Posted by donAdeo on 2015-02-23
If you ask a local startup leader what is holding back their community from growing, chances are the answer you will get is “a lack of capital”.
But in our experience working in nearly 100 markets across the globe, "lack of capital" is nowhere near being the biggest hindrance to startup community growth.
In fact, in nascent and developing markets, we have seen an influx of government and strategic capital actually hurt the local ecosystem more often than it helps it.
Consider the following sequence of events, which we have seen play out time and time again across several continents;
1. New capital to grow a local startup ecosystem is announced, either by the government or foreign investors. This money needs to be allocated fairly quickly, so investment will go to a select few organizations.
2. Organizations in the local ecosystem immediately begin jockeying for the investment. As a result, these organizations start (1) creating exclusive relationships with others in the ecosystem (these become known colloquially as “tribes”), or (2) vertically integrate (ex. co-working spaces that used to partner with accelerators now create their own accelerators, and those same accelerators start looking for real estate).
3. Almost overnight, a once collaborative ecosystem becomes overly competitive and fragmented.
The biggest losers in this scenario? Local entrepreneurs.
Rather than having access to many different options at each stage of their startup journey, they now become funneled into “walled gardens” of services (or “tribes” of partners). This fragmentation limits optionality, and creates a less inviting environment for new entrepreneurs to start up.
Unfortunately, it doesn’t take an influx of capital to create this scenario. As entrepreneurship becomes more “in vogue” and competitive across the globe, we see growing ecosystems become more and more fragmented every day.
The biggest threat to a growing startup ecosystem is not a lack of capital - it is fragmentation and a lack of transparency, because it takes a city to raise a startup.
A Solution: The Startup Ecosystem Canvas
In the must-read book Startup Communities, Brad Feld (Co-Founder of TechStars and Foundry Group) describes the dangers of fragmentation as well. According to Feld, "fragmentation kills local entrepreneurship", and a “philosophy of inclusiveness” is a key pillar of a vibrant startup ecosystem.
Fragmentation can’t be fixed overnight, but if you can map out your local ecosystem, then you can immediately make it more transparent and inviting for newcomers. In other words, if you can lower the barrier to entry for new entrepreneurs to join your startup ecosystem, you can ultimately help it grow.
Hence, we developed the Startup Ecosystem Canvas to help startup leaders map their local ecosystem in a framework that makes it more transparent and inviting for new entrepreneurs.
The Canvas is free to use, and is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Learn more about the Startup Ecosystem Canvas project at the Founder Institute blog.PRIVATE: Members Only