Mark Gritter (markgritter) wrote,
Mark Gritter

Seth Levine on Startup Communities

So, Seth Levine of Foundry Group graciously agreed to come speak to a bunch of Minnesota entrepreneurs in a Tech.MN-sponsored event on "building entrepreneurial communities". (He's a VC and Foundry recently made their first investment in Minnesota.)

The points he talked about were:

1. It takes a long time to build a startup community. Boulder is highly ranked now but it wasn't overnight.
2. Community development needs to be led by (and for) entrepreneurs, not venture capital. Entrepreneurship can exist without the money but not vice versa
3. Importance of a "give-first" attitude, rather than asking what we can take from the community. Recognize that it's not a zero-sum game. He gave examples about community hours (signup to talk with a VC or founder) and talked about the importance of inclusiveness, letting outsiders plug into wider networks.
4. Communities are built on the efforts of lots of people. Foundry gets too much credit, the Boulder success is not based on just 1 or 2 people.
5. Entrepreneurial community is mentor-driven. Think about how you interact with other people. Align on "give first" and goals.

One of the most concrete examples he gave was that there was a regular meetup in Boulder for entrepreneurs, usually featuring one or two startups presenting, where people could not only network but plan for and have confidence would be there if they missed a session.

So far, so good. This is attractive picture of bottom-up community development. What's missing here?

While I was listening to this and some of the Q&A I was reminded of the question about how you tell whether somebody is a better-than-average tournament player, or just got lucky. The answer is that mainly you can't, variance is too high for live tournaments. You need a lot of data points.

VCs and entrepreneurs are in the same boat. They start companies which often fail but sometimes have big successes. Are the big successes deserved or lucky? If your current fund returns above-average returns, is the next fund likely to do so as well? (Probably not, as Mr. Levine mentioned, the average VC loses money.) People vastly underestimate, in retrospect, the contribution of luck to their success.

So why should we believe Seth Levine's prescriptions? This is a man whose job involves being wrong more than half the time! And the number of trials is absurdly small for startup community development.

One of the tidbits in Strategy: A History is that business studies too often proceed from looking at successful companies, to identifying qualities that led to their success, without closing the loop and asking whether other, less successful companies also had those qualities. (Also, many highly lauded companies underperformed in the years following analyses of their past success...)

So, Seth's observations may be the key to Boulder's success and are repeatable. But they might also be correct and unrepeatable--- perhaps they work at a scale of a 250,000-person metro area, or they worked five years ago but not today. The lessons learned may simply be incorrect, and other factors mattered more in Boulder. Or perhaps in five years we won't think Boulder is a successful model to follow!

That uncertainty doesn't mean we shouldn't try to take the ideas that seem good from Boulder and apply them to the Minneapolis startup community. There are certainly good reasons to act in the manner he suggests, even if it does *not* lead to a successful local community. But it does suggest we should look at multiple models and look at what isn't working as well as what has worked.
Tags: economics, gambling, minneapolis, startup, talk
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