What is the formula for a great startup ecosystem?


I’m from the Bay Area and watched areas like Mountain View and Cupertino become “Silicon Valley” and the headquarters for some of the most famous startups in the world. Over the last ten years alone the ecosystem has grown exponentially. While there’s still an ongoing debate about soaring housing prices, and yes, it’s a problem that is making it harder for people to live a normal life in the Bay Area, it’s no secret that it is global hub for Venture Capital. On top of that I think everyone would agree it’s the go-to example of a great startup ecosystem.

Startups in the Bay Area have phenomenal access to two insanely important things:

  1. Capital
  2. Talent

Now this isn’t to say that other cities don’t have either or both of these elements. Boston, New York, and Los Angeles and Seattle also have thriving startup scenes with amazing VC’s and amazingly talented people. I think it’s fair to say that these cities probably have a lot of the magic that it takes to be considered to have great startup ecosystems like Silicon Valley.

Of course the formula is a lot more complex than just having good access to capital and talent (duh). You need companies that have big exits that create employees that become founders and angel investors. Great Universities make a big difference, a few IPOs a year doesn’t hurt either. Forbes wrote an article earlier this year citing five steps to building a meaningful startup ecosystem in your city, #1 on their list was to start with a collaborative mentality which I think is so important, but it’s often overlooked as most people are fixated on KPIs like total dollars invested or number of unicorns per square mile (okay maybe not that second one).

The first thing to understand is that entrepreneurship is not “zero-sum.” Startups are exciting precisely because they have the opportunity to create new markets that did not exist before. When you adopt this mentality, a competitive startup, startup organization, or startup ecosystem does not have to lose in order for you to win…the most lucrative opportunity is to make the pie bigger for all. (Source – Forbes)

The challenge that many cities have outside of San Francisco, Boston, New York, LA and Seattle is that they often have a few of the ingredients that go into making the magic, but fall short on some that are so critical to making a good ecosystem a great one. One of the prime examples here is cities that might have a good group of VCs and angel investors and a very collaborative mentality but lack a solid history of previous startup exits and the founders that then give back and help build the ecosystem. In many cases, for better or worse, founders will end up leaving a second or third tier city and move to San Francisco, Boston, New York, or LA.

Now there’s nothing wrong with this in my opinion. I’m from the Bay Area, I miss it, it’s home. I also know that as our startup continues to grow, the Bay Area is likely going to continue to be a growing source if not the primary source of our capital. At the same time, I’m really enjoying being a part of the Austin startup ecosystem, there are some truly great people here and innovative companies, but I know we’re missing some of the key elements needed to make a truly great startup ecosystem.

I guess the question to ask yourself is – do you want to be a part of making an ecosystem great or do you join a great ecosystem? While the two aren’t mutually exclusive it’s bigger than just you and while you can always make an ecosystem better, you can’t control what happened before you got there. While there’s definitely no exact formula, there probably is a general formula that can be derived by looking at elements that the great startup ecosystem have in common.

What do you think? What makes a great startup ecosystem and is there one where you live, or are you still missing a few critical elements needed? I’ve said my piece now I want to hear from you. Comment and let your voice be heard!

Morgan Linton

Morgan Linton