The Entrepreneurial Lifecycle and the role of government at each stage
There is a popular misconception among the general public and startup aficionados alike that government programmes promoting entrepreneurship are nothing but words and empty gestures.
In reality, many of the people running such programmes walk the walk, and sincerely want to improve their country’s economy.
Why, then, so few make meaningful progress towards a vibrant and self-sustaining startup ecosystem?
I am a serial entrepreneur who has traveled to over 90 countries, formed close relationships with local businesses and government officials, learned from experienced founders, and mentored at startup events from San Francisco to Kathmandu.
What I found is:
The problem often lies not in bad intentions, lack of resources, or insufficient action, but in the lack of focus, and a misunderstanding of the entrepreneurial lifecycle.
Let me explain…
Enter the factory
The seasons turned so fast and I’m moving too slow
I get blown off course, like everyone I know
I need more time, I need more time
To make good on the promises I made to the world
when the world was moving slower
— New Model Army
I believe the main problem to be that too many policy makers go directly to the what and how, and skip the why, when and who.
They begin by thinking ‘we need more startups’ and launch websites, bootcamps, university courses and other programmes that try to take people in, and output businesses a set interval later.
But this approach is ineffective at boosting entrepreneurship, which is not a skill, but a state — dependent on external factors, and sheer serendipity — timing, team, unique insights, investment climate, life situation, and so on.
There is a thousand and one reasons why participants don’t continue working on their projects after programmes such as the Startup Weekend, and most have nothing to do with the viability of the idea, the quality of the programme, or even the team.
The reasons tend to be much more personal.
Some of the participants have cushy jobs that they are not ready to give up; others live paycheck to paycheck and can’t afford to take the plunge. Some are students about to pursue a challenging degree, and yet others are following a loved one to another country.
They have the right mindset, a good idea, maybe even the financial means to go ahead with their project. But, when the rubber hits the road, they realize they cannot give it their all — not at the moment.
Not to mention that in some cultures, the prospect of a failed startup venture on a CV would be considered a disaster in terms of a professional narrative.
Every step of the way
I’ll be there for you
(When the rain starts to pour)
I’ll be there for you
(Like I’ve been there before)
— The Rembrandts
A more effective approach to develop entrepreneurship is the equivalent of lifecycle marketing.
It relies on the understanding that entrepreneurs are not made. They can only be nurtured, on their own terms and schedule.
All we can do is promote positive serendipity, and make sure that when all the stars align, the entrepreneur doesn’t crash into a wall because they lack some basic skills, meet an insurmountable bureaucratic obstacle, or miss basic infrastructure (e.g., a payment gateway).
Just as in lifecycle marketing, we must target people with different messaging and products over time, satisfy their pressing needs, and influence their behaviour at each stage.
We must first inform people unfamiliar with entrepreneurship that this path exists, show them that they can do it, and develop their skillset so they have a higher chance of success once they start a venture.
We must then increase the chances of external factors falling into place through networking opportunities, financial support, counselling (can’t expect people to risk and go out of their comfort zone when they lack that comfort zone in the first place), mentoring, and so on.
4 stages of the entrepreneurial lifecycle
💡 I. Inspire future entrepreneurs
Early stages of the entrepreneurial lifecycle is where the government can make the biggest difference — later stages, closer to tangible returns on investment, tend to attract sufficient attention from the private sector already.
There is immense value in programmes such as the Startup Weekend, Asia Pacific Youth Exchange and Youth:Co Lab, and many of their participants go on to achieve great things two, five, or ten years down the line.
But in order for such programmes to succeed, the number of companies started after the programme cannot be one of their Key Performance Indicators.
The goal of early stage programmes is to create not companies, but entrepreneurs.
Their primary function is to move participants further in the lifecycle — teach them that entrepreneurship is a viable path, then build confidence that they can do it too, and finally nurture their basic skills such as public speaking and design thinking.
Example: UNDP Youth:Co Lab
As an intergovernmental organization with limited budgetary or electoral pressures, the United Nations has more freedom to invest in the development of entrepreneurship in the earliest stages of the lifecycle. Programmes such as the UNDP Youth:Co Lab focus on 21st century skill education and promote entrepreneurship as an acceptable path across Asia. Many of the participants go on to found successful social enterprises after graduating from the programme.
That said, the value of new connections and learnings can extend far into the future.
As such, early stage initiatives should not just think about the value they provide during the programme, but use it as leverage to generate value indefinitely into the future.
Their objective should be for participants to stay in touch after the programme, continue helping each other, and become lifelong friends and business partners.
Example: Thought for Food
Thought for Food is a group of 5,000+ individuals from 105 countries working to answer a single question: How to sustainably feed 10 billion people? They do not live together, and only occupy the same space one week per year, but the sense of community TFF holds is one of the most powerful I’ve experienced. This is achieved through a common purpose, a shared folklore passed down to new members, and regional ambassadors who keep the conversation going long after the annual summit.
Once their task is done, early stage programmes can and should provide optional continuous support, or feed participants to organizations operating in the later stages of the lifecycle. But they should refrain from urging participants to immediately start a venture.
Great ideas die because entrepreneurs are pushed to execute too early, while they are not at the right stage of their lives, when they don’t have the right team around them, or when the market isn’t ready for their idea.
Example: Startup Weekend
Techstars, a global accelerator, has helped organize thousands of Startup Weekend events around the world. Although some of the projects that come out of the three-day frenzy of business model creation, coding, design, and market validation become successful businesses, there is no pressure for participants to stick to their projects. The goal is to nurture future entrepreneurs over a series of events, building up their network and entrepreneurial toolkit, so they are ready when the right opportunity presents itself.
🌱 II. Incubate new ventures
Democracies of the world are shaped by election cycles, which inevitably leads to short-term orientation. Many initiatives thus want businesses to be the output of their programmes.
This is unfortunate, but also understandable, as thriving startups are an easier sell to taxpayers than a cohort of inspired young adults.
If the objective of a programme is to output successful projects, rather than future founders, it must target individuals who are in the latter substages of the lifecycle — helping them align the missing stars, and overcome specific logistical challenges.
Example: The Refiners
The Refiners is a San Francisco-based accelerator which takes in serial entrepreneurs with a product and traction, and provide targeted mentorship on the specifics of doing business in California, legal support with immigration to the US, and so on.
Disclaimer: I have participated in and received investment from The Refiners.
Example: MaGIC National Regulatory Sandbox
The Regulatory Sandbox at the Malaysian Global Innovation & Creativity Centre targets startups that require legal changes to operate in the country. The programme provides a controlled environment for innovators to pilot their solutions, while working closely with the government on regulatory frameworks that can support their businesses.
The earlier the target participants are in the lifecycle, and the more stars there are to align, the longer the programme needs to be.
Example: Entrepreneur First
Entrepreneur First is an international accelerator that takes in talented individuals highly skilled in computer science, and with a diverse professional and personal background, but no team or clear business idea. The reason the programme works is it’s 6 months long, includes a very generous stipend, only accepts participants who are ready to give up everything to start a business now, and provides an abundance of support for years after the programme.
The earlier stages are where the public sector may be needed most, but there are always opportunities for local governments to boost startups in ways the private sector could only dream of.
This is particularly true for deep tech startups with long R&D timelines, or companies that integrate with the public infrastructure. When done well, government contracts can make or break projects of this kind.
Example: Metropolitan Transportation Authority
The New York Subway has been in a state of emergency for more than a year, due to ageing infrastructure overwhelmed by ever increasing ridership. To solve these challenges, the MTA has launched the Transit Tech Lab accelerator, which gave six startups access to one of the most complex transit systems in the world, and streamlined procurement processes to accommodate small business.
🚀 III. Facilitate growth
Governments let go of companies too early.
The moment startups start making profit, and grow to a certain size, they’re left to fight it on their own, or get passed onto departments dealing with traditional big businesses and SMEs.
There is no question financial support must end at a certain point, and an abundance of ‘easy money’ through governmental grants and contracts can do tremendous harm. After all, what we want to nurture are robust businesses that can sustain their growth through sound management and a profitable business model.
But that does not mean all support should cease once a company becomes a scaleup.
Innovation-driven enterprises, to borrow Bill Aulet’s term, are fundamentally different from traditional companies with no aspirations for rapid, global growth.
As such, the kind of support they need, from timely changes of outdated laws, to infrastructural improvements, requires champions who have followed them over time, and understand their unique situation.
Example: AB-262 — California’s home cooking bill
When Josephine, the home-cooked food marketplace in Berkeley, grew to a few thousand sellers, local food safety officials decided it’s time to do something about it. With a heavy hand, they came knocking on home cooks’ doors, threatening them with up to three years in jail lest they cease their operations. Josephine unfortunately went bankrupt, but after working closely with the state government, their team managed to negotiate a mutually-acceptable solution. California is now home to several startups (including my own — Pona) creating new economic opportunities in the kitchen for stay-at-home parents, seniors, and disabled individuals.
Example: London Datastore
In 2010, the Greater London Authority launched London Datastore, an unprecedented open-data initiative offering unrestricted access to reams of public sector data for private or commercial use, with the aim of kickstarting a new wave of services that find novel ways to make use of the information. This initiative, which includes a developer-friendly API, is behind numerous success stories, such as Citymapper.
More importantly, it is crucial to keep entrepreneurs at this stage as active participants in the ecosystem.
Among others, scaleups are invaluable to:
- Serve as role models for younger startups
- Provide exit opportunities for projects that can’t make it on their own
- Build platforms and infrastructure that lowers the risk of starting new businesses
History is full of examples of pioneering firms that served as “entrepreneurship academies,” from which other entrepreneurs sprung.
— Josh Lerner, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed
♻ IV. Capture know-how
Most companies will fail. Others will mature and grow beyond anyone’s imagination. Whatever the case, eventually, their early employees and founders will exit, and maybe even start new ventures.
This is a critical stage of the entrepreneurial lifecycle, and what differentiates mature ecosystems, such as the Silicon Valley, from their developing counterparts in other countries.
It is crucial any governmental startup initiative learns to close the loop, and capture the know-how of entrepreneurs it spent many years and tens of thousands of dollars to nurture.
At its most basic, this means events that give serial founders the opportunity to share their successes and failures.
At its best, this includes incentives for angel investors, a safety net for failed founders to get back on their feet without selling-out to the corporate world, progressive IP law reforms, and a culture that values failure for the learnings it brings to the ecosystem.
Example: UK tax incentives for angel investors
Angel Investors in the UK have access to important tax relief schemes (EIS, SEIS & SITR) that recognize the risks they take in giving back to the ecosystem, and the unique value they provide compared to institutional investors (mentoring, industry know-how, personal connections…)
Example: Non-compete enforcement in California
California courts refuse to enforce contracts that limit employee mobility. This unusual approach to non-compete agreements promotes competition, and may be one of the reasons behind the West Coast’s rise as an international hotbed for innovation.
Example: Recycling of know-how in the Silicon Valley
Whereas in most countries, failed entrepreneurs have to resort to regular jobs, and often exit the ecosystem forever, Silicon Valley startups see them as worth their weight in gold. After all, what’s a better shortcut than hiring someone who has researched your niche for years, and learning from their failure? This is true even for big tech companies such as Google and Facebook, who are known to rehire former employees after their stint in the startup world.
Example: Singapore’s acceptance of failure
Singapore has long tried to make the nation more comfortable with the uncertainties inherent to entrepreneurship. One initiative, the Phoenix award, recognised founders who made a successful comeback after braving failure. Asia’s first Failcon, organized under the auspices of The National Research Foundation, then gave entrepreneurs a platform to share their learnings. Although empirical data is hard to come by, Singapore’s thriving startup ecosystem is an indication that the culture has changed for the better.
The importance of focus
Just as thriving businesses, successful incubators, accelerators and other initiatives have first and foremost a clear idea of their target.
If we do not know who the customer is, we do not know what quality is.
— Eric Ries, The Lean Startup
When starting any kind of programme in the startup ecosystem, you must understand the exact stage of the entrepreneurial lifecycle you’ll cater to, which in turn will define what constitutes a positive outcome of your initiative.
Do you inspire new entrepreneurs to someday do something impactful, once they are ready, or do you empower existing entrepreneurs to make impact right now? So many programmes attempt to do it all, yet these are distinct target groups that require different resources and approach.
Stay focused on your one, chosen stage of the entrepreneurial lifecycle, and you will no doubt make lasting impact your participants will remember far into the future!