by Dr Lianne Taylor
Venue: Lecture, Vienna Private University, Austria, February 2021
I am passionate about Entrepreneurial Ecosystems and sharing my experience with equally passionate global students made me think that their questions apply to many start-ups or growing businesses. Currently, although technological advances are reducing this phenomenon, the overriding evidence is that demography and geography play a significant role in business success because it enables access to resources and meaningful connections.
However, there is still no real consensus on the definition of ‘Entrepreneurial Ecosystems’ or ‘Clusters’, but knowing the key variables can help to understand the factors and actors that represent it successfully. In general entrepreneurial businesses consider culture, funding and finance, training and education, government regulation, advisors and peers, infrastructure access to markets and talent in their decision to set up or relocate their business. When faced with these decisions ask yourself:
Does access to market in an ecosystem matter for my business profile and why?
Most researchers have argued that ecosystems offer businesses an easy to reach market of potential clients. However, for many businesses this is inaccurate and irrelevant especially within high tech as clients exist a distance away from the businesses trying to reach them. It does of course depend on the business age, available resources and their sector. For many entrepreneurial ecosystems clients and customers are global whether they are businesses such as the Semi-conductors in Silicon valley; Digital printing in Chicago, PC’s in Florida, Healthcare in Pennsylvania, Space care in Colorado or high tech in Cambridge. Thus whilst access to market is crucial, using it as the main criteria for relocating to a particular cluster is unnecessary for most businesses. However, there are significant advantages to be immersed in an entrepreneurial minded culture. Ask yourself:
How does entrepreneurial culture benefit the ecosystems?
It is undisputed that having an entrepreneurial culture helps the cluster to be sustainable as entrepreneurs drive progress. Entrepreneurial culture is seen to take place at the minor level of an ecosystem, between the individual and group players, but effect change and influence on major levels. As one entrepreneur recently said,
“In Cambridge it is just the done thing”.
In some regions, Universities have historically tightly controlled the type of early-stage ecosystem, the building of new Science parks and expertise areas in order to avoid diluting “the ecosystem’s brand”. Key players such as Universities can either ‘block’ or ‘unblock’ business applications for building Science parks or manufacturing units depending on the entrepreneurial culture. Therefore, consider early on whether your business ‘fits’ into the specialisms that the ecosystem is supporting and recognised for, or planning permission and other required licenses can become difficult to achieve. While you are considering if your business is the right ‘fit’, there is a marked advantage of being in an ecosystem when and if investment is required. Ask yourself:
How does accessing funding and finance feature in my chosen ecosystems?
The brand of a cluster helps the sales and fundraising opportunities for most businesses in the ecosystem. Starting your business in such a successful environment provides a lower risk context for investors. As one insightful student aptly put it,
“an ecosystem provides a low-risk environment for a high-risk venture”.
The lower risk extends to the employees as well, which increases the pool of highly skilled individuals who have options to change employers if they wish. The network of private investors or VC networks are typically well known in an ecosystem and referrals are mostly a good short-cut-reducing uncertainty for stakeholders and short circuiting trust issues. The are many barriers that can be minimised for a venture requiring funding by being recognised in an established ecosystem.
These questions capture some of the main decisions entrepreneurs have to make when considering where to set up or grow, but underpinning all factors to reflect on are three key applicable words: reciprocity (what can I do for others), interconnectivity (how can I share with people) and networks (how do I connect with groups)! The latest research shows that Covid and ‘working from home’ is radically changing the concentration of entrepreneurial ecosystems, but predicting the lasting effect is much more challenging. I hope you found the article useful, contact us if you need any help with your decision.