these individual components of a global startup ecosystem community; imagine DueDash to be a monolithic structure but decentralized (counter-intuitive); a kind of “Big Sur” and dotted with “Sequoias” (individual ecosystems) which voluntarily cooperate at every level; right from the idea to profits utilizing global linkages, resources and accessing markets and most importantly self-diligence with a single-minded mission – “Making startups and scale ups even more investable”.
“I would like to thank my professors from Haas School of Business @ UC Berkeley – Jerry Engel, David Charron and Peter Bryant @IE Business School, Madrid, Spain & Sean Doyle (Managing Director – Intel Capital) and Nicole Quinn (Partner, Lightspeed Ventures) to have directly contributed with their teachings, experience, published works and in person meetings,interviews and sessions to enrich my knowledge and understanding of the startup ecosystem and innovation clusters, which is so intimate to my body of professional work. There are several quotes which have been used in preparation of this article which are attributed to Jerry Engel. DueDash is an applied result of direct learning” – Nikhil Mada