In the 1990’s, basketball players wanted to “be like Mike” (Michael Jordan). Today, local governments want their regions to be like Silicon Valley. In both the developed world (tech = growth and skilled jobs), and in the developing world (tech = rapid development), entrepreneurship is seen as a magic pill. But it is not easy to create an entrepreneurial ecosystem. “There’s not a clear playbook to do this,” says Professor Michael Goldberg of Case Western Reserve University.
Governments want to create new companies, create a larger tax base, and higher employment. But government officials aren’t trained as businesspeople, venture capitalists, or entrepreneurs. So it’s very challenging, even with the best intentions, to put together programs that truly support entrepreneurs.
Most basketball players didn’t get to be like Mike either, though a few did (Kobe, LeBron). While we haven’t cracked the code (no pun intended) on what makes Silicon Valley unique, we know the main ingredients: top-quality universities, a diverse population, plentiful venture capital, numerous successful large and small companies, and a culture of innovation. Silicon Valley wasn’t built overnight and even it had support from federal and state government programs.
But there are other successful entrepreneurial hotspots that have emerged: New York, Boston, Austin, Seattle, Tel Aviv, Bangalore, and others. Michael notes: “frankly, there are a number of consultants that run around the world preaching how easy it is to become another Silicon Valley”. Michael became interested in this area while teaching at the National Economics University in 2012 as a Fulbright Scholar in Hanoi, Vietnam, and the Vietnamese government asked how they could get to be more like Silicon Valley. Michael’s response was that other cities might be better models for them: “you guys look a lot more like Cleveland than Silicon Valley”. He introduced them to contacts in Cleveland, Ohio (home to Case Western Reserve University), particularly regarding a technology commercialization program.
The Key to the Ecosystem: Having a Long View
Since Michael has been studying this, he might be in the best position to identify how to create a successful entrepreneurial ecosystem. He is hesitant to claim that he can point to the “secret sauce”. But he does highlight one key aspect:
I think the single most important thing, in my view, is the long view. It is very hard…government officials are focused on their next election, and election cycles are short
Governments must take a long view: for example, the technology commercialization program in Ohio was a multi-year commitment of $2.3B, a program called the Third Frontier that survived (and expanded) during transition from a Republican to a Democratic administration. Donors and venture capitalists must also take a long view—until a self-sustaining cycle is in place, there may be very few near term exits that provide returns on investment. Finally, entrepreneurs themselves must also understand that not every good venture will grow at Facebook-speed.
Then, a cycle develops: successful entrepreneurs provide returns to investors (VCs, incubators, accelerators), which justifies additional investment, attracts talent, and produces experienced entrepreneurs who can then create something else, and repeat the cycle.
Bootstrapping Past the Chicken and the Egg
Communities that want to develop an ecosystem like this are faced with a chicken-and-egg problem: how do you put the elements together to support entrepreneurship when the best way to do that is to have a track record of entrepreneurial activity? To bootstrap the system, Michael has some suggestions:
Partnering with non-governmental organizations (NGOs). Michael gives the example of Jumpstart, a Cleveland NGO, which has $75 million of donor and government money to support entrepreneurship. Some philanthropic organizations take an investment approach (termed “patient capital”) and some organizations, such as Acumen or Omidyar Network, actively invest in for-profit organizations that contribute to the development of their communities.
Utilize diasporas – interest groups cross geographic boundaries, and a strong on is country or ethnic ties. Michael gives an example from the previous session of his MOOC: he met a few young entrepreneurs in Thessaloniki, Greece who developed an iPhone app to capture video in an innovative way. He introduced them to a Greek angel investor in Cleveland, who introduced them to contacts in San Francisco. Diasporas are already networks where money, information, and contacts flow, to tapping into these to boost entrepreneurship makes sense.
New technology. Michael thinks that some technology-driven trends, such as AngelList and crowdfunding sites should help make supporting entrepreneurship easier. AngleList and other equity investment platforms is a way to increase transparency and reduce the transaction costs to invest in seed stage ventures. Crowdfunding has also become a popular way to launch certain products. An early example of pairing crowdfunding with teaching entrepreneurship is the Pozible partnership with OpenLearning.
Besides these three, we can now add a fourth, and that is Michael’s MOOC. In the MOOC, stakeholders from different communities are sharing ideas, networking, and inspiring each other. This might be an ideal use of current MOOCs: to provide a way for specialized groups around the world to come together and learn with and from each other. Etienne Wenger-Trayer defines this as a ‘community of practice’:
Communities of practice are groups of people who share a concern or a passion for something they do and learn how to do it better as they interact regularly.
Thus, this is what Michael has created with this MOOC. However, it is not perfect. Most current MOOC platforms don’t allow for much local community building or continued connection after the course is finished. Michael sees this gap and would like to find solutions that help build persistent local connections. The purpose of his MOOC after all, is for participants to help develop their local communities. “There were significant efforts to organize local meet-ups. I think in those areas, people…want to do something together.” He calls this gap “the last mile” for these global MOOC platforms. Perhaps this is a key ingredient missing in the MOOC ecosystem, and would help it evolve to the next level of effectiveness. (See, the MOOC is already getting us think about ecosystems!)
If you are interested in the development of entrepreneurship in your community, join the MOOC Beyond Silicon Valley: Growing Entrepreneurship in Transitioning Economies, which starts Oct. 3, and get involved in the discussions. An additional point: Michael is proud to point out that the best basketball player in the world, LeBron James, went back to Cleveland this year–why Cleveland? Because of the network of various ties to the community–in other words, the ecosystem.