Thinking with the end in mind regarding how to build an entrepreneurial ecosystem: Output/Exit first, Throughput/Process, then Input

Elements of ecosystem throughput: Part I

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When you start or build something, you would focus on the inputs, all the pieces, and the raw materials needed, right? Well, a couple of months ago, here on LinkedIn, I shared my unconventional thoughts on the value of the exits by venture startups; the end, or the output, may be more important to build the ecosystem and should be considered for more investment.

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If you are not yet convinced, let me start with an analogy. In the world of athletics, whenever an athlete makes a remarkable achievement, he/she ends up making an even greater impact on that sport. For example, according to the article by PBS, there has been a significant increase in the number of girls, specifically black girls, in gyms whenever Simone Biles appears on TV. This is despite gymnastics is one of the sports that black girls have not actively participated in historically. They call it "Simone effect". Similarly, I contend that entrepreneurs with a significant exit have a similar effect on the ecosystem, getting more (and hopefully more diverse) people to participate in entrepreneurship.?

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So, leading with a successful output may be more effective in increasing the input. In October 2023, the US Women's team won a record-breaking seventh world title at the World Gymnastics Championships (oh, and Simone won the individual all-around title also). Could such a feat be possible without an effective ecosystem that is filled with experienced coaches, effective training programs, and sufficient resources??

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Do you think girls with an interest in gymnastics will somehow learn and train on their own without coaching or a training program? How would any of them find other great gymnasts to form a team? Then, somehow, they travel to Belgium (where the 2023 World Gymnastics Championships were held) together on their own dime and win the world title. Well, I will never say never.

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Now, I welcome you to think with me why output alone (or, for that matter, the input alone) is not sufficient to create a venture ecosystem, especially if the goal is to make the ecosystem sustainable. What are the important elements in the venture ecosystem needed for sustainable venture ecosystem development to ensure efficient and effective throughput/process, equivalent of training programs, resources, and coaches for a team to succeed like the Team USA of women’s athletic gymnastics?

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Here are my thoughts:? ? ??

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Education as the Foundation:

Education serves as the foundation and substrate upon which thriving venture ecosystems will grow. It provides the common knowledge base and alignment needed to navigate the complex interactions and the business relationship between entrepreneurs and investors.?

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When interactions are complex, it is critical that both sides speak the same language. Organizations that catalyze the venture ecosystem recognize the significance of educating both entrepreneurs and investors with the same definition for a word or phrase. Shared facts on workshops and accelerator programs enhance effective communication between entrepreneurs and investors because the definitions of the terms used by entrepreneurs and investors are the same.

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Education is the foundation that propels the ecosystem toward informed and strategic decision-making toward a deal that can be formed with a full understanding of investment landscapes, risk assessment, and output expectations.?Under such conditions, the pitch events and networking events become a trustworthy marketplace platform for entrepreneurs and investors to interact with aligned goals. With a common language, sustainable growth becomes possible by imparting knowledge from one generation to the next and fostering a culture of continuous learning between (and among) entrepreneurs and investors.

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Investment as the Fuel:

While education provides the foundation, an engine block, investment injects the necessary fuel to thrust the ecosystem forward. Financial support enables startups to scale their operations, hire talent, and execute business plans. The infusion of capital is a critical element in the venture development cycle, and successful accelerator programs understand the symbiotic relationship between education and investment.

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Most of the renowned accelerator programs provide immersive and extensive educational resources but also offer seed funding to their graduates. Importantly, this avoids the hypocrisy of what they say and teaches about entrepreneurship by showing their interest through action - sharing of the risks and rewards with the entrepreneurs. Investment becomes a resource enabler, allowing entrepreneurs to turn their innovative concepts into market realities to drive positive impact to change the world.

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Mentorship as the Catalyst:

Mentorship serves as the guiding light that steers entrepreneurs through the intricate journey of building a successful venture. Seasoned mentors bring invaluable industry experience, insights, and networks that can significantly impact the trajectory of a startup. The mentorship provided by investors extends beyond education. Many mentors have experience as an entrepreneur or a professional in a specific field. The advice is based on real-life experience, encompassing guidance on strategy, selection of the beachhead market, and the nuances of navigating business challenges.?

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When the mutual interests of entrepreneurs and investors for both financial return and impact are aligned through mentorship, it becomes a catalyst. When catalysts activate the fuel on a strong substrate, a complex reaction can take place much more efficiently. An efficient system will increase outputs with positive financial return and impact, creating jobs and fostering economic development in the ecosystem.

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Not surprisingly, most of the prestigious accelerator programs offer a diverse mentor network and place a strong emphasis on mentorship as a linchpin of their accelerator programs. Startups benefit from the wisdom of mentors who have weathered entrepreneurial storms and emerged victorious. The mentorship component ensures that entrepreneurs have a support system to lean on, helping them make informed decisions and avoid common pitfalls.

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Synthesis with a touch:

In the realm of venture ecosystem development, the synergy among education, investment, and mentorship is indispensable. The success stories from the top accelerator programs like Techstars, Y Combinator, and 500 Startups validate the transformative impact of combining these three factors.

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But wait, I think there is one more thing that is more important for the nascent ecosystem than the mature ecosystem, and that is a touch of angels. Many angel investors are former entrepreneurs themselves or ‘intapreneurs’ with experience leading innovative changes. Also, angel investors are usually not solely driven by financial returns but are a way to support entrepreneurs and their new ways to solve societal issues in tangible ways.

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Many angels consider the capital injected into ventures is not merely a financial transaction. Mentorship becomes a key avenue through which angel investors actively contribute to the growth and success of startups. Mentorship is a mode of education through knowledge transfer, fostering meaningful connections leading to sustainable and impactful growth for a vibrant venture ecosystem.

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The Rockies Venture Club ’s HyperAccelerator exemplifies the integration of education, investment, and mentorship with a touch of angels in a comprehensive venture ecosystem development program. Through its intensive curriculum, startups gain insights into market dynamics, financial modeling, and investor relations. Simultaneously, the program provides access to a network of seasoned mentors who offer personalized guidance based on their experience as a former entrepreneur or subject experts. Moreover, the HyperAccelerator facilitates direct investment opportunities to mentors who are often also angel investors, ensuring that startups not only receive education and mentorship but also secure the financial backing necessary for growth.

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Conclusion and Call to Action:

Education lays the foundation, investment fuels progress, and mentorship provides a spark or catalyst, creating an environment where startups can thrive and contribute to the dynamism of economic development. Angel investors, with their dual role as financiers and mentors, amplify the impact of these triumvirate elements. Especially for the nascent ecosystem, the contribution of angel investors emerges as a vital force, injecting not just capital but also the medium of knowledge transfer, imparting wisdom and experience. I believe the holistic integration of education, investment, and mentorship, with the angel's touch, are vital elements for fostering innovation and driving the development of a sustainable venture ecosystem. It ensures economic dynamism with innovation in the ecosystem and circular flow of resources where successful entrepreneurs will become angel investors to give back to the community, creating a sustainable ecosystem and improving the throughputs of the ecosystem.

If we want to create a vibrant venture ecosystem, the quality of mentors in the ecosystem is critically important. Not only must they have experience-based real skills, but they must also have the right intentions and motivation that align with that of the entrepreneurs'. The former entrepreneurs with exit badges, in particular, are very valuable resources and mentors, as I supposed in my previous article. Harnessing this critical resource could be the difference between creating a sustainable venture ecosystem or not. So, shouldn’t there be more investment toward exit-experienced entrepreneurs to give back to the community, especially in a nascent ecosystem?

What are your thoughts? Agree or disagree with my thoughts? Please comment and share your thoughts. If there is enough interest, notice I titled this article as Part I? I can share more thoughts, digging deeper into each element.

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Oh, and by the way, I will be doing my part next week as a new cohort of Rockies Venture Club HyperAccelerator starts their journey, volunteering as a mentor (time), transferring my knowledge and experience (talent), and as an angel investor (treasure).