Building Ecosystems Starts With Creating More Connections

Whether you use dated expressions like “it isn’t what you know but who you know” or you are deep into “networking theory,” we all know the importance of having communities to turn to for advice or validation. But how important is what Dane Stangler and Jordan Bell-Masterson call “connectivity” in their Kauffman Foundation report offering policymakers a framework for evaluating and measuring entrepreneurial vitality?

In the early 1990s, Iqbal Quadir was struck by the idea that connectivity equals productivity. An economist from Bangladesh, he theorized that “connectivity helps people to reorganize themselves step-by-step into more complex economic arrangements” that foster “greater interdependence and specialization.” This insight led him to found GrameenPhone, which revolutionized thinking about development and foreign aid. The idea, while radical at the time, has now become accepted wisdom. During a TED talk, Quadir said, “Allowing people to be connected through mobile phones generated a culture of entrepreneurship, which is crucial for any economic development.”

How closely the key elements within an entrepreneurial ecosystem are connected to one another continues to be critical through an ecosystems’ evolution.

Yas Motoyama, a senior scholar at the Kauffman Foundation, recently conducted an in-depth study of connectivity within entrepreneurial ecosystems. Of his key findings, one stands out. Entrepreneurs learn from interacting with one another irrespective of industry boundaries and this is especially true for seed and early-stage startups.

The implication for policymakers and support organizations is that focusing on fostering entrepreneurial connectivity could yield more results than imagined.

But what are the key elements to link? Motoyama’s study points to links between entrepreneurs, links that entrepreneurs have to support organizations and links that entrepreneurs have to informal supporters, such as those made at entrepreneur-oriented events like Meetups. Of these, it is the connections between entrepreneurs themselves that proved most important.

An important implication, which policymakers should keep in mind, is that the focus of publicly supported venture funds and incubators ought to be on encouraging the creation of entrepreneur cohorts. For instance, public VC funds could distribute smaller investments to multiple startups so as to create a group of entrepreneurs who can support and learn from one another.

Because informal mentorship is also highly valuable, events that connect entrepreneurs who may not otherwise meet have proven highly valuable. In St. Louis, for example, those that consistently succeed at this include Start Louis, Build Guild and Code Until Dawn.

However, networks take time to solidify. This is why 1 Million Cups shapes its program as a recurrent weekly gathering, providing entrepreneurs the time it takes to build meaningful, long-lasting connections to see each other through rough patches. The name of the initiative comes from the notion that entrepreneurs discover solutions and network over a million cups of coffee.

In terms of measuring connectivity as a proxy for entrepreneurial vibrancy, Bell-Masterson and Stangler suggest capturing the spinoff rate as an option. Entrepreneurial “genealogy” (i.e. the links between entrepreneurs and existing companies) is an important indicator of sustained vibrancy.

Rhett Morris of Endeavor Insight has developed a common Ecosystem Mapping methodology to visualize such connections in 100 cities around the world—validated across research organizations that are part of the Global Entrepreneurship Research Network (GERN). New York City (mapped by Endeavor Insight) and Cairo, Egypt (mapped by Mercy Corps) have now been joined by the Inter-American Development Bank, MaRS, Nesta and the World Bank, to produce this open-access visualization tool in 15 more cities. For each city, users will be able to see key connections among entrepreneurs, mentors, investors and others via detailed and highly interactive maps.

Ted Zoller and Maryann Feldman of the University of North Carolina have developed another way to measure connectivity: examining “dealmaker” networks. They have looked at the role that individuals “with valuable social capital” play in “mediating relationships, making connections and facilitating new firm formation.” Zoller and Feldman have produced detailed dealmaker maps for 12 cities, which include Austin, Boston, Denver/Boulder, Seattle, Silicon Valley and Raleigh/Durham.

With the knowledge of how, when, or why entrepreneurs and their supporters interact with one another, both public policy and support programs can become more effective. Particularly for policymakers, knowing how successful ecosystems develop over time will allow them to foster the necessary connections in their city or region. This is far better than attempting to copy the elements that exist in an already well-developed ecosystem. Moreover as the Kauffman report reads, “connections matter, and a dense network of connections, among a small number of programs, is arguably more important than a sparse network among a larger number.”

“Our inner imagination can be burst into flame,” Albert Schweitzer said, “when we connect with another human being.” It is for this reason that connectivity is so vital for entrepreneurs.