My State of the Startup Community – Raleigh/Durham

Last week, I had the privilege to speak about the state of our startup community at Innovate Raleigh.  I have been a little quiet around here lately as I survey and observe startup communities around the world.  I thought I would share my thoughts here (without the actual slide deck) to create some more conversations.

Good morning.  Thanks to Bridget and the rest of the INNOVATE RALEIGH team for inviting me here today.

My name is Chris Heivly:

  • I am a serial entrepreneur (co-founder of MapQuest)
  • I am a long-time investor (corporate venture fund, co-founder of 2 micro VC funds, and an angel investor)
  • I have been involved in startup community building for the last 9+ years

What you should know about those three things is

  • MQ was born in Lancaster, PA a city with 400k metro and 55k Amish
  • The Corporate VC with 38% RIO focused on Internet companies was run out of Chicago
  • The Community is Raleigh/Durham and is not Boston, NY or Silicon Valley

Last year I joined Brad Feld of Startup Communities and Techstars to share with community leaders around the world, how great communities get built.

Today I am going to share with you some of those experiences and best practices so that each of you can leverage our collective thoughts on how to grow our community.

We are here today to talk about entrepreneurs, startups and startup communities.

But what we really want to talk about is about economic growth for our city.

Every citizen wants to be part of an economy that is moving forward.

Every government and quasi-government official is waking up every day with the goal of facilitating economic growth.

Three of the most common ECONOMIC GROWTH goals include:

  1. Improvements in Productivity
  2. Commercializing Innovation
  3. Job Growth Through Growth Companies

I would argue that all three can be achieved through a solid support of entrepreneurship.

Ultimately the question that each one of us want to know is – – – WHO WILL THRIVE, and WHO WILL JUST SURVIVE?

What are the new set of rules,

What new combination of decisions and decision-makers.

Which leaders will pull their city into the list of the fortunate?

Who will adapt to a new economic paradigm?

Every one of us in this room looks at FACEBOOK in one of three ways:

  1. I want to build a company as big and as important as Facebook, or
  2. I want to invest in a company as big as Facebook, or
  3. I want my community to create/host a company as big and with as many jobs as Facebook.

Being in a community that can produce a company as impactful as Facebook is an awesome opportunity and for some a measuring stick for everyone involved.

But to be a part of either of those 3 positions, you must first understand what it is like to be an entrepreneur.

As a long-time entrepreneur myself, let me share some insights into the entrepreneurial journey.  Choosing to be an entrepreneur for many is about individual control and for each and every one of us, we live to decide how & when.

This decision is scary – which is why we call it a leap.  In order to minimize or eliminate our fears, we surround ourselves with others in the same office, room, building and city.  As a long-time entrepreneur, I can attest to the anxiety as well as the somewhat relaxed state I get to when surrounded by my tribe.  Tribe is a critical element for all of you to understand about entrepreneurs.  MY TRIBE HELPS ME WIN!  Our tribe is our COMMUNITY.

Regardless of whether you are an entrepreneurial farmer distributing your goods in the local farmers market, or

One of two woman creating the next online fashion ecommerce marketplace, or

A diverse group of entrepreneurs coming together to exercise their startup muscles at a Startup Weekend, like here at The Frontier in 2016.

Entrepreneurs decide not just what they work on, or when they decide to leap, and how they get started, but they also decide where.

OK BUT WHAT DO WE INVEST IN NEXT, CHRIS??

An Innovation Park?  A Venture Fund?  Recruit Amazon or Apple to my community?

As if there were just one play or one tool to accelerate us to the top.  And what is the top anyway?  Silicon Valley as some gold standard?

Every startup community is at a different stage along a maturity scale:  DEVELOPING  |  EMERGING  |  LEADING

Each of our communities have a different asset mix.

Each of our communities have a different culture.

So, why does everyone seek THE PLAYBOOK when there are so many variables?

This is why the answer to this question is so hard.

Let me share with you a story.  Please meet Joe Smith.

Joe is a long-time successful business man who now has a critical role in the development of his community.  Joe has decided it is time to give back and his newest project is the advancement of a startup community or ecosystem.  Joe sits on many boards, has the ear of the local government officials, and is very enthusiastic about his city.  Joe really cares!

Joe is working with his peers (government & economic development leaders, fellow businessmen, executives at local corporations and a handful of university folks) with the mission to build a startup community.  Everyone is motivated by the experienced and stellar group of community leaders that have been brought together to lead this city into the next wave of entrepreneurship.  The next unicorn company is just around the corner and if we can find that founder or company and share with the world that our city can produce breakout companies, we will put ourselves on the map!

The first thing the group does is create a name for their organization – Startup Boise/Bogata/Berlin – and begin to work on a strategic plan for the city. Funding is achieved to operate a few events that celebrate entrepreneurs and a sub-group has started working on the development of a “innovation park”.  Build a great place and the entrepreneurs will naturally arrive is the thought.

A different group has begun discussions to develop an investment fund that will attract new entrepreneurs to the area.  Everyone uses their network to reach out to various organizations that are considered influencers (Sequoia Capital, Techstars Accelerator, Rise of the Rest, etc.) in order to recruit these entities to their city.  Land one of these and our community can accelerate ahead of our peers is the thinking.

After 2 or 3 or 5 years, Joe and his peers have a very modern space geared for entrepreneurs, an annual conference that showcases the existing talent (with a high-profile, brand-name speaker of course), a government-underwritten investment fund, and a marketing campaign to tell the city’s story.  All of this activity feels great and progress has been made.

Though, the breakthrough company has yet to emerge yet, that should be right around the corner.

What is wrong with these last two pictures?  Where are the entrepreneurs?

I like to say, no entrepreneurs – no entrepreneurial community.

I would describe what happened to Joe and what is currently happening to well-intentioned leaders around the world is the result of applying the wrong model to a new problem.

You see everyone one of us is the victim of our own success.

Most of you in this room and the majority of people I work with have achieved great success either as a business person or in a government role.  You don’t get to be a power broker without a great amount of success in your career.

These muscles that have been built and honed with years of effort are what we would describe as the muscles needed to operate a COMPLICATED SYSTEM (borrowing from Systems Theory).

Great outcomes of COMPLICATED SYSTEMS require lots of planning, rigid structures, command and control leadership and lots of reverse-engineering of various sub-components.  If Silicon Valley could be reverse-engineered and all we needed was some money and some brains . . . . Would we not have 20 Silicon Valley’s today??

We believe that the understanding and practice of startup community building can be improved by incorporating insights from COMPLEX SYSTEMS — a “science” used to explain the dynamics of physical, biological, social, and information networks.

Like the birds in this picture operating in a complex almost chaotic manner but individually achieving a single sense of purpose . . .

There are 3 concepts that I would like to share with you today about applying Complex Systems theory to startup communities and ecosystems.

SELF-ORGANIZATION:

There is no king.  Nobody owns the community.

Examples include schools of fish, flocks of birds, or insect colonies like ants, where these organisms take biological and chemical cues to coordinate behavior in a collectively useful way.

Startup communities are “organized” in the form of networks of human relationships.

These patterns are not centrally planned, they emerge. Attempts to control or coerce entrepreneurs only work to create friction that prevents or slows progress.

Don’t try and control activity or impose structure – enable activity with new emerging leaders and networks evolve.

The idea of network connectedness is critical.  It is one of the primary factors that we assess when determining where a community is operating along the maturity scale,

MEANINGFUL INTERACTIONS:

While the individual elements are important in a complex adaptive system, what matters most is how they interact.

No one in this room can tell me where the next great entrepreneur will come from and more importantly what they look like.  Race, gender, age, educational attainment . . . who knows.  To that end, it is incumbent on community leaders to create different on-ramps or connection-building opportunities that serve an inclusive & diverse set of entrepreneurs.

What are you going to create/support/enable that target women or non-college graduates?

There is no room for personal and business agenda’s here.  Entrepreneurs smell this coming and disengage.  There is not enough time to handle agenda’s that don’t include full 100% support of the entrepreneurial journey.

Build MEANINGFUL into your daily strategy and remove the actions, people and behaviors that work against it.

#givefirst is a phrase we use every day which states simply “give first to others without any expectation of getting anything in return”.

I do this through OPEN OFFICE HOURS, DAILY INTRODUCTIONS, and ATTENDING EVENTS in support of OTHERS.

POSITIVE CONTAGION:
We have a strong opinion about how to grow a startup community.  WE influence our friends friends without even knowing it.

Our collective goal is to shift a mindset and create an updated set of community norms by targeting a group of influencers so that they can in turn infect others.

Are the right cultural norms in our community supported and disseminated?

We can create positive contagion through leader influence and make an impact for every community.

So, regardless of what role you play in the community here are a few takeaways for each and every one of you that calls the Triangle or RTP or Raleigh/Dirham home.

Outside of our beloved cities they think of us as ONE REGION.

Older people call us RTP.  Some know us as the TRIANGLE.  The rest think of us as RALEIGH/DURHAM.

And yet there are a few inside our regional family that fight hard to maintain our individual city brand.  I get it.  We should all have pride in our respective cities.

But the brand is as ONE REGION.  Every ounce of energy spent creating individual brands dilute the opportunity and scale of the region.  Our future customers think this way why do we fight it?

Many of you have talked about this in the past but very few have changed their behavior.

I want to remind you that our investment accelerator was originally called TRIANGLE STARTUP FACTORY.

Today, I have chosen to use the label RALEIGH/DURHAM when referencing anything that happens within the region.  This bears no disrespect to Cary, or Chapel Hill or Apex.  Blogging, tweeting, speeches, and everyday conversations refer to Pendo, Channel Advisor, Red Hat, Adwerx or Bronto as from RALEIGH/DURHAM.

While I am on this thread, most know that the census bureau treats us as 2 MSA’s.  In fact, because they are “splitting our baby in half” we get left off many lists.  Lists are another branding opportunity that we lose or get diluted.  Who wants to form a group to figure out how to get this changed?

Lastly, our transit system (is there one?) creates friction between our great cities.  I should be able to choose to live in Durham and work in Raleigh with only a 20-30 minute train ride loaded with WIFI.  New Yorkers have been doing it for years.  BART in SF serves many and creates seamless opportunities.

We are 15 years behind this issue and it needs loud vocal support.  Entrepreneurs are fluid by nature – support their needs.

Talent is the underlying constraint that every community, especially the startup community suffers from.  I am sure I will get no argument here.  But here is the subtle issue with respect to the startup community.  If Red Hat or IBM or Channel Advisor needs a skillset not available here, they simply recruit for it in another office.

If a startup does not have enough talent, they consider moving the entire company to another location.  That is a loss.

But what I find is that our startup to mid-level companies complain about the problem but are not willing to find solutions.  Every person over the age of 40 let’s say probably worked for a large company at some point and we attended one or more training sessions.  Sales, management, finance were all typical topics.

I hear this question every day, “I cant find a senior developer”.  You know where senior developers came from?  Junior developers.  Take responsibility to train your people, bake it into your business model and stop looking to outsource this major challenge to someone else.

We talk every day when selling our region about our great universities.  Yet the gross majority of our students are recruited from DAY 1 to go to New York, or San Francisco.  Career service are incentivized to place students in larger firms who sponsor events to build brand.  Yet there is little awareness of what is happening here.  I am not arguing that every student should join a startup but we have an opportunity to at least tell our story.  There are lots of way we can do this with little to no additional funds.

Lastly, colleges and universities are not the only way to train for today’s skills.  We have a population seeking to create new-age opportunities and to serve them we need new-age solutions.  Full disclosure that I am an investor in the Momentum Learning program which provides a 12 week, fully immersive course on how to be a software developer.  This is just one area.  Digital marketing, sales, customer service are other areas where we could identify & support alternative programs to re-train our population.  Move the needle just 5% and we make a serious impact.

Regardless of whether your community is in a developing, emerging or leading state, regardless of whether you are an entrepreneur, and investor or economic development executive, regardless of whether your city has a population of 100,000 or 10,000,000, there are a set of community supportive behaviors, attitudes, a culture that serve as a foundation and that can accelerate your community from its current state to a more robust state.  That is the game of probabilities.

The game never ends.  My partner Brad Feld likes to say, “community building is a 20 year effort that restarts every day”.

Thanks for listening and please reach out to discuss any of these thoughts.

Speaker, investor, mentor, startup founder. One of 3 or 4 Co-Founders of MapQuest (sold to AOL for $1.2B). Managing Director of $25M Venture Fund in late 90's. CEO, COO or President of various companies ranging from $200k to $20M in size. One of two Managing Directors of The Startup Factory (35 investments across 7 cohorts), founder and MC of the Big Top Reverse Job Fair and national writer and speaker waxing poetic around startups and startup communities. Currently EIR @ Techstars with Brad Feld ~ Startup Communities, to help community leaders around the world grow their startup community.

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