(Full Version) Building an Entrepreneurial Ecosystem: Lessons from Omaha (Draft 4)
Upcoming SlideShare
Loading in...5
×
 

(Full Version) Building an Entrepreneurial Ecosystem: Lessons from Omaha (Draft 4)

on

  • 4,074 views

By Tom Chapman ...

By Tom Chapman
Director of Entrepreneurship & Innovation
Greater Omaha Chamber of Commerce
tchapman@omahachamber.org
@tchap623

© Copyright Tom Chapman, 2011. All rights reserved.


Share your thoughts and additions to this paper here.

An abridged version of this paper is available. Download and discuss it at: 
http://www.slideshare.net/seedhere/building-an-entrepreneurial-ecosystem-lessons-from-omaha-draft-5

Summary
Tom Chapman is working to build a stronger entrepreneurial ecosystem in Omaha and across the Silicon Prairie (an area Chapman roughly defines as covering Minneapolis to Oklahoma City from north to south and Nebraska to Chicago east to west, though there is not a generally agreed upon definition) from his position as director of entrepreneurship and innovation at the Greater Omaha Chamber of Commerce. In this paper Tom lays out the three major steps of his methodology for supporting entrepreneurs (knowing and being honest about the area’s strengths; helping players connect; and building stronger teams) and then dissects five core elements of entrepreneurial ecosystems (human capital; financial capital; deal flow and other metrics; a knowledgeable community; and infrastructure) and four things communities should not do.

Tom’s people-centric approach to building the ecosystem is focused on understanding the ecosystem’s strengths, taking action to support its health, focusing on building better startup teams and connecting players appropriately. He sees the role of economic development organizations as connectors who can help develop a clearer understanding of the current startup landscape, convene conversations among players, spread information and success stories, support transparency and lead helpful government policy initiatives. His approach is infused with humility and honesty.

Statistics

Views

Total Views
4,074
Views on SlideShare
4,015
Embed Views
59

Actions

Likes
4
Downloads
159
Comments
0

5 Embeds 59

http://www.techgig.com 30
http://tagthink.com 13
https://twitter.com 11
http://10.150.200.57 3
http://paper.li 2

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

(Full Version) Building an Entrepreneurial Ecosystem: Lessons from Omaha (Draft 4) (Full Version) Building an Entrepreneurial Ecosystem: Lessons from Omaha (Draft 4) Document Transcript

  • Summary Tom Chapman is working to build a stronger entrepreneurial ecosystem in Omaha and across the Silicon Prairie (an area Chapman roughly defines as covering Minneapolis to Oklahoma City from north to south and Nebraska toBuilding an Chicago east to west, though there is not a generally agreed upon definition) from hisEntrepreneurial position as director of entrepreneurship andEcosystem innovation at the Greater Omaha Chamber of Commerce. In this paper Tom lays out the threeLessons from Omaha major steps of his methodology for supporting entrepreneurs (knowing and being honest about[Full Version Draft 4] the area’s strengths; helping players connect; and building stronger teams) and then dissectsBy Tom Chapman five core elements of entrepreneurial ecosystemsDirector of Entrepreneurship & Innovation (human capital; financial capital; deal flow andGreater Omaha Chamber of Commerce other metrics; a knowledgeable community;tchapman@omahachamber.org and infrastructure) and four things@tchap623 communities should not do.© Copyright Tom Chapman, 2011. All rights reserved. Tom’s people-centric approach to building the ecosystem is focused on understanding the ecosystem’s strengths, taking action to support its health, focusing on building better startup teams and connecting players appropriately. He sees the role of economic development organizations as connectors who can help develop a clearer understanding of the current startup landscape, convene conversations among players, spread information and success stories, support transparency and lead helpfulShare your thoughts on this paper online at: government policy initiatives. His approach ishttp://www.slideshare.net/seedhere/building-an- infused with humility and honesty.entrepreneurial-ecosystem-lessons-from-omaha-draft-4An abridged version of this paper isavailable. Download and discuss it at:http://www.slideshare.net/seedhere/building-an-entrepreneurial-ecosystem-lessons-from-omaha-draft-5Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 1
  • Preface you about my failed attempts. I doIn my work for the Greater Omaha Chamber try to include some learnings, but itof Commerce, I get asked a lot of questions would be awful if I included all of myabout how to create an innovation and dumb mistakes. You will have toentrepreneurial ecosystem. First, I don’t make some of these on your own.know that I have the answer, so let me startby saying that I don’t think we in Omaha ● I do not work alone. In fact, in manyhave accomplished this feat…yet. With that ways, I am a smaller part of theproviso, I will lay out the basics of our ecosystem machine than some otherstrategy for you. A couple of things that key players – funders, customers,shape me perspective, approach and thispaper that you should know up front: media folks (like Silicon Prairie News), entrepreneurs and local ● Omaha and Lincoln are essentially innovators. Most of my job is to not the same place for my work. I treat get in the way but help facilitate everything in Nebraska and Iowa better interaction – be a catalyst, not within 100 miles of Omaha as my an owner. working canvas. Ecosystems do not stop at political or artificial ● My perspective is highly biased by boundaries. If someone comes to what I have worked on in Omaha. Omaha to see a collaborator, then Numerous parties have had unseen they are a part of our ecosystem. impacts and untold success. Finding these stories is oen illuminating for ● I work for a Chamber of Commerce me, and oen this illumination which happens to be a good location happens well aer I thought I for my work here, but I do not think “understood.” It has been important that it is in many locations around the for me to be willing to change my country. In all honesty, working for a view and adjust my insight. e Chamber can also be a hindrance to hardest part of my job is to accept my work. Many do not take me or my that my impact is really only part of efforts seriously because of who I the effort – many things “cause” work for. success. My role requires sharing the ● I have a tremendous amount of success with the “many mothers and freedom to try things and fail in my fathers” and taking the blame by job – thus, I am not required to myself for all bad things. produce $100 million in VC by 2012 ● We all know about the star cities or else, so as you read this paper, when it comes to this work, and I try recognize that I am not always tellingBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 2
  • to look at the success stories of Silicon In general, startups tend to happen in places Valley, Israel, Austin, etc. in context. where there exists human capital capable of Don’t try to replicate today’s thinking and executing on a strategy to serve programs – look at what happened a customer that they understand and for just before and during their which they can iterate solutions. at’s a emergence. It is not particularly vague way of saying: we need to look for difficult to find information on these clusters of companies in certain spaces that times, but it requires a lens to be are growing and innovating. placed on that period of time Insurance is one that exists in Omaha – and specifically. may ultimately spin out a number ofStep 1. Know Your Strengths, companies due to the changes in multiple insurance laws over the last decade – but itNot-Strengths & WeaknessesNot every place is built to be Austin where a has had stagnant innovation and growth forlarge university and seat of government is many decades. Contrast that with paymentlocated. Not every place is built to be Boston systems where technology continues towhere there are tens of very high quality evolve and new companies continue to springuniversities. With that in mind we try to look up to respond to these various opportunities.at Omaha for Omaha. Vendorin, LoDo Soware, FTNi, Transactions Ole, ED3H have all developedOmaha’s Strengths payment systems innovations in the area inFirst, Omaha has many very large companies the last four years.– more than 20 billion-dollar enterprises -and a wealthy community with numerous Clusters are one area of strength, but culture,millionaires and billionaires. people and companies matter also. For example, Blue Cross/Blue Shield of NebraskaStrengths come in clusters and Omaha’s is a strength because they have worked witheconomy has depth in insurance, financial at least three start-ups in the last 24 months,services, logistics, defense, operations and have started a couple of companies and havearchitecture/engineering/construction/ invested in a venture fund. at’s a companydesign. Omaha is home to Offutt Air Force that is starting to plug in and be a realBase which is the home to USSTRATCOM. strength for the developing ecosystemese are some strengths from an economic particularly with regards to Healthcare IT.development perspective, but what about Moreover, there is a developing clusterentrepreneurship and innovation? e around Healthcare IT associated with NeHIIapparent strengths for one purpose are not and some new ventures. However, Omahaalways the strengths for others. does not have a Cerner-type company thatBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 3
  • has a deep knowledge and workforce workforce development strategies rather thanassociated with these types of projects, so at leadership, innovation and excellencebest, Omaha may develop some additional training. For example in 2008, I visited thecapacity and grow steadily, but it is unlikely Peter Kiewit Institute (an IT and engineeringto sky-rocket because sky-rocketing would college in Omaha) and talked with theirrequire almost 100% workforce recruitment. premier students, the Scott Scholars. We met with approximately 100 students – boughtOmaha’s Not-Strengths them pizza and soda and did a little talkere is a collection of things that appear to about innovation and entrepreneurship. Webe strengths that are not. Usually these are started the talk and asked the question – howstrengths in other areas that people naturally many of you would like to be anassume are strengths across the board or in entrepreneur. One person tentatively raisedareas that they do not naturally fit. For their hand. At PKI, students areexample, if Warren Buffett is a strong programmed to want safety and comfortableinvestor, then he must be a leading voice on jobs at Union Pacific where they are a cog in aventure capital in the community. He is not. machine. eir jobs are not unimportant,I call these areas of mis-perception ‘not- but they don’t yield a strong naturalstrengths.’ ese are definitely not inclination to look for entrepreneurialweaknesses, but don’t be caught in the cul-de- opportunities. Moreover, within the jobs atsac of not-strengths. Union Pacific, the worker is not necessarilyOne good example of a not-strength for most prepared in other ways for leadership andplaces is their local universities. Oen when management because they are learning jobI discuss entrepreneurship and innovation, tasks rather than teamwork, how to challengethe first reference to people is the universities themselves, and how to succeed outside of– these are the places where innovation and clear parameters. us, there is a doublestart-ups happen. Much of this thought effect that both the university and our largeprocess is probably tied to the success of MIT companies don’t start or spin out companies.in Boston and Stanford in Silicon Valley, butthe reality for us when we look at the data isthat the universities in Nebraska do not drivethe amount and types of innovation that theycould.I honestly think that the universitiesultimately will drive innovation, but I thinkthat we are still overcoming years ofBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 4
  • INDUSTRY    STRENGTHS NOT STRENGTHS WEAKNESSESPayment Systems Medical Research Nano-FabricationBuilt Landscape Technologies Advanced MaterialsRisk Analytics  Logistics     PEOPLE    STRENGTHS NOT STRENGTHS WEAKNESSES Not a long list, but notBill Fisher Warren Buffett publishableMark Hasebroock Malcolm X  Doug Nielsen  Jeff Slobotski  Steve Kiene  INSTITUTIONS    STRENGTHS NOT STRENGHS WEAKNESSESOffutt AFB University of Nebraska Berkshire HathawayACI OPPD  Blue Cross/Blue Shield NE  Gallup     CULTURE    STRENGTHS NOT STRENGTHS WEAKNESSESAccessibility Public Policy Risk TakingMomentum Institutional CapitalSilicon Prairie News Silos     Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 5
  • Omaha’s Weaknesses evidence of that shi is not easy to illustrateMore than simply identifying not-strengths, to an audience from a totally different set ofit also helps to identify weaknesses. ere are circumstances. In short, doing a serious andat least three key weaknesses in our honest inventory of your own strengths, not-ecosystem: strengths and weaknesses is necessary but may not provide the necessary materials to ● e states are large geographically and see the end game or even know how the not particularly diverse or densely hallmarks of the end game will appear. populated ● e states’ institutions and Try to see the world as it is and not as you institutional investors have not would like it to be. Also, focus on the world invested in early-stage risk capital and of entrepreneurship and innovation. do not appear to have the expertise or Obviously, Warren Buffett is an incredibly will to do so in the near future important man and has done wonderful ● e region’s leadership has a things in Omaha, but I would not place him traditional viewpoint that limits as an important or particularly relevant certain types of activities including person in a conversation regarding horizontal structures, collaborative entrepreneurship and innovation in this arrangements with small companies, community. Other billionaires, such as and the ability to discuss regional and Walter Scott, Howard Hawks and Joe community issues in an open dialogue Ricketts, are more important regarding this conversation.ese are ongoing process and orientationproblems, not shortterm problems. ere are Also, if one of your partners or organizationsobviously other ones that are shorter term, shows up on your list as a weakness or not-but these problems provide longterm strength, I would recommend an openchallenges that need to change for the dialogue to check your facts and knowledge,community (or will change because of the but also a willingness to share thiscommunity) to excel. information openly. Why? If for example, I punted on discussing the University ofKnowing Your Own Strength Nebraska system as a not-strength, then theOne key learning that I have had is that entity does not receive relevant feedback andseeing transition and watching things evolve pressure to improve. Moreover, they have adoes not necessarily make it very easy to much bigger brand in my community thanexplain. For example, clearly there has been a the Chamber – certainly in this conversationshi in the value placed on entrepreneurship – and yet, with entrepreneurs they havein Omaha, but why this happened and clear limited credibility right now. at is bad andBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 6
  • it’s particularly bad if the university does not ● A commercialization fund thatknow it. is does not mean that you should provides matching funds for efforts tosit down and tell your partners who are part commercialize technologiesof the challenges or who are not-strengths ● A mechanism to receive funds forthat they are in the way., but occasionally, you companies that partner with thedo need to openly discuss the realities of university to do certain types ofsituations. commercial researchAlso do not stand pat and simply punt on is total package places Nebraska towardsyour weaknesses. When I wrote the first the front of U.S. states regarding writtendra of this paper, I stated that one weakness legislation, but it remains in the not-strengthwas the State of Nebraska did not have category because it has not yet beenmeaningful legislation that incentivized and implemented. I fully expect that within fivealigned with building an entrepreneurial years, Nebraska will be able to move publicecosystem. is was a primary learning in policy into the strength category, but it’s a2008 and 2009, and I have talked and written process. Don’t forget to improve theseabout it frequently.1 is spring, the State of process type things as you work onNebraska changed its laws by adding: immediate programs and events. ● An angel tax credit that is one of the better ones in the country 2. Get as many people on the ● An SBIR Phase 0 plan similar to bus as you can and leave Kentucky’s very successful program Don’t try to get everyone and don’t wait - just ● An SBIR Phase I match, a proven go with as many people as you can reasonably SBIR incentive program that both get to board. attracts and organicly grows SBIR You don’t have to own or build the bus. grant companies In fact, I would try to find a couple of busses ● A prototyping fund that offers non- that already have people in them. For dilutive grants to start-ups example, within your community there are probably some developing clusters of high-1  See  Silicon  Prairie  News  for  my  series  of  ar3cles  on  Nebraska  Governor  Dave  Heineman’s  “ Talent  and  Innova3on  Ini3a3ve”  (hCp://www.siliconprairienews.com/2011/02/special-­‐series-­‐talent-­‐and-­‐innova3on-­‐ini3a3ve-­‐internship-­‐bill)Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 7
  • growth startups that are already forming or ● Customers: people or companieshave formed. Find them and ask them how that will buy goods or services fromyou can help. a new startup ● Collaborators: people or companiesTo find ways to help, talk with startups. that will help a new startup as aAlmost every startup conversation I have service provider, professional,begins with funding – I need X millions of mentor or testerdollars or a grant to do Y. e key to this ● Funders: people or companies thatconversation is to transition into a discussion will provide cashabout why they need the funding and what ● Peers: people that will share bestthey will do with it. Usually within this practices and learnings from a peertransition, your opportunity to help will be perspectiverevealed. Do this one-on-one and in smallgroups,2 otherwise, groupthink takes over From 1998-2006, entrepreneurs in Omahaand the group does not get clear of the desire were thrown into groups with smallfor money or the desire for appreciation from businesses. ese groups simply did notpeers. provide the necessary information, networking or customer exposure necessaryBy the way, one key observation is that as the for the entrepreneurs to “stay engaged” as apeople within the entrepreneurial class – not just as individuals. us, one ofcommunity become better networked, the the key things that needed to happen inconversations about money become much Omaha was to help these entrepreneursmore sophisticated. is is probably a good emerge from their labs, closets and garagesindicator of evolution in a non-measurable to find others who were struggling withway. many of the same issues.Getting the Right People Onboard Convening ConversationsOne big thing that we have spent a lot of time We started by breaking down the ecosystem’sdoing is connecting. is is a natural needs and creating separate networkingextension of the Chamber of Commerce in groups:Omaha, but it is surprising how little we as aChamber knew (and still know) about the ● Cornstalks and its ilk for high-growthstartup landscape in our community. ere entrepreneurs only. We intentionallyare a couple of key connectivity groups: try to keep this a word-of-mouth type2  I  have  not  been  par3cularly  adept  at  transi3oning  a  group  of  more  than  four  or  five  regarding  these  issues  –  so  I  am  not  sure  if  that  is  instruc3onal  or  just  a  failure  on  my  part.    As  a  general  piece  of  advice,  do  what  works  for  you  –  even  if  it  is  not  what  I  recommend  or  what  works  for  me.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 8
  • group. When we have a meeting, we ● Investors Group is made up of five or typically have about 20 people there six investor groups in the area. and our Twitter stream typically has Basically, these are quarterly meetings about 40 mentions for a good night. that are facilitated by the Chamber. us, followers of entrepreneurs (who e agenda of these meetings is oen are entrepreneurs or would like usually pretty straight forward: who to be) tend to find us through are you and what are you working on. Twitter, word-of-mouth or similar We have identified the ten or so most means. Out of the blue, monthly I active groups or people in the region, typically find about five new and we invite them to attend these interested parties. We also use Silicon meetings. ese are not particularly Prairie News as our sole means of formal and do not include outside communicating meeting times, dates invitations or an open dialogue and locations. e key thing is that regarding their existence. we could easily fill a room with 75 We established these types of gatherings (and people by extending the invite, but in others with similar activities) in the three doing so, we dilute the value for the buckets – high-growth entrepreneurs, 20 (and probably more like five) corporate innovation champions, and entrepreneurs that choose to attend. investors – for a reason and with great care. ● Growth Initiative Group (the “GIG”) ere was not a group of high-growth is a group for people championing entrepreneurs in 2007 that really had the innovation within established buy-in of other entrepreneurs. ere were companies. In this group, we have groups that claimed this authority without CFOs and line employees. In truth, having key constituencies represented, so we have not found the right mix yet establishing common understandings and or the right marketing strategy. In expectations amongst the peer groups was general, the group listens to best item #1 for our thought process. We try to practices from another company keep in mind a conversation that I’ve heard about how they work with internal repeatedly (something akin to Adam projects, new ventures or intellectual Nielsen’s discussion with Sarah Lacy in the property commercialization. is summer of 2008): “I do business with these group has a ton of potential within guys because they are my friends. We were Omaha, but we have not quite put friends first and that makes it easier for me to our finger on how to organize it. be honest and tell them what I can do to help.”Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 9
  • ese conversations are hard to have in a In the last three months, the pools offorum where only 10-20% of the audience separated individuals have begun clamoringunderstands the criticality of the discussion. for joint programming, so we will startHaving a meeting with the entrepreneurs merging some of our efforts to providewithout either a loud small business forums for the two groups to come togetherdominate discussion about sales taxes or a and discuss things. One example of thisharem of attorneys, accountants and bankers program is our demonstration night, whichlusting aer a new sale keeps the focus on is basically a chance for regional companieshigh-growth needs, such as funding, to demonstrate their latest releasedworkforce, finding beta customers, or a technologies. At the first event in March oftechnical/business founder or person, etc. this year, we had ten companies present. Since then, three of our companies haveFrom a purely practical perspective, it was received direct inquiries from investors thatsurprising how many entrepreneurs did not were in the audience, and at least one of theknow of other entrepreneurs in their space. companies looks like it will receive riskSame could be said for angels. Ironically, our capital from an investor based on this event.thought was that the industrial silos withinthe community were causing a lack of spin- One key thing to remember: don’t makeouts because there was limited cross- these people/companies become members infertilization between big companies – your organization or some other pay-to-playlimiting innovation. However, the bigger event. In general, if this is a membershipimpact is that angels and entrepreneurs from effort, then you are already on a route toindustries and genealogical trees did not failure. If you do a good job, they willknow (and sometimes did not know of ) each eventually pay to play.other. us, one of the best impacts of ourvarious meetings is a significant improvement 3. Study the elements of ain the depth and range of the networks in sustainable entrepreneurialOmaha in the entrepreneurial ecosystem. ecosystem e five basic elements of our ecosystem areis was our intent, but we did not predict human capital, financial capital, deal flow andthe impact correctly. However, we try to other metrics, knowledgeable communityadjust our efforts and programming to better and infrastructure. In general, there arefacilitate these types of changes in course.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 10
  • numerous articles written about social or dollar business around thebusiness ecosystems - all of these involve production of media. He is also theclassifications regarding the types of things current CEO of Proxibid, a multi-that are most relevant. Our understanding of million dollar auction site.our ecosystem is really premised on both this • Doug Nielsen, Mark Hasebroocktheoretical learning and on observation.3 and Julie Mahloch started gi-Ecosystem Elements: Human Capital certificates.com, Netshops (nowWith most startups there are a few people “Hayneedle”) and each has startedthat literally make “the thing” happen. I other ventures independently andcould write a whole paper on this itself, but with others.let me start with a couple of premises. First, • Bill Fisher bought and grew a littleserial entrepreneurs are really important. soware company called “ACI” intoSecond, larege companies can be genealogical a billion dollar enterprise, he hastrees that breed other interesting businesses. cofounded other entities includingird, building better teams should be the Sojern. Mr. Fisher writes a blog onnumber one priority. Silicon Prairie News and currently isFirst, within the human capital world, serial the lead manager of a firm calledentrepreneurs are gold. Find them and love Treetop Ventures where he investsthem. Your community probably does not and builds investment pools forhave very many people who have started a entrepreneurs. ere are probablybusiness that is worth more than $50 million 20-50 of these people in Omahaand a second business that is also a that have really built multiple highcommercial success. growth businesses and executed across industries to accomplishree examples from Omaha: significant business growth. • Bruce Hoberman started a record Serial entrepreneurs are critical because they store in the 1970s. He realized that typically have the ability to fill many of a there was an opportunity to make startup teams critical roles - leader, technical media – rather than just to sell lead, sales lead, finance person, legal person music - so he built a multi-million and administrative/operations lead. Very few3  Three  authors  that  we  have  studied  are  –  Michael  Porter  –  par3cularly  his  ar3cle  called  “Clusters  and  the  New  Economies  of  Compe33on”  (and  others  like  it  that  he  has  wriCen)  -­‐hCp://www.wellbeingcluster.at/magazin/00/ar3kel/28775/doc/d/porterstudie.pdf?ok=j  ,  Daniel  Isenberg’s  “How  to  Start  an  Entrepreneurial  Revolu3on  (aCached),  and  urban  economists  such  as  Richard  Florida.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 11
  • people can do this and moreover, very few investors. Look for companies that producepeople have documentably and successfully interesting, entrepreneurial people that wantdone this. to start things.Gallup consistently references the 10 trillion It may even be better if you can find adollar growth of the US economy from the company that is willing to put money tolate 1970s to 2000 as being caused by work in intrapreneurial or entrepreneurialapproximately 1000 people. Basically this is efforts. A local example is NelNet and Costthe class of serial entrepreneurs in the Effective Technologies. is example is toocountry – 1000 people plus some one hit recent for me to really understand wellsuperstarts (Bill Gates, as an example), so enough to know its impact and its potential –understand that this is a select group and more on this in future papers.treat them like your economic development Companies in Omaha do not naturallystrategy is built around them.4 collaborate across industries. My premise isSecond, I use the term genealogical trees to that if they did, more spin outs anddescribe a company that will plant seeds for opportunities would arise. is is thenew companies. In Omaha, the company premise behind the “GIG”. However, onethat has produced the most seeds recently is thing that ACI clearly documents is thatACI - not one of our billion dollar companies that lay-off people regularly andenterprises (although it once was). ACI was shi their strategy to move to newone of the original companies that worked on opportunities do seem more likely to spin outATM and banking soware systems. is startups. is may be a need by the newcompany grew to be huge under the entrepreneur to leverage existing expertise,aforementioned Fisher. However, in the last but it appears that these companies alsofive years, roughly five companies – including recruit specific types of people that are moreSojern, FTNi and Lodo Soware – have likely to start their own thing.grown from the progeny of the ACI tree. If In my own experience, Enron was constantlyyou look back over the years, ACI has spinning out new companies eitherproduced the personnel and talent behind intrapreneurially, in their accountingnumerous start-up companies. Moreover, records,5 or through displacing smart peopleOmaha’s most dynamic startup space – that were ambitious. In fact, almost everypayment systems – links back directly to ACI new technology that has been successfullythrough people at other companies or4  Maybe  it  should  be.5  Ha,  ha!Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 12
  • deployed into the electricity space in the last ● Founding entrepreneurs struggle todecade has a direct tie back to Enron in some give up control to gain wealth.form. I am not suggesting that you want to Giving up control may be giving uppush for an Enron in your community, but equity for the ability to scale, butthe key is to develop a dynamic idea- usually it is about design,generating place with ambitious people development, implement, etc. Insteadwilling to take some risk to execute a hard the founder wants to stay micro-idea. is describes ACI and a couple of engaged in less important aspects ofother Omaha companies, but frankly not the business when finding customersvery many of our largest enterprises. and building a better strategy for market entry are the needs of the day.ird, the building better core teams iscritically important. If you read around, you us, most companies do not fail due to awill see many articles and publications about lack of capital – they under-performthe entrepreneurship efforts of communities, possibility or they move - but they rarely failcities, countries or towns and their failures. for that reason. Most companies do not failMy general take is that most communities because their technology was “too early” –think that the failure of the entrepreneur is they fail because customers did not wantthe failure to write a good business plan or what they were selling. Most companiesunderstand business. I heartily disagree. don’t fail because they don’t have anFrom my experience, most companies fail for incubator in which to grow – they failone of three reasons (which are all human because they can’t build a team that has thecapital related): capability to build, sell and grow with just a ● e founding individual cannot build few people. And thus, most efforts at a team that can execute on the building an ecosystem that focus on these construction of their technology and things also fail. I believe that to succeed an sell it. ecosystem needs better entrepreneurial and ● e core team does not listen to founding teams, not just help writing customers well – thus they cannot business plans or learning more skills, but adjust to their market and to their with key people inserted in key roles and best customers to provide truly useful focusing on those roles. e six key roles are: products or services – preferring to 1. Leader – someone who makes the build what they want and expecting hard call and is the de facto “person in others to show up to buy “it” aer “it” charge” is built.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 13
  • 2. Technical lead – someone who can the most difficult part of the equation and build the “it” or manage the team the most important to get right. building the “it” We have worked with Gallup for about three 3. Business development lead – someone years to help make our startup teams more who can listen and understand effective by understanding their strengths customers as well as listen and and weaknesses as groups. In working with understand the abilities of the many companies that have not succeeded to company – both current and future their possibility, we have found that the customers and company. weakness is almost always a team weakness. Oen it is not even a lack of skill within the 4. Good6 finance person – this might be team, but an understanding of how best to a CFO or a hired gun (on contract) deploy their talent within their company. For 5. A good legal/regulatory person – this example, many companies cannot pivot to person’s job is really to keep the serve customers because they do not listen to company out of trouble and to them effectively in their sales or marketing establish strong contractual and efforts. Push marketing does not oen work documentation (IP protection) sustainably – adjustment and adaptability is expectations within the company key. (sually this is a hired law firm (with a e Gallup program is premised on a couple lead advisor) that can provide of key ideas: formation, contract and IP legal advice) ● Establishing mission, vision and values – many startups don’t know 6. An administrative/operations person what their purpose is and what they – this person’s job is to keep the are intending to accomplish (and company on track, paying bills, how). managing HR issues, etc. (two key ● Understand the strengths of the team things for this person are to get billing – a high percentage of startups that I and customer service right) work with actually have all technicalSo, if you focus on teams and people, then it or all business people without any ofis easy to see why I say that human capital is the other mixed in. Moreover, even within technical people there are6  The  defini3on  of  good  is  someone  that  has  worked  with  a  start-­‐up  in  your  space  before  and  has  the  necessary  past  experience  to  provide  insight  and  protec3on  before  they  are  “needed”.    A  company  can  stretch  with  industry  but  not  with  experience  from  my  point  of  view.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 14
  • architects, programmers and ● Orient the team toward goals – visionaries. We look to position those having clear metrics with measurable people differently and give them the outcomes for startups is really critical. roles and responsibilities where they can succeed.Two important and really hard exercises we use are to layout a milestone map (i.e. over the nextthree months, we will roll XYZ out and here’s how we will do it) and build a basic P&L/IncomeStatement. Both require the ability to take known data today and project the ability to executeinto the future. For example, entrepreneurs are oen overly-ambitious on product developmenttimelines that cause their income projections to massively fail. Here is an example:S i m p l e M i l e s t o n e WeekMap to Prototype 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Basic Architecture ofSite Find Two Developers Hire Two Developers Begin MarketingEfforts to BetaCustomer Prototype Launch 1.0 Sell First ProductCost ModelRevenue (ea unit costs$400) $400.00 $400.00Expenses Developer Salaries $1,346.15 $1,346.15 $1,346.15 $1,346.15 $1,346.15 $1,346.15 $1,346.15 $9,423.08  -Net $9,023.08Where are the weaknesses in this plan? ● ird, what if you don’t sell your first product for $400, ● First, what if development is but $200. slow and it takes 10 weeks ● Fourth… instead of 6? ● Second, what if you cannot In other words, the central issue is that you find a good beta customer? can overplan your startup and under deliver simply by focusing too much and too little onBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 15
  • the plan. Companies that focus too much on certain industry, this person will be able tothe plan spend their time worrying about best set up a model for sales into the futurecost models with no sales and development and should be considered a strategic advisorcycles in the minutiae. Companies that focus and asset by the team. In most instances,too little do not see the connections between chambers of commerce and similardevelopment, customers and revenue. Oen companies simply cannot offer this type ofbusinesses can fake their way through it by tangible help – that’s why we are connectorslooking at peer-level information and simply in most instances in Omaha.replicating their pricing model, sales Ecosystem Elements: Mentors & Modelsexpectations, etc. In the high growth space, One critical aspect of the human capitalthis ability is limited. us, helping component of an ecosystem is the need tocompanies find mentors, models, peers, fully engage mentors and models into thecollaborators, etc. that provide the needed efforts.information to keep this balance is critical.From a programmatic basis, SCORE7 does a ere are four forms of mentoring:good job in certain industries, (so dotechnical advisors at universities) but what is ● One on onecritical for a Chamber or a community ● One on manyorganization, is to understand these strengths ● Many on oneand weaknesses and connect appropriately. ● Many on manyFrankly, when there is not really good helpavailable, we tell the company that they may Most efforts of mentoring focus on the firstnot be able to find really good help locally - type of model. ere are really goodwe do not recommend bad help simply examples from around the country of thisbecause it is easy or what you can find. working successfully. Frankly, most of these examples are better than our success inLastly, if teams do a good job of getting the Omaha, so I’ll let you find that informationright people on the boat and find a good elsewhere.advisory board, many of these serviceprovider issues simply go away because the e Gallup efforts - and most of thosenecessary advice is already built into the executed by investors - tend to be the secondsystem. If, for example, a company hires a type, which border between coaching andreally good startup sales person who has mentoring. For example, Gallup has 25marketed and sold a lot of products in a mentors working with 130 companies. us,7  From  the  SCORE  website  (hCp://www.score.org/):  SCORE  is  a  nonprofit  associa3on  dedicated  to  educa3ng  entrpreneurs  and  helping  small  businesses  start,  grow  and  succeed  na3onwide.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 16
  • each mentor has approximately five value here, particularly with ad hoc sessionscompanies to which they are providing and the ability to push multiple advisors onleadership coaching and strategic advice the same difficult problems. Omaha isregarding certain concepts. strongly considering a program of this nature, but we have not really deployed it yet. If IWe have begun looking for a way to provide were starting an incubator, this is the type ofventure mentoring. MIT started a program program that I would try to facilitate –about fieen years ago called the MIT minimizing the focus on buildings andVenture Mentoring Service. is program accomodations and focusing on peer-to-peerhas a great reputation and has been and many-to-many mentoring opportunities.successfully deployed in St. Louis. I stronglybelieve in this program but have not found a Ecosystem Elements: Financial Capitalgood way to deploy it in Omaha, yet. e core concepts to building financial markets are transparency, liquidity andIn my experience, eight companies are the governance – not sheer size of funds.capacity of most individual investors whetheras part of a fund or as individuals. For Does Size Matter? Most cities get caught upexample, a fund with $100 million to invest in “bigger is better” when it comes to capital.or $1 billion with three partners will typically In some ways, this is probably true for an areahave no more than 24 investments and like Silicon Valley or Austin. In those cities,usually a lot fewer, like 15. is is why many capacity for activity is very high and talentfunds end up having to invest so much populations will move to the area formoney in individual investments because opportunity. In most other cities, the key isthey have limited “coaching” capacity and to sustainably build the capacity for capitalthus need their coaches to be taking bigger up to a certain level that can be continuedinvestments. indefinitely. In Omaha, that area in the near- term (the next ten years) is probably betweenFinally, many-on-many mentoring really takes $50-100 million of investment in local dealsplace in forums like TechStars or Y- per year. In some years, you’ll have really bigCombinator where the real value is the fundings and lots of outside investment andability to be coached individually by many in others there will be none or less. Fordifferent mentors/coaches who are also example, Nebraska has had anywhere from 0-providing advice to many other companies. $150+ million invested per year over the lastis sort of program creates lots of network decade. However, the median is around $4opportunities and allows the best strategic million. e really big years were tied toadvisor to advise multiple companies without individual events – not a host of companiesbeing tied to any longterm. ere is clear receiving moderate money. In the investmentBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 17
  • market, you want to have these home run questions like the following are generallyinvestments, but you need to create a pipeline known among ecosystem players:of $1-10 million dollar investments. Our ● How much is an investor willing togoal is to build a system that creates 20-30 value and pay for a company?investible deals per year for the next five years ● What are the terms and conditionswith the idea that this is sustainable and can associated with this payment?increase as capacity (people, in our case) ● How quickly can an investor exit aexpands to fill the opportunities created. position?Transparency is the ability to clearly see the Going deeper, here is an incomplete list ofcompanies, terms and agreements that are critical things that should be roughlybeing executed in a market. is does not understood for some percentage of deals inmean that every angel investment needs to be the ecosystem:public or worse - publicly regulated. Instead,the key is that the involved community ● Key parties: Who is part of theshould be able to generally piece together a funded team? Who are the funders?set of common expectations for deals in the Who were the key agents or advisors?ecosystm at any given time. For example, if ● Key terms: What was the valuation?one law firm provides 90% of the legal advice How much money was raised?to startup teams in the area that have had ● Intellectual Property Rights: Weresuccessful deals, the market at some level they transferred, retained or split?should reflect this information. ● Key marketing terms: Is this a new joint venture, partnership or businessWorking with Enron, I saw in the energy contract?sector that most engineers want to provide ● Key contractual terms: Who is payinglots of useless information to investors, while for whatmost investors want to keep key transaction ● Expectations of parties: is is alwaysterms secret (length and term of contracts for somewhat opaque, but an exampleexample). However, an energy market – like would be exit timeline and plan (3a startup ecosystem - needs some yrs, IPO)understanding of what is happening in the“spot” market to be sustainable. In the case of Everyone knowing each of these things forentrepreneurial deals, the spot market is the every deal should not be expected or evencurrent market for deals in a region. At encouraged. e goal is to providesurface level, you know your market is transparency over time to others operating inrelatively transparent if the answers to the market regarding each of these things soBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 18
  • that they can plug-in reasonable expectations and so, they can adequately help sharewhen the time arises for their own deals. information. However, it is critical that entrepreneurs find serviceAre there exceptions? Absolutely. Most professionals with these experiencesventure deals in Omaha today are probably to leverage that information, whetherand should be exceptions to having lots of formally or in opportunities via many-these terms understood, but Omaha is big to-many mentoring sessions.enough that angels and angel-ready dealsshould be relatively close on many of these 2. Second, media outlets should reportitems with only partial knowledge from information in this space. ere areaggregating information across numerous organizations that regularly publishdeals. venture capital fundings, and entities like Silicon Prairie News locallyTransparency is important because it publish funding information from theprovides angels with protection from bad Silicon Prairie region.deals and sets expectations regarding theirparticipation and contract terms. On the 3. ird, chambers of commerce canstartup side, transparency helps first-time color this information via networks ofentrepreneurs know when they are “eligible” all parties involved. For example, Ito talk to investors about a term sheet. A might know non-public terms andnapkin plan is not enough for most people to conditions from multiple deals and beget funding. However, in a community able to highlight to someonewithout transparency, entrepreneurs may preparing for a deal some things thatthink that this is all it takes because they they should expect. One example isheard a story about this happening to that in Omaha the startup usuallysomeone somewhere else. pays for the deal’s legal fees. Another example may be that Investor X isTransparency builds context so everyone really hard to work with aer the dealknows the common rules.8 Certain parties is done because they are very focusedhelp share this information: on hitting accounting and revenue 1. First, service professionals work on milestones. Neither of these are both sides of alternating deals. us, impediments to a good deal because an accountant or lawyer may advise everyone wants to have success and the selling client or the buying client, expectations can be shared effectively8  Amanda  Styron  wrote  this  in  her  notes  on  the  first  drad  of  this  paper.    I  unabashedly  took  it  directly  from  those  notes.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 19
  • by third parties. Moreover, was interested. at angel sat on the reasonable post-deal expectations and company and eventually was forced to accept awareness of other deal terms usually a less than perfect corporate exit. He made make the terms and conditions seem money but he had to wait for 18 months to less onerous during the contract clear his position. at means that the region discussion. lost out because that person did not invest that money for an additional 18 months andLiquidity is the ability for an investor to exit he became disillusioned with his ability toa position quickly. In this context, quickly execute a positive exit quickly, so now thatmay mean a couple of months or a couple of person invests in a smaller variety of thingsweeks, but most investors invest to eventually and in other regions. is is a rationalsell their stake to someone else – the founder, decision by the investor, but not necessarilyanother investor, a roll up or a large good for the region.corporation. Two key ways that the Chamber helpse ability to get clear of a deal allows liquidity are to:investors to invest in multiple deals and toleverage their cash more effectively against 1. Host quarterly meetings of investorsdebt or other financial vehicles. For example, By hosting regular investor meetings,if investor A knows that he can make five the Chamber has seen thatinvestments and exit each within a year collaboration has increased.regardless of position – then that person can Surprisingly, many of the keyuse the same five million dollars multiple investors in Omaha had never mettimes if better deals arise. However, in the each other until the Chamber putsituation where the person fears the ability to them in the same room together andbecome liquid, they may wait much longer to put a context around the ecosysteminvest and stay in positions beyond their and the individual group’s activities.comfort zone because they know they are 2. Provide regular connections forlosing access to act on other opportunities. entrepreneurs to investorsA good example of this problem is a local e Chamber regularly introducesinvestor bought stakes in a company, helped entrepreneurs to investors. By helpingit grow about 50% year on year for three investors build a better pipeline ofyears and then could not sell his position to deals, many are more willing to takeanother investor. e company was still a on an increased number of dealsgood investment and was much stronger for because they are confident that thethe angel’s three-year investment, but nobody best deals will find them. is meansBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 20
  • that they can and do deploy more federal law. For example, the SEC requires capital into the market. certain deals to file Reg. 504, Form D for certain types of filings. is is a federalUnfortunately, one weakness in the Omaha governance structure for deals, and itmarket is the exit liquidity. ree private provides a public information vehicle forequity funds raised approximately $450 other later deals as well.10million in Q2 2011 with the purpose ofhelping businesses grow and expand aer In general, a couple of critical federal thingsthey have good EBITDA’s9 and have $10-100 for any community to take into account aremillion in revenue. is may ultimately help accreditation of investors, filing guidelines atexit liquidity, but it is too early to predict the the federal level and research informationactual outcomes. publicly available via federal grants. Each of these have components of governance andOne thing that is certainly happening is more information that manifest important types ofprivate equity money is being put into data for a community to both formallysmaller companies from the region than five acknowledge and to informally digest andyears ago. Associations, like the Association discern. For example, recent regulatoryfor Corporate Growth (ACG: Nebraska), changes regarding the SBIR program mayhave helped these groups network and have positive or negative impacts on yourpossibly increase liquidity, but good data on community, but either way, they need to bethis is still limited. My simple answer is ad communicated to your entrepreneurs.hoc examples of success are apparent inOmaha, but good factual data to provide an Regarding micro-governance of the deal, theaction plan to another community is still not ultimate goal for the United States should bethere regarding improving exit velocity. to provide a relatively similar playing field to all parties whether they are in Silicon ValleyFinally, governance is critical. We look at or Moncks Corner, South Carolina. Siliconformal and informal governance as important Valley has a very robust environment that hasways to guide consistent deal structures and sorted through the balancing issuesmaintain transparency for the ecosystem. associated with good contracts forFormal governance requires the corporate entrepreneurs and investors in a much morestructure, terms of agreements and other complicated and robust way than most othercomponents be compliant with local and areas, so migrating Omaha’s contractual rules9  Earnings  Before  Interest,  Taxes,  Deprecia3on  and  Amor3za3on  (EBITDA)10  Also,  I’d  recommend  looking  at  hCp://www.formds.org    to  get  a  handle  on  how  many  and  what  type  of  companies  are  filing  SEC  documents  from  your  community.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 21
  • towards Silicon Valley’s existing rules is SBIR should be part of our portfolio. Alignultimately probably going to be both your policy to these types of needs.necessary and good. ere is also informal governance. InformalAn example from Omaha is that currently governance is making sure that everyone canmost entrepreneurs pay for the legal fees see bad actors and bad actions. esewhen they receive an investment. In Silicon participants are punished. For example, inValley, the investor pays. ink about that Omaha there is an investment group that hasfor a minute and why it is important. Most a very bad reputation. If this group isequity Series A investments have legal fees of involved, much of the smart money simply$10-50k, so if you are to receive a $1 million will not participate in the round regardless ofround, the up front cost is 1-5% of the total the company, team or technology. us, thisequity infusion, and your cost is not tranched informal governance has a direct impact onin the way that some capital infusions are.11 both of the above criteria – transparency andis can be a burden to entrepreneurs raising liquidity.capital at appropriate times and levels. Regarding the role of the Chamber, our roleOne of the best examples of a place that has is to be as aware of deals as we can be. We actgrown an entrepreneurial community quickly to create transparency in the market byis Israel. As a country, they have encouraged letting other companies know of informationpeople to be creative and innovative, and as a that is relevant to their terms. is is trickygovernment, they have strongly facilitated because I and others on staff sometimes signthat through policy and programs. How does non-disclosure agreements12. It is also trickyyour state and community do? Align your because we need to build trust within all ofpolicy efforts to key hurdles and assets within the participants that we will not try to inflateyour community. SBIR is important to our power or the terms of transactions. TwoOmaha because - as I will explain in the next things that I am consistently thinking aboutsection on deal flow and metrics - for the type are:of city that we are, we are actually really good 1. Is this knowledge that is only beingat SBIR grant production. We have a major shared with me or does the “market”US military installation in the area and thus,11  Simplis3cally,  the  untranched  cost  is  a  problem  because  it  means  that  an  entrepreneur  may  receive  four  tranches  of  $250,000  at  certain  milestones  –  but  the  $50,000  legal  fee  will  come  due  immediately.    Thus,  the  first  tranche  is  almost  20%  legal  fees  –  not  useable  cash  for  the  startup.12  When  signed,  we  abide  strictly  by  these.    However,  usually  I  am  able  to  convince  companies  that  a  connec3ng  en3ty  is  preCy  limited  if  they  can’t  share  key  things  about  a  company.    Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 22
  • already know this information that I (or most Chamber executives that I through another channel? know) have the ability to execute the 2. Have I heard this same information necessary diligence and process-building to about someone or a specific type of do an excellent job of running an angel deal before? group.If either of them suggests that the Ecosystem Elements: Deal Flow & Otherinformation is not exclusive or proprietary, I Metricsmay share the information in general ways In our current state, Omaha does not havesuch as, “word on the street is that enough deal flow for it to be a relevantentrepreneurs are paying for the legal part of metric, but, we strongly believe that you needthese types of deals – is that what you are to identify some key measurements that ifhearing?”. Also, when possible, I try to get moved positively will help you determine ifexpress permission from parties to share this you are making progress. In Omaha, wetype of information with other deals. One measure a lot of things including SBIRinvestor that I know said that it was fine as grants, SBIR monetary awards, universitylong as it was not a deal that he was in active research, Inc 5000 companies, Form Dnegotiation with at the time. filings, dollars invested on Form Ds, new technology companies mentioned on Silicone Chamber’s other role, as mentioned Prairie News, SBA loans, etc.earlier, is to help funders find each other andto build transparency and informal In general, this is one of the hardest areas forgovernance through familiarity and trust. me to predict what would be goodYou can’t force this. You have to wait until measurements for a region. We have takenthe various key parties start reaching out to the approach that we will measure lots ofyou. I have found that four years in, funders little things and aggregate that data into anare starting to want to talk to me. In years “algorithm” that measures them. We testedone and two, I had to wait months to get on this algorithm to see if it worked. Basicallykey people’s calendars. we took 24 cities and said Boston and Silicon Valley should be high and some othersOther Chambers have asked me if they should be low. What we found looked aboutshould help organize an angel group. My right. Omaha was about 16th out of 24simple answer is that we have not, but we communities when we started measuring thehave discussed it at a high level and have not relevant data. Omaha has moved into theacted…yet. I am not sure if a Chamber- second tier at around 11th or 12th since weorganized angel group would work well. I started measuring.have heard of it happening, but I am skepticalBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 23
  • People have asked if I will share this cities from the Midwest that are smaller.information. I will not. is is not because it Regarding SBIR, Omaha does not have ais particularly secretive, secure or major research university, so it probablyconfidential. e biggest issue is that the should not produce as many SBIR companiesprocess of constructing the information is as some other cities that do – like Madison,almost as valuable for developing the way you Wisconsin. Interestingly, Omaha crushesshould be thinking and the companies that comparable cities without a researchyou should be noticing as the actual outcome university on SBIR grants and dollars. Forof the data. For example, when I started, I example, Omaha had 10 times more than Desreally thought that our Fortune 1000 Moines. Even though Omaha is bigger thancompanies produced a significant number of Des Moines, this is still relevant information.the new startups in the area. is is factually e state of Iowa and both Ames and Iowawrong for Omaha. is may not be factually City do well on a per capita basis againstwrong for where you live. You need to see Omaha and Nebraska, but the point is thethe data and work through identifying the process to discover this information revealedright metrics for your area to understand more than the simple data could.your comparative strength/weakness. Figure out what you think that you shouldHere are some other things that I have count. Be creative and conventional. Usenoticed from our data collection about things that everyone uses and some stuff thatOmaha and other places that I could never no one else uses. [One thing that I would nothave seen by just looking at numbers without personally do again (but did do) is countthinking about what to collect. Omaha was patents. Many publications will list thiscomparatively weak on SBA 7(a) loans and information as a means to show howcomparatively strong on SBIR loans. If you innovative a place is. I found the data to belook at media for these things, this is not only loosely correlated to outcomes.what you read. You read the opposite. Here’s Basically, if you could separate out thewhy that press is wrong: Omaha, itself, gets ridiculous patents and the shelving patents,far fewer loans than cities like Madison, then it might be useful, but I was unable toWisconsin. In fact, in a peer group in 2007 do this in a time efficient or effective(the last time I counted and analyzed all of manner.] It is not particularly difficult tothe 7(a) data for this particular group of count stuff and then build a weightingpeers) Omaha was 12th out of 13 on a per method. I would be happy to help you buildcapita basis for SBA loans, but Omaha’s SBA these things but I won’t just give you ours –comparison group in national terms is not even as a template. I believe that if I give itmeasured per capita as is generally many away, it both undervalues the tool andBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 24
  • undervalues the process to build the tool. something more, this needs to change, but itBasically, then you won’t get anything from is not something that will change based on athe transaction. single program or message from a chamber of commerce. It’s a constancy thing - keepingEcosystem Elements: A Knowledgeable relevant messages in front of people andCommunity educating a little bit at a time. For example,Building a knowledgeable community is a recently at a meeting of our economiclong term process. is is probably the one development partnership, I gave a 10 minutepillar on which I was most vague when we presentation in which I talked about many ofstarted and on which I still struggle to give things that I have stated in this paper, andreally tangible advice. then I also mentioned three pieces of newHere’s my story: I was standing in line at information. I defined the differenceStarbucks in central Omaha, and I overheard between a “quick pitch,” an “investor pitch”the conversation between two youngish and a “demonstration.” In entrepreneurshipwomen (mid-30s), well dressed in velour parlance, these mean different things but intrack suits and articulate regarding their lives. Omaha most people make no distinction.I was not really eavesdropping, but one of Over time, raising this level of conversation isthem said “venture capital” and of course in important to building an ecosystem thatmy world, that’s like sounding a storm siren - sustains beyond me and beyond key people.it got my attention. She said that her However, the biggest single impact entity ofhusband was starting a business, and he was the effort to build a knowledgeble commuityseeking venture capital. She talked about the so far in Omaha is Silicon Prairie Newsbusiness for a bit and then revealed that it (http://www.siliconprairienews.com). eirwas a new restaurant. Restaurants do not unifying place for information and efforts toreceive “venture capital,” and certainly not in sustain a ongoing conversation is incrediblyOmaha, Nebraska. important and valuable. I probably cannotIn a place like Austin or Silicon Valley, the do it justice other than to point at a couple ofcommunity has enough intersection points key components:with high-growth enterprises to understand ● First, I mentioned three serialsome basic foundational information that is entrepreneurs earlier. Very few peoplenot currently the norm in Omaha. Our in Omaha probably could even namecommunity does not have a commonly these people, and yet within theunderstood vocabulary regarding following of SPN, everyone has atentrepreneurship and high-growth least heard their stories andcompanies. For Omaha to grow intoBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 25
  • appreciates why they are relevant, entrepreneurship and innovation than important and models of behavior. someone that opens a meeting about Two, the Chamber’s membership in ecosystems with a discussion about sites or ● Omaha is not made up of pipes - this may be a new tech park, entrepreneurs. SPN allows the incubator, broadband system, whatever. Chamber and other organizations to ese things are simply irrelevant in most spread relevant messages outside of cases. If you think that you have an normal channels so that it does not exception, I am happy to chat about this but get “picked up” by parasitic know of my disdain for this topic. It is not companies. that I think that they are not relevant, they are. It is like the focus in baseball on saves orIn Omaha, other entities have existed to help batting average. ese are not badentrepreneurs but they have been overrun measurements, but they do not measure awith lawyers, accountants and pretend useful category of things based on new, betterentrepreneurs. Real entrepreneurs did not analytics. A better measurement for battingwant to pay to play and did not have any real efficiency is on-base percentage or on-baseincentive to participate. SPN is an authentic percentage plus slugging percentage (OPS).13asynchronous way to stay engaged, and In the same way, a better way to think aboutvirtually every entrepreneur that I work with entrepreneurship and innovation is to focusknows about it now. My advice is not to start the conversation on teams and humanan SPN in your city - it’s to find an SPN capital.waiting to happen in your city. In mostplaces with technology, somebody is writing a Infrastructure is about building events, mediagreat tech blog that could “blow up” with connections, joint recruitment platforms,consistent, free exposure from a Chamber idea collaboration, etc. If your core asset isand similar organizations. We’ve tried to people, then your core infrastructure needs tohelp SPN at every turn and they, in turn, be people-centric. As an example, one keyhave been very kind in not portraying us as component of Omaha’s entrepreneurialstiff suits who do not know anything. ecosystem infrastructure is Jeff Slobotski, cofounder of Silicon Prairie News. Jeff isEcosystem Elements: Infrastructure perhaps the most gied serial networker withFinally, infrastructure is really important. whom I have worked. He can “create”ere is probably nothing more infuriating to conversations with key people, follows upmy personal philosophy regarding13  If  you  have  no  idea  what  I  am  talking  about,  even  if  you  do  not  like  sports  or  baseball,  you  should  read  “Moneyball”  by  Michael  Lewis.    There  is  new  and  consistently  revealing  data  available  that  people  simply  don’t  use  because  they  rely  on  conven3onal  wisdom.    This  conven3onal  wisdom  is  oden  provably  wrong.    It  is  a  great  book.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 26
  • and builds bridges. is helps explain why an introduced. Nobody knew who heevent like “Big Omaha” works, but it also was. is person was responsible forexplains how many of you found me. He uses about $100 million of investment inmany tools better than other people and uses the community and more than 800his in-person time with people very jobs, and yet because there was never aeffectively. giant new building or a cool event, people just did not register hisHere’s three more questions to ask about importance to the local economy. Tellinfrastructure. your entrepreneur’s story in ● Where are your entrepreneurs? traditional and non-traditional We were asked this question about media. Be consistent and not just Omaha’s entrepreneurs and had no when you have nothing better to talk answer five years ago. By we, I mean about. Find your SPN – it can be a we, the community, not just we the place where models and mentors can Chamber. Today there are lots of emerge. In addition, pick some events (maybe too many) that get a winners and talk them up and then variety of people together at very little talk them up some more. Make sure cost, around the city. ere are quick that everyone knows who the model pitches, pitches, demonstrations, entrepreneurs and startups are in your meetups, tweet-ups, networking area. Remember the people in line at coffees, startup drinks, barcamps, Starbucks should all know who these startup weekends, hackathons, etc. companies are and what they do. Literally, none of this was going on in a significant way five years ago. Today, What Not to Do the core group of “believers” is I have four things that you as a community probably in the range of 200-500 very should not do: active participants, and thousands ● Don’t let negative comments about more participate in some capacity. entrepreneurs persist in the ● What is your relevant region’s policies community. When I first started, one towards entrepreneurship? of the complaints or “accusations” that I heard was that entrepreneurs ● How well does your region tell the did not live here because they were entrepreneur’s story? not committed to anything, that they Recently, I was at an event where a were greedy, that they were bad in local serial entrepreneur was some way. e sentiment was, weBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 27
  • don’t want ‘those people’ here. is is ● Don’t follow the lead of places like simply ridiculous. ere are virtually Silicon Valley or Boston. ese are no cities (Washington DC and unique places that have a long unique Canberra might be counter-examples) history. For example, if your city is that were built without entrepreneurs not home to Stanford University or and private enterprises driving the MIT, then you probably will need a development. less university-centric program of work. Moreover, programs being ● Don’t try to pick winners. If you are a implemented at these places right service provider (like an economic now are not necessarily great development organization but programs for your community right different from a service professional now. Focus on the the needs of your like an IP lawyer), don’t try to judge community and study the reasons for technologies - be technology agnostic. program in other places. If your Do not attempt to pick winners early community does not have those same in the process based on technology. issues, then you should think strongly Very few startups succeed with their about using other programs. initial prototype and strategy – that is one primary reason that team development is the critical thing – but Conclusion it doesn’t mean they won’t be successful. Finally, aer you have done everything else written in this paper, ask yourself am I the ● Don’t be too focused on any one story right person/group to execute on this effort? or metric. In other words, don’t focus e answer may not be a problem of desire on SBIRs as the only thing that but a problem of ability or execution. Find matters. ere is literally not a single the best fit for the effort. My two words of thing that could possibly be the one advice to people that get to the end of this metric or exclusive directional paper and still ask me what to do are: “be measure. is is too dense an humble.”14 ere should be no ecosystem to really understand that embarrassment in understanding that way. someone else should lead the effort or that14  [I  do  not  intend  to  go  par3cularly  “Zen”  at  the  end  of  this  paper.    But,  I  would  offer  the  one  piece  of  inspira3onal  literature  that  I  tend  to  think  about  when  we  have  success  or  failure.    Archbishop  Oscar  Romero  wrote  a  poem/prayer  called  “We  are  builders”.    This  is  a  must  read  for  me  before  you  start  or  con3nue  your  efforts  effort.  ]Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 28
  • you can only do a little bit. In fact, if you things that have happened in Omaha – keydon’t realize how hard this is to do by the end fundings, key company creations, SPN,of this paper, then re-read it. I have reported expanded user groups, etc. - I had virtually noa lot of stuff here, but only did some of it impact.personally. And, on some of the most criticalAbout the AuthorTom Chapman is the Director of Entrepreneurship and Innovation for the Greater OmahaChamber of Commerce. He is passionate about helping economic ecosystems (particularly in theSilicon Prairie) flourish. He has worked with hundreds of new ventures, many very large companiesseeking innovation advice, and a host of funders looking for deals. Chapman writes a series called“Innovation Chamber” for Silicon Prairie News and has a background in energy having worked atboth Enron and American Electric Power in Houston, Texas and Columbus, Ohio. He holdsdegrees from Creighton University and the University of Nebraska–Lincoln, owns two businesses,practices law and is working on a startup of his own.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 29