How To Encourage Entrepreneurs-10 Steps To Create an Entrepreneurial Ecosystem

Posted by Jeff Carter
on May 29th, 2011

A big deal is being made about the StartUp America program the Obama administration has put forward. Entrepreneurship is the lifeblood of the American economy. No other world economy has been more entrepreneurial in the history of mankind-and that is one of the reasons our economy is the top of the heap.

Some of the people associated with StartUp America are great entrepreneurs. They are already engaged in building entrepreneurial communities. Programs like Y-Combinator,TechStars, Excelerate Labs are popping up all over the country to create the right medium for an economic engine to start. Organizations like the Kaufman Foundation have been intimately involved already in helping and encouraging young companies to get started. Then of course there is the established ecosystem, Silicon Valley. Successful entrepreneurs view starting up companies like a drug, it’s addicting.

It’s really hard for me to be against a plan like Start Up America. The heart is in the right place. But, I am suspicious of any government program, Democrat or Republican, to create anything. It seems to me the more the government gets involved with a program the less effective. Virtually everything the government touches gets messed up. Energy policy, land policy, education, poverty, medicine and on and on. I am afraid that too many people will rely on the government to do it, and ignore what they can do to build an entrepreneurial ecosystem.

I am afraid the government will pick winners and losers, and encourage crony capitalism, not true entrepreneurial capitalism.

What can you do?

1. Become a customer of a start up. Instead of using the big kahuna, use the start ups services.

2. Introduce a local start up to a customer. Use your influence to help people find the local start ups.

Notice a theme on the first two? Start ups can’t succeed without customers.

3. Join, or start a local angel group that invests in start up businesses. Start ups cannot start up without money. Angels provide the capital that is the lifeblood of the American economy. If you are a local business, sponsor a local angel group.

4. Find small companies and serve on their board of directors or advisors. Mentor them. If you have been a successful businessman you can help them avoid a lot of pitfalls and make the path smoother for them.

5. Go to schools and give a talk on how you built your business and became a successful entrepreneur. Be sure to talk about your failures too. Kids need to be exposed to what it means to be a start up businessperson. Work with your local college or community college to establish or enhance an existing entrepreneur program.

6. Start or work with a Junior Achievement organization in your neighborhood.

7. Encourage high schoolers to major in engineering, science or math at college. These are the majors that create the building blocks for new ideas.

8. As you go about your daily life, be aware of pain points. Think about how processes could be made better. Can businesses be started from those ideas?

All these things are relatively low cost (except the angel investing) and will help start up an entrepreneurial ecosystem. Then, there are two things the government can do.

9. Allow all angel investors to get a tax credit on their investments in a company, and have one simple flat tax of 15% or less for successful exits.

10. Eliminate the layers and layers of regulation that inhibit ideas from becoming businesses.

In Chicago, I ran into two entrepreneurs with an idea for a scalable software business. It turns out, Chicago has passed regulations to eliminate a business like this from forming within the city. There are artificial roadblocks set up by governments everywhere. They ought to concentrate on eliminating those instead of spending their time designing new programs.

Encouraging entrepreneurs doesn’t take a government program. Like most efficient markets, it takes the actions of individuals acting in their own self interest to get the party started.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.