City Hubs for Entrepreneurship Series
A Platform to Accelerate the Development of Local Entrepreneurship Ecosystems | Case: Miami, Florida
City Hubs for Entrepreneurship Series: Miami, Florida / 9 These new companies and investment firms fueled the growth of other actors in the ecosystem and supported the development of new high-growth companies. Intel is now worth more than $100 billion, and more than 70 of its former employees have started new companies. KPCB and Sequoia were early investors in AOL, Apple, Cisco, Compaq, Electronic Arts, Google, Netscape, LinkedIn, Oracle, PayPal, Sun, Yahoo!, YouTube, and more than 500 other companies. Many entrepreneurs they supported also became active mentors and investors, including Steve Jobs of Apple, who mentored Facebook’s Mark Zuckerberg, and Marc Andreessen of Netscape, who has invested in Skype, Twitter, and Zynga.11 The same cycle has fueled the growth of a very successful ecosystem for tech companies that emerged in Buenos Aires. During the last 20 years, entrepreneurs in the city have faced significant challenges, including the devaluation of Argentina’s currency, but the local tech industry has produced several firms that achieved exits of more than $100 million, and it now employs thousands of people.12 Google even located its third international headquarters office there in 2007.13 Endeavor Insight conducted a detailed study of the tech sector in Buenos Aires and found that the entrepreneurs at successful companies frequently served as mentors, investors, and role models for other local founders and companies, as Figure 4 illustrates. For example, Wences Casares, the founder of Patagon.com, which was sold to Banco Santander for $750 million, is an active mentor and angel investor in local firms. Ariel Arrieta, a co-founder of Digital Ventures, which was sold to Fox Entertainment, launched a local accelerator, and Hernan Kazah, who co-founded the NASDAQ-listed company, MercadoLibre, also co-launched Kaszek Ventures, the largest venture capital firm in Latin America. Together, these three entrepreneurs touch more than 100 other tech companies in the city, as the right panel of Figure 4 shows. Figure 5: The Growth Cycle of Successful Entrepreneurship Ecosystems. Growth Cycle Steps & Sub-Components: 1 2 3 4 New entrepreneurs seek to build scalable companies in the local area Entrepreneurs are able to grow their companies and reach scale Successful entrepreneurs stay in the local area and remain engaged in the ecosystem Successful entrepreneurs reinvest in the next generation Local quality of life Entrepreneurial ability Local quality of life Mentorship Access to markets Inspiration & ambition to reinvest Angel & VC investing Inspiration & ambition to grow Access to talent Role model promotion Access to finance Other (e.g., serial entrepreneurship) 2 Support the next generation Build scalable companies 1 3 New Entrepreneurs Successful Entrepreneurs 4 The Growth Cycle of Successful Ecosystems Has Four Steps. The stories of Silicon Valley and Buenos Aires are not the only examples of the growth cycle of entrepreneurship ecosystems. Additional examples of this cycle can be found in a variety of other successful ecosystems, including fashion companies in Paris, healthcare companies in Nashville, and even high-end restaurants in New Orleans.14 The growth cycle has four steps, as illustrated by Figure 5. It begins with local entrepreneurs who seek to build scalable companies. This requires that they have the desire to live in the local community and the ambition to build a scalable company. The second step is reached when their companies begin to grow significantly. To do this, entrepreneurs must possess the ability to achieve their vision. Research has shown that this also requires that companies have access to markets, talent, and finance.15 The third step of the cycle occurs when entrepreneurs who achieve significant success — taking a company public, selling a firm or reaching significant scale (e.g., $100 million or more in revenue) — choose to stay in the community and remain engaged in the ecosystem. The cycle culminates when successful entrepreneurs reinvest their financial, intellectual, and social capital into the next generation of local entrepreneurs and companies. The most common ways that successful entrepreneurs reinvest are by acting as mentors, venture capital or angel investors, and role models. Reinvestment can also occur when entrepreneurs and employees from successful companies choose to launch new firms.