Startup Communities: Building an Entrepreneurial Ecosystem in Your City

INVESTORS

Although investors are a key part of a startup community, they are often inappropriately blamed for the failure of a startup community to thrive, or excessively praised for a startup community’s success. The phrase “there is not enough capital here for startups” is heard all over the world, and it is as much of a cliché as “money will go to where the good deals are.” At the early stage, raising money is hard, figuring out which deals are good is hard, and everything else associated with getting a company up and running is hard, so what’s the big deal? Rather than struggle with this, investors should recognize that they are feeders into the startup community, play a long-term game, and work hard to help support the development of their startup communities.

One of the classic problems is that some investors view themselves as gatekeepers to a startup community. This is especially true at the early stages where investors, especially local VC firms, position themselves as the first source of smart capital. When I moved to Boulder in the mid-1990s, I often heard from other local VCs things like “we invest in the best local deals and then import out-of-state investors for the next rounds.” Although true in some cases, the dependency is an unhealthy one, especially when there are very few local VCs or the investors they import from out of state end up with crummy financial results over time.

Investor arrogance is tightly coupled to this. Many investors forget that the entrepreneurs ...