How to build an entrepreneurial ecosystem in 4 steps (or: “get over Silicon Valley”)
Moaning about the entrepreneurial community in Europe seems to be the thing to do in print and social media. Too few entrepreneurs. Poor quality of startups. Timid (or worse, too-greedy) business angels. Ultra-conservative VCs. Misguided governmental support. Berlin and London not living up to their expectations for replicating Silicon Valley in Europe.
So I thought I’d weigh in on the discussion with two thoughts and a few constructive suggestions.
Thought nr. 1: get over the Silicon Valley already. Yes, it’s the bees’ knees, and no, you won’t be able to replicate it in Europe for a whole host of good reasons, main one of them being culture (say people who have first-hand experience with both).
Thought Nr. 2: just because you can’t replicate Silicon Valley doesn’t mean you can’t (and shouldn’t) do something very different with the resources we do have here to improve the situation.
Tellingly, Brad Burnham of Union Square Ventures (yes, the colleague of THAT Fred Wilson) said the other day in a meeting with Neelie Kroes, Vice-President of the European Commission: “trying to become Silicon Valley is going where the ball was”. Before I get to the suggestions, however, let me offer a bit of a background.
For the past three years I’ve been taking a rather active part in the startup ecosystem in Belgium. I’ve co-organized four Startup Weekend events in three cities, seven Bizcamp events, more training workshops for entrepreneurs than I can remember, entrepreneurs-meet-investor hangouts, four HealthStartup events for web entrepreneurs in healthcare in three countries. In addition, I serve as a coach in Microsoft Innovation Center’s Boostcamp program in Brussels. And, for the past three years I’ve been running westartup, web-and-events platform for first-time entrepreneurs.
While doing all of the above, I’ve met quite a few entrepreneurs, and made these three observations:
- There simply aren’t enough first-time entrepreneurs… Few are ready to quit reasonably steady and well-paid jobs for the insecurity of startup life
- Most of those who leave the jobs lack basic business knowledge
- Most of those who overcome the first two steps seem to be limited in their vision and capability – and don’t scale beyond their city/region/country.
So, in Europe growth in numbers and quality of startups simply won’t happen on its own – it needs help. And, any concerted effort to drastically boost entrepreneurship in Europe should be geared towards compensating for these issues.
Which – in terms of building up an ecosystem that makes an impact – is kind of like making a wedding cake out of marzipan icing and plastic toppers – you know, the silly figurines of the bride and the groom at the very top of the cake.
It’s not enough to feed the wedding party (bear with me, this cake metaphor is going somewhere). Last year all of Belgian startup incubation programs (public and private, and I’m really stretching the definition here) yielded twelve early-stage startups.
It’s simply not enough to make a difference in the grand scheme of things. These programs have their place, but you still need the actual cake (the bit made of flour and eggs and butter) and the moist, gooey filling to hold the whole thing together.
So, how does one go about building an ecosystem that works?At westartup, we believe that a regular schedule of entrepreneurship-building activities should be planned and executed across four stages: Discovery, Basic Training, Acceleration and Incubation. Cake, filling, icing and topper. (See, I made that metaphor work!)
Most people don’t start with an entrepreneurial mindset. It doesn’t occur to them that the entrepreneurial lifestyle is something “for them”. The objective at this stage is creating excitement and convincing poeple that yes, they too can become entrepreneurs. So, the ecosystem must offer simple, low-entry-barrier events that help potential entrepreneurs to discover the world of startups first-hand.
In Brussels, two events have been supremely helpful in achieving just that: BetaGroup and Bizcamp. Both events create opportunities for future entrepreneurs to see today’s entrepreneurs up close, hear them talk about everyday challenges and solutions to these challenges. The fact that these entrepreneurs are just a few steps ahead of the rest of the audience makes them very relatable and highly credible – just listening to them gets people thinking…
Yet today most of the activities put in place by either government or private actors like Seedcamp, Startup Bootcamp or Rockstart are focusing on a limited number of the more advanced, promising projects. Surprisingly, the specific content of these events doesn’t really matter. A bit of knowledge sharing goes a long way, but it’s more about the buzz, the atmosphere, and the camaraderie. The speeches or the pitches are just an excuse to have an interaction on a mass scale.
Word of mouth is the main way these events grow. People with a bit of an entrepreneurial spark join of their own free will – these events are free and happen outside of working hours, so the barrier for participation is very low. Everybody is welcome, but people not interested in entrepreneurship simply don’t come, which means these events are filled with the right people.
Both BetaGroup and Bizcamp are easy to carry out with a small team of volunteers, cost practically nothing, and are very flexible. Both have parallels in other countries (Startup Crash Test in Kiev, Pitch Your Shit in Aarhus) but are simply not done often enough, consistently enough – and above all not in enough places.
2. Basic Training.
Most startup entrepreneurs I come across have variously misguided notions of how businesses work; many are completely ignorant of the basics. They often know the words “business model” and “cash flow” and “marketing” but rarely understand how they apply to their businesses. They obsess for months about the legal form their company should take – and not about finding out how long their sales cycle is, or how their products should be priced.
Just as an indication of how dire things really are: a business angel network in Belgium sees about 1000 projects a year and invests in about 30. A business angel network in Western Poland saw 500 projects in the past two years… and invested in two. And it’s not a question of money – there’s always more investment capital than there are competent businesses to invest it into.
So, the objective at this stage is to give them the understanding of fundamentals of the profession of running a business, teach them to think like entrepreneurs.
Fortunately, there’s plenty of business knowledge available. Most successful entrepreneurs I’ve met in the past three years are prepared to share what they know with the next generation – it’s just a question of building the right mechanisms for channeling their knowledge to the right people.
To share specific knowledge (fundamentals of marketing, finance, sales, etc.) we’ve organized dozens of topical workshops led by experienced entrepreneurs who volunteered their time. Abundance of qualified volunteers makes scaling activity at this stage fairly straightforward: organize more workshops! For the reference, it takes one person a full day to prepare and carry out a topical workshop, and (if done properly) they can also be self-sustaining financially.
Basic training works best when it’s applied to projects that have progressed beyond the rough idea stage – ideally, a working prototype. Typically by the time an entrepreneur gets to that point in the project’s development, she starts seeing where she lacks the knowledge and seeks out the opportunities to find it. So, like at the Discovery stage, the audience is self-motivated and self-selecting. It’s enough to spread the word about the trainings through the right channels (those established at the Discovery stage, if you’re doing it right) to bring them in, and to put in a small entry barrier (a small fee does nicely) to keep out the “tourists”.
After the two previous stages the more serious future entrepreneurs ought to know where they want to get and a few good ideas about how to get there; many continue to grow on their own. Which is great, but often slow: it’s very easy for a future entrepreneur to continue working on a project in spare time and not make the jump and launch a real business.
So, objective at this stage: make sure all entrepreneurs with potential progress (quickly) beyond the prototype stage. A little structured follow-up goes a long way to achieve this.
Acceleration programs can take many forms – Microsoft Innovation Center’s Boostcamp has been quite successful in polishing up startups, but even something as simple as a series of meetings with an advisor or a team of peers can help move a startup forward. Concrete milestones and timelines are crucial in any acceleration program – it’s very easy for a first-time entrepreneur to lose momentum and to waste precious time.
While volunteers can be leveraged to make these programs more cost-effective, some money does need to be spent on a good program – our estimate is between € 2,500 and € 6,000 per startup.
Where the previous two stages were driven by the entrepreneurs themselves, this stage calls for individual, targeted selection by an organizing body. So, this stage is about one-on-one contact with the “high-potential” startups, not the one-to-many communication of the previous stages. And of course, at this stage a well-maintained database of projects becomes a real asset.
This is where the best and the brightest should go – a bit of capital, more structure, and more networking power. I will not talk about this in depth – there’s little need to “force” creation of incubators as both governments and private players invest a lot of effort at this stage. It’s worth mentioning though that a good pipeline taking startups through the three previous stages should ensure there are enough of the best and the brightest to choose from.
A single web platform is very useful for connecting the stages and keeping track of the startups as they progress. Our modest effort, http://westartup.eu, is making the first steps towards becoming one.
So there you have it, a recipe for building a local, distributed, European version of the Valley with the resources we already have. Yes, it’s a lot of work – but if at all the energy that goes today into moaning is instead channeled into getting things done, we’ll be well on our way.[Photo by Tamdotcom, cake by Zingermans, feature photo: Heisenberg media]
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