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(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]
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(Abridged) Building an Entrepreneurial Ecosystem Lessons from Omaha [Draft 5]

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By Tom Chapman …

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

Edited & Abridged by Amanda Styron
Community Builder
SEED HERE
amanda@seedhere.org
@mandastyron

© Copyright Tom Chapman, 2011. All rights reserved.

Please share your thoughts and additions to this paper online here.

A more in-depth version of this paper is available and recommended for economic development professionals and others looking for a deeper dive into Omaha’s ecosystem and the behind-the-scene stories of Tom’s approach. Download and discuss it at: 
http://www.slideshare.net/seedhere/building-an-entrepreneurial-ecosystem-lessons-from-omaha-full-version-draft-4

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.

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  • 1. Summary Tom Chapman is working to build a stronger entrepreneurial ecosystem in Omaha and across the Silicon Prairie (an area Chapman roughlyBuilding an defines as covering Minneapolis to OklahomaEntrepreneurial City from north to south and Nebraska to Chicago east to west, though there is not aEcosystem generally agreed upon definition) from his position as director of entrepreneurship andLessons from Omaha innovation at the Greater Omaha Chamber of© Copyright Tom Chapman, 2011. All rights reserved. Commerce. In this paper Tom lays out the three[Abridged Draft 5] major steps of his methodology for supporting entrepreneurs (knowing and being honest aboutBy Tom Chapman the area’s strengths; helping players connect;Director of Entrepreneurship & Innovation and building stronger teams) and then dissectsGreater Omaha Chamber of Commerce five core elements of entrepreneurial ecosystemstchapman@omahachamber.org (human capital; financial capital; deal flow and@tchap623 other metrics; a knowledgeable community;Edited & Abridged by Amanda Styron and infrastructure) and four thingsCommunity Builder communities should not do.SEED HERE Tom’s people-centric approach to building theamanda@seedhere.org ecosystem is focused on understanding the@mandastyron ecosystem’s strengths, taking action to support its health, building better startup teams and connecting players appropriately. He sees theShare your thoughts and additions to this role of economic development organizations aspaper online at: connectors who can help develop a clearerhttp://www.slideshare.net/seedhere/building-an-entrepreneurial-ecosystem-lessons-from-omaha-draft-5 understanding of the current startup landscape, convene conversations among players, spreadA more in-depth version of this paper is information and success stories, supportavailable and recommended for economic transparency and lead helpful governmentdevelopment professionals and others policy initiatives. His approach is infused withlooking for a deeper dive into Omaha’s humility and honesty.ecosystem and the behind-the-scene storiesof Tom’s approach. Download and discuss itat:http://www.slideshare.net/seedhere/building-an-entrepreneurial-ecosystem-lessons-from-omaha-draft-4Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 1
  • 2. Preface • I do not work alone. In fact, in many ways, IIn my work for the Greater Omaha Chamber am a smaller part of the ecosystem machineof Commerce, I get asked a lot of questions than some other key players – funders,about how to create an innovation and customers, media folks (like Silicon Prairieentrepreneurial ecosystem. I don’t think we in News), entrepreneurs and local innovators.Omaha have accomplished this feat…yet. Most of my job is to not get in the way but help facilitate better interaction – be aWith that proviso, I will lay out the basics of catalyst, not an owner.our strategy. • • My perspective is highly biased by what IFirst, a couple of things that shape my have worked on in Omaha. Numerousperspective, approach and this paper that you parties have had unseen impacts and untoldshould know up front: success. Finding these stories is often• illuminating for me, and often this• Omaha and Lincoln are essentially the same illumination happens well after I thought I place for my work. I treat everything in “understood.” It has been important for me Nebraska and Iowa within 100 miles of to be willing to change my view and adjust Omaha as my working canvas. Ecosystems my insight. do not stop at political or artificial boundaries. If someone comes to Omaha to see a collaborator, then they are a part of our Understanding Why Startups ecosystem. Succeed and Fail• In general, startups tend to happen in places• I work for a Chamber of Commerce which where there exists human capital capable of happens to be a good location for my work thinking and executing on a strategy to serve a here, but I do not think that it is the right customer that they understand and for which place to do this work in many locations they can iterate solutions. Human capital is around the country. In all honesty, working people, so we take a people-centric approach to for a Chamber can also be a hindrance to my building our entrepreneurial ecosystem. work. Many do not take me or my efforts seriously because of who I work for. Most communities think that the failure of the•• I have a tremendous amount of freedom to entrepreneur is the failure to write a good try things and fail in my job – thus, I am not business plan or understand business. We find required to produce $100 million in venture that most companies fail for a human capital capital by 2012 or else, so as you read this related reason. paper, recognize that I am not always telling • Most companies do not fail due to a lack of you about my failed attempts. I do try to capital – they under-perform to their include some learnings, but it would be awful potential or they move – but they rarely fail if I included all of my dumb mistakes. You for that reason. will have to make some of these on your own. ••Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 2
  • 3. • Most companies do not fail because their We also find not-strengths (i.e. things that technology was “too early” – they fail because appear to be strengths that are not) in our data. customers did not want what they were Usually these are strengths in other areas that selling. are assumed to be strengths across the board• (for example: universities). ese are definitely• Most companies do not fail because they don’t have an incubator in which to grow – not weaknesses, but don’t be caught in the cul- de-sac of not-strengths – look at your data to they fail because they can’t build a team that determine real strengths. It also helps to has the capability to build, sell and grow with identify weaknesses. just a few people. To understand the ecosystem strengths inEfforts to build an ecosystem by focusing on Omaha we:these things – writing business plans,developing business skills, providing more • Try to see the world as it is and not as youcapital, developing ideas, and building would like it to be.incubators – also fail. What startups need is • Focus on entrepreneurship and innovationhelp finding customers, mentors, models, peers, and don’t get lost in economic indicators thatand collaborators that provide the needed are not important or particularly relevant toinformation for launching and pivoting their these things.business. e role of the economic • Are willing to share ecosystem informationdevelopment organization is to understand the openly, even if it is negative, to provideecosystem’s strengths and weaknesses, take feedback and pressure to improve.action to support its health, focus on building • Do not punt on weaknesses. We talk aboutbetter startup teams and connecting players them and you can effect change.appropriately. As you take on this work, keepyour focus squarely on helping the Step 2: Get as many people on theentrepreneurs. bus as you can and leave Don’t try to get everyone and don’t wait - justStep 1: Know Your Strengths go with as many people as you can reasonablyAs economic development organizations, our get “on board.” Start with finding a couple ofrole is to know our strengths better than buses that already have people in them. Findanyone, and to that end know our not- them and ask them how you can help. e goalstrengths and weaknesses too. Keep in mind, is to help entrepreneurs emerge from their labs,the apparent strengths of an economy for one closets and garages to find others who arepurpose are not always the strengths for an struggling with many of the same issues. One ofentrepreneurial ecosystem. For strengths, look our organization’s best impacts is a significantfor clusters of companies in certain spaces that improvement in the depth and range of theare growing and innovating. networks in Omaha and within the entrepreneurial ecosystem.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 3
  • 4. Here’s how we did it: needs better entrepreneurial and founding teams. e most important thing is getting key• Spent a large amount of time listening to startups and connecting them with people inserted in the right key roles. customers, collaborators, funders and peers. Our focus on building better core teams• Created networking groups where there were involves: none. Our community needed groups for high-growth entrepreneurs, corporate • Knowing and supporting our serial innovation champions, and investors. entrepreneurs. ey are gold. Find them and love them. is is a select group and we treat• Separated high-growth entrepreneurs from small businesses to keep the focus on high- them like our economic development strategy growth needs such as funding, workforce, is built around them – it is. finding beta customers, or a technical/ • Looking for companies that produce business founder or person, etc. interesting, entrepreneurial people that want to start things.• Once these peer groups gelled, they ask for programs with the other groups. is is • Helping companies collaborate across where the connecting power takes off. industries to create more spin outs. • Helping companies develop a dynamic idea-Warning: Don’t make these people/companies generating workplace with ambitious peoplebecome members of your organization or some willing to take some risk to execute on hardother pay-to-play event. In general, if this is a ideas.membership effort, then you are already on aroute to failure. If you do a good job, they will Startups – and the people who run them – needeventually pay-to-play. to be able to listen to their customers effectively in their sales or marketing efforts and pivot accordingly. Startups must be able to adjust andStep 3. Study the elements of your adapt to find a place in the market. We workecosystem with Gallup to help startup teams:e five basic elements of our ecosystem are • Establish mission, vision and values(1) human capital, (2) financial capital, (3) deal • Understand the strengths of the teamflow and other metrics, (4) a knowledgeable • Orient the team toward goalscommunity and (5) infrastructure. If teams do a good job of getting the rightHuman Capital people on the boat and find a good advisoryHuman capital is the most difficult part of the board, many of the common failure issuesequation and the most important to get right. simply go away because the necessary advice ise weakness that causes startups to fail is already built into the system. In most instances,almost always a team weakness. Often it is not a economic development organizations simplylack of skill within the team, but a lack of cannot offer this type of tangible help – that’sunderstanding of how best to deploy talent why we are connectors in most instances.within the company. To succeed, an ecosystemBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 4
  • 5. Mentors & Models • Encourage media outlets to reportA critical aspect of the human capital information on dealscomponent of an ecosystem is the need to fully • Share disclose-able deal information ourselvesengage mentors and models into the efforts. via networks of all parties involvedFocus on developing a many-on-manymentoring program and minimize the focus on e role of our organization is to be as aware ofbuildings and accommodations. Peer-to-peer deals as we can be. We act to createand many-to-many mentoring opportunities transparency in the market by letting otherare much more helpful and valuable to the companies know of information that is relevantecosystem. to their terms and disclose it whenever appropriate.Financial Capital Liquidity is the ability for an investor to exit ae core concepts to building financial markets deal quickly so that they can invest in multipleare transparency, liquidity and governance – deals and leverage their cash more effectivelynot sheer size of funds. against debt or other financial vehicles.A note on size: e size of deals (or the capital Two key ways that we help liquidity are:market) of an ecosystem is not as important asthe effort to build a sustainable capacity for • Hosting quarterly meetings of investorscapital up to a certain level that can be • Providing regular connections forcontinued indefinitely. Of course, we want to entrepreneurs to investorshave periodic home run investments, but we Governance - both formal and informal –focus on creating a pipeline of smaller creates consistency among deal frameworks andinvestable deals each year and plan to for the fosters transparency for the ecosystem.next five years. Capacity (people, in our case)can expand from there to fill opportunities as Government can strongly encourage people tothey are created. be creative and innovative through policy and programs. When it comes to formalTransparency is the ability of ecosystem players governance, we work to:to generally see the terms of deals that are beingexecuted in a market so that over time others • Align our policy efforts to the key hurdles andoperating in the market can plug-in reasonable assets of the ecosystemexpectations when the time arises for their own • Take advantage of the data created bydeals. regulations and reporting to both formally acknowledge and to informally digest andTo build transparency, we look to: discern deals made in the area• Network service professionals (accountants Informal governance is making sure that and lawyers) who work on both sides of everyone can see bad actors and bad actions. alternating deals with entrepreneurs and can Our role in informal governance is to help share general expectationsBuilding an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 5
  • 6. funders find each other and to build e biggest single impact entity of this effort totransparency through familiarity and trust. build a knowledgeable community in Omaha isYou can’t force this. Silicon Prairie News* (SPN), a local online news website focus on entrepreneurs, creativesDeal Flow & Other Metrics and startups. We try to help them at every turnWe measure lots of little things in our and they, in turn, have been very kind in notecosystem and aggregate that data into an portraying us as stiff suits who do not know“algorithm” to track our progress. We worked anything. Do not try to start an SPN in yourthrough many different indicators to determine city as economic developers - find and supportwhat made the most sense for our area and then an SPN waiting to happen in your city.tested the algorithm with cities we expected to * http://.siliconprairienews.combe higher or lower on the scale. e process ofconstructing our measurement system has Infrastructurepowerfully shaped the way we think about our e core asset of an ecosystem is people, soecosystem and the companies, people, assets your core infrastructure needs to be people-and data we pay attention to. Each ecosystem centric. Infrastructure for entrepreneurship andwill need to see their own data and work innovation is centered around teams andthrough identifying the right metrics for the human capital, not sites and pipes. A solidarea to understand your comparative strength/ infrastructure will include events, mediaweakness. connections, joint recruitment platforms, idea collaboration and innovation-supportingTo start building an algorithm, start simply policies.with: To start supporting the infrastructure here, we• Figure out what you think you should count began by:• Be creative and conventional - use some metrics that everyone uses and some metrics • Learning where the entrepreneurs work and that no one else uses hang out• Count stuff and then build a basic weighted • Talking up our successful entrepreneurs and algorithm then talking them up some more. We want everyone in Omaha to know who the modelA Knowledgeable Community entrepreneurs and startups are hereA knowledgeable community in and around the • Telling entrepreneurs’ stories in traditionalecosystem makes for a better networked and non-traditional mediaecosystem. We work to help the community • Being consistent and not just highlightingdevelop a commonly understood vocabulary them when there is nothing better to talkregarding entrepreneurship and high-growth aboutcompanies by keeping relevant messages infront of people and educating a broad audiencea little bit at a time.Building an Entrepreneurial Ecosystem: Lessons from Omaha© Copyright Tom Chapman, 2011. All rights reserved. 6
  • 7. What Not To Do • Don’t try to replicate success from anywhereI have four things that you as a community else. Focus on the needs of your communityshould not do: and study the reasons for programs in other places. If your community does not have• Don’t let negative comments about those same issues, then you should think entrepreneurs in the community slide. Ideas strongly about using other programs. When about not wanting ‘those people’ here are you do look at the success stories of Silicon poison. Try to squelch complaints or Valley, Israel, Austin, etc. take them in “accusations” that entrepreneurs are not context. Look at what happened just before committed to anything, that they are geeky, and during their emergence. It is not greedy, reckless or otherwise bad in some particularly difficult to find information on way. ere are virtually no cities that were those times, but it requires a lens to be placed built without entrepreneurs and private on that period of time specifically. enterprise driving the development.• Don’t try to pick winners. If you are a service Conclusion provider (like an economic development If you don’t think this work is hard, please re- organization but different from a service read pages 1-7. Building an entrepreneurial professional like an IP lawyer), don’t try to ecosystem is a multi-faceted, long-term effort judge technologies. We are technology that no one can force, just about everyone agnostic. Very few startups succeed with their needs, lots of people will work on and few will initial prototype and strategy – that is one receive credit. Our best advice is to be humble primary reason that team development is the and be honest about how you and your critical thing. organization can support this effort. Good luck! Call us if we can help.• Don’t be too focused on one story or metric. Look at the big picture of the ecosystem and help everyone else do the same.    About the Author Tom Chapman is the Director of Entrepreneurship and Innovation for the Greater Omaha Chamber of Commerce. He is passionate about helping economic ecosystems (particularly in the Silicon Prairie) flourish. He has worked with hundreds of new ventures, many very large companies seeking 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 at both Enron and American Electric Power in Houston, Texas and Columbus, Ohio. He holds degrees 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. 7

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