Ecosystem or egosystem: the mismatch between Startups and Government
For better or for worse, Silicon Valley is unlike no other location on earth when it comes to the startup scene.
It’s a mythical place; companies continue to attract monster valuations compared with the rest of the world. Money is thrown around like it’s confetti at a wedding and the ecosystem that supports this — a myriad of investors, startups and talent — continues to thrive.
So what is an ecosystem? A quick Google of the term and you get back the following:
Ecosystem
Equal balance between any powers, influences, etc; equality of effect.
Ecosystems are born out of equilibrium. Growing up we’re taught about this being mostly present in nature. Where everything has a role to play to support one another and the broader community.
And if you look into it further, the condition of an ecosystem is held in balance by negative feedback systems operating within it. It’s held in check by everything doing its part, including the predators eating the weaker prey to enable the stronger species to survive.
Ecosystems are so complex that they take years to build. And many will die along the way if that balance is not achieved quickly.
Is Silicon Valley an ecosystem in the truest sense of the word?
Depends on how you look at it.
Yes, because it does have a number of the key ingredients: money, new ideas, supporting services, acquisitions, quick deaths of those companies that are weaker than the rest.
On the flip side, the Valley is also built on unrealistic valuations and founders can still manage to secure an oversubscribed round despite the fact that they don’t actually have a successfully operating business model yet.
Good or bad, the fact is Silicon Valley has managed to establish itself as that special place where things continue to work. New ideas are born, funded and grow.
So what, then, does that mean for all the other locations around the world that are vying for the “next Silicon Valley” title. Does that title even matter?
Here in Sydney I’ve seen so much debate about which location will take the mantle of the next startup hub. The one that can attract the coolest, most innovative, most funded, “most [insert adjective here]” startups.
In recent years it was Barangaroo, the great new development on Sydney’s waterfront that was hailed as the next hive of activity for everything “startup”. There was fanfare, the Crossroads report launched by Startup AUS, press articles from people in the industry talking up the strength of this new precinct and how it would change everything.
Then, a few months later that all ended and there was another announcement, this time from the NSW Government, about the one startup hub to change them all. They are creating a Silicon Valley-like ecosystem, likened to the Paris-based Station F, where all of the best and brightest startups, accelerators, incubators etc will all base themselves. It’s planned to be in the hotbed of activity, just doors away from our very own poster-child Atlassian (together with Canva, two of the most over-used examples of startup success by the Australian media).
Looking across Australia, we’ve got Techstars in Adelaide, LaunchVic from Victorian and more. That’s just in the domestic market. I haven’t even scratched the surface when it comes to what’s going on in the rest of the globe, outside of Australia’s proportionally small market.
What’s this all for?
So I think the bigger question here is what does this great crusade for the next best startup ecosystem do for the sector?
On the one hand, it helps to raise support for startups wherever this campaigning occurs. It creates visibility for awesome ideas and awesome people. It attracts more investment and support services which in turn helps the hub to begin to grow.
But where it falls down is when ego starts to get in the way. When rather than focusing on the greater good and the biggger opportunity, it turns into silo warfare.
Like the not-for-profit sector, the startup world is faced with a similar set of dilemmas. Especially when so much of the debate is often public.
Something I’ve often observed is that in the NFP sector, there is so much unnecessary competition for the same cause. Someone thinks the way the other person is raising the profile of a cause is the wrong way to do it. So they go out, use their network, campaign the government to give them money then off they go.
And as a result, the other player(s) doing a good job are suddenly thrust into a defensive position, being distracted from all the good they are doing and needing to deal with this new player who is more interested in telling everyone why they should exist.
Granted, competition is good. I’m not saying the same guys should always rule the roost. But when competition is started through ego and not the greater good? Then that’s not helping anyone.
On Reid Hoffman’s Masters of Scale, there is a great episode about building startup ecosystems. Linda Rottenberg from Endeavor, who is the feature of the 40 min discussion, is approaching it from the best place. Where she is truly seeking to help companies in lesser known tech hotspots to break through. She’s fuelled by a genuine desire to get companies the support they need. That shit is awesome.
But when it becomes a pissing contest, that’s when things stop being about the companies we are trying to help grow and the industry we want to flourish. As I was writing this I came across this brilliant article from Dean McEvoy. One paragraph in particular helps to sum up what this stupid ego-driven fighting can do:
“I was stunned speaking to the country head for a large technology company who told me how weird it was having NSW and Victorian government representatives outbidding each other to him. He found it odd we didn’t have a united story around why Australia was great… While the states were trying to score points of each other, we almost missed out on this business being in the country.”
That’s the sort of shit that happens when cities and states focus on themselves, not the startups they’re supposed to be supporting. Where the KPIs of those in charge is a numbers game; where success equals more money for the city or state in question, helping to line the public coffers and stick it to the other states or cities that missed out.
That focus is all wrong. It’s about vanity. Startups are a long term play. They need ongoing support to flourish, with a true ecosystem that supports their growth. That means going beyond just building a set of cool workspaces in the same area.
But how the hell will we ever get there if all the other supporting parts of that ecosystem — investors, professional services, larger companies looking for acquisitions etc — don’t really know where to look.
And more so, why would the startups stay somewhere that doesn’t have a unified story? Where at any moment that city or state could decide that something else is the flavour of the month.
It should never be about why you shouldn’t set up somewhere or why this state or that accelerator isn’t right. Instead, it needs to be about providing support for the right reasons — to grow awesome businesses.
That’s where Governments around the world (and particularly in Australia) have a lot to learn. Because if they want to be anything like Silicon Valley, it’s not just about providing the right infrastructure and support, it’s about going into it with the right attitude.
