Even those that agree that the COVID crisis needs to be addressed, that unlimited free donations should be avoided, and that entrepreneurship is one of the best, if not the best way that the developed world could help those in more developing areas, there is still the question: why ecosystems? It certainly seems that there are other effective ways to help entrepreneurs… why start now with a new model?
Not a New Idea
First, the thinking about Entrepreneurial Ecosystems is not new. As far back as the early 2000s or even earlier, there has been significant theory developed around entrepreneurial ecosystems. However, in practice, most of the organizations who are “building” ecosystems are doing so in the already developed world. ECatalyst believes that what has worked in the developed world can work in the developing world as well.
What makes Entrepreneurial Ecosystems a great solution?
ECatalyst believes that Entrepreneurial Ecosystems are different from other entrepreneurial programs. With Ecosystems, the focus is not just on the entrepreneurs themselves, but on the community and the economy where the entrepreneurs live. It's the place, not just the people. ECatalyst wants to create environments where entrepreneurs in a community are intimately connected to each other, to larger businesses, and to other resources in that community.
Then, as those businesses grow, they will inspire and empower other entrepreneurs in that same community to take their ideas and grow them into business realities. In this way the whole community grows as businesses grow, jobs are created, and the economy expands. The pathway to entrepreneurship becomes easier and more attractive as entrepreneurs connect to and support each other. And as the economy grows, it can substantially alter a city’s image, making it a more attractive place to live or for other businesses to move into. Ecosystem growth creates a ripple effect that makes local economic growth self-perpetuating. This is why we believe in ecosystems: they are the vehicle for comprehensive, localized economic development.
Other Entrepreneurial Development Programs
There are other types of programs focused on helping entrepreneurs such as micro-business (microloans), accelerators, small business loans, and business training. Each of these programs play important roles in the creation of a vibrant and thriving ecosystem, and we pull elements from many of them. However, while each of these are effective in one way or another, by themselves, each has its limitations (see below).
Microbusiness is an very important process that is needed in more parts of the world rather than less. Microbusiness is the process of giving a small loan (usually less than $500) to a very poor family so that they can buy a sewing machine, a goat, or some other commodity that they can then use to start a business. These loans are highly effective in that they not only help a family move from abject poverty to a sustainable income, the loans are also paid off at a high rate, usually well over 95%.
But... what Microbusiness is unlikely to do, no matter how successful the program, is significantly improve the economy of an area or create jobs for those not involved in the microbusinesses themselves. There are of course exceptions to this, as some microbusinesses do grow bigger. But it is not really in the goals of a microbusiness program to build economies. So while Microbusiness is vitally important in extremely poor areas, more is still needed to help elevate communities to the next level by creating jobs and growing the economy.
Accelerators are great tools to help entrepreneurs, especially those that have already shown some significant success in business. Accelerators usually take a cohort of businesses from some base level of success and help them grow in significant ways in their profit-making potential. Most accelerators or incubators are run in the for-profit realm with businesses that show the potential of making substantial profit for the accelerator’s organizers. Accelerators are rarely interested in businesses that have not yet launched. It makes sense… startups are very high risk.
The other issue with most accelerators is that they are usually focused on the entrepreneurs without regard to their home communities. Many accelerators ask that entrepreneurs come to them, usually in a capital or other city, and thus the local community no longer benefits from their entrepreneurs. Brain drain is often a reality for smaller communities anyway, but accelerators can at times accelerate that process unnecessarily.
Small business loans are also a necessary part of helping entrepreneurs. Some companies who offer loans also offer training or provide other resources. However, there is a need for a more comprehensive solution to make sure that the culture of entrepreneurship grows in the entrepreneur's community along with the individual entrepreneurs.
There are lots of organizations doing business training of one kind or another, sometimes with huge variations in quality. One thing that we have found, however, is that training, by itself, does not necessarily move the need of progress towards entrepreneurship. Even world-class content like what we offer at ECatalyst requires significant follow-through and implementation to actually create businesses or develop ecosystems.