The Changing Entrepreneurial Ecosystem

Some of my thoughts on the Entrepreneurial Ecosystem and the changes that I’m seeing recent observations (since 2012) and over a 15-year involvement in business incubation and working with entrepreneurs (since late 1999). 

The entrepreneurial ecosystem is changing and expanding.    The ecosystem is much more than just a business incubation or an accelerator program.   But rather, a series of entrepreneurial support programs, facilities and financing options that are targeting for the start up and emerging company.

Here is an overview of the types of companies and the role of business incubation and entrepreneurial support organizations. 

Start-ups of All types:  One year or less.  Maybe “pre-revenue”, with a founder or co-founders.   The company my have launched from an “home office”, coffee shop, StartUp Weekend, business plan competition, student incubator or ESO (such as SBDC in US).  This the pre-incubation and early business incubation phase.  It’s companies getting started. Anywhere! 

From an NBIA point of view, including our 2010 Best Practices in Action (BPiA), we have several pre-incubation and selection examples in the book.

Launching Companies (StartUp & Emerging) can be done in a variety of ways.    Start Up programs are very short term (days or weeks), whereas the Accelerator model is 3 to 6 months.   Accelerator programs are very selective, well suited for software, mobile apps, simple widgets or easy to scale technology.   Usually accelerators will take equity stake (3% to 10%) that is held by the investors (as part of the Accelerator program).  The initial goals for the emerging companies are the Minimum Viable Product (MVP), some initial customers (or beta testing), plus preparing the emerging company for their “pitch” for their series A round of financing.   The Global Accelerator Network (licensing by TechStars of their accelerator process) is best-known worldwide example.  Once an Accelerator graduate company “launches” and is “funded” by initial investors, it is ready for business incubation, as an option for “building the company”.  

Business Incubation is about “building companies” and helping an emerging company (one to five years) become viable, serving customers and growing to the point of being “bankable” and/or financially viable.    The company can “start” in the incubator, even in a pre-revenue stage.   Usually the company has 1 to 10 employees, though typically one or two at the starting point with business incubator.   The emphasis is on company viability over the course of the business incubation program.   An Accelerator is focused on product or service viability (MVP).  For gradation, the company is ready for the market place, and has (or can obtain) financing.  

From the NBIA point of view, we are in the middle of the entrepreneurial ecosystem “building companies everyday”.    The start up phase is important, and fits in to the pre-incubation or initial business incubation phase of the programming.    Accelerators are a way to “quick start” the process, as some business incubators struggle to get their startups growing as fast as needed.  

Once the company graduates from the Business Incubator, other programs such as Economic Gardening (stage 2 strategy, for companies from 10 to 100 employees) can assist in the company growth.    EDO (Economic Development Organizations) begin to be interested in helping, one the Business Incubator company is growing and adding employees.   As a graduate company of a business incubator, there are many options, including just keeping and growing the company?  Or merging or being acquired?  Or looking to be acquired for your exit?    

In the summer of 2013 I heard the CEO of a Colorado-based company speaking in Telluride, CO.   His company acquisition focus is the acquisition of Stage 2 companies with 20 to 50 employees that have $10MM USD or more in revenues.    So where do these companies come from?   A stork who is flying over your community?   LoL    Seriously, for a Stage 2 company to get to that “job creation size”, you have to have Stage One companies (see Ed Lowe Foundation http://edwardlowe.org/tools-programs/your-economy) launched in the first place.   That is what business incubators are good at.

So the process of assisting startup companies, and helping them to launch is the goal of entrepreneurial support organizations (ESO’s).    From coworking to business incubation, from startup weekends to accelerators, there are a number of facets in the entrepreneurial ecosystems.   Over the past 25 years, and expanding more rapidly in recent years, the role of ESO’s in assisting emerging companies is fascinating.   

If your community or economic development organization (EDO) is ready to really help to grow the local entrepreneurs, please contact Four Corners Management Systems.      A membership in NBIA is a good place to start, and looking at Option 6 for your EDO to seriously support startup companies in your community and region.  

 

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