Startup Communities – Building An Entrepreneurial Ecosystem In Your City by Brad Feld

My notes on “Startup Communities – Building An Entrepreneurial Ecosystem In Your City” by Brad Feld

Give Before You Get

• Boulder is an incredibly inclusive community. Although there is some competition between companies, especially over talent, the community is defined by a strong sense of collaboration and philosophy of “giving before you get.”
• If you contribute, you are rewarded, often in unexpected ways.
• At the same time especially since it’s a small community it’s particularly intolerant of bad actors. If you aren’t sincere, constructive, and collaborative, the community behaves accordingly

What Are The Benefits of a Startup Concentration In An Area?

• Companies co-located in an area benefit from “external economies of scale”. Emerging companies need certain common inputs – for example, infrastructure, specialised legal and accounting services, suppliers, labour pools with a specialised knowledge base – that reside outside the company
• Companies in a common geographic area share the fixed costs of these resources external to the company. As more and more startups in an area share the costs of specialised inputs, the average cost per startup drops for the specialised inputs.
• Network effects operate in systems where the addition of a member to a network enhances value for existing the users. Eg The Internet, Facebook, Twitter and email are examples. These services have value with just 100 users, but with 100 million they are more useful

The Boulder Thesis

1. Entrepreneurs must lead the startup community
2. The leaders must have a long-term commitment
3. The startup community must be inclusive of anyone who wants to participate in it
4. The startup community must have continual activities that engage the entire entrepreneurial stack

Participants in the StartUp Community

1. Entrepreneurs
   • Entrepreneurial leaders are charismatic. People want to be around them and are inspired by them
   • They don’t motivate people, they create context in which others are motivated
   • The startup community is continually evolving, this evolution can’t be controlled but should be embraced. Encourage and support new things, people and ideas and think of it all as additive.
   • It’s a game of increasing returns with more great things happening
2. Government
   • Must be a support role rather than a leadership role
   • Have a macro view. Use words like global, macroeconomic, policy, innovation, economic development.
   • Entrepreneurs use lean, startup, product, people and focus on the micro, specific things that need to get done or will have impact
   • You may see reports in the newspaper about innovation activity, unemployment changes, economic output, annual earnings, stock prices, executive compensation. Almost all this info is irrelevant to a set of entrepreneurial leaders who are on a long-term journey to create a sustainable startup community
   • Create policy (whereas Entrepreneurs are hardwired to take action)
   • Control (whereas Entrepreneurs want impact)
3. Universities
   • Have 5 useful resources: the first 2 are students, professors which are most important, the next 3 are institutions: research labs, entrepreneurship programs, and technology transfer offices
   • Students are fresh every year, some will be entrepreneurs, some will work for startups. They all bring new ideas and fresh perspectives
4. Investors
   • They are feeders and so support the development of the startup community
5. Mentors
   • Advisors have an economic relationship with the startup, mentors do not.
   • Mentors give before they get
6. Service Providers
   • Lawyers, accountants, recruiters, marketing consultants. Some are companies, some are individuals
   • The best service providers invest their time and energy for no charge in early-stage companies
7. Large Companies
   • Can provide space and resources for local startups
   • Can create programmes to encourage startups to build companies that enhance the large company’s ecosystem
   • Eg Google provides free event space that can hold 250 people

Attributes of Leadership in a Startup Community

1. Be Inclusive
   • Invite new people to events
   • Connect visitors to 10 people they should connect with
   • Give out assignments to those who express an interest in taking on a leadership role
   • Nurture new leaders, hand off existing activities to them, take on new activities yourself and hand those over
2. Play a Non-Zero-Sum Game
   • Having winners and losers is counterproductive
   • There is a huge amount of untapped opportunity
   • Embrace the notion of increasing returns
   • More startup activity will generate more attention to the startup community, which will generate even more activity
3. Be Mentorship Driven
   • The best leaders can be incredible mentors
   • Leaders should mentor other leaders, help people to become leaders, mentor entrepreneurs, and entrepreneurs should mentor each other
4. Have Porous Boundaries
   • The best startup communities have porous boundaries
   • It’s acceptable for people to flow from one company to another
   • Leaders talk to each other and share strategies, relationships, ideas, and resources
   • When someone leaves one company for another, they aren’t shunned
   • When someone moves to town, they are welcomed.
   • When someone leaves town, they are missed, and celebrated every time they come through for a visit
5. Give People Assignments
   • If you’re a leader and people come to you to ask how they can be involved, give them assignments
   • This sorts out the serious from those who are not
   • Assignments should be immediately helpful. Trivial, but requires the person to take action. From a few minutes to one hour of work with minimal specific knowledge
   • 1 of 3 things will happen:
   • You’ll never hear from them again (that’s ok, they just weren’t serious and now they’ve self-selected out). If you hear from them again later, ask them about their assignment
   • They’ll do it. Awesome. Finding people who are good at just getting stuff done is hard. Increase assignement complexity and ambition gradually
   • They’ll take it to the next level. They’ll fit their assignment into a broader context, they’ll make their assignment their own, they’ll use use the assignments as starting points
6. Experiment and Fail Fast
   • Having initiatives fail must be an accepted part of the culture of a startup community
   • In entrepreneurship, failure is simply part of the process of creating something great, rather than an endpoint
   • If failure is not acceptable, bad ideas will perpetuate

The Mentor Manifesto

• Be “socratic”
  • spark debate by taking an opposing point of view
  • stimulate critical thinking and illuminate ideas with questions
• Expect nothing in return (you’ll be delighted with what you do get back)
• Be authentic/practice what you preach
• Be direct. Tell the truth, however hard
• Listen
• Your relationship is two way, not one way
  • Seek to learn more than you teach
  • Become peers. Become mentors to each other
• Clearly separate opinion from fact
• Hold information in confidence
• Clearly commit to mentor or do not. Either is fine
• Say “I don’t know” when you don’t know
• Guide, don’t control. Teams must make their own decisions. Guide but never tell them what to do. It’s their company, not yours
• Accept and communicate with other mentors that get involved
• Be optimistic
• Provide specific actionable advice; don’t be vague
• Be challenging/robust but never destructive
• Have empathy. Remember that startups are hard

Classical Problems

1. The patriarch problem
   • If there is a startup hierarchy there will be an old white guy on the top who made their money many years ago and still run the show
   • Ignore them. Do your thing without getting approval from the patriarchs
   • Lead, and let them come to you if they want. Some will, and when they do they’ll love what they see
2. Complaining about capital
   • “There’s not enough capital here”. Let it go. There will always be an imbalance between supply and demand for capital
   • Instead focus on creating business around a problem they are obsess about. Believe you can raise the capital you need to scale your business regardless of the local supply of capital
3. Being too reliant on Government
   • Very few people in Government have a background as entrepreneurs. So they don’t understand startups
   • Government moves much slower
   • Governments run in a 4 year cycle. A different cycle from entrepreneurs
   • Entrepreneurs live in networks, Government lives in a hierarchy. What happens when a network relies on a hierarchy?
4. Making short-term commitments
   • Take a 20 year view. It’s not a countdown. Reset that 20 year view every day
5. Having a bias against newcomers
   • In a hierarchy newcomers have to earn their way in
   • In a network newcomers are not just welcomed, they are mobbed (in a good way)
6. Attempt by a feeder to control the community
   • Examples: VC’s, Government, Universities may attempt to position themselves in the middle of all startup activity in a community
   • They often retard the growth because they are all hierarchies with top-down control pressing down on a network
7. Creating artificial geographic boundaries
   • Entrepreneurship doesn’t follow geographic boundaries
   • What prevents a startup from expanding into another city, or picking up and moving? Nothing. If you want to keep and attract you need to keep improving
8. Playing a zero-sum game
   • Don’t try and win at the expense of neighbouring startup communities. That will stifle the growth of the startup ecosystem. Take a network approach and connect your startup community with neighbouring ones
9. Having a culture of risk aversion
   • Concerned about investing your time in something that doesn’t have impact? Take chances but give your effort time boundaries. If it’s going not going anywhere after a few months, change it or kill it
   • Fearing rejection from leaders in the startup community? Let it go. If your initiative doesn’t work, try another one. Build a reputation for trying stuff, collecting data, pivoting and improving
10. Avoiding people because of past failures
    • If an entrepreneur fails and burns bridges on the way down, let it go and embrace them. He’s learnt a lot. It’s a way to encourage entrepreneurs to take risks.

Activities and Events

1. Young Entrepreneurs Organisation
   • Provide tangible peer support to founders building high-growth, successful companies both through education on relevant topics and through small peer support groups
2. Office Hours
   • Similar to the concept of a professor making himself available for a few hours every week for students who want to meet with him
   • One day a month, choose a day and announce you’ll spend 15 minutes with anyone. Slot in people that are referred to you
   • Or, turn up at a cafe at the same time every week for an hour, and let anyone join you
3. New Tech MeetUp
   • 5 presenters get 5 minutes to pitch their new technology followed by 5 minutes Q&A
4. Open Coffee Club
   • Where members of the community can interact deeply in an informal setting
5. StartUp Weekend
   • 54 hour event which enables people to start a startup
6. Pitching Events
   • aka “Pecha Kucha”
   • Each speaker gets 5 minutes: 20 slides that automatically advance every 15 seconds
7. Beta
   • Gathering for entrepreneurs, investors, students and curious minds in an informal social setting
   • Showcase startups
8. StartUp Digest
   • A weekly email newsletter about events that are happening in your area:
   • Have a topic
   • Good content matters
   • Avoid the filler content
   • Vary the event’s dates and times
   • Schedule daytime events
   • Look beyond the local area
9. New Venture Challenge
   • Like the business plan competition at universities
10. StartUp Week
    • Schedule in a large number of events into a single week
11. Entrepreneurs Foundation
    • With a volunteer board of local entrepreneurs, service providers and local community foundation help, make it easy for startup companies to endow the community. They sign over 1 percent of their company to the foundation
    • The funds are used to build stronger communities, strong businesses, stronger leaders and more entrepreneurial success and empathy

The Power of Community

1. Give before you get
2. Everyone is a mentor
   • For people who say they want to be involved, find a person they can mentor
   • Focus on your specific skill or background, and let the community know you are willing to mentor one person on this
3. Embrace Weirdness
4. Be open to any idea
   • In an hierarchy when someone suggests something, the immediate reaction is to start asking questions and try to figure out why it won’t work
   • In a network, the opposite is true. Respond with “awesome, go do it!”
5. Be honest
   • You don’t get stronger and better by people telling you that you are already perfect. You get stronger by being pushed by your workout buddy challenging you
   • Be direct, blunt and challenging
6. Go for a walk
   • Too many meetings happen in conference rooms
7. After-party’s are important
   • That’s when the real part starts

Myths about Startup Communities

1. We need to be like Silicon Valley
   • You can’t do it, so don’t try
   • Instead work on permeable organisation boundaries, help people move freely, help young entrepreneurs collide. Let things evolve with your own unique flavour
2. We need more local venture capital
   • It isn’t that important. Less than one in 5 of the fastest-growing companies in the US take on any venture capital in their history. And less that 0.5% of all new business
   • When banks won’t lend you money, use friends, family, credit cards, and the best of all – from your own customers that can give you money tomorrow and you never have to pay it back
3. Angel investors must be organised
   • Just get started developing strong interpersonal relationships based on trust, build your collective network, make investments in promising entrepreneurs

How To Get Started In Your City

• Meet every young entrepreneur and startup
• Ask them what they need
  • Hint: It’s not money. They need mentoring and a bridge to larger markets
• Building bridges is about relationships
  • In the hyperconnected world one can connect online, but to really build relationships one has to break bread, shake hands, and look each other in the yes. Conferences provide a fantastic platform for that