How to Grow the Next Generation of Entrepreneurs
The past few years have seen an explosion of accelerators and incubators around the world. Will all of this activity lead to more successful startups and entrepreneurs? Recent research says yes.
Chicago offers one example of a city that’s seen exponential growth of its startup environment and number of entrepreneurs. The city was recently listed as the seventh best startup ecosystem worldwide, up three spots from 2012, and boasts nearly 90 accelerators, incubators and co-working spaces.
Accelerators, incubators, and shared workspaces have become so ubiquitous in Chicago that most have their own areas of focus. There’s digital technology, the Internet of Things, manufacturing, energy, healthcare, arts and music and even and entities designed for specific populations. Aside from generating a lot of excitement and boosting the visibility of Chicago as a startup hub, there’s a big question – can all of this activity make a difference? Will it provide long-term benefits to a region that lags the national average in job growth by nearly a full percentage point?
The Importance of Socialization
Recent research suggests there are brighter days ahead. In a working paper for the National Bureau of Economic Research, “Learning Entrepreneurship From Other Entrepreneurs?,” researchers report that people who grow up in an area with a large number of startups are more likely to become entrepreneurs and be more successful doing it. The researchers indicate that their results are not due to better access to capital or to a greater concentration of innate entrepreneurial traits. Rather, they propose that a robust startup community not only encourages more people to become entrepreneurs but also teaches them how to be better entrepreneurs. In other words, easy money and entrepreneurial density are not as important as socialization.
Watch and Learn
What seems critical is for young people to see entrepreneurship as a viable career path, not something only genius technicians or inventors do, but something that anyone with an idea, energy and a willingness to learn can pursue. Sure everyone wants to be the next Dropbox or Uber or Pinterest, but the more that young people see others creating all manner of startups that add real value to peoples’ everyday lives, the more they will become comfortable exploring that world for themselves. Young people would still follow a learn-then-do approach, but rather than spend years in post-graduate education learning then “doing” in a traditional job, they would experience much quicker iterations of that cycle. In fact, popular methodologies such as design thinking and the lean startup approach are premised on experiential learning. Get out of the building, talk to customers, test and refine your idea based on talking to people about their problems.
On-the-job learning and both formal and informal mentorships have long played a key role in many professions but perhaps their value is amplified when it comes to building a new business. Just as the related worlds of private equity and venture capital have traditionally been mentorship models, so too is entrepreneurship. Anyone can open up a book or take a class to learn the mechanics of specific functions such as accounting, financial planning or digital marketing. But when it comes to creating a company, much of that textbook knowledge barely offers a solid footing in the face of real customers, idiosyncratic partners, and unexpected issues. Seeing how other entrepreneurs navigate real-world challenges and having the opportunity to learn from those experiences offers younger entrepreneurs a path to success.
The Startup Ecosystem Flywheel
These findings shouldn’t come as a surprise to anyone who’s lived in or observed innovation hubs such as Silicon Valley, Boston or more recently Chicago. What’s more compelling is the implication for any city’s future. If that city’s startup ecosystem can grow and thrive, young adults will be more likely to start their own businesses and will be more successful doing it. Aside from benefitting those entrepreneurs personally, that outcome would also benefit the city, the region and the economy.
Fostering a flourishing startup environment that offers support, encouragement, advice and, perhaps most intangible of all, inspiration can lead to big benefits. It’s not just the chance to create one or two unicorns, but the opportunity to instill confidence, a self-sustaining work ethic and a sense of community into a younger generation that can create the foundation for stronger, more vibrant economies over the longer term.