Triggers
Triggers are the externally impressive exits and high start-up valuations that spark a sharp
increase in Resource Attraction, driving the growth of an ecosystem and its evolution to the
next phase of the Lifecycle.
Ecosystem development is not natural or continuous: the global concentration of exit
values and tech start-ups is one indication of just how hard it is to develop a strong start-up
ecosystem. Without large exits ecosystems can get stuck or trapped in one phase: this is
the “ecosystem trap.” Momentum may stall, enthusiasm might wane, and the rhythm of
exits can slow down or fail to materialize.
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The number and size of exits needed to trigger Resource Attraction varies with
a)
The relative attractiveness, geographic distance, and number of other ecosystems
in the country (relative National Attraction), or continent and the rest of the world
(relative Global Attraction);
b)
The rhythm of follow-on exits (one per year rather than one offs);
c)
Immigration Barriers;
d)
The type of exit (IPO and unicorns often creating more Attraction); and
e)
The attractiveness of the sub-sector (an Artificial Intelligence exit may create more
Attraction than an e-commerce one).
The analysis demonstrates that over the last ten years, exits greater than $100 million have
triggered an ecosystem into Globalization and National Resource Attraction.
Source: Global Startup Ecosystem Report by Startup genome, 2017
Figure 3: Net Resource Attraction by Phase
Source: Global Startup Ecosystem Report by Startup Genome, 2017.
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Figure 4: Global Connectedness by Phase
Source: Global Startup Ecosystem Report by Startup Genome, 2017
Figure 5: Accessible Resources by Phase
Source: Global Startup Ecosystem Report by Startup Genome, 2017
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Figure 6: Startup Attraction by Phase
Source: Global Startup Ecosystem Report by Startup Genome, 2017
1.7
Entrepreneurial Ecosystem Stages of Development
It is important that stakeholders understand the current stage of development of their entrepreneurial
ecosystem so they can make a more informed assessment of what supporting role they should currently
assume as well as progressively assume as their entrepreneurial ecosystem matures. Furthermore
joint determination with other stakeholders regarding the current development stage helps the
engaged stakeholders ensure that their roles are complimentary and any identified challenges are
addressed. Furthermore joint determination of current development stage builds a “we are in the
same boat” mentality contributing to a sense of community, a prerequisite for a more nurturing
environment.
There are four progressive stages of development for an entrepreneurial ecosystem. Progression
from stage to stage is delineated by the amount of resources available to entrepreneurial ventures,
the favourability of the business and market environments and the dynamics of the entrepreneurial
community. The later factor is a function of the degree of collaboration among stakeholders and the
focus of this tool kit. The following brief descriptions of each stage serves as reference for stakeholders
to mutually agree upon what stage their Entrepreneurial Ecosystem can be placed.
•
Community Building Stage
The call word for this stage is “Construction.” The first community-builders appear, usually from the
ranks of pioneering entrepreneurs who envision the importance of a mutual support community
in an environment of scarce resources for entrepreneurs. The formation of informal groups and
perhaps the organization of tech enthusiast related events such as Bar Camps and hacker thons that
draw out passionate techies who are potential aspiring entrepreneurs is often the first step in any
organizing efforts and represent the first signs of community-building. Consequently a few minor
bootstrap opportunities are created and the seeds for a community conscious is planted. A few more
start-ups start coming out of the woodwork and the first angel investors may appear. VC funding
transactions are few and far between and limited to seed funding. Additionally the first start-up
organizations may open their doors with the initial objective to raise entrepreneurial awareness and
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conduct entrepreneurial-skill building workshops. In Academia business plan competitions commence
and we begin to see entrepreneurial and software coding clubs forming on campuses. During this
stage attempts to organize community-building activities remain largely informal and there is little
or no coordination between the different stakeholders. The government, corporate community and
media find little to be of interest. No one senses they are part of a larger community yet and it remains
“all-for-one.” Empathy, engagement and collaboration between different stakeholder groups remain
a dream to only the few visionary community-builders currently engaged.
•
Dysfunctional Community
The call word for this stage is “Consciousness.” The commencement of this stage is usually marked
by the earliest signs of a community consciousness. An early sign may simply be a blog post or an
event that includes the word “tech” or “start-up” in the same sentence as the word “community.”
During this stage early organizational efforts begin to bear fruit with appearance of first formal
local start-up organizations, including hackerspaces. International organizations mandated to foster
innovation and entrepreneurship begin to arrive and implement programs designed to support
start-up ventures in addition to individual founders. Academia and government agencies have a
similar change in outlook and begin to offer activities and programs increasingly focused on directly
supporting entrepreneurial ventures, not just the development of individual aspiring entrepreneurs.
Consequently the first public and university incubators appear. Public funding programs first appear,
however, as is unfortunately the case the first public funding programs are ill-conceived stipulating
for example expense reimbursements for cash-starved start-ups, constricting use of funds terms
and costly and time consuming reporting requirements. The first pioneering start-ups emerge and
start to secure funding from the first institutional investors on the scene. VC funding continues to be
predominantly seed but a few Series A funding rounds may occur for the first time in the community.
However the fledging investor community remains disorganized with little or no co-investments
occurring and funding terms remain relatively unattractive for start-ups. The presence of the first
institutional investors does help the community brand and inspires more entrepreneurs to found
their own ventures. Tech media outlets and blogs are established to cover this newly perceived
“community” and report on the first set of promising start-ups. They play a crucial role during this
stage in advancing and fortifying a community conscious. Corporations first begin to sense something
anew and try to determine whether these new start-ups pose a competitive threat or an innovative
opportunity. Corporate sponsorships rise bringing with it mainstream media attention for the first
time. Near the end of this stage the first co-working spaces may begin to open their doors. Indeed this
is the “golden age” for the proliferation of Entrepreneurial Support Organizations further solidifying
a community conscious. They also serve as the earliest physical forums for collaboration. There
remains little or no coordination and no perceptible synergistic benefits from being a member of the
community that would indicate a functioning community. However, the existence of a community
conscious has the effect of attracting additional members to the start-up community and increased
engagement by community members who now recognize mutual interests in contributing to the
community’s further development. These motivations will serve as a basis for collaboration and the
subsequent organic sustainable growth to follow.
•
Functional Community
The call word for this stage is “Collaboration.” At the beginning of this stage the first co-working
spaces are becoming centres of collaboration. The role of the tech media becomes a nexus of
information which is critical in this collaboration stage in that various members become aware of
who the other members are and what they are doing. Academia and entrepreneurs now begin to
recognize a mutually beneficial collaborative exchange of research. Entrepreneurs exchange their
collected marketplace and consumer behavioural data in exchange for primary research conducted by
academia. Corporations also begin to identify immediate commercial interests in partnering with start-
ups whose innovative products or services represent a premium feature for their own customer base
or access to a previously unreached market segment. Corporate community engagement progresses
from mere event sponsorship to co-marketing partnerships with start-ups and, later in this stage, to
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launching corporate VC arms and accelerator programs. Entrepreneurial Support Organizations now
flourish as they transition from community-building to collaborative mode. An investment community
is now more organized with sufficient deal flow making frequent co-investments with increasingly
more competitive terms to the benefit of start-ups. The first Series B investments in the successful
pioneering start-ups occur as the community attracts the attention of more established regional and
global institutional VC’s. With increased media attention, corporate engagement and collaboration
with academia the government is now compelled to devise new programs and consider revising
existing regulations and policies in support of local start-ups which are now recognized as the main
engine of local innovation and global competitiveness. New tax breaks and other incentives begin to
be offered to tech start-ups. Public funding programs are now being better structured and packaged.
Different public agencies may begin to collaborate creating multi-department programs and initiatives.
During this stage stakeholders have been collaborating together at the transactional level- for the
mutual benefit of only the engaged parties. However, the first signs of transition to the next “vibrancy”
stage appear as stakeholders begin to informally assume important roles in the entrepreneurial
ecosystem. “Go-to” people and organizations are identified to provide direct assistance or find a
solution to more community-wide issues. This stage is also significant in that for the first time all
stakeholders enjoy the synergistic benefits derived from merely being a stakeholder in the ecosystem
as a result of strong community dynamics and branding.
•
Vibrant Stage
The call word for this stage is “Choice.” Many of the collaborative relationships that were established
during the previous stage have evolved into more formal strategic partnerships to actuate joint actions.
Every major stakeholder group is actively engaged and have an intimate awareness of the other players
and a keen understanding of what role they play within the community. Entrepreneurs have a wide
variety of choices in sources for acquiring all three types of critical resources.
1.7.1 Shared Imperative for Collaboration
In a properly functioning entrepreneurial community there is a shared imperative for stakeholders to
collaborate together to attain the next stage of development. Similar to a start-up that aims to establish
a market dominating position in their home market as swiftly as possible so they can execute their
regional or global growth strategy faster so should be the intent of stakeholders in an entrepreneurial
ecosystem trying to establish a dynamic environment at home as swiftly as possible in order to attract
foreign stakeholders and their resources as quickly as possible. Each progressive development stage
should be perceived by stakeholders as a progressive funding round for the entire entrepreneurial
ecosystem consisting of foreign capital, tech talent and global markets.
1.8
Stakeholders’ Progressive Roles & Updated KPIs
Once stakeholders have mutually agreed on the current stage of development their entrepreneurial
ecosystem is placed it is now time for each stakeholder to identify their proper role given their
needs, the needs of the other stakeholders and the objectives that need to be met to attain the next
development stage.
Once each stakeholder clearly understands their role they may need to update their KPI’s to accurately
reflect their expected immediate contribution. The ideal situation is for either a sense of peer pressure
to permeate amongst the engaged stakeholders or the anxiety of letting their fellow stakeholders down.
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Figure 7: Progressive Roles for Start-Up Players
1.9
Community Building & Culture of Innovation
The opportunity for optimal stakeholder collaboration is most likely found within a culture of
innovation. To illustrate this we will first define what a culture of innovation is, illustrate how a
community consciousness develops into a more permanent culture of innovation and the benefits
to be derived from such a culture in which a vibrant entrepreneurial community sustainably maintains
a symmetry of risks and benefits amongst the stakeholders.
1.9.1 What is a Culture of Innovation?
As discussed in the previous section under “systems of innovation,” the production of innovation is a
complex non-linear process that entails an interaction of many factors including talent pools, culture,
economic conditions, markets, investment, networking and community building. The interaction of
these factors represent the dynamism or vibrancy of the ecosystem. A culture of innovation exists
where all the stakeholders share a sense of community, drive this dynamic and share the risks and
benefits through informally designated roles that serves as a basis for collaboration.
1.9.2 Relationship between Community-Building & Culture of Innovation
What is the connection between community-building and a culture of innovation?
The best path to a culture of innovation is sustained community-building activities leading to a vibrant
entrepreneurial ecosystem. Community-building activities, which includes all forms of collaboration,
creates a community consciousness. A community consciousness is simply the belief in a shared
identity. For any culture such a sense of self-identification is required. A sense of community is the
belief in a shared destiny. A sense of community based on mutual empathy, a “we are in the same
boat” mentality (shared destiny), a perceived symmetry of shared risks and benefits and an implied
division of labour through informally delegated roles serves as a strong base for collaboration. A
sense of community pervading throughout an entrepreneurial ecosystem eventually evolves into a
more permanent culture of innovation. Once a sense of community becomes pervasive the defining
characteristics of a vibrant community can begin to form. The three defining characteristics of a
vibrant community include Dynamism, Organic and Sustainable.
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