10 Rules for Entrepreneurship Ecosystems from Babson

Someone over at Babson College Entrepreneurship Center (cutely called, BEEP), has the right idea about entrepreneurship ecosystems. Here are their 10 rules (reprinted) for entrepreneurship ecosystems. A lot of wisdom here, I'll have to return to this to comment in more depth.

1. Stop emulating Silicon Valley! Even Silicon Valley could not create itself today if it were starting from scratch. Give up on thoughts of a “knowledge-based society” or “the information economy.” You don’t need to tell entrepreneurs that they need to use Internet and mobile technologies anymore than you need to tell them to use water or electricity.
2. Tailor an ecosystem around your own particular characteristics. Sustainable entrepreneurship is the result of numerous forces working together, which we call the entrepreneurship ecosystem. Each region has a unique ecosystem with more than a dozen elements.  Are there large companies that are used to interacting with small, innovative suppliers? Are there markets close by? Is the human capital technical in orientation? Does the culture support risk taking and innovative, contrarian thinking? Is leadership overtly and clearly supportive of entrepreneurship?  You need to understand all of them, and how they can be strengthened and aligned.
3. Engage the entrepreneurship stakeholders early on. Entrepreneurship is about engagement and empowerment. Stakeholders should be engaged early in the process. This includes the various segments of the private sector, educational leaders, community leaders, government officials, entrepreneurship development organizations, leaders of diaspora networks, university officials, investors and lenders, and so on. In some communities the cooperatives, unions, and even religious organizations are influential. There are many ways to engage, but ongoing, sincere, open dialog is the most important starting point.
4. Support the high potential entrepreneurs. Although entrepreneurship is inclusive, to jumpstart an entrepreneurship ecosystem, the most impactful sector to influence is the high ambition, growth oriented, market-seeking ventures. These create the jobs, the dynamism and vitality, and the growth.
5. Get some visible successes, even by “brute force” if necessary. Success breeds success. Endeavor [LINK TO http://www.endeavor.org/ ] has built its entire strategy around this principle, finding and nurturing “high impact entrepreneurs.” This happens because: (a) successful entrepreneurs like to help other entrepreneurs; (b) successful entrepreneurs become angel investors; (c) successful entrepreneurs make excellent board members; (d) success inspires latent-entrepreneurs to take the leap; and, (e) successful entrepreneurs become powerful voices for governmental reform. According to the law of small numbers: it only takes a few successes to change the entire game. But when you see some successes on the horizon, make sure you celebrate them! Give a medal, an award, make them visible.
6. Change the culture head on. Many leaders believe that this takes generations, and although much societal change is long term, there are certain social norms that can be changed in a few years: it is possible to increase tolerance for risk, the legitimacy (even nobility) of launching your own business, acceptance for honest failure. Media campaigns, annual events, and awards all help. Just think if you ran an entrepreneurship campaign as seriously as your own campaign for re-election?
7. Stress the roots: don’t provide easy money. Early stage capital is always scarce, everywhere. But moving to the opposite extreme is equally disastrous. Provide funding, but insist that the entrepreneur bring in a matching investor. Keep the funding off the ventures’ balance sheets. Make sure the funds are not equity: government has no business selecting and nurturing winners. Directly incentivize the financial intermediaries, not the ventures themselves: make it easier for banks, private equity, angel investors, family businesses, and leasing companies to invest in the ventures themselves. Don’t be an evergreen financer: figure out a way to start the private financing markets, and get out, or focus on the highest risk areas.
8. Pave the footpath. Don’t push clusters too hard. Every government now has a cluster strategy and thinks that will get entrepreneurship going, but success is elusive and rare. Clusters don’t create entrepreneurs. Entrepreneurs create clusters. Mike Porter said that in 1999, only no one listened. Watch where the entrepreneurs are walking, and then pave the footpath. Remember, entrepreneurship is inherently a contrarian activity, so wherever you decide they should be, the good entrepreneurs will always be figuring out how to do something else, do it differently, and do it better. Identify, watch, encourage, support.
9. Remove bureaucratic obstacles for entrepreneurs. Eliminate roadblocks and red tape through consolidation and streamlining. Redeploy the dozens or hundreds of clerks whose seats depend on their ability to slow everything down. Have permitting “bootcamps” to free up log jams. Make regulations transparent and provide tools for entrepreneurs to address them. Get rid of outmoded obstacles to redeploying people–support and retrain the unemployed rather than preventing their firing. Make sure tax collections are rigorous, fair, but entrepreneur-friendly. As a government purchaser, buy from small suppliers, but make sure you pay on time: nothing is as demotivating as doing a good job as a new company, and waiting three months to get paid: this is absolutely unforgivable and has a huge dampening effect on entrepreneurship.
10. Experiment relentlessly and holistically. You can learn from what others have done around the world, but you have to experiment based on your own reality. Focus initially on short run experiments, small scale funding, short courses, and small numbers of entrepreneurs. Develop a norm of reflecting and learning from mistakes as well as successes. But don’t expect piecemeal action to work: you need to move different elements of the ecosystem simultaneously. To use a simple example, creating private equity will be self-defeating if there is no high potential deal flow for investors to invest in, and ways for them to realize (“exit”) their investment.