Startup Angels — Blog — The 7 Stages of Startup Ecosystems - Startup Angels



The 7 Stages of Startup Ecosystems

This is the second part of our interview with Marc Nager of Techstars (read part one here). Marc joined us the other week at AngelSummit Americas in Miami, where he offered a global perspective on startup investing and what communities must do to grow their investor networks.

In part two of our interview, Marc lays out a framework for the 7 stages of startup communities he recognizes around the world. This is a super valuable perspective for everyone who works with startups: whether you’re a community leader, an angel, a corporate executive, or a founder…consider this framework carefully and think through what’s needed to grow your city to the next level.

Over the coming year, Marc and the Techstars team will be expanding on their startup ecosystems framework with the purpose of creating additional resources and perspectives for startup communities of all shapes and sizes. But here’s your sneak peak.

Startup Angels: At this point in your career, you’ve seen many different startup communities. How would you characterize the different stages that startup ecosystems encounter?
Marc Nager: That’s a really interesting subject, and we spend a lot of time thinking about it at TechStars. I think I’ve honed it down to 6 or 7 different levels:

1. Nascent
The first stage is where it all starts. This is a ‘nascent ecosystem.’ It has a group of people passionate about building the startup community, who are investing their time and energy into small activities. You might see things like a meetup or a first Startup Weekend planned. People might gather more regularly at coffee shops and you can probably identify a few people working on interesting projects. There also might be aspirations to open a coworking space.

2. Foundational
At the second stage, you actually have some startups being formed. You’re past the aspirational stage and you might notice a geographic center of ‘entrepreneurial density’ taking shape such as a co-working space and regular events established.

3. Accelerating
By the third stage, you have some visible signs of success: legitimate traction, sustainable programming and maybe an exit or two. You begin to consciously and deliberately pull together the leaders – the entrepreneurs and the feeders – institutional stakeholders, universities, governments, investment groups and the broader technology community. Everyone is gathering to discuss the future of the community and what they want to see.

4. Established
The fourth stage takes everything a step further from activity to strategy and proactive planning. This is where your ecosystem exhibits a variety of cultural differences. You see a greater diversity of participants in your community, yet there’s still a lot of support for a high number of activities covering most stages and needs, such as meetups, Startup Weekends, pitch events, angel workshops and more. The energy is great. There’s a moderate level of alignment between the key players, and you have a real opportunity to pull all the pieces together. This is where organizations like Startup Angels can help centralize community and launch your city into stage five.

5. High Functioning
At this stage, you now have a high-functioning startup community that’s identified what makes it unique. The key players have all their roles defined, and the community is really humming with a slew of sustainable and impactful activities as well as real company outcomes. There is a steady supply of talent, a healthy culture, and great support for startups. Strengths and weakness are known, and clear patterns and cycles are emerging around established startup activity. There are clear strategies and initiatives that the key stakeholders are aligned around. You might consider cities like Seattle or Boulder as “Fifth Stage” startup communities.

6. Progressive
There are just a few cities in the world that fall into this category at this time and are the marquee markets relative to their regions like San Francisco, Tel Aviv, London and New York. These markets are immediately recognizable for their high-functioning centers of entrepreneurial density. They have and support thousands of startups and entrepreneurs and are truly the regional hubs driving all aspects of activity and resources, from political and capital support to events and global thought leadership. It’s important to note that when comparing ecosystems and stages, you should be benchmarking more regionally vs. having everyone benchmark against Silicon Valley.

7. Aspirational
This last category isn’t a precise category, rather something every startup community can aspire to achieve. Marc would challenge the idea that any community has ‘made it’. He contends that communities are alive — they are ever-changing and could fall behind or even die if they become complacent. Any and every community has room to evolve, learn and innovate and should always be striving to achieve this metaphysical 7th stage.

It’s no secret that angel investors are a huge part of the equation and journey for many startups. At each stage of a startup ecosystem, angels form the base layer to fuel our entrepreneurs of tomorrow. As Marc clarified in our interview, “Angels are the first line of attack as a capital resource for entrepreneurs. So the more sophisticated your angel networks are, the more sophisticated the later stage venture networks can become. If you actually have an active and vibrant angel community that is engaged in all of the early stage activity, the rest seems to follow.”

“We’re just at the beginning of humanity’s entrepreneurial renaissance and I know there are a lot of exciting things to come we have yet to even foresee,” concluded Marc.

What stage has your startup ecosystem reached and what role will you play in its evolution?

Share Marc’s interview on twitter or attend an upcoming summit or angel workshop near you.