What are Entrepreneurial Ecosystems?

Communities like Silicon Valley, Boston, Tel Aviv, London, Boulder, and Berlin took decades to become robust entrepreneurial ecosystems.²² However, such ecosystems can grow anywhere today. In the modern economy, every community has the opportunity to become a thriving ecosystem. In fact, many already have.

The essence of an entrepreneurial ecosystem is its people and the culture of trust and collaboration that allows them to interact successfully. An ecosystem that allows for the fast flow of talent, information, and resources helps entrepreneurs quickly find what they need at each stage of growth. As a result, the whole is greater than the sum of its separate parts.²³

Elements of an ecosystem.

A thriving ecosystem includes these key elements:

– Entrepreneurs who aspire to start and grow new businesses, and the people who support entrepreneurs.

– Talent that can help companies grow.

– People and institutions with knowledge and resources to help entrepreneurs.

– Individuals and institutions that serve as champion and conveners of entrepreneurs and the ecosystem.

– Onramps (or access points) to the ecosystem so that anyone and everyone can participate.

– Intersections that facilitate the interaction of people, ideas, and resources.

– Stories that people tell about themselves and their ecosystem.

– Culture that is rich in social capital – collaboration, cooperation, trust, reciprocity, and a focus on the common good – makes the ecosystem come alive by connecting all the elements together.

Diversity is a critical driver of innovation. We need diverse inputs for entrepreneurship – from the people who start companies and work for them to the resources they access – and we need a culture that supports heterogeneous communities, a range of industries, and a wealth of different ideas.

In investing, a diverse portfolio has been shown to perform best. In human systems, diversity is linked to more innovation. In business, diverse teams have exhibited stronger results – in their ability to attract, retain, and satisfy employees and to increase shareholder returns.²⁴

Similarly, entrepreneurial ecosystems need diversity to truly thrive.

A community of entrepreneurs…

People are at the center of an entrepreneurial ecosystem. They are its fundamental building blocks. All the ideas, incubators, and capital in the world will not create anything valuable without talented people putting them to good use.

…and the people who support them.

Entrepreneurship is a community sport.²⁵ Building companies requires people throughout the community to help in a wide variety of roles. They include:

People may move in and out of the community over time, shift between roles, or even play several roles at the same time.

Some of the most successful entrepreneurial ecosystems are also talent magnets and incubators. Ecosystem building requires attracting, retaining, and cultivating talented people – including entrepreneurs, but also potential employers and other supporting partners. Strong ecosystems tend to have substantial cross-linkages between schools, universities, and the private sector so that talent supply and demand are efficiently matched.

Knowledge and resources to help entrepreneurs.

Strong ecosystems allow entrepreneurs to quickly find knowledge and resources they need to succeed. The knowledge and resources required by entrepreneurs are diverse. Knowledge may include answers to logistical questions (“How do I get my export license?”); points of friction (“How do I get my team to function better?”); or simple inquiries. A thriving ecosystem is an environment that encourages people to ask these questions and offers an abundance of easy ways for them to find the answers. Knowledge may reside with other entrepreneurs, other people (such as mentors or professionals), or institutions (such as universities, libraries, or accelerators).

Resources are the assets entrepreneurs need, such as capital, potential hires, office space, professional services, or raw materials. In a successful ecosystem, these resources are more abundant and visible.

It is often connections among individuals and institutions that allow knowledge and resources to flow to entrepreneurs quickly.

Champions and conveners.

Champions and conveners promote entrepreneurs, organize the ecosystem, and build awareness. They advocate for local entrepreneurs and their companies, bring them together in collaboration, challenge them to grow, and push everyone forward. They are the catalysts, connectors, cheerleaders, co-creators, and changemakers.

Champions and conveners wear many different hats. They could be the organizer of a Startup Weekend, the reporter covering local entrepreneurs, the lawyer that introduces clients to others, the early adopter who first buys from new businesses or restaurants, or the chamber leader who shines a spotlight on new businesses. Most importantly, they work relentlessly to help entrepreneurs and companies with little direct benefit for themselves.

Onramps…

Onramps make ecosystems more open by creating clear paths for people to join. They grow networks by bringing in more talent, thus fostering diversity and allowing for serendipitous interactions that lead to new ideas. Healthy ecosystems have visible and welcoming onramps that make the ecosystem easy to access – for anyone, regardless of their background, experience, or ideas. These onramps may come in the form of events like 1 Million Cups; organizations like accelerators, small business development centers (SBDCS), or career development centers; or online communities like websites or social media groups.

…and intersections.

Collisions between people, ideas, and resources often allow entrepreneurs to find missing pieces of the puzzles they are trying to solve. Ecosystems must “engineer serendipity” between disparate elements of the network by creating intersections where such collisions can happen.

Intersections may be institutions, such as coworking spaces, research parks, or coffee shops that are regularly frequented by entrepreneurs and their supporters. Or they may be events, such as pitch competitions, conferences, or meetups. Intersections may also take place online, such as through a Slack channel or Twitter hashtag that convenes a virtual community.

The collective story that people tell themselves – and the rest of the world – powerfully shapes an ecosystem’s future. It frames what is possible.

In Silicon Valley, this story is about the generations of legendary entrepreneurs who were misfits determined to disrupt the status quo. This story inspires new aspiring misfits to arrive in the Valley every day. Some communities, however, tell themselves negative stories. They bemoan the native entrepreneurs who left, the brain drain of young people, or the catastrophic failure of a company many years ago that still serves as a cautionary tale. These negative stories become self-fulfilling and inhibit new entrepreneurs.

A community must discuss, define, and disseminate its collective story, and in that process identify its unique strengths, resources, and opportunities. The best community stories are authentic and true.

This collective story also deeply influences a community’s “sense of place” – a dynamic and complex set of factors that develops the lens through which people experience and make meaning of their experience in and with place.²⁶ It is through this sense of place that people imagine its future and their role in it.

A collaborative culture that is rich in social capital.

Culture makes the ecosystem come alive. We find culture in a community’s energy, its attitude toward collaboration and competition, and its enthusiasm for entrepreneurship.

An ecosystem culture that is rich in social capital – the networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit²⁷ – is like rocket fuel for entrepreneurial growth. An ecosystem will struggle without a culture of collaboration, cooperation, and trust that inspires people to move quickly, help each other, and be open to novel ideas.

A community’s culture can be cultivated, tended, and nurtured. It is by no means static. People engage in culture change naturally – through the conversations they have, the questions they ask, and the behaviors they model.