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From Ingredients to RecipeIn Entrepreneurship Ecosystem

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Yas Motoyama, Ph.D.
Director of Research and Policy
Ewing Marion Kauffman Foundation

Presentation to C2ER (Council for Community and Economic Research) -- State Chapter

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From Ingredients to RecipeIn Entrepreneurship Ecosystem

  1. 1. © 2013 Ewing Marion Kauffman Foundation From Ingredients to Recipe In Entrepreneurship Ecosystem Yas Motoyama, Ph.D. Director of Research and Policy Ewing Marion Kauffman Foundation
  2. 2. © 2013 Ewing Marion Kauffman Foundation Local Ecosystem of Entrepreneurship • Commonly identified elements in the ecosystem 1) Finance / risk capital 2) Incubators 3) Talent / skilled labor 4) University & research 5) Core customers 6) Support organizations & social capital
  3. 3. © 2013 Ewing Marion Kauffman Foundation
  4. 4. © 2013 Ewing Marion Kauffman Foundation Questions to Consider • Does injecting a missing element help? o Such as establishing venture funds or incubators • Should all ecosystems look alike? o The model after Silicon Valley?
  5. 5. © 2013 Ewing Marion Kauffman Foundation Myth Element 1: Lack of Finance? • Easy to complain (by entrepreneurs and by supporters) • 80% of VCs unable to return 3% return/yr (Bradley 2012) • Sources of high-growth Inc firms: o 6.5% VC, 7.7% angels vs. 67% savings, 14% bootstrapping, etc. • VC investment unrelated to startup rates (Motoyama and Bell-Masterson 2014) • Do they (entrepreneurs) really need VC investment? • VC induce growth, or firm growth induce VC invt?
  6. 6. © 2013 Ewing Marion Kauffman Foundation Myth Element 2: Incubators / Accelerators • Failure of incubators (Amezcua 2010) o Likely prolonging dying firms o Providing business services by 1.8 staff? • Accelerators? o Competitive application process o Pre-seed investment, with equity exchange o Create a cohort of entrepreneurs, and focus on teams o Connect to mentors • No evaluation research yet o Outliers (Y-Combinator, TechStars) o What happens after being funded?
  7. 7. © 2013 Ewing Marion Kauffman Foundation Myth Element 3: University • Scientific research, NIH funding, etc. o Little connection b/w scientific discovery & commercialization (Motoyama et al. 2011) o Little connection with startup or high-growth firm ratios o But % college graduate is correlated (Motoyama & Bell-Masterson 2014; Motoyama & Mayer, forthcoming) • Courses on business plan writing o Beautiful rice cake in picture
  8. 8. © 2013 Ewing Marion Kauffman Foundation Questionable Element: Anchor Companies • Should anchor firms interact with startup firms? • Depends on the strategy and culture of the anchor firms o Free-flow company: old Fairchild, HP, Google o Captive company: • Blind partnership may hinder startups and flows of talent
  9. 9. © 2013 Ewing Marion Kauffman Foundation Ingredients vs. Recipe • Great elements, but poor entrepreneurship result o Baltimore (Feldman 1994; Feldman & Desrochers 2003) o Cleveland (Fogarty and Sinha 1999) o Philadelphia, St. Louis, Albuquerque o Buffalo, NY • Elements = Ingredients Ecosystem? Question: • How can you mix ingredients?
  10. 10. © 2013 Ewing Marion Kauffman Foundation The Biggest Challenge of Most Ecosystems (Brasunas, interview, December 10, 2012) • The typical problem with entrepreneurs in St. Louis five years ago was like this: • “I do this business alone, and I don’t know other startups in town. I don’t know investors here, and there is only old money from big corporations in St. Louis, so I go to Silicon Valley to find an investor.” • Then, if you talked to investors, they would say: “I don’t find any startups in St. Louis, and, in fact, there may not be any prospective startups here, so I go to Silicon Valley to find companies to invest.” • So somehow, they might find each other in Silicon Valley, but not in St. Louis.
  11. 11. © 2013 Ewing Marion Kauffman Foundation Alternative Strategy • Connect entrepreneurs to: 1) Other entrepreneurs (peer and experienced) 2) Support organizations • Promote learning between entrepreneurs o Not about scientific knowledge or through business courses o But about experimental knowledge, i.e. how to run a business • Connect and coordinate support organizations
  12. 12. © 2013 Ewing Marion Kauffman Foundation Connections of Entrepreneurs & Organizations
  13. 13. © 2013 Ewing Marion Kauffman Foundation Applying Alternative Strategy  Incubators: • A place to interact: Within incubated firms and outside • Events to recruit different kinds & stages of entrepreneurs o But no cocktail party  University: • Connecting students and startup firms • Connecting local firms to academic networks • Human transfer > Tech transfer
  14. 14. © 2013 Ewing Marion Kauffman Foundation Summary • Some conventional elements are unimportant, or at least insufficient o Venture capital o Incubator o University R&D • The elements merely expresses health of ecosystem • Focus on recipe, instead of ingredients • With connectivity, measure between people & orgs

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