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Waking Up a Dormant Startup Ecosystem

I am often asked how we built the Wilmington North Carolina startup ecosystem in less than ten years. I was asked twice last week by cities in the Carolinas. According to the ecosystem author Brad Feld of Techstars, it can take 20 plus years to build a successful ecosystem to assist entrepreneurs. (Watch this animation with Brad Feld with information from his book, Startup Communities.)

In cities where there is no formal ecosystem, the entrepreneurs are BEGGING for help and the city needs a new source of job creation. The entrepreneurs often read how easy it seems to be to raise capital from investors in other more economically progressive cities. And they are considering relocating to a city with more resources for entrepreneurs. Did you know both Amazon and Microsoft started in Albuquerque, New Mexico before moving to Seattle?

An ecosystem is not built successfully simply because of a shiny new facility. A newly built coworking space can be part of the solution as a place to gather but an existing event space for 75 people is also a great start. Jane Jacobs once said, “New ideas require Old (cheap) buildings.” A coworking space needs to offer more than the neighborhood coffee shop with WiFi.

 

 

The activities are much more important than the facilities. And the activities need to be about putting more money in the hands of the entrepreneurs. Events need to be around increasing sales and raising capital for scalable companies with innovative products.

I started my first entrepreneur support organization in Charlotte around the slowest night of the week (Tuesday) for a locally owned restaurant because I did not have my own event space. And 24 years later, we mostly have our events in Wilmington at Ironclad Brewery when appropriate.

But I am struck this morning as I post my own weekly newsletter, Durham is hosting events for organizations that are celebrating their 40th year anniversaries. That means they survived a few serious economic recessions unlike most entrepreneur support orgs in North Carolina.

But how do you build momentum in a city that doesn’t have a formal startup ecosystem and make them stick even in tough economic times?

 

How Does a City With Only 125,000 People Have 280 People at Startup Events?

I had been working in the North Carolina innovation ecosystem for more than a decade when I was recruited to Wilmington. I have always had the theory that if you do three favors for another person, you can then ask for what you want / need from the other person. This is how I built a career on sales. I was a relationship salesman. I had collected a ton of small favors / referrals / introductions over that twelve year career.

I had attended nearly every large startup and investor conference for twelve years. Eventually you develop a friendly relationship with people at these conferences. If you attend their events, you can eventually ask them to participate in your events. Entrepreneurs LOVE to hear from successful entrepreneurs. Entrepreneurs LOVE to be introduced to active investors instead of having to cold calls or cold emails.

The entrepreneurs that you want at these startup events want to meet NEW business executives that they can learn from or do business deals with. You can’t allow the events to get stale. So we invite and welcome people from other cities. How else could we build events with 280 people attending when Wilmington only has 125,000 people?

And let’s face it, people rarely turn down an invitation to the beach. (But for some reason that had not really been done on a consistent basis from 1990 – 2013.) Captain Obvious here but most investors tend to have a beach house.

If you don’t have a beach to offer, make an event around a big sports event or a social festival. If you don’t have one, create one. New traditions start EVERY DAY. We built our investor fly in event around the annual Azalea Festival. We are now starting a new tradition with #910 LOCAL (Startup) Celebration day to be held annually on September 10th. (9-10 as #910 is the local phone area code.)

 

Expect a Slow Build and Celebrate Small Wins

In a city where there has never been a formal ecosystem, the big successes don’t happen fast.  The first time entrepreneurs aren’t prepared for big wins if all they know is what they see on Shark Tank. An investment deal does not happen in three minutes while Mr. Fantastic chews on the latest gummy product to solve low testosterone.

Small wins for first time entrepreneurs include an article in a regional media outlet. A good win is when an entrepreneur in the ecosystem wins a pitch contest with a substantial cash prize. A great win is a substantial non-dilutive grant. A huge win is a new client especially outside of the state or a new investment or being accepted into a cash and equity based accelerator.

 

 

A coalition needs to be built where your Ecosystem leader gets referrals from other economic development / entrepreneur support organizations that don’t want to handle the high risk of working with startups. You will find some organizations shy away from directly introducing entrepreneurs to potential investors.

Part of the reason an ecosystem hasn’t been built is because people don’t want to be seen promoting a young startup that may be dead in 9 months. They don’t want to risk a friendship or business relationship by promoting a startup to an investor where they may lose their money in less than three years.

But SOMEONE in the community needs to play this role. You will find that investors are more forgiving than you think. They also have due diligence responsibilities so they can’t fully blame where the referral for the failed business came from.

 

Momentum Attracts Resources

As we are growing as an ecosystem in Wilmington, we are not being modest or humble but we are yelling it from the Lighthouses. And the word is out. Since our last event, we have added four new sponsors.

In fact, I count communications as one of the six aspects of ecosystem building. Not only do we promote our own events through our newsletter, we also promote the success of our startups to the regional media. To nail the point home, there is a high profile innovative org in North Carolina that includes a link to our whole newsletter every week.

Yes, these new sponsors want to be part of a growing ecosystem. I have asked these new sponsors who come from cities outside of Wilmington why they are supporting the coastal ecosystem.

They see the momentum, “Wilmington is the NEXT city with room to grow.”
Because they are invited. We have not built a WALL around our city that is closed to outsiders
Because they see Wilmington entrepreneurs at other events.

We bought a table at the NC Tech Association Awards for our members.
We annually bring 20 plus people to the CED VentureConnect event.
There were 12 people from Wilmington at the annual First Flight Venture Center High Flyer Awards.

To be clear, Wilmington is no closer to the Raleigh / Durham organizations and resources than any other city in North Carolina. Wilmington is the same distance / drive time as Charlotte or Winston Salem to the state capital and statewide organizations. But Wilmington has created what David Hall of Revolution Capital called “Umbilical Cord to the bigger ecosystem”. We call it the Coastal Corridor. We don’t have to reinvent the needed resources but we have the relationships to these important assets that we can borrow or engage with when needed.

So yes, an ecosystem can be built from scratch, but what you will actually find is a community of entrepreneurs or potential entrepreneurs that have always been in your city but the organizations or the events did not appeal to them. Or that previous attempts to build an ecosystem made empty promises and could not deliver the resources needed by the entrepreneurs. The person that leads the organization needs to have persistence, have perseverance, be provided with the economic and political support and the resources to do the job.