Building a Robust Entrepreneurship Ecosystem in ...sbdcinvestors.com/mediafiles/uploaded/e/0e3604017... · Breaking Myths 4: University • Scientific research, NIH funding, etc

© 2014 Ewing Marion Kauffman Foundation

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Building a Robust Entrepreneurship Ecosystem

in Springfield, Missouri

Yas Motoyama, Ph.D.

Senior Scholar

Ewing Marion Kauffman Foundation


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Myths of Entrepreneurship Ecosystem

• Silicon Valley is the best model of ecosystem

• Fulfilling the missing elements will help

• The essential elements are:

1) Venture capitals

2) Incubators / Accelerators

3) University research & entrepreneurship courses

4) Entrepreneurs

5) Skilled labor

6) Supportive culture, social capital


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Breaking Myths 1: Silicon Valley?

• Decades of experiments (Saxenian 1994; Lecuyer 2006)

• Imitating fully developed system is not the answer

• Do you have to be the next Silicon Valley?

• Does every ecosystem have to look alike?


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Breaking Myths 2: Venture Capitals

• Failure of private venture fundso Hard to pick winners; 50% out within 5 years (SBA 2012)

o 80% of VCs unable to return 3% / year (Bradley et al. 2012)

• Failure of public venture funds (Lerner 2009)o Politics overtake investment decisions

• Alternative methods of financeo Bootstrapping (Motoyama et al. 2013)


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• Financial sources of high-growth Inc companies (n=479)

Source Count Share

Personal savings 322 67.2%

Bank loans 248 51.8%

Credit card 163 34.0%

Family 100 20.9%

Business acquaintances 57 11.9%

Angels investors 37 7.7%

Close friends 36 7.5%

Venture capitalists 31 6.5%

Government grants 18 3.8%


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Breaking Myths 3: Incubators

• Failure of incubators (Amezcua 2010)

o Likely prolonging dying firms

• Accelerators?o Competitive application process

o Pre-seed investment, with equity exchange

o Create a cohort of entrepreneurs, and focus on teams

o Connect to mentors

• No evaluation research yeto Outliers (Y-Combinator, Foundry)

o What happens after being funded?


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Breaking Myths 4: University

• Scientific research, NIH funding, etc.o Little connection b/w scientific discovery & commercialization

(Motoyama et al. 2011)

• Technology transfer officeo When lawyers try to maximize revenues to university (Litan et al. 2007;

Kenney and Patton 2009)

• Entrepreneurship course at business school

o Beautiful rice cake in picture


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The Biggest Challenge of Most Ecosystems

(Brasunas, interview, December 10, 2012)

• The typical problem I saw with entrepreneurs five years ago was like this:

• “I do this business alone, and I don’t know other startups in town. I don’t know investors here, and there is only old money from big corporations in St. Louis, so I go to Silicon Valley to find an investor.”

• Then, if you talked to investors, they would say: “I don’t find any startups in St. Louis, and, in fact, there may not be any prospective startups here, so I go to Silicon Valley to find companies to invest.”

• So somehow, they might find each other in Silicon Valley, but not in St. Louis.


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Then, What Works?

Dense connections b/w entrepreneurs where they can:

• Get constantly engaged with other entrepreneurs

• Learn to solve a number of problems

• Find mentors (serial entrepreneurs, angels, capitalists)o Not for getting funds

o But for learning how to run companies

• Tailored to stages and sectors

• Tailored to you

Local


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Connections Observed in St. Louis


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Alternatives 1: Venture Funds & Incubators

• Reorganize them in order to create connections b/w

entrepreneurs and support organizationso Policy Digest #1: Do’s and Don’ts of Local Entrepreneurship Promotion

• Provide a space where entrepreneurs get togethero (eg.) 1871 in Chicago

o Porous boundary (Feld 2012)

• Host experimental, entrepreneurship-related eventso (eg.) Startup Weekend

• Connect to other experts who can help entrepreneurs


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Alternatives 2: University

• Reorganize course-based educationo Less emphasis on business plan writing

o More emphasis on how to implement & how to find resources

o To inspire students

o To connect with other students with similar minds, different skills

• Connect students to local startupso Have local startups as the judges for the competition

o Send students as interns (but do not exploit them!)

o (eg.) Skandalaris Center at Wash U, LaunchPad at Univ of Miami


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Alternatives 3: Toward Firm Growth

• Nurture startups to high-growth companies

• Identify successful local entrepreneurs & championso Not necessarily the leaders of largest local businesses

o Entrepreneurial companies; high-growth companies (eg. Inc firms)

• Connect experienced and growing entrepreneurs


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The Pipeline Program

• “To create the lifelong connections among entrepreneurs”

(Joni Cobb, Jan 17, 2014).

• To scale up: Company CEOs of $1 mil sales

• To connect with peers, mentors, and supporters

• KC, Wichita, Omaha-Lincoln + St. Louis?


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Inc Firms in Springfield, MO

Company Sector Count

Altec Solutions Group Advertising & Marketing 1

ECS Advertising & Marketing 1

Marlin Network Advertising & Marketing 3

Elite Promotions Computer Hardware 1

Penmac Personnel Services Computer Hardware 1

Jack Ball and Associates Architects PC Financial Services 1

JMark Business Solutions Financial Services 3

Banta Foods Food & Beverage 1

HealthcareFirst Food & Beverage 5

America's Incredible Pizza Company Health 2

Electronic Check Services Health 1

Wickizer & Clutter Insurance 1

Duck Creek Technologies Retail 1

Interactive Hotel Solutions Retail 1

Intuitive Web Solutions Software 1

Russell Cellular Software 2

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• Entrepreneurship by stages

• Seamlessly

Startup

Weekend

1MC

Pipeline

Connecting

w/ Inc firms


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Alternatives 4:

• Know who is served in your ecosystem & who is noto Participate in our survey in September?


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Other Suggestions

• Don’t look for superhero

• Don’t worry about a company leaving

• The talent issue?o Retaining and attracting talent? (Lessons from attracting firms?)

o Entrepreneurs start where they are located

o High-growth companies recruit local talent and train them (Motoyama et

al. 2013)

Documents

Building a Robust Entrepreneurship Ecosystem in ...sbdcinvestors.com/mediafiles/uploaded/e/0e3604017... · Breaking Myths 4: University • Scientific research, NIH funding, etc