Platforms versus Pipes


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One of the biggest challenges facing startup communities (or ecosystems if you prefer) is the inability of “feeder” organizations—such as governments, economic development authorities, corporations, and universities—to engage with an entrepreneurial mindset. The reason is simple: startups and startup communities are organized through networks. Feeders are structured around hierarchies.

Hierarchical organizations exist in a “complicated systems” paradigm, where input-output relationships are linear, outcomes are relatively stable and predictable, and the path to success is illuminated by rigorous planning, tight control, and flawless execution.

Feeders like control. They like plans. They like programs. They like clear lines between cause and effect, and a return on investment that is reducible to one number. Moreover, feeders often want to be the vehicle for change rather than an enabler of the change agents. But these are not the makings of vibrant startups or startup communities.

Startups and startup communities are “complex

Joe Maruschak, Bill Janeway

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Accelerated Companies at Series A


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A friend asks: “what percentage of U.S. startups that raise a Series A do not go through an incubator or accelerator?” That’s a great question that I haven’t thought about before. So, I dug into the data to find out.

The chart here shows the annual number of Series A financings in the U.S. (bars) between 2010 and 2018, broken down by whether the company previously participated in an accelerator (dark bars) or not (light bars). The green line on the right axis indicates the accelerated-company share of Series A financings.

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We can observe a steady, linear increase in the share of Series A startups that previously completed an accelerator program—from around just 2 percent in 2010 to 28 percent today. The direction of the line does not surprise me, but I the magnitude does—around one out of every four Series A companies today participates in an

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Ikigai


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Over the weekend, I first learned about the Japanese concept “Ikigai” (eee-kee-guy), which translates to “reason for being” or “reason for living.” I don’t recall where I found out about it, but it was through this graphic:

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I was immediately captivated by the image and the construct. I just spent all of last week on a work retreat of sorts with two dear friends—Amy Batchelor and Brad Feld—and we talked a lot about deep, life’s purpose kind of stuff. So, my discovery of the Ikigai concept could not be better timed.

After sitting with it today, this framework has given me remarkable and immediate clarity into what is causing me angst in my working life at the moment. At this stage, I have a pretty good sense of what I’m good at and what I can be paid for. However, I’m deeply questioning if the Continue reading “Ikigai”

It’s been a record quarter for European VC investment


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This article originally posted at Sifted.

In the first quarter of 2019, European startups raised a record amount of venture capital investment. That’s the key takeaway from this Sifted Chart of the Week.

According to data provider Dealroom, venture capital investments into European startups reached €7bn (€8bn if Israel is included) so far in the first three months of the year; an all-time high. Those capital investments were spread over 690 venture deals (766 when including Israel).

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The news comes as European startups raised an all-time record for annual venture investments in 2018 of €24.9bn, according to Dealroom data. That’s up from €23.1bn in 2017, for a gain of 8%.

Some of the biggest deals include $500M into Veeam, the Swiss enterprise security software company, $440M into London-based Fintech company OakNorth Bank, and $300M into N26, another Fintech startup based in Berlin. Other major funding Continue reading “It’s been a record quarter for European VC investment”

If You Want to Better Understand Startup Communities, Read These Three Women


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I’m working hard on The Startup Community Way this week with my co-author Brad Feld. As we’re polishing up the meaty part of the book—which draws on a wide range of theory, empirics, frameworks, and just some really brilliant thinking on the part of the many impressive shoulders this work stands upon—a few names keep coming up in the references we’ve assembled.

Three of these names I want to talk about today are intellectual giants in the areas of entrepreneurship, geography, and cooperative social systems. Their work collectively intersects in a way that explains a lot about why startup communities exist. If you want to understand startup communities, you should know their work. Two of them I consider friends, so not only do I get to benefit from their insightful work, I also know there’s a kindness and generosity behind their ideas. The third is not someone I knew, and

Left to right: AnnaLee Saxenian, Maryann Feldman, Elinor Ostrom

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Startup Communities Everywhere in the World


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Amy and I are in Knoxville, Tennessee all week. We are with Ian Hathaway (my co-author of an upcoming book titled The Startup Community Way) finishing up the draft of the book.

My plan was to end the week with the Knoxville Marathon on Sunday (marathon #26) but I had a crummy long run on Saturday in Boulder and woke up this morning with a cold. While it could merely be pre-race hypochondria, I feel lethargic enough to consider downgrading to the half marathon. Plus, my resting HR is 60, vs. my normal low 50s, so it’s another indicator that I’m worn out and need to take care of myself. So, we will see.

Recently, Ian and Richard Florida did a large study that culminated in an extensive report on the Rise of the Global Startup City. In addition to the report, there’s a website with a digital

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Silicon Valley VCs are investing more in European startups


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This article originally posted at Sifted.

Silicon Valley investors are growing increasingly interested in Europe. That’s the main takeaway from this Sifted Chart of the Week.

Last year was a record year for fundraising by European startups with €20.5bn (£18.1bn) spread over more than 3,300 deals. And it came with an increasingly US flavour.

US firms were present in more deals: Some 7% of venture capital deals into European startups involved at least one Silicon Valley venture capital firm in 2018, up from 3 percent in 2013.

And they invested bigger sums in those deals: 22% of total venture capital invested in 2018 was in deals involving at least one Silicon Valley venture capital firm, up from 12% in 2013 and 8% in 2008.

This indicates that when investing in Europe, Silicon Valley venture capitalists are involved in relatively larger, late-stage deals.

Some of the biggest deals include Continue reading “Silicon Valley VCs are investing more in European startups”

The 1% (of VC)


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In the last year, I have written about the increasing size of venture capital deals across the round stages and what it means (here, here, here, and here). Today I’ll take a closer look at that the top of the distribution by examining the share of venture capital dollars in U.S. startups captured by the largest one percent or five percent of deals.

This analysis shows that in spite of the large expansion in venture capital deployment across all deal sizes in recent years, the biggest deals are driving the trend. In fact, the largest five percent of deals now account for more than half of venture capital deployed —twice as much as was the case just a decade and a half ago. In the last few years, the trend has been even more concentrated—driven entirely by the top one percent.

The first chart

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Why Content-Driven Strategy is Smart Business


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Nicolas Colin, Co-Founder and Director, The Family

Nicolas Colin, Co-Founder and Director, The Family

My friend Nicolas Colin has an excellent new article out titled “Content-Driven Strategy,” in which he makes a convincing case for thoughtful content as a means of demonstrating and shaping the strategic direction of businesses. Nicolas would know: a robust content-driven strategy has been foundational to the success of The Family—the early-stage investment firm he co-founded with Oussama Ammar and Alice Zagury in 2013. What started out in Paris, The Family is expanding rapidly throughout Europe, with offices in London, Berlin, Brussels, and more surely to follow.

What’s special about The Family in my mind is that they’re investing not only in some of Europe’s most promising early-stage companies, they’re determined to improve the environment around them. The Family is on a mission to change the way people think and behave in the European startup ecosystem, and a strong content Continue reading “Why Content-Driven Strategy is Smart Business”

How Change Happens


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I recently picked up a copy of How Change Happens: Why Some Social Movements Succeed While Others Don’t, a book out last year by Leslie Crutchfield. She leads the Global Social Enterprise Initiative at Georgetown University’s McDonough School of Business. I have my friend Bob Litan to thank for the tip.

I immediately became interested by the title because of my upcoming book The Startup Community Way, which will be out later this year. That interest came from the fact that our book (I’m co-authoring it with Brad Feld) is really about a special type of movement-driven social change—one built around local entrepreneurship.

How Change Happens is the product of many years of research by Leslie and her team studying a wide range of social movements in the United States—from gun control, to same-sex marriage, to smoking, to drunk driving, to acid rain reduction, to vaccination, and Continue reading “How Change Happens”

Which cities lead the nation for women founding venture-backed startups?


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This article originally posted at the Brookings Institution.

International Women’s Day is this week, and millions around the world are mobilizing to celebrate womanhood and promote women’s rights. Unfortunately, there’s perhaps less to celebrate for women in the venture capital industry and the high-growth startups it supports. In 2017, just 16 percent of venture capital funding in the United States went to startups with at least one female founder, and only 2.5 percent went to companies with all female founders.1 An estimated 9 percent of general partners (the people making investment decisions) at leading U.S. venture capital firms are women.

Compare those numbers to female representation in the workforce (47 percent), business ownership (36 percent), high-tech industry employment (30 percent), or as alumni of the relatively small number of feeder institutions (particular universities, degree programs, or corporations) that tend to dominate the sector (various percentages).2 It quickly becomes

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How venture capital mega-rounds obscure improving gender diversification of startup founders


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Last month, I published The Ascent of Women-Founded Venture-Backed Startups in the United Statesa new report for the Center for American Entrepreneurship. I encourage you to read the whole thing, but here’s a summary. I also posted an additional analysis from the underlying data a few days ago.

My report looked at first financings by the gender composition of founding teams. I chose first financings for two reasons. First, I was particularly interested in capturing the number of companies entering the venture-backed pipeline each year. Second, I wanted to track company outcomes over time (follow-on financings and exit rates), which was the main novelty of the study. In order to do this, I had to group them into annual cohorts at the time they raised a first round of venture capital.

Today, I’m going to do something entirely different—analyzing headline numbers of venture capital investments ($) by founder

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Women-Only and Mixed-Gender Founding Teams are Driving New Venture-Backed Startup Activity


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Two weeks ago, I published a new report for the Center for American Entrepreneurship, titled The Ascent of Women-Founded Venture-Backed Startups in the United States. I followed-up with a summary on this blog last week.

The study analyzed venture capital first financings in the United States between 2005 and 2017, segmented by the gender composition of founding teams. It established two key trends. First, the number of “women-founded” startups entering the venture-backed pipeline each year—while unquestionably low compared with women’s representation in adjacent areas of the economy—is improving steadily over time. Second, once women-founded companies raise a first round of venture capital, they achieve similar outcomes as non-women-founded startups—such as the ability to raise follow-on rounds of capital or achieve an exit (IPO or acquisition). There is a lot more in the report and I encourage anyone who is interested to go and read it.

One criticism of the

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How to Build a Successful Startup Ecosystem in your City


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Techstars recently launched a Startup Ecosystem Development offering, which is designed to work alongside of communities around the world to help them build a more vibrant environment for entrepreneurship. The program has been in an R&D/beta-launch phase the last year, but the first official program will take place in Buffalo, New York over the next three years.

Yesterday, to introduce the program and answer questions about what they’re up to, Chris Heivly (who leads Ecosystem Development at Techstars), Brad Feld (author of Startup Communities and a Techstars co-Founder), and Eric Reich (chairman of 43 North, the startup support organization in Buffalo that is partnering with Techstars to lead the effort) participated in an hour-long segment on Crowdcast.

I embed the event below and encourage anyone interested in the topic to give it a listen—it’s definitely worth your hour and is full of wisdom and insights from these three.

 

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Lagged Deals and the Dynamic Nature of Venture Capital Databases


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Venture capital databases are great but they are not perfect. One of the key problems is their dynamic nature. New information is coming in all of the time. Early-stage activity in particular is systematically lagged until additional rounds are raised—either because the earlier rounds were unpriced or because they were unannounced.

For this reason, I try not to report annual tabulations of deals too recently from when they are to have occurred. For example, we are just two months into 2019 and so I’m uneasy making claims about what occurred in 2018 because the data are still coming in. Many others still do it for any number of reasons. All of the major venture database companies produce annual statistical reports shortly before or after year-end, and many interested parties, such as corporations and venture firms, routinely produce similar reports.

I recently had an editor of a major news outlet refuse

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New Study on Women Founders


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Last week, I published a new report for the Center for American Entrepreneurship, titled The Ascent of Women-Founded Venture-Backed Startups in the United States. The study is the culmination of months of research and collaboration with some amazing friends at the National Center for Women & Information Technology and beyond.

Let me first start by saying that overall venture funding markets for women founders are abysmal. According to data given to me by PitchBook, in 2017, just 16 percent of venture capital invested in the United States went to companies with at least one female founder and only 2.5 percent went to startups with all female founders. PitchBook has since updated those numbers, and things didn’t getting better on that front in 2018—if anything, they’ve gotten worse.

Compare those numbers to women’s representation in the workforce (47 percent), business ownership (36 percent

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Take a Break


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I’m on the final day of a week-long vacation (or holiday, if you like). We booked the trip less than a week before it began, so it was also a bit of a surprise. It felt like one of those things I needed to do, and not something I wanted to do. In fact, I didn’t really want to do it at all—too busy, not time for that. However, within 24 hours of being away from my routine, I knew it was the right move.

This winter has been cold, dark, and wet for me—three things I like to avoid. It has also been a stressful and disappointing one. I have been overwhelmed by work, family health issues, and frequent reminders that humans are imperfect beings. I was unable to take a single day off during the Christmas and New Year’s holiday season, a period that is on my “do Continue reading “Take a Break”

Student Loan Debt is Killing American Entrepreneurship


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Ethan Mollick, a professor at the Wharton business school, Tweets about a paper that causally links student loan debt with declining entrepreneurship in America (including in high-growth, high-tech activities).

By exploiting two “exogenous shocks” to the student loan system (public policy changes that were made independently of the system), the authors demonstrate that student loan debt not only causes individuals to start fewer businesses (especially in the high-tech, high-growth segments), but when they do, they are (a) less likely to be successful, and (b) experience greater hardship from business failures (which are themselves already more Continue reading “Student Loan Debt is Killing American Entrepreneurship”

Robert Noyce, Mao Zedong and Lessons for Startup Communities


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In 1957, a group of eight Silicon Valley executives lead by Robert Noyce resigned from famed Shockley Semiconductor to start a rival in Fairchild Semiconductor. This sort of thing happens all the time in Silicon Valley today, but at the time, it was a watershed moment that sent reverberations throughout the industry. The Traitorous Eight, as they became known, changed the course of innovation forever by injecting the region with an entrepreneurial ethos that continues to this day and has made Silicon Valley the envy of the world.

Around the same time, nearly 6,000 miles (~10,000 kilometers) away, a very different type of revolution was taking place in Communist China. In 1958, Communist Party Chairman Mao Zedong launched the Great Leap Forward—a wide-sweeping series of economic and political reforms aimed at transitioning China from an agricultural economy to an industrialized one, and at consolidating power around the socialist regime.

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The J-Curve of Startup Community Transition


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In The Startup Community Way, my upcoming book with Brad Feld, we explain that startup communities must be viewed through the lens of complex adaptive systems. Such systems are characterized as having many elements (people and things), interdependencies (connections between them), feedback loops (actions lead to reactions), and as being in a constant state of evolution (never at rest).

We make the effort to explain the complex systems framework and tie it to startup communities because the nature of these systems requires a very different type of engagement than we are used to in most of our professional and civic lives. Complex systems require different skills (diversity v. expertise), mental processes (synthesis v. analysis), tactical approaches (experimentation v. planning), and goals (right conditions v. right outcome), among other factors we discuss in the book.

One prominent condition in complex adaptive systems that I want to talk about today

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