5 Key Factors to Create An Active Startup Ecosystem Flywheel

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This Blog Post has been Adapted from its Original Publication in October 2015

One of the most enjoyable aspects of my role with Hyde Park Venture Partners is getting to see some of the most dynamic tech ecosystems around the country. As a firm we focus on high growth, recurring revenue type businesses – usually in the Midwest. I recently had the opportunity to visit Atlanta for a board meeting with Terminus at the Atlanta Tech Village. I also spent time in Cincinnati for the Brandery’s Demo Day and Cintrifuse Annual Meeting.

I have lived in both cities, and they each hold a special place in my heart. I was born and raised in Cincinnati. Like many aspiring marketers in the Midwest, I received my training at P&G from 1999-2005 where I was one of the earliest digital marketers. I then moved to Atlanta to lead Worldwide Digital Marketing for Coca-Cola. The tech ecosystems then were sparse then. However, I remember early players emerging like Planet Feedback in Cincinnati + SilverPop and MindSpring in Atlanta. Fast forward to 2015, and both cities have thriving tech ecosystems and have built the foundation for even bigger things.

Atlanta now has several technology companies that have scaled to leadership and/or that have had successful exits: Pardot (acquired by ExactTarget in 2013), SilverPop (acquired by IBM in 2014), SalesLoft (recent funding by Emergence Capital) and MailChimp are all industry leaders based in Atlanta.  The 103,000 square foot Atlanta Tech Village, which was built by David Cummings, is nothing short of spectacular and has hundreds of people working to turn promising startups into great technology firms.

After visiting Cincinnati last week, I was blown away by the level of energy and momentum in the startup community.  As usual, the Brandery had a stellar lineup of 10 Companies deliver presentations as compelling as I’ve seen at any demo day.  The Brandery and CincyTech are producing some great early stage companies, and more mature technology firms like Ahalogy (a graduate of the Brandery) and Everything but the House (recent $30M Funding led by GreenSpring) are on building category leading businesses.

These visits got me thinking about the significant progress of each city and trying to identify if there was a pattern. While each has carved its own path, I  think there are similarities to be found in building a thriving ecosystem:

1. Access to Talent:

Department of the obvious…but everything starts with amazing entrepreneurs and teams. This is the lifeblood – without great people nothing happens. A dynamic cluster of universities often cultivates a community of talent that builds on itself.  Universities are a fantastic cultivator of talent necessary for a startup ecosystem. Indianapolis truly shines here with schools like Indiana University, Purdue, Notre Dame, DePauw, Rose-Hulman, and Butler to name a few.  Atlanta has Georgia Tech, University of Georgia, and many others that attract graduates from all over the South. In addition to the University of Cincinnati (Go Bearcats), Miami of Ohio, and Xavier, Cincinnati has a legendary alumni pool from P&G, Kroger, and world renown marketing agencies all contributing to the ecosystem.

2. Capital

Again, this seems obvious, but capital must be available at all stages of the tech lifecycle, from seed funding to Series A and later stage. Several years ago this was a great detriment in the Midwest across all stages. However, now it seems like the early stage angel investing funds are prevalent and once a business is ready to scale, the later stage expansion funding is now available as well. Funding for Seed Rounds and Series A are still missing, which has created a barbell type distribution. This is precisely what HPVP is excited to address with high growth businesses across the Midwest.

3. State & Regional Support

Employer job credits, angel tax credits and local government entities provide important incentives to recruit and retain high growth companies. In addition, organizations like TechPoint, Cintrifuse, and the Illinois Technology Association all help capture the innovation and energy and showcase growing companies through events and awards that celebrate success as well.

4. Physical Space

While this seems obvious, great space is tremendously important. There are spaces like Atlanta’s Tech Village and Union Hall in Cincinnati, High Alpha (and hopefully more to come) in Indianapolis, and 1871 in Chicago. Having a place to congregate with like-minded people accelerates growth of the ecosystem. This is critical for building energy, sharing best practices and making efficient use of time for VC’s visiting cities.

5. Mentors & Advisors

I think this is often the most overlooked element. There is no substitute for coaches, mentors, advisors who have already traveled the path you’re walking. Mentors with experience in Go to Market, and Product Management are particularly needed because early missteps can prove most costly. When superstars move from large Companies to emerging startups, it seasons the talent pool and inspires the next generation of leaders.

The Startup Ecosystem Flywheel

I think of these five elements working together as an active “Startup Ecosystem Flywheel”, which starts and ends with great talent. The greatest accelerant for increasing the pace of the flywheel is success. When companies grow, they attract more talent, create more energy, and ultimately distribute back capital and talent into the ecosystem. Each of the factors in the ecosystem flywheel continue to reinforce one another and ultimately create a self-reinforcing ecosystem. The cumulative effect leads to what Cintrifuse most recently called “triple bottom line results”: 1) financial returns 2) innovation 3) community.

I’m more encouraged than ever how quickly the flywheel is turning. Vibrant ecosystems are forming where almost nothing was in place only a few years ago. It’s amazing to see how each city in the region has taken a slightly different approach in creating their own unique ecosystem. The flywheel is clearly in motion in the Midwest and I believe the best is yet to come.

What else do you see as necessary for a tech ecosystem to thrive?

Please note: I reserve the right to delete comments that are offensive or off-topic.

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