Avoiding a Startup Monoculture

April 2015 ImageAs the number of entrepreneurship support programs increase, whether for fluid talent and ideas or basic startup support, there is more competition for finite resources. Are we unwittingly creating a global startup monoculture? That is a question raised by Amisha Miller from the Kauffman Foundation at the Startup Nations meeting during the Global Entrepreneurship Congress in Milan last month.

 

When so much of America’s manufacturing base went overseas over the past few decades, our anxiety was very much concentrated on the loss of good American jobs. There may be an equally significant implication. Other nations are capitalizing on their manufacturing infrastructures and strengths in fostering low-tech startup movements. While the Maker Movement was born in the United States, and there are notable exceptions of US maker accelerators, if we are not careful, the United States might miss needed innovation potential in industries that have yet to see technological revolution or that need non-tech solutions.

 

A common rebuttal from traditional small business constituencies to putting more effort into policies that advance efforts targeted at increasing rates of new firm formation is that it is all about high-tech startups, and that America is betting too much on its young code writers and designers for its economic future. However, while a Kauffman Foundation report released in 2014 suggests “the high-tech sector packs a lot of economic punch”, it also notes that high-tech startups are a “relatively small size – representing just 4.1 percent of total private-sector firms in 2011”.

 

In the entrepreneurial global race, does it matter what type of startups we are nurturing? When globalization gained momentum two decades ago, it started to create a loss of local cultural idiosyncrasies. Some argue that the consequences of a narrow focus are costly from both macroeconomic and microeconomic perspectives and that it goes against efforts to democratize new business creation.

 

Diversity

To begin with, when programs focus on high-tech entrepreneurs they tend to recruit more male talent, resulting in a wider gender gap and limiting the reach of entrepreneurial exposure in the ecosystem. Ultimately, this results in fewer women and non-tech mentors, narrowing the diversity of successful entrepreneurs-turned-investors, and perpetuating a high-tech selection bias in many ecosystems. The end result: innovations end up being less diverse than would be ideal.

 

Also, as many of us have sought to advance a deeper understanding of the distinction between startups and small business, we have inadvertently allowed people to equate startups with high-tech startups. In an effort to value diversity in the world of innovative business ideas, Google purposefully chose to coin its community-building space “Google for Entrepreneurs” instead of “Google for Startups.” Bridgette Beam, its senior partnerships and program manager, pointed out during a Startup Nations meeting in Seoul last November that the tech industry workforce in the United States is only 5 percent Latino and 4 percent African American.

 

Venture Capital

Beyond diversity, another reason lower tech startups matter is capital. High-tech is commonly equated with a Silicon Valley VC exit-oriented model of build, scale and exit, yet a large majority of startups will never follow that path. Venture capital is the exception, not the norm, as a funding source for startups (see myths about VC’s punch on the entrepreneurial economy here). The implications for policymakers of focusing on the VC sector of entrepreneurial ecosystems means focusing on those 5 or 10 percent of late-stage startups and missing out on the vast majority when considering program and policy needs.

 

Skills

Another implication for entrepreneurship program leaders is that the skills required to start and grow a business are not just technical skills, but involve abilities in sales, marketing, customer acquisition, and management. Many businesses that rely on the internet and smartphone to offer innovative services, such as AirBnB & Uber, are not tech-first businesses but service-first businesses.


There are, however, some impressive efforts underway in the United States. While the value of incubators has been questioned in terms of new firm formation rates, according to the National Business Incubation Association, just 37 percent of North American incubators are focused on technology. The rest come from fields such as manufacturing, arts, fashion and food, explains Entrepreneur Magazine.

 

We also have some impressive examples of accelerators that do not focus on technology such as the Creative Ventures Program, a business accelerator for creative sector entrepreneurs in Detroit. Another, Dogfish, is the world’s first film production accelerator providing all the support of a typical accelerator program to teams of producers looking to develop their business model prior to the investment phase of a film.

 

There is also “Creative-Startups” in Albuquerque that blurs the lines between technology and the creative industries and focuses on cultural entrepreneurs and has already built iconic brands in music, film, publishing, fashion, and television.

 

There’s no doubt that high-tech entrepreneurs have innovated many new products and processes, creating new jobs and improving the quality of life for many. However, a narrow focus on one entrepreneurial sector means only unearthing a portion of a nation’s entrepreneurial potential. Among those untapped entrepreneurs could lie solutions to valuable answers in healthcare, environmental sciences, education and beyond. Let’s hope the next wave of startups and programs to support them does not forget the makers and doers of things and our unique American idiosyncrasies. After all, as Harold Evans reminded us “They Made America”.


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