Startup Communities by Brad Feld

These are the notes that I have taken from reading Startup Communities by Brad Feld. This isn’t meant to be a Cliff Notes version or a substitute for reading the book.

Additional notes I’ve taken while reading other books can be found here.

The leading source of job creation in the US comes from young companies starting up, growing and innovating.

Studies show that the geography of innovation is neither democratic nor flat. This is surprising since you would think that location matters less than ever since information can be sent/received from anywhere (and accessed anywhere). In theory, the relationship between place and innovation should be lower than ever. However, economic geographers observe the opposite - evidence suggests that location is more important than ever.

Three frameworks for explaining why some locations become hotbeds for entrepreneurship

The fourth framework is the Boulder Thesis

“High Growth Entrepreneurial Companies” vs “Small Businesses”

Small businesses are local, profitable, slow growth and have a tight co-dependency on their community (and are often “pillars of the community”).

Entrepreneurial companies have the potential to be high growth, are only involved in the local community as employers and indirect contributors to small businesses and the local economy but their extreme focus on their companies keeps them from being involved in the broad business community

The Leaders

There is no “leader of the leaders” - the best startup communities are loosely organized and consist of broad, evolving networks of people. By having inclusive philosophies, it’s easy for new leaders to emerge organically.

Feeders (everyone else) are on different time cycles (e.g. two or four year cycle of the government) or different motivations (i.e. service providers can grow by increasing revenue from clients). Many entrepreneurs have families and struggle mightily with balancing work and the rest of their life - “leading their startup community” can sound like one more burden on top of an already overwhelming set of responsibilities. Entrepreneurial leaders need to be inclusive of any feeders that want to participate.

Universities (MIT’s close proximity to Cambridge/Boston/Route 128 and Stanford’s proximity to Silicon Valley) lead to the belief startup communities are dependent on a university. Universities provide students, professors, research labs, entrepreneurship programs and technology transfer offices. They can be a source of fresh blood, new thinking, and additional potential leaders.

The Mentor Manifesto

Attributes of Leadership in a Startup Community

Be inclusive

Anyone regardless of experience, background, education, ethnicity, or perspective should be welcomed into the startup community. When someone new shows up at the gates of the startup community, the leaders should make sure the person knows what activities exist to quickly get them involved. If someone is visiting from out of town, the leader should quickly introduce them to about 10 people he thinks are relevant so the visitor can get a bunch of meetings set up to explore the local startup community.

Play a non-zero sum game

Many people approach business as a zero-sum game - there are winners and there are losers. Fully embrace the notion of increasing returns (through a more powerful non-zero-sum approach) - the goal of the startup community should be to create something that is durable for a very long time.

Be Mentorship Driven

Leaders should be focused on mentorship at several levels. They should be mentoring other leaders, working with anyone who wants to be a leader in the startup community to help them become a leader. They should mentor other entrepreneurs, especially those early in their careers who are searching for new mentors. And they should be mentoring each other - because the best mentor relationships turn into peer relationships

Have Porous Boundaries

It’s acceptable for people to flow from one company to another. Leaders talk to each other and share strategies, relationships, ideas and resources.

Give People Assignments

Use assignments as a filter to find people who will get stuff done (you’re being inclusive by people a chance to do something to engage)

Experiment and Fail Fast

Think of your startup community as a lean startup - try lots of experiments, measure the results, and pivot when things aren’t working

Classic Problems

(1) The Patriarch Problem

In many cities, these patriarchs are the old white guys who made their money years ago but still run the show. The leaders of the startup community should simply ignore the patriarchs and do your thing without getting their approval.

(2) Complaining about Capital

There will always be an imbalance between supply of capital and demand for capital.

(3) Being too reliant on government

Although government can play a constructive role in startup communities, a reliance on government to either lead or provide key resources for the effort of building a startup community over a long period of time is a misguided view. Government often has less money to apply to things than people think it does. Most people in the government don’t have a history as entrepreneurs and thus don’t understand startups in any depth. Entrepreneurs live in networks - government lives in hierarchy.

(4) Making short term commitments

The previously mentioned 20 year time frame signifies a generation - it takes a generation of effort to get a startup community up and running in a sustainable way.

(5) Having a Cultural Risk Aversion

People are afraid of investing time in their startup community because they are afraid there won’t be a payoff either (a) their time will be invested in something that doesn’t have an impact or (b) fear or rejection by other leads in the startup community

(6) Having a Bias Against Newcomers (7) Attempt By a Feed to Control the Community (8) VC’s are some of the worst offenders of this (9) Creating Artificial Geographic Boundaries (10) Playing a Zero Sum Game (11) Avoiding People Because of Past Failures

Activities and Events

The Power of Accelerators

David Cohen made a few angel investments but wasn’t happy with the dynamic of how the entrepreneurs engaged with him and felt his experience was wasted - there must be a better way for experienced entrepreneurs to help companies who were just getting up and running.

TechStars takes simple applications on the web (no business plans), select and fund the best founders who are working in interesting markets and put them together with the best mentors and investors for three months.

The model works because it’s focused on the very people (both founders and mentors).

Accelerators and incubators aren’t the same thing. Incubators some characteristics but were originally created to foster economic development - they provide entrepreneurs space, infrastructure and advice in exchange for a fee (which is occasionally paid in part in equity). Incubators operate year round and continuously.

University Involvements

Universities are a feeder that, at a minimum, generate a steady stream of new young people into the startup community.

Contrasts Between Entrepreneurs and Government

A reliance on government is one of the classic problems in startup communities.

Governments can be well intentioned (especially around anything that creates jobs or creates new tax revenue) but the often have no understanding of what entrepreneurs do or the pressure the face.

Self Aware vs Not Self Aware

Great entrepreneurs are greatly self aware. They know what they are bad at and often describe it as “I suck at X.” Government leaders rarely talk this way. Entrepreneurs fail often and own it; government leaders rationalize why something didn’t go their way. Entrepreneurs are critical of themselves and other and support their viewpoints with data. Government leaders work to “impact public opinion”

Bottom up vs Top Down

Entrepreneurs work bottom up and government works top down. When entrepreneurs start a company, they do all of the work without the resources, staff, structure or framework for what they are attempting to do. They just go do it. Government is exactly the opposite - there is a well defined hierarchy, existing infrastructure, staff that persists from one administration to the next and clear rules of engagement for getting things done.

Entrepreneurs operate in a networked world - government operates in a hierarchical world.

Entrepreneurs are hard wired to take action. Government leaders focus on creating policy.

The Power of the Community

Give before you get

Always willing to try to be helpful to anyone, without having a clear expectation of what is in it for yourself.

Everyone is a mentor

The best moment in a mentor-mentee relationship is when the mentor learns as much or more from the mentee. The culture of widely sharing knowledge, experience and expertise is incredibly satisfying and self-reinforcing. The more you do, the more you’ll see others in the community do.

Embrace weirdness

In his book The Rise of the Creative Class, Richard Florida talks about weirdness as a key attribute of innovative communities. People can be themselves and be accepted for who they are and what they do.

Be Open to Any Idea

Try anything once, as long as it isn’t illegal. The best way to learn is to try things. In a hierarchy, the response to a new idea is to start asking questions and figuring out why it won’t work. In a network, trying things and running experiments has become synonymous with the learn startup movement.

Be Honest

Regardless of how you feel about a particular issue, decision or situation, being intellectually honest trumps everything. You don’t get better by people telling you that you are perfect. Someone has to be the asshole. After the initial shock (of blunt, direct and challenging feedback), it occurs that the feedback was actually constructive and probing (not people trying to knock each other down a peg or two because of low self esteem).

Go For a Walk

Too many meetings happen in conference rooms. Whenever I (Brad Feld) want to have a long discussion with a CEO or founder who I’m working with, or need to work through something with someone, we often walk a loop around town.

The Important of the After Party

In many situations, the real party happens after the official party ends.

Broadening of a Successful Startup Community

Parallel Universes - There are five startup communities of Boulder - software/internet, biotech, clean tech, natural foods and lifestyle of health and sustainability (LOHAS).

Myths about startup communities

We need to be more like Silicon Valley

Much of what makes Silicon Valley (or any startup community) work has to do with things that happen below the surface. It has to do with the permeability of organizational boundaries, continuous collision of young entrepreneurs in a dense urban environment, failing entrepreneurially is accepted in the Valley.

We need more local venture capital

Startup communities and venture capital aren’ t the same. Venture capital is a service function, not materially different from accounting, law or insurance. It services existing businesses - not one that causes companies to exist in the first place. While businesses need capital, it isn’t the capital that creates the business.

Angel Investors must be organized

Most startup communities feel like they’re aren’t complete without at least one angel group who meets regularly, screens companies, see pitches and (after group deliberation) invests individually in young companies. These groups may be useful to some angels who may want additional deal flow through these organizations or help someone else to help them through the screening or legal process. Sometimes these angel groups are too slow, aren’t active active, complain and have too many processes.

Getting Started

Scott Case (Startup America Partnership): How does your community stack up?