Successful and Inclusive Entrepreneurial Ecosystem
The combined presence of (1) entrepreneurs and (2) organizations that aim to support new business owners can be found in most urban centers; however, many conference attendees agreed, a successful entrepreneurial ecosystem can be defined by the strength of the interactions between these entities. Before reflecting on measurement challenges when it comes to entrepreneurial ecosystem, it is important to first define and assess indicators of success for two primary pieces of the puzzle.
Puzzle Piece 1: Successful Entrepreneurs
There is no single/simple definition for a successful entrepreneur. Some new business owners may define success as the moment their organizations is formally established via articles of association and registration with local, state, and federal revenue sources. Others may not consider the venture successful until the moment their idea becomes an operational business that fully covers their personal financial needs.To support inclusive innovation, we need some flexibility to allow for variation in the entrepreneurs’ starting points when defining success.
An aspiring entrepreneur with substantial financial support is more likely to be able to access the advice of legal and accounting experts to inform the process of incorporating their business. They are positioned to more easily cover the upfront costs to submit the official paperwork and may even be able to sustain a ramp-up period of limited business-generated income without sacrificing their needs for daily living. In contrast, some individuals in the entrepreneurial pipeline may be receiving government subsidies to cover food and health insurance costs. Many entrepreneurs need additional time to: access the necessary supports to develop their idea into a business model, to expand their financial capital to cover the start up costs, and to establish a baseline of business-generated to be able to abandon their current job and to relinquish eligibility for subsidies that support their family. Barriers for (relatively more) affluent and under-resourced entrepreneurs are remarkably different from the very beginning.
Among the topics discussed by attendees of the “Diversity and Inclusion” track at the InBIA conference, simply defining “success” for entrepreneurs was identified as a significant obstacle to ongoing measurement efforts. Some asserted that the belief in one’s ability to access the resources needed to make the person’s dream come true was a point we needed to consider in measuring efforts to increase inclusivity. Participants generally agreed, even allowing oneself to dream an “American dream” is not equally accessible in the United States and therefore the ability to do so could be a step towards progress. Evaluation of growth in the diversity of aspiring entrepreneurs is one potential starting point.
Puzzle Piece 2: Successful Entrepreneurial Support Organizations
Many entrepreneurial support organizations are not created with the mission of expanding access to entrepreneurship to underserved populations of innovators. If the effort to reach out to these groups is not intentional, it’s likely to be inequitable. Entrepreneurs’ perceptions regarding the potential value of connecting with specific support organizations varies along with perceptions of trustworthiness as we find repeatedly in our own panel survey studies we run at Forward Cities. In many communities, a long history of disinvestment in minority populations and neighborhoods has created an atmosphere of cynicism and distrust when it comes to the ability and willingness of support organizations to understand the struggles of aspiring and current business owners. Assessing the perceptions of aspiring entrepreneurs and current small business owners can help identify issues driving variation in trust and expectations in the target community.
Alongside an external stocktaking of community perceptions of the support organization, internal evaluation can also be beneficial to ensure the organization’s efforts are reaching the population they aim to serve. Based on concerns raised during the conference, our own work at Forward Cities and my personal experience with inequities research, I generated a list of questions that support organizations can ask themselves as they strive to serve a diverse population and overcome existing barriers to inclusion.
Who makes the decisions and how are they made?
- Does leadership of the entrepreneurial support organization look like the population they aim to serve? Have they experienced similar struggles and successes firsthand?
- Is the organization driven by local grassroots leaders or does it operate with direction from people who do not live in (or have never lived or worked in) the geographic region being served?
Who does the support organization serve? How does the support organization serve target populations?
- Does the organization make a commitment to reach out to people from historically marginalized, under-connected and under-appreciated populations?
- Are the services the organizations available at a time and point that the people it intends to serve can actually attend to?
- How often does the organization refer entrepreneurs to other support organizations when they cannot meet all their needs?
- Are the services and their associated costs clearly articulated in language and format that is resonant and visible to the target audience?
- Is there clarity about the organizations’ goals and transparency about how resources are being utilized and distributed?
- How does the organization define its own success?
- How does the organization define the success of the entrepreneurs they serve?
- How does the organization benefit from the success of the entrepreneurs they support?
Assessment of the environment supporting inclusive innovation requires measurement at multiple levels using varied techniques to answer the important research questions discussed in this blog. Flexibility in definitions of success for new business owners and aspiring entrepreneurs needs to account for differences in opportunity at multiple stages including: (1) the ideation phase, (2) launching a new business, and (3) evaluation of the success of a new business. An assessment of who is (and is not) being served and the existing barriers to accessing services are necessary to evaluate an organization’s contributions to an environment supporting inclusive innovation.
In Part 2, I discuss how we can measure how these puzzle pieces come together to create Successful, Inclusive Entrepreneurial Ecosystems
Fairlie, Robert, Sameeksha Desai, and A.J. Herrmann. (2019) 2017 National Report on Early-Stage Entrepreneurship, Kauffman Indicators of Entrepreneurship, Ewing Marion Kauffman Foundation: Kansas City. Available at https://indicators.kauffman.org/wp-content/uploads/sites/2/2019/02/2017-National-Report-on-Early-Stage-Entrepreneurship-February-20191.pdf
Kauffman Foundation. Data Resources https://www.kauffman.org/microsites/state-of-the-field/user-resources/data-resources