Startup Communities – Building Regional Clusters

How to build regional entrepreneurial communities has just gotten it’s first “here’s how to do it” book. Brad Feld’s new book Startup Communities joins the two other “must reads,” (Regional Advantage and Startup Nation) and one “must view” (The Secret History of Silicon Valley) for anyone trying to understand the components of a regional cluster.

There’s probably no one more qualified to write this book then Brad Feld (startup founder, co founder of two VC firms – Mobius and Foundry, and founder of TechStars.)

Leaders and Feeders
Feld’s thesis is that unlike the common wisdom, it is entrepreneurs that lead a startup community while everyone else feeds the community.

Feld describes the characteristics of those who want to be regional Entrepreneurial Leaders; they need to be committed to their region for the long term (20+ years), the community and its leaders must be inclusive, play a non-zero sum game, be mentorship-driven and be comfortable experimenting and failing fast.

Feeders include the government, universities, investors, mentors, service providers and large companies. He points out that some of these, government, universities and investors think of themselves as the leaders and Feld’s thesis is that we’ve gotten it wrong for decades.

This is a huge insight, a big idea and a fresh way to view and build a regional ecosystem in the 21st century. It may even be right.

Activities and Events
One of the most surprising (to me) was the observation that a regional community must have continual activities and events to engage all participants. Using Boulder Colorado as an example, (Feld’s home town) this small entrepreneurial community runs office hours, Boulder Denver Tech Meetup, Boulder Open Coffee ClubIgnite Boulder, Boulder Beta, Boulder Startup Digest, Startup Weekend events, CU New Venture Challenge, Boulder Startup Week, Young Entrepreneurs Organization and the Entrepreneurs Foundation of Colorado. For a city of 100,000 (in a metro area of just 300,000 people) the list of activities/events in Boulder takes your breath away. They are not run by the government or any single organization. These are all grassroots efforts by entrepreneurial leaders. These events are a good proxy for the health and depth of a startup community.

Incubators and Accelerators
One of the best definitions in the book is when Feld articulates the difference between an incubator and an accelerator. An incubator provides year-round physical space, infrastructure and advice in exchange for a fee (often in equity.) They are typically non-profit, attached to a university (or in some locations a local government.) For some incubators, entrepreneurs can stay as long as they want. There is no guaranteed funding. In contrast, an accelerator has cohorts going through a program of a set length, with funding typically provided at the end.

Feld describes TechStars (founded in 2006 with David Cohen) as an example of how to build a regional accelerator. In contrast to other accelerators TechStars is mentor-driven, with a profound belief that entrepreneurs learn best from other entrepreneurs. It’s a 90-day program with a clear beginning and end for each cohort. TechStars selection criteria is to first focus on picking the right team then the market. They invest $118,000 ($18k seed funding + $100K convertible note) in 10 teams per region.

Role of Universities
To the entrepreneurial community Stanford and MIT are held up as models for “outward-facing” research universities. They act as community catalysts, as a magnet for great entrepreneurial talent for the region, and as teachers and then a pipeline for talent back into the region. In addition their research offers a continual stream of new technologies to be commercialized.

Feld’s observation is that that these schools are exceptions that are hard to duplicate. In most universities entrepreneurial engagement is not rewarded, there’s a lack of resources for entrepreneurial programs and cross-campus collaboration is not in the DNA of most universities.

Rather than thinking of the local university as the leader, Feld posits a more effective approach is to use the local college or university as a resource and a feeder of entrepreneurial students to the local entrepreneurial community. He uses Colorado University’ Boulder as an example of of a regional university being as inclusive as possible with courses, programs and activities.

Finally, he suggests engaging alumni for something other than fundraising – bringing back to the campus, having them mentor top students and celebrating their successes.

Role of Government
Feld is not a big fan of top-down government driven clusters. He contrasts the disconnect between entrepreneurs and government. Entrepreneurs are painfully self-aware but governments are chronically not self-aware.  This makes government leaders out of touch on how the dynamics of startups really work. Governments have a top-down command and control hierarchy, while entrepreneurs work in a bottoms-up networked world. Governments tend to focus on macro metrics of economic development policy while entrepreneurs talk about lean, startups, people and product. Entrepreneurs talk about immediate action while government conversations about policy do not have urgency.  Startups aim for immediate impact, while governments want to control. Startup communities are networked and don’t lend themselves to a command and control system.

Community Culture
Feld believes that the Community Culture, how individuals interact and behave to each other, is a key part of defining and entrepreneurial community. His list of cultural attributes is an  integral part of Silicon Valley. Give before you get, (in the valley we call this the “pay it forward” culture.) Everyone is a mentor, so share your knowledge and give back. Embrace weirdness, describes a community culture that accepts differences. (Starting post World War II the San Francisco bay area became a magnet for those wanting to embrace alternate lifestyles. For personal lifestyles people headed to San Francisco. For alternate business lifestyles they went 35 miles south to Silicon Valley.)

I was surprised to note that the biggest cultural meme of Silicon Valley didn’t make his Community Culture chapter – failure equals experience.

Broadening the Startup Community
Feld closes by highlighting some of the issues faced by a startup community in Boulder.  The one he calls Parallel Universes notes that there may be industry specific (biotech, clean tech etc.) startup communities sitting side-by-side and not interacting with each other.

He then busts the myths clusters tell themselves; “lets be like Silicon Valley” and the “there’s not enough capital here.”

Quibbles
There’s data that that seems to indicate a few of Feld’s claims about about the limited role of venture, universities and governments might be overly broad (but doesn’t diminish his observation that they’re feeders not leaders.) In addition, while Silicon Valley was a series of happy accidents, other national clusters have extracted its lessons and successfully engineered on top of those heuristics. And while I might have misread Feld’s premise about local venture capital, but it seems to be, “if there isn’t a robust venture capital in your region it’s because there isn’t a vibrant entrepreneurial community with great startups. As venture capital exists to service startup when great startups are built investors will show up.” Wow.

Finally, local government top-down initiatives are not the only way governments can incentivize entrepreneurial efforts. Some like the National Science Foundation Innovation Corps have had a big bang for little bucks.

Summary
Entrepreneurship is rising in almost every major city and region around the world. I host at least one region a week at the ranch and each of these regions are looking for a roadmap. Startup Communities is it. It’s a strategic, groundbreaking book and a major addition to what was missing in the discussion of how to build a regional cluster. I’m going to be quoting from it liberally, stealing from it often, and handing it out to my visitors.

Buy it.

Lessons Learned

  • Entrepreneurs lead a startup community while everyone else feeds the community
  • Feeders include the government, universities, investors, mentors, service providers and large companies
  • Continual activities and events are essential to engage all participants
  • Top-down government-driven clusters are an oxymoron
  • Building a regional entrepreneurial culture is critical

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17 Responses

  1. I love the idea of leaders and feeders. But you could argue it is common sense (if not common practice). Someone with the drive and ambition to launch a start up of any sort will always have more at stake and therefore be more emotionally and intellectually involved than some third party asked to manage it.

    When anyone starts an enterprise, their thoughts tend to be on how to grow it. When management takes over their thoughts tend to be on managing.

  2. Thanks for a great article!
    I think it would be interesting to know that we are also working on http://www.StarterPad.com: Where Founders Help Founders!

  3. Steve – thanks for the kind words and incredibly thorough review! I’ll put up a post in the next few days on Startup Revolution (http://startuprev.com) that addresses the Quibbles (good quibbles, by the way!)

  4. Steve,

    I haven’t read Brad’s Book, but interesting enough, we had an idea, a dream and we PRODUCED an event in San Diego on September 22, 2012 called http://www.SDEntrepreneurDay.com of which we invited all the vertical markets (NOT JUST TECH), colleges, mayor’s office, state senator’s office, SBA.GOV, San Diego County supervisor and city council etc., resulting with over 100 exhibitors from a variety of vertical markets, and over 500 volunteers, exhibitors, vendors, participants, etc. collaborated bringing in about 5,000 attendees for our inaugural one day event. We received the “triple crown” recognition by the Federal Government -SBA.Gov with a certificate, California State Senate, another certificate and the City of San Diego, Mayor’s office, proclaiming September 22, 2012 as “Entrepreneur Day”. Corporate sponsors included: Microsoft, Qualcomm, Herman Miller, Mike’s Hard Lemonade, Stone Brewing Co, Boston Brewing Company, Kimco Realty, Sony, AccionSD, UT-San Diego, Stanley Morgan, and more.

    See the schedule for Entrepreneur Day here: http://sdentrepreneurday.com/events/events-schedule/

    See photos Facebook and photos at http://gallery.arroyophotos.com/g/ed_2012, http://www.youtube.com/watch?v=eWjM3-nynxY

    This event was in the works for over 1.5 years, from the launch of the http://www.SDEntrepreneurCenter.com, plugged into a coworking facility to expand it to more that coworking-shared office space, but an incubator and accelerator.

    Today, our database and entrepreneurial eco-system community has grown from starting with 42 to over 11,000 and counting each day, in about a year.

    Our goal in San Diego, is to be the largest Entrepreneurial Eco-system and membership network in San Diego county, and have Entrepreneur Day 2013 have over 10,000 in attendance in a 2-3 day event, as the “Comicon For Entrepreneurs”.

    A crucial part of this is that we created a fund from proceeds from our event(s) and work, the “Robin Hood Fund”, of which monies will be given to Entrepreneurs and Small Businesses, as investments or awards, as well as products and services through the San Diego Entrepreneur Center. As a result of Entrepreneur Day, last week we donated over $5,250 in cash, and gave away laptop computer to a small business owner who never had a laptop before. And we gave away gift cards, and there’s more coming from the Robin Hood Fund to support our movement.

    We are currently updating the San Diego Entrepreneur Center’s business model due to the success of Entrepreneur Day, and our growth with our following and movement in becoming the largest Entrepreneurial Eco-system and membership network in San Diego.

    Best,
    Ray Hivoral

    Please join our events posted on our Meetup Group and receive updates via Facebook
    meetup: http://www.meetup.com/San-Diego-Entrepreneur-Center-Society/
    facebook: https://www.facebook.com/SanDiegoEntrepreneurCenter

    Ray Hivoral
    San Diego Entrepreneur Center (SDEC)
     
    Discover – Recognize – Collaborate and Celebrate Entrepreneurship

  5. Reblogged this on and commented:
    This is a great book review by Steve Blank reviewing the book that I waited for more than 9 months called “Startup Communities”. If you are too lazy to read the book, then at least read his short book review.

  6. Great review and I do agree VCs do follow trends and market dynamics to service entrepreneurs. I’m eager to read this book as a practical guide to continue building the startup community in Malaysia.

  7. [...] If you want a preview of what I’ll be talking about, Steve Blank, the successful entrepreneur and brilliant brain behind the Customer Development idea, has an outstanding and thorough (like everything Steve does) review of Startup Communities up on his site. [...]

  8. I agree with the quibble–venture capital/angel already exists in most regions, it just isn’t organized toward technology startups there. We have a ton of tech startups in Central PA, a ton of private capital, but very little of it flowing to tech startups.

    Working on changing that.

    Here’s my take on it from last year:

    Self-Sustaining, Regenerative Tech Ecosystems

    http://diggingintwo.blogspot.com/2011/10/self-sustaining-regenerative-tech.html

  9. WOW — if i had known that living through the Silicon Valley heydays in the 80s and writing about it was so “novel” i might have written a book myself…i worked for the American Electornics Association 1982-86 ish and lived in SV from 1961 til 1990…met some incredible people and had a great time watching the Valley morph….education is the key!!! and Ed Zschau’s R&D tax credit did too!!

  10. Hi Sean,
    WOW, what an inspiration to read your post!!!
    I really would love to read the book to cleary understand the principles / methodology.
    I an a true believer in the sharing of knowledge / information, mentoring, team work, colaboration across all areas – ( Business, Corporate, Community, Local, State and Federal Governnents).

    This is the key enabler that allows each individual the opportunity to contribute for the overall greater good of today’s fast paced always changing environment…

    Knowledge, and the sharing of information are the foundation and building blocks for the overall greater good of today’s society to evolve, adapt, drive creativity and embrace change through the sharing of new ideas!!!

    Most important of all is that it empowers the future generations to folllow the path of innovation, self belief and have the willingness to be challenged to follow the path in the pursuit of success, happiness and satisfaction for all to realize there dreams, goals and aspiration’s…

    Kind regards

    Sasha…

  11. Reblogged this on Sydstart and commented:
    Hopefully SydStart, Fishburners and some of our wider activities like Cooper & Co mentoring, PushStart, StartMate and more are really delivering on the promise Brad Feld and Steve Blank are describing in this post. the Lessons Learnt section is gold.

  12. [...] Startup Communities – Building Regional Clusters (steveblank.com) [...]

  13. “engaging alumni for something other than fundraising”

    Universities have so much to learn about this. My alma mater only contacts me when they want money.

    But one day about two years ago…

    A prof in the b-school posted a request to LinkedIn for people to help critique his entrepreneurship students’ business plans. A ton of very smart people came out of the woodwork and offered lots of great feedback. I’ve never felt as connected to the school post-graduation.

    I wrote a note to the alumni office suggesting they publicize this to all the other departments. Free mentoring for your students, plus the opportunity for them to make networking contacts in advance of the inevitable job search. AND your alumni will feel engaged and perhaps be more inclined to write a check. What’s not to like?

    Crickets…

  14. The single point of entrepreneurs leading and all the rest feeding is a great reminder.

  15. Thank you Steve, really a useful review.

    I was just wondering if the same considerations that Feld makes in his book apply to places outside the US, where the “US-startup-like entrepreneurial culture” is far from being given for granted. I am thinking about the Old Continent, as I live in Italy, and possibly of many regions in Asia.
    Entrepreneurship here in Europe is understood pretty in a much different way than in the US. Entrepreneurs often do not talk to each other, above all in provincial areas, because they are afraid of loosing business because of their talks or contacts. I am thinking of small-medium businesses that address local (not global) markets, and see their own contacts (with customers, problem solvers,… or local politicians…) as their real competitive advantage to be jelously protected from their neighbours.
    In these contexts, I think that the public sector can play a big role as a mindset innovator, trying to shift old-school “localised” entrepreneurs into the globalised world. Nothing would be born otherwise by waiting for them to spontanously “lead themselves”.

    Would be very interested to know your and Feld’s thoughts about this!

    PS: I speak out of experience as I have been a startupper in Trento, a provincial area of Italy, in the Alps, and now work here as a public officer – my job is “starting” the startup scene locally… and setting fire on a burnt land is not that easy, I can tell you – for sure I have the impression that it would not have started on its own.

  16. […] the Launchpad has been a great place to make life a little easier. The space has created a strong Community Culture that Brad Feld, venture capitalist and author of Startup Communities, would be proud of. It […]

  17. Hi Steve, long time fan…love your writings. In my small town this is happening but on a smaller scale. Small community colleges are starting to help entreprenuers with funding, giving them a place to work and so on. It’s really exciting to see the smaller hubs growing into mini-silicon valley type places all over!

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