September 23, 2015 • Bookshelf

“Startup Communities”

As one of the organizers and a participant in the 2014 EO Thrive conference held here in Cleveland, I was thrilled to have Martin Babinec, the founder of TriNet and an entrepreneur passionate about building entrepreneurial ecosystems, as one of the keynote speakers. As anticipated, I was moved by Martin’s desire to help transform the entrepreneurial community in upstate NY, where he resides, and eagerly accepted his invitation to attend a SERGE (Seasoned Entrepreneurs Gathering Exchange) gathering in Boulder, CO this summer. It was at SERGE that I had the pleasure of meeting Brad Feld and was inspired to read his book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City.

For those of you that know me, I’m passionate about Scaleups, which ScaleCo defines as having at least $500,000 of free cash flow with a plan to reach at least $5,000,000 in free cash flow within the next five years. These are established businesses, ready to transform or scale from an entrepreneurially run business into a professionally managed, process driven organization that will change the lives of its employees, families and community in which it resides. As I read Startup Communities, I began to see Startups and Second Stage Companies in the same light. What will help one, will help the other. It is all about supporting the entrepreneurial community or ecosystem.

While reading the book, I could not help but reflect on how far Northeast Ohio has come since I arrived in 1995. And yet there is still tremendous opportunity for Northeast Ohio to further transform, using Mr. Feld’s own example of the startup community he inspired in Boulder, Colorado, as the benchmark.

According to Feld, to build a Startup Community, the following ingredients are needed:

1. Entrepreneurs must lead the Startup/Scaleup communities. I believe this is the single greatest driver of a strong entrepreneurial community. Entrepreneurs must lead the community with support from government, universities, investors, mentors, service providers and large companies supporting.

2. The leaders must have a long-term commitment. Building a Startup/Scaleup community takes a rolling 20 year commitment. In Colorado, Brad Feld and other entrepreneurs, started in 1995 and in 2015, Boulder is a leader in Startup activity. Now the next 20 years!

3. The startup community must be inclusive of anyone who wants to participate in it. Having a culture of abundance and the true belief that business development is not a zero sum game is extremely important.

4. The startup community must have continual activities / events to engage the entire entrepreneurial stack. After reading the book, the concept of including anyone that wants to participate makes too much sense, but not something I’ve considered or focused. This needs to change.

In Boulder, CO, arguably one of the greatest stories of creating a Startup Community from very little, the foundation of this entrepreneurial lead community was the Entrepreneur’s Organization (EO). This organization, in my opinion, is the single best resource for entrepreneurs. Prior to moving to Boulder, Brad had been a member of the EO Boston chapter, and the only person he knew when relocating to Colorado was one of the founders of EO, Verne Harnish. Brad’s first move was to start an EO Chapter in Colorado. EO created the critical mass needed to springboard the entrepreneurial community.

I started my first business in 1995 in the Chicago area. I was 28/29 years old and was able to raise capital and bring on talent by telling my story. The group of entrepreneurs that supported and guided me, investing in my ideas, allowed for my life changing event. In return, they shared equity in the businesses that I built, and is what inspired Evolution’s business model. In 1998, after moving to the Cleveland area, I assumed with a solid track record and a little money to put where my mouth was, leaders in NE Ohio would embrace my ideas and energy. I was wrong. I remember pitching my next company to the “Cleveland Blue Bloods” or “Cleveland Mafia” (yes, this is what they called themselves), a group of wealthy lawyers, insurance agents, later generation wealth and other advisers. I was told, “We will pay you a fee, but equity is for family” OR “I don’t want to invest or spend any time, but you can use my name.” Brad Feld calls this the Patriarch Problem – when who you were, where you went to school and who you knew are the drivers, not what you did. What is the solution if you live in a town with a Patriarch Problem? Simple, you just move on without them.

The biggest change in the Cleveland entrepreneur activity since 1995 has been the development of an EO Chapter. Marty “the godfather” Tarr, started the chapter out of pure will in 1998. If you can, ask him to tell you the stories, they are priceless. I joined in 2001, when there were only about 10 members. Today, EO Cleveland has over 130 members and is driving the entrepreneurial activity. I still wonder what Cleveland would look like today if the “Cleveland Bluebloods” had embraced and shared with the wider entrepreneurial community? It makes me think of the saying, the best time to plant a tree is 25 years ago; the next best time is today. The same goes for building entrepreneurial communities.

Today, Northeast Ohio needs to take the next step using groups like EO, that create the critical entrepreneurial mass, and team with groups like JumpstartPurpose Capital Cleveland and anyone else that will embrace these four criteria to establish an inclusive group with a long-term view to transform how entrepreneurs are mentored and supported.

Anyone interested in learning more about supporting their entrepreneurial community should read Brad Feld’s book, Startup Communities. The book really made me reflect on the things I have not been doing, yet should.

About ScaleCo

ScaleCo Capital is a Cleveland-based lower middle market private equity firm that focuses on control-oriented leveraged buyout and growth equity investments in fast-growing companies based primarily in the Great Lakes region. ScaleCo partners with companies in the verticals of business services, tech-enabled services, value added distribution and assembly, and training, compliance, and education sectors, bringing operational expertise and strategic resources to scale their growth potential and build long-term value. To learn more, visit scaleco.com.

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