Six Principles to Foster Self-Propelling Entrepreneurial Ecosystems
By Hamza Shad
Endeavor Insight has studied the development of entrepreneurial ecosystems in nearly 50 markets around the world. Over the past two years, we have spoken with hundreds of entrepreneurs and dozens of investors, executives of support programs, and program officers at major funding organizations. We recently reflected on what we have learned across our research projects to share findings more widely. In that process, we distilled our body of work into six key principles for decision-makers to improve support for entrepreneurs and their ecosystems.
The “Self Propelling Ecosystem Development” guide presents an approach that focuses on selecting the right entrepreneurs, providing effective support for the growth of their companies, and achieving a lasting impact by enabling them to pay it forward. Endeavor Insight’s six principles for fostering the development of self-propelling ecosystems are:
- Focus on scale and local capacities.
- Align action with goals.
- Increase support for evidence-based solutions.
- Tailor support for innovation.
- Encourage founder reinvestment.
- Enable self-propelling local development.
These principles are explained in depth in the guide and further elucidated by several case studies and tools for decision makers, which are described below.
Evaluating Ecosystem Maturity
The “Ecosystem Maturity Rubric” presented in the guide is a tool for evaluating venture ecosystems across several dimensions, including local wealth accumulation and the extent of founder-to-founder connections. A mature and self-propelling ecosystem is characterized by a strong network of connections between local companies, a high level of trust, and the reinvestment of profits from successful exits into the local ecosystem. This framework prioritizes capacity building so that ecosystems can benefit from the growth and innovation of successful companies, rather than being dependent on external support.
Case Studies and the Multiplier Effect
Support organizations and companies that have made significant contributions to self-propelling ecosystem development are featured as case studies in the guide. For example, the founders of the Bulgarian software company Telerik reinvested in their local entrepreneurial community as both mentors and investors. As illustrated in the graphic below, their former employees — who held direct share and stock options in Telerik when the company exited — have gone on to start nearly 40 other companies. This is a notable example of the multiplier effect, which occurs when the success of one entrepreneurial company enables the growth of the next generation.
Tools for Decision Makers
Endeavor Insight developed additional resources for different groups of stakeholders to put the principles into practice. For example, the “Stakeholder Guide for Entrepreneurs” presents founder testimonials on reinvesting in their ecosystems as well as a set of reflection questions to assist in the process of deciding to join a support program. This includes both questions for founders to consider on their own as well as questions to ask support programs.
The “Stakeholder Guide for Support Organizations” features a self-diagnostic tool for support program managers to assess the extent to which their offerings reflect the six principles. The tool covers how support organizations can elevate the voices of successful founders through leadership roles, and design their selection process, curricula, and services to best serve entrepreneurs.
The “Stakeholder Guide for Donors and Philanthropies” includes an action plan for those who work in nascent ecosystems. Nascent entrepreneurial ecosystems have limited resources and few successful entrepreneurs to serve as leaders and to reinvest in the local ecosystem. In such cases, donors and philanthropies can still lay the foundation for future success and self-propelling growth. As detailed in the stakeholder guide, this involves starting with an assessment of existing strengths and weaknesses, and then turning to other actions like training local angel investors and supporting the efforts of returnee and diaspora entrepreneurs.
To read more and download all the materials, visit endeavor.org/self-propelling-ecosystems.
About Endeavor Insight
Endeavor Insight is the research division of Endeavor that provides data-driven analysis and visualizations showing what makes entrepreneurial ecosystems thrive. Our research team of economists, data scientists, and policy analysts specializes in understanding the needs of high-impact entrepreneurs and evaluating the networks that enable them to scale up and pay it forward to the next generation of entrepreneurs.
About Argidius Foundation
This project was supported by Argidius Foundation. Argidius Foundation aims to help entrepreneurs build profitable businesses and contribute to the sustainable development of their communities. We do so by improving the effectiveness and reach of small and medium enterprise capacity development services.
Hamza Shad is a Research Manager at Endeavor Insight.
