[CEO Friday] How to Bootstrap a Startup Ecosystem in 3 Easy Steps

David Barrett —  September 26, 2014 — Leave a comment

At lunch with the Tunisian Minister of Technology, M. Tawfik Jelassi, at the International Innovation Summit of 2014, the topic of the day was: how do you bootstrap a startup ecosystem?

Don’t Reinvent What’s Already Been Done

To be clear, the question isn’t “How do you recreate Silicon Valley?” I think Alberto Sillitti (Free University of Bolzano, Italy) has answered that question best: Silicon Valley simply cannot be replicated. It is the unique product of 100 years of risk, return, and reinvestment, starting with vacuum tubes and leading to the present. Silicon Valley is a petri dish of large corporations, startups, and industry/university partnerships, concentrated into a 100 km strip of land, and fueled by a global base of private investors. The conditions that created Silicon Valley exist nowhere else in the world, and probably never will again. 

But as enviable a proposition as that might be, recreating Silicon Valley is also not necessary; just as there’s no need to reinvent electricity or the internet, bootstrapping a startup ecosystem isn’t about starting from scratch. It’s about starting from today, and all that today has to offer. With that in mind, here are three ideas gleaned over multiple days of discussion with government ministers, corporate giants, university professors, and local entrepreneurs about how it might be done in Tunisia, or anywhere else in the world.

1. Evangelize The Fact That Local Success is Possible

Expensify: How to Bootstrap a Startup Ecosystem

Don’t need a map when everything you have is already here

Wherever you are, you’re there due to the generations of entrepreneurs that came before you. Many of them are probably still there, and countless more are surely in the wings, ready to take off. But it’s likely they don’t know each other, meaning few will have have personally seen someone truly succeed – a critical moment in any entrepreneur’s life to prove that success isn’t a mirage, a miracle, or a luxury enjoyed only by unknown geniuses on the other side of the world. Rather, success is the inevitable result of sustained hard work and repeated failure. Create a community that recognizes and celebrates local success, and that exists to spread knowledge about best practices for success in your local region.

Set the wheels in motion: Create a monthly dinner series where you identify one prominent local entrepreneur to come and tell their “origin story”. Not the “exit story” about how great it is to have succeed, but rather the story of the hard times before success, and how they got through. Keep it very private and intimate — 10-20 seats, hosted at an unreasonably nice restaurant that most entrepreneurs will never go to otherwise. The limited attendance not only controls cost, but also creates an exclusivity that makes tickets extremely sought after. Accumulate a database of potential local entrepreneurs and actively curate the list to invite the best and brightest: it needs to be an extremely “talent dense” meeting for people to walk away impressed. Have an open application process so anybody can apply for a ticket, and then seed the database by canvassing all local universities to identify their top students, as well as asking business leaders for their rising star employees. Once started, focus on nominations. Make a point to have a good mix at every dinner of vocal and enthusiastic people from past dinners, as well as new people who have never come before. Aim to make the event so interesting and so exclusive that every local entrepreneur looks forward to their invitation with anticipation. Once a year, invite everybody in the database to an annual entrepreneurship conference full of the best local and a select group of global speakers.

2. Eliminate Barriers to Global Investment in Local Startups

Expensify: How to Bootstrap a Startup Ecosystem

Work on a streamlined process that works for everyone. Photo credit: Financial Times

Most discussion on global investment seems to focus on very large, abstract issues like trade agreements, import tariffs, and other issues that only really matter to enormous multinational corporations. The barriers that affect startups are quite different and generally much more mundane. Make a point to talk to the smallest of entrepreneurs — the lone individuals with an idea and enthusiasm but no idea where to start — and give them a clear roadmap from zero to success.

Pro-tip: Hire a prominent Silicon Valley law firm – with a name every investor would recognize worldwide – to come up with a legal corporate structure that addresses the common concerns of an investor while meeting the needs of local entrepreneurs. There are a huge range of small, arbitrary issues that few people seriously care about but just need to be decided: where is the company incorporated (possibly in multiple jurisdictions), which corporate entity owns which types of assets, how to employees get paid, how investors are protected, who gets what in the event of failure, and how is everything split up when there is a success.

Work with that law firm to boil this down into a streamlined, repeatable process, and then promote this legal structure to every VC you can find, everywhere in the world. Negotiate a deal with that law firm to represent your region’s startups at a highly discounted rate (because it’s been so standardized) – possibly even subsidized to help offset the enormous legal expenses that cripple a small startup. Make sure the structure has genuine teeth that are enforced aggressively against startups who attempt to commit fraud against foreign investors: even a few bad apples can ruin the entire initiative, so demonstrate up front that you are not just an advocate for the local entrepreneur, but also a local representative of the foreign investor.

3. Create incentives for people to stay

Support your local rockstars.

Support your local rock stars.

The key risk if you succeed with (1) and (2) is that Silicon Valley will instantly poach your best entrepreneurs; rather than invest in a remote entity, they’ll immediately move the team to Silicon Valley. A sustainable startup ecosystem requires entrepreneurs to succeed locally and stick around to mentor new entrepreneurs, invest in local startups, and become serial local entrepreneurs in their own right. This is likely the most difficult of the three, and failure here is likely what keeps most burgeoning startup ecosystems from taking off.

Set the wheels in motion: Make your successful entrepreneurs rock stars. If they left and succeeded elsewhere, give them a hero’s welcome and encourage them to come home. Invite them to meet government ministers and foreign dignitaries or have them on stage at key functions, including not just the annual entrepreneur conference outlined in (1) but also at local fairs and holiday festivals. Give them positions as guest lecturers at universities, put them on local TV, and give them a monthly column in a local newspaper. Very little of this actually costs money, but all of it is something nearly impossible to obtain in Silicon Valley due to the sheer scale of the ecosystem. Local entrepreneurs should be seen as a national treasure to be nurtured and celebrated.

Granted, some might question whether it makes sense to celebrate an app developer more than a fireman, but the question at hand is how to encourage more startups and not more firemen. Whether or not it’s fair is open to debate, but I wager a country that does elevate entrepreneurs to national hero status will have more entrepreneurs that a country that doesn’t.

These are just three of what I’m sure are countless possible ways to bootstrap a startup ecosystem. Some of the ideas are crazy. But part of being a startup is being a little crazy — if it were safe and obvious, someone would have done it already. Really, every city and country in the world is its own startup. If you want your city-startup to attract more entrepreneurs, it needs to act like an entrepreneur itself.

David Barrett

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Founder of Expensify, destroyer of expense reports, and savior to frustrated employees worldwide.

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