Driving Economic Growth through Entrepreneurship Ecosystems

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Copyright © 2011, 2012 , 2013 Daniel Isenberg

Entrepreneurship Policy AdvisorsE

ntrepreneurship Policy A

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Driving Economic Growth ThroughScale Up®Ecosystems

Professor Daniel Isenberg

Date: March 14, 2017

A Methodology That Works toScale Up Regional Economies

@danisen

In affiliation with

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Topics

• What is our mission?• Why is local growth the focus?• How does a Scale Up project work?• What is the cost and impact?• How can you benefit?

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Our ambitious mission:To benefit regional economic prosperity by catalyzing the

entrepreneurship ecosystem in a way that is:

In collaboration with

• Rapid – impact in 1 year, self-accelerating in 5• Recordable – can be measured in jobs, wealth, and taxes• Resource efficient – inexpensive in $ terms• Replicable – has a consistent methodology that is…• Relevant—for “normal” economies in diverse environments• Robust – self-sustainably rooted in the local fabric

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Singular focus: new GROWTH

If more and more local firms grow more and more rapidly, prosperity is easier to achieve and sustain

Help grow more and more new firms

Help more firms get new growth!

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Ventures: increasingly rapid growthRegions: more companies growing more rapidly

Entrepreneurship = Scaling Up

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InnovationDisruption

Self-employment

Startups

Silicon Valley

Micro-enterpriseFamily business

If we want more of it, need to be aligned on meaning

What hasn’t generated results

Over $53 million spent

https://www.nytimes.com/2017/01/19/nyregion/start-up-new-york.html?_r=0

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Countries with MORE competitive economies have LOWER start up rates

• Scale ups can be all ages (many are 2nd and 3rd gen).• Scale ups can be all sectors (most in basic industries).• Scale ups grow sporadically• Quantities of local scale ups lead to quality of local startups.• When more local firms grow more rapidly sustained prosperity

is more likely.

Sustained regional economic health requires Scaling Upof local firms

Scale Ups – the facts

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Examples of scale upsSome familiar, some not

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100-yr oldmanufacturing asset

77% annual growth 2010-2015

7 people until 3rd generationGlobal leader with

3000 employees worldwide

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1950 1968

19752005

2nd generationGrown to 35 restaurants and ~5000 employees nationwide

Growth-driven innovation

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1982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015

-50000

0

50000

100000

150000

200000

250000

Apple Performance 1982-2015

12years

Virtually all of Apple’s value created after 25 years

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Worth $143 million in 1966

800% growth in last 7 years 200,000 employees

Disney is >90 years old

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“Most observers conclude that Silicon Valley is great because it …creates start-ups. Most observers

are wrong.”Reid Hoffman

How Scale Up® Projects Work

Level 1

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Demonstrating Quick Growth

Teaching Growth Communication

Level 2

SparkingEcosystem

Engagement

Level 3

Scale Up works on different levels

20


The Scalerator®

Level 1

Scalerator®Overview

6 months, 100 contact hours

Scale UpChallenge

Scale UpChallenge

Scale UpChallenge

Scale UpChallenge

Scale UpChallenge

Scale UpChallenge

Workshop

Workshop

Workshop

Workshop

Workshop

Workshop

Workshop

Mentoring

growth events andstory telling

Ecosystem sta

keholder visits

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• Serve customers• Customer value• Results-driven• Self-sustaining

• Real• Hard-working• Not very sexy

Copyright © 2016 Daniel Isenberg

WorkhorsesUnicorns• Serve investors• Paper value• Exit-driven• Investor-dependent

• Imaginary• Hard-pitching• Heroic glamor

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Level 2

Level 1


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If a tree falls in the forest andno one hears it,does it make a sound?

If growth happensand no one knows about it,does it have an impact?

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What does Real Growth look likewhen it is just starting?

• Customers– New contracts– New sales– Exports– MOUs/LOIs– OEM agreements– Beta sites

• Capacity– New hires– New facilities– New equipment– Supply chains

• Cash– Better cash cycles– New investments– New loans, credit– Public finance

For example, growth story telling

“$10mm->$20mm in 1 year”

“$0 to $2mm in 5 years”“Within 2 years $45 millionAnd $31mm invested in plant” “Started projects in Mexico

Hiring people right away”

“Exporting to 12 countries”“We doubled sales in 1 year”

“Growth the entire city can hear”

Programs to teach growth communication

• Messaging program for elected leaders• Growth story telling by entrepreneurs and others• Communications tool kit for stakeholders• Project branding exercise• Growth awareness for journalists• Celebration of Growth community events• Symbolic activities (eg closing city, ringing growth bell)• Measuring and communicating impacts

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Level 2Feedback

Level 1


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Level 2

SparkingEcosystem

Engagement

Level 3

Feedback

Level 1


Support professions

• Legal• Accounting• Investment bankers• Technical experts, advisors

Non-Government Institutions

• Entrepreneurship promotion in non-profits

• Business plan contests

• Conferences• Entrepreneur-friendly

associations

Educational Institutions

• General degrees (professional and academic)

• Specific entrepreneurship training

Networks

• Entrepreneur’s networks• Diaspora networks• Multinational corporations

Government

• Institutions e.g. Investment, support

• Financial support e.g. for R&D, jump start funds

• Regulatory framework Incentives e.g. Tax benefits

• Research institutes• Venture-friendly legislation• e.g. Bankruptcy, contract

enforcement, property rights, and laborEarly Customers

• Early adopters for proof-of-concept

• Expertise in productizing• Reference customer• First reviews• Distribution channels

05/02/2023 © 2009, 2010, 2011 Daniel Isenberg

Leadership

• Unequivocal support• Social legitimacy• Open door for advocate• Entrepreneurship strategy• Urgency, crisis and challenge

Societal norms

• Tolerance of risk, mistakes, failure• Innovation, creativity, experimentation• Social status of entrepreneur• Wealth creation• Ambition, drive, hunger

Success Stories

• Visible successes • Wealth generation for founders• International reputationLabor

• Skilled and unskilled• Serial entrepreneurs• Later generation family

Infrastructure

• Telecommunications• Transportation & logistics• Energy• Zones, incubators, co-working, clusters

Domains of the Scale Up® Ecosystem

Financial Capital

• Micro-loans• Angel investors,

friends and family• Zero-stage

venture capital

• Venture capital funds• Private equity• Public capital markets• Debt

Scale UpEntrepren

eurship

Policy

Finance

Culture

Supports

Human Capital

Markets

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31

Policymakers and public

leaders

Financial actors

Culture impactors

Support organizations,

event organizers

Educators and developers of human capital

Corporations

Wealth,Impact,

Recognition

Competitiveness, talent, innovation, distribution

Dignified jobs, inclusion, broader tax base, votes

© 2014 Daniel Isenberg

Grants, donors, student jobsaccreditation

Social mission, recognition, financial sustainability

ROA, IRRLower default rates

Content to reach bigger, better audiences

Ecosystem actors have different goals

Level 1

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SparkingEcosystem

Engagement

Level 2

Level 3

Feedback


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SparkingEcosystem

Engagement

Level 2

Level 3

Feedback

The fourth level:Capacity building, exit

Level 1

Phase 1 – Engagement & alignment

Phase 2 – Proof of concept

Phase 3 – Local platform to scale up

Phase 4 – Local capacity and platform

Phase 5 – Transfer tolocal & exit

Scale Up® Ecosystem Projects

1291New jobs

$35mAggregate $

49%Sales growth

157Separate programs

9New

financings

>19,000

Participants1451

New contracts

42trainedmentors

10,000

6New exporters

Mediafollowers

High level impacts since 2012:1291 Scalerator jobs (10% of entire jobs)

1451 new B2B contracts19,000 event participants

Growth: 88%, 34%, 42%, 30%

Cost (5 years): ~$3.5 million(< 30% public funds)

Time to 1st impact: 1 year

$228MAggregate revenues (2015)

$255MAggregate revenues

(2016)Projected as of 9/16

170New hires for 2016

Projected as of 9/16

420+Aggregate new hires

(2013-6)

18%Median growth (2016)

Projected as of 9/16

1473Aggregate employees

• 57 participating companies, 4 cohorts• <$2000 public funds/job created• $27 million last year growth• 80% of participants ↑growth rate• 35% average growth post Scalerator®

• Cohort 1 has increased sales 100%• > Numerous new financings ($6M in 2016)• >60% w/significant capex in 2016• 97%: “region improving for growing company”

High level impacts:$255 mm of economic engagement

($27 mm increase in 1 year)

Cost to date (3 years): ~$2 million(< 40% public funds)

Time to 1st impact: 1 year

BABSON COLLEGE — ALL RIGHTS RESERVED

Today, a replicable methodologyWith broad applicability


Rapid – impact in 1 year, self-accelerating in 5 Recordable – can be measured in jobs, wealth, and taxes Resource efficient – inexpensive in $ terms Replicable – has a consistent methodology that is… Relevant—for “normal” economies in diverse environments Robust – self-sustainably rooted in the local fabric

BABSON COLLEGE — ALL RIGHTS RESERVED

Some lessons learned


• Big numbers of startups ≠ big numbers of scale ups• If you take care of scale ups, startups take care of themselves• The age, type of company less relevant than value infused• Scale ups are not late stage startups• Scaling up can be locally contagious• A small number of scale ups can → virtuous cycle• And….

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Grow!

Get bigger!Succeed!

Prosper!

Scale up!

Win!Achieve!

…the language of growth can take root

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Scaling by Design

Scale UpPanama

Scale UpRussia

A Scale Up® Project is Coming to your Region Soon

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How to get involved?

1. For individuals: Driving Economic Growth October 2-4 20172. For EDOs: Scale Up Ecosystems workshops3. For local impact: Scalerator, Scale Up project4. For national leaders: Scale Up policy program

Follow us: @danisen, @scalerator, [email protected]@ep-advisors.com

Driving Economic Growth through Entrepreneurship Ecosystems

Economy & Finance

Transcript of Driving Economic Growth through Entrepreneurship Ecosystems