Why it takes a community to raise a startup

By Jana Matthews, University of South Australia

There’s an old saying that it takes a whole community to raise a child. Likewise, it takes a whole community to raise a successful startup company that can grow, scale and contribute to a healthy economy.

This was the message from Brad Feld, top global venture capitalist and TechStars co-founder, when he came to the Centre for Business Growth at UniSA to speak with venture capitalists, angel investors, growth entrepreneurs, politicians, community leaders and students.

His message was clear: startup communities can be built in towns that are 50,000 and larger. Although size does not matter, community attitudes and startup density definitely matters.

We talk a lot in Australia about our entrepreneurial ecosystems. We map them and analyse their strengths and weaknesses. Our analyses are clinical and data driven: numbers of companies that are started, numbers of co-location spaces available, and the amount of venture money invested each year.

After listening to Brad for a week, it’s clear that isn’t enough. Australia is still far too “arms-length” from the process of starting and growing companies. We need more people to be willing to wade in and fully participate in the process. Starting, and more importantly, growing a company is not clean, tidy, or easy. It’s not enough to be able to describe and diagnose. We need to get much more personally engaged with our Australian startups.

Over the last few years, we have gotten better at encouraging people to “give it a go” and start a new business. But we still have a long way to go to provide the support they need to become a high-growth company: knowledge, mentoring, access to money, markets and customers. And we’re totally missing a big part of the picture: showing entrepreneurs how to fail gracefully, then supporting them when they try to do it again.

In short, we need to build startup communities, not just startup ecosystems.

Brad outlined a number of essential elements to a vibrant startup community:

• people willing to start companies, as well as mentor and support the entrepreneurs who try, fail and try again;
• community leaders with a 20-year perspective who focus on building a culture where trying, risking, failing and helping chief executives succeed is the norm;
• people willing to set aside self-interest and focus on giving (ideas, time, advice, money) without the expectation of an immediate return; and
• people who welcome outsiders and value diversity – of sex, ethnicity, perspectives, cultures, knowledge and experiences.

We need to adjust our attitudes and shift our expectations about how many startups actually succeed, what valuations to expect, how quickly they will grow, and how much support they will need. Very few of the world’s great entrepreneurs figured it out on their first “go”; it usually took them several failures and pivots to get it right.

Children do not grow into adults overnight, and not all become rocket scientists. Every investment cannot be a success – and we can’t wait to invest until we are sure it will be.

At one point, Brad had made US$25,000 angel investments in 75 startup companies and he doubled down on several of them. Did he lose money? Yes – he lost money on most of them. But the money he made on the few far surpassed the total amount he had invested in them all. Many of the entrepreneurs who failed the first time started another company, and he invested in them the second time – figuring they were much smarter about the startup process this time than when he made his initial investment. In his words, “you’d be an idiot not to back them” the second time around.

Unfortunately, there is no startup simulator where entrepreneurs can practice and experience all the things that can go wrong. So we all need to support them in their journey.

The stronger the startup community, the more likely it is to have companies that have grown and scaled who can help other companies understand how to grow and scale. We need to ensure our startups have access to tools, knowledge and frameworks to help them understand what is happening.

We must encourage experienced chief executives to “wade in”, mentor, and share their experiences in starting, growing and exiting companies. We need to educate those who invest in venture capital funds, as well as VCs and angel investors to have more realistic expectations about time frames for return on investment. And if we build these kinds of supportive communities, then the startup density will increase, the numbers of successful companies will increase, jobs will increase, investors will do well, and Australia will thrive.

Jana Matthews is the ANZ Chair in Business Growth and the director of the Centre for Business Growth, at the University of South Australia. 

This article was originally published on The Conversation. Read the original article.