“Current trends toward entrepreneurship and resisting hierarchy, as well as the desire to create egalitarian work spaces, are nothing new,” according to Fred Turner, a communications professor at Stanford University. “It is a rhetoric that comes right out of the 1940s.” Turner found that the 1960’s American counterculture, as well as the modern entrepreneurship movement, “owes many of its ideals, and particularly its understanding of how media shapes people, to a generation… that really came to life during World War II.”
Both the 1960’s American counterculture and modern entrepreneurship movement developed predominantly in the greater San Francisco area, although they were also connected to New York City. What implications does the formation of the 1960’s American counterculture have for people working to develop startup ecosystems in other parts of the world?
Promote Openness, Collaboration, and Independent Thinking
The Committee for National Morale convened in New York during the 1940’s to promote an open, flexible, collaborative, and democratic personality among the American people. Commissioned by the Museum of Modern Art, Bauhaus artists then created propaganda exhibitions, which people were supposed to interpret as free democratic individuals, to further the Committee’s goals. Turner links the Committee for National Morale and the Bauhaus aesthetics to the multimedia environments that would become cornerstones of the 1960’s countercultural movement.
If you want to develop a startup culture in your region, you should harness the powers of art, music, architecture, and other mediums to promote entrepreneurial values.
Since startup ecosystems resist hierarchy, startup ecosystem management can be a difficult undertaking. How do you act as a manager if the system, by nature, lacks leadership positions?
You act as a prominent network node. This can be as simple as making introductions, and it can be as complex as organizing events or speaking at ecosystem gatherings. During the 1960’s countercultural movement, which also resisted hierarchy, leaders were well-connected and vocal people, such as authors and musicians. They organized and keynoted events to make statements and build relationships. Examples include Ken Kesey, Bob Dylan, and Timothy Leary. While these people lacked formal positions of power, they spread ideas, expanded perspectives, and formed networks.
In the 1960’s counterculture, leaders introduced new forms of art, ideas, and mind expansion. Similar to rocks dropping into a pond, these intellectual stimulants created ripple effects that combined to create a counterculture.
If you want to lead a startup revolution, you should introduce innovative tools to your regional ecosystem. By introducing tools, you generate ripple effects and create credibility for yourself as a progressive originator of growth. Startup Commons’ Business Plan Tool and Ecosystem Mapping Application are two tools that are designed to solve confusing problems for entrepreneurs and service providers. Would you like to be known as the people’s savior?
Open Communication Lines
As you can tell, multimedia, art, and communications played significant roles in cultivating the 1960’s countercultural movement. In fact, communications may well be the backbone of all revolutions. Technology has given birth to new forms of communication that, when applied to startup ecosystems, will lead to an economic development digital transformation.
Startup ecosystems are decentralized and dynamic, so they require different policy approaches than traditional economic development. Although governments do not typically promote countercultural revolutions, enabling startup revolutions are often in smart governments’ best interests because they can lead to digitized economic development and data-driven innovation. How can governments help promote entrepreneurship and startup culture?
One small step that smart governments and their partners can take is opening communication lines for ecosystem actors. By providing proper digital infrastructure, governments and their partners have the ability to rapidly accelerate cultural change. This can be accomplished by introducing Startup Commons’ Startup Ecosystem Portal to your ecosystem.
Now, apply what you have learned, engineer a countercultural movement, and lead your region's startup revolution!
On March 31, 1968, Martin Luther King Jr. delivered a speech at the National Cathedral, titled “Remaining Awake Through a Great Revolution.” He discussed a triple revolution that was taking place, consisting of three factors: technology, weaponry, and human rights. Does that sound familiar to our present situation?
Martin Luther King Jr.’s wisdom has valuable implications for today’s entrepreneurs and policy makers. Here are four key takeaways for entrepreneurship ecosystem developers from “Remaining Awake Through a Great Revolution.”
Ethics need to keep pace with technological changes.
“Through our scientific and technological genius, we have made of this world a neighborhood and yet we have not had the ethical commitment to make of it a brotherhood.” This statement from King’s speech resonates deeper in the modern era than it did in 1968. Internet, smart phones, and social media now link people around the world with constant communication. Furthermore, smart cities and govtech solutions are rapidly bringing regulators into the digital future. However, our ethics still need to keep pace with our increasing digital connectedness.
With so much digital information available, entrepreneurs and policy makers must make decisions about who controls and maintains responsibility for data. The European Union’s General Data Protection Regulation (GDPR) is an effort to give citizens control of their personal data. The Startup Commons team is happy to advise on GDPR compliance, and our Digital Ecosystem Applications are designed to give users control of their data, no matter where they are in the world.
Another challenge presented by technological change is intellectual property ownership. As startups increasingly drive innovation, traditional technology transfer models are becoming cumbersome and outdated. Startup Commons offers Open IPR consulting for universities and research institutions so that they can more effectively contribute to innovation.
Leaders create consensus.
"Sir, I’m sorry you don’t know me. I’m not a consensus leader,” King once told a newsman. He claimed in his speech that “ultimately a genuine leader is not a searcher for consensus, but a molder of consensus.” If you are leading an entrepreneurship ecosystem, you will need to balance several competing viewpoints and opinions. Sometimes you will feel the need to take unpopular positions, such as Martin Luther King Jr.’s stance against the war in Vietnam.
What do you do if you are a politician and the majority of your constituents fear losing their jobs to immigrants? Do you push for stricter immigration policy? What if your constituents do not understand that high-skilled immigrants actually create, rather than remove, jobs in your region’s economy? When you take a position on an important issue, it is sometimes best to create, rather than respond to, consensus.
Gain insight from interconnectedness.
During his speech, King made the point that “we are tied together in the single garment of destiny, caught in an inescapable network of mutuality. And whatever affects one directly affects all indirectly.” Similar to our broader society, entrepreneurship ecosystems are inescapable networks of mutuality. They rely on the contributions of multiple players, ranging from startup employees to political leaders.
How do ecosystem developers make sense of these interconnected relationships? Startup Commons’ Digital Ecosystem Applications illustrate the interconnectedness of entrepreneurship ecosystems, enabling ecosystem developers to visualize and benchmark ecosystem activity. For example, our Ecosystem Mapping Application enables entrepreneurs and policy makers to see how support providers serve a startup’s needs at various phases of the startup’s development. By mapping out support-provider roles, we help entrepreneurs and grant makers navigate an otherwise complex, interconnected network.
The time to act is now.
Since “time is neutral,” King made the point that things do not automatically improve with time. He called on his audience to “realize that the time is always ripe to do right.” King’s wisdom holds true for economic development.
If you want to build an entrepreneurship ecosystem, then you should start now. Reach out to Startup Commons!
Thomas J. Donohue, CEO of the U.S. Chamber of Commerce, delivered the “2018 State of American Business Address” on January 10th. After making the case for economic growth, Donohue outlined eight priorities for the 2018 and beyond. How can Startup Commons answer Donohue’s calls, assist American business, and drive economic growth in 2018?
Building the Workforce of the Future
As Donohue stated in the Address, “Growth doesn’t happen without people,” and we completely agree. Our Growth Academy provides a curriculum for training entrepreneurs and startup employees, as well as the educators and personnel who support them. If America desires high-growth companies, we will build the workforce that fuels them. Startup Commons also offers numerous services for higher education, including Open IPR and startup ecosystem consulting.
Embracing Technology in our Economy
Our mission is to help you develop high-tech startup ecosystems. Whether your region seeks govtech solutions or consulting, Startup Commons is your one-stop-shop for embracing technology.
Modernizing and Expanding Infrastructure
Does your state or city want to cultivate a thriving entrepreneurship ecosystem? If so, then you will need digital infrastructure to manage your ecosystem development efforts. Startup Commons’ Digital Ecosystem Applications can supply the digital infrastructure to build your region’s startup ecosystem. America has long been a global leader in telecommunications infrastructure, originating telephone lines and internet cables. Will you stay ahead of the curve with digital infrastructure and smart cities? Startup Commons is here to assist.
Reasserting American Leadership in the World
Does American want to be the leader in global innovation? Unfortunately, it will take more than Silicon Valley, Boston, and New York City. Luckily, Startup Commons can help America strengthen its startup ecosystems in other parts of the country. Regardless of your ecosystem’s maturity, we can help guide you to the next level with our training and software.
Fueling Business Growth
We are eager to help you build the strongest startup ecosystems in the world. All you need to do is ask.
Restoring Fiscal Health
According to Where the Jobs Are, startups create all net new jobs in the United States. If America wants to combat its rising debt and protect the middle class, then startups provide a key piece to the puzzle, supplying tax dollars and job opportunities.
Electing Pro-Growth Leaders
Our Digital Ecosystem Applications add transparency to economic development. We force leaders to ‘walk their talk,’ by holding them accountable to their communities. To further increase accountability, Startup Commons will help you structure public-private partnerships for startup ecosystem development and data handling.
Protecting Free Speech and Civil Discourse
Since our software facilitates transparency and trust, we create space for civil discourse. Additionally, we promote open knowledge and best-practice sharing. Similar to Thomas J. Donohue, Startup Commons champions freedom as a means for economic growth.
Will You Work with Us?
What are you waiting for, Americans? It is time to reassert your leadership in the world. Startup Commons is here to help.
According to Investopedia, “The principal-agent problem develops when a principal creates an environment in which an agent's incentives don't align with its own.” This specific example of moral hazard results from differing interests and information asymmetries.
Why do economic development efforts often fail fantastically?
You guessed it. The principal-agent problem. Here are five ways that the principal-agent problem kills economic development efforts:
1. Voters and Elected Officials
Once elected officials enter office, they do not need to fulfill their campaign promises. Even if they are up for re-election, it may be in their best interest to appease major campaign donors, rather than individual voters. Since legislation is often too long and complex for voters to bother reading, public perceptions of elected officials are often crafted by the media. This information asymmetry often results in economic development initiatives that are merely for show. The situation gets even worse if bribes and backroom deals occur.
2. Elected Officials and Regulators
Regulators know the industries that they regulate much more intimately than elected officials do. Almost all regulators desire to keep their government jobs or jump to a more lucrative careers in the private sector. Either way, regulators possess incentives to take credit for successes and conceal their mistakes, using information asymmetries to keep elected officials and supervisors content. When regulators want to use the revolving door to enter the private sector, they can use information asymmetries to their advantage to appease private-sector interests at the expense of politicians.
3. Regulators and Businesses
Although regulators understand industries, businesses know their operations better than outsiders. Attempting to maximize shareholder value, businesses may bend or break regulations. Depending on the reasons for pursuing economic development, regulators and entrepreneurs can end up at odds. For example, generating taxable revenue and increasing employment may not serve shareholder interests. Offshore holdings and automation may benefit entrepreneurs and investors, but they may not help regulators, as well as politicians, achieve their objectives.
4. Regulators and Support Organizations
The relationship between regulators and support organizations is similar to the relationship between regulators and businesses. Support organizations understand their own operations much better than regulators. This is especially dangerous when support organizations are competing with each other for government grants. Incentivized to stay in operation and maintain their salaries, support organization personnel may exploit information asymmetries to exaggerate their economic development contributions.
5. Support Organizations and Businesses
Support organizations and businesses can ideally align their interests through contracts and equity deals. However, deals can become so complex that one side manipulates the other and, as they say on Wall Street, “rips their face off.” More commonly, one side just fails to deliver on their promises, and the situation becomes even more complex when they attempt to save face for regulators.
How Can You Solve Principal-Agent Problems?
Startup Commons offers a suite of tools that are designed to eliminate principal-agent problems in startup ecosystems. Our digital ecosystem applications increase transparency for all parties, reducing information asymmetries at all levels of economic development. What can you accomplish with trust and transparency?
Are you investing exclusively in U.S. companies? If you think this is a wise strategy, sorry sweetheart, but you are stuck in the 90s. Now that it is 2018, intelligent angel investors and venture capitalists are putting their money into foreign companies. Do you not believe this? Here are four reasons why you should invest outside the U.S. if you want meaningful returns:
Decimalization and SOX
According to Investopedia, “The U.S. Securities and Exchange Commission (SEC) ordered all stock markets within the U.S. to convert to decimalization by April 9, 2001, and all price quotes since appear in the decimal trading format.” Previously U.S. stocks had traded at 1/16 dollar increments, but they traded at penny increments after the decimalization conversion. This has caused tighter spreads, resulting from smaller price increments and movements. While tighter spreads are wonderful for the trading desks at investment banks and high-frequency traders, they are awful for small-cap stocks.
According to AICPA, “The Sarbanes-Oxley Act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting. Section 404(b) requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls.” Even with the JOBS Act providing an “on-ramp” for high-growth startups, compliance can cost companies millions of dollars when they go public. AOL went public at $10 million in 1992. No company in their right mind would do that today.
Decimalization and Sarbanes Oxley, deter venture-backed companies from IPOs. This is why we have begun to see so many unicorns, private companies valued over $1 billion, in U.S. markets. When startups cannot effectively go public, they must resort to exits through acquisition. In recent years, startups have been forced to choose between acquisition by Facebook, Amazon, Apple, Netflix, or Google (FAANG). While these exits create lower returns for investors, they also tend to destroy company cultures that startup executives and board members work hard to cultivate. Furthermore, acquisitions are often a way for established players to quash would-be competition, which increases tech-sector consolidation.
There were only 39 venture-backed U.S. issuer IPOs in 2016 - the lowest number since 2009. Compare this with 270 venture-backed U.S. issuer IPOs in 1999. With venture-backed IPOs at historically low levels in the U.S., it may be time for investors to look toward countries that are more IPO-friendly.
In Chapter 6 of Where the Jobs Are, John Dearie and Courtney Geduldig explain that there are too many venture capital funds, and they are investing too much money in U.S. ventures. “As funds swelled in number and size, industry critics say, general partners became less focused, less disciplined, and ultimately, less effective.” Fred Wilson claimed in 2009 that “the venture capital asset class does not scale,” and he advocated a “back to the future” approach of smaller funds, partnerships, deals, and exits.
Since these critics of venture capital are focused on the U.S., they fail to see that expanding the scope of venture capital could solve problems plaguing the industry. Even with larger funds, venture capitalists could add discriminatory nature to their investments by sourcing deals globally. Instead of throwing money at increasingly risky ventures within 15-mile radii of their offices, intelligent venture capitalists invest in the most promising startups, no matter where they are located.
By investing globally, venture capitalists can significantly de-risk their asset class and continue attracting institutional investments, even during U.S. economic downturns.
In Tim Draper’s book, How to be The Startup Hero, he discusses how he bought a Willie Mays rookie card in Boston for $600. However, the baseball card would have cost him over $2,000 if he had bought it in San Francisco. After learning the lesson of geographic arbitrage, Draper went on to create a venture fund, called DFJ ePlanet, that invests in startups around the world.
Investors often obtain larger equity stakes in exchange for smaller amounts of capital when they invest in foreign startups. In other words, they get better deals on startups that are outside the U.S. Similar to Willie Mays cards, valuations tend to be higher in Silicon Valley than anywhere else in the world. If comparable technologies are being developed in Silicon Valley and Southeast Asia, it may be a better move to invest in Southeast Asian startups.
In How to be The Startup Hero, Draper explains that “when the government piled on Sarbanes Oxley Act regulations to public companies, our best form of financial exit was sabotaged. Our international investments through DFJ ePlanet were our saving grace.” In addition to utilizing geographic arbitrage, you can see that Draper’s strategy circumvented SOX issues and de-risked his portfolio. Investing abroad can be a powerful move.
Innovators Live Abroad
Where do the top innovators and technology entrepreneurs live? If you guessed the U.S., then you better reconsider.
Dearie and Geduldig claim that Finland “is the only country where students leave high school ‘innovation-ready’.” At least, U.S. students excel in technical disciplines, right? The PISA 2015 tests, which measure students in 71 countries, ranked the U.S. 38th in math and 24th in science.
Luckily for the U.S., the country’s world-leading universities attract some of the best and brightest students from around the globe. Unfortunately, U.S. immigration policies deter students from staying in the country to work for or launch startups after graduation. Chile, Canada, Australia, New Zealand, the United Kingdom all offer visa programs that are designed to attract entrepreneurs. Intelligent investors should follow the talent and focus on entrepreneur-oriented countries.
How Can U.S. Regulators Reverse These Trends?
As intelligent investors open their eyes to opportunities abroad, the U.S. government may want to wake up and reverse the exodus of early-stage capital. As our society becomes increasingly globalized, geographic arbitrage and de-risking strategies will remain appealing to investors. However, regulators can pursue a number of actions to drive innovation and strengthen the pull of U.S. markets.
Federal regulators should consider tiered price levels in U.S. stock exchanges, similar to Japan and Hong Kong, as well as entrepreneur-friendly immigration policies. Although it is a massive undertaking, education reform may be necessary if the U.S. hopes to stimulate entrepreneurial competitiveness among its citizens. At the state and local levels, tax credits for angel investors can provide useful incentives.
Most importantly, the U.S. needs to build robust startup ecosystems outside of New York City, Boston, and Silicon Valley to create at-home options for investors. This is exactly where Startup Commons can help.
Supporting startup ecosystem development, from entrepreneurship education, to consulting to digital infrastructure for connecting, measuring and international benchmarking.
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