Talk to a venture capitalist for longer than a few minutes and you might hear the phrase “startup ecosystem.” What the heck is it and why should you try to get in on the action?
A startup ecosystem is essentially a network of startups that have synergistic relationships with one another, usually involving combinations of barter and advice. Some consider the definition as including providers of funding and relevant industry associations.
However a startup ecosystem is actually configured, the arrangements enable startups to avail themselves of the kinds of things that hitherto might have seemed exclusive to larger companies — so a startup that might not have all of the departments of a mature company might obtain those capabilities by partnering with others in the same ecosystem.
Venture capitalists try to foster an ecosystem among all the companies in their portfolios — it makes financial sense for everyone involved. Startup incubators also encourage their constituents to work together.
Coworking Spaces
Additionally, you can often find some form of startup ecosystem by setting foot in any coworking space that houses multiple companies that all rent space within — especially when all the constituents understand that it behooves them to network with one another.
The potential synergies with other startups can make it worth the expense to lease a desk in one of these coworking facilities, especially the ones that host community events intended to get all of the different tenants to mingle.
There are also city-based startup ecosystems — the best example of this is the greater San Francisco Bay Area, including the southern suburbs known as Silicon Valley.
Find a Startup Ecosystem
But don’t fret if you want in on the ecosystem action and don’t reside in the vicinity of San Francisco; if anything, it might not be as much of a hub as it used to be, as inflation in real estate prices keep driving startups to a diaspora of ever-smaller cities.
While we’re at it, you don’t even need to be venture funded, part of an incubator nor even paying rent to a coworking space to become part of a startup ecosystem.
If you use social media, you should be able to find other startups to network with — whether you’re looking for barter opportunities, mentorship or both.
Network Like Crazy
For the latter, you’ll want to reach out to more mature companies than yours, and you can find them by joining topically-focused groups on LinkedIn, Facebook or MeetUp.
As for the barter possibilities, they’re a great way to save money on various things you would otherwise need to set up a supply chain for, but it’s important to be rigorous in how you select barter partners.
You might not have to conduct as much due dilligence on prospective trade partners who are all in the same venture portfolio as you, simply because your mutual investors already did that work for you — and they’re probably encouraging you to work with one another anyway.
Create Your Own
You may have to do some more footwork when you’re attempting to create your own startup ecosystem. When negotiating barter or even mentoring arrangements with companies that you met through other means, you would do well to precede any agreement with some form of background check on your counterparties; try talking to mutual connections that you find through whatever groups in which you first met.
If you proceed with a barter arrangement with another startup that you found on your own, you’ll want to take steps to take sure that the exchange is equal on both sides.
Typically this means each of you keeps detailed records of what you give to one another and receive in kind, so that the exchange is equal — or at least feels like it’s moving both of you forward.
Everyone Wins
Making the extra effort to barter with other startups — creating your own ecosystem — creates value that goes well beyond the cash you save on buying supplies and services: You can become customer case studies for one another at a time when you most need to amass customer testimonials.
Synergies such as these explain why proponents of startup ecosystems believe that when an ecosystem grows, all of its constituents tend to benefit as a whole. Actually, so does the larger economy: Startups are generally considered the largest source of job creation.
You might be part of a startup ecosystem without even realizing it. Perhaps you are depriving yourself of a valuable resource that might help your venture grow by leaps and bounds, if only you start engaging with other startups or increasing your involvment with them.
Fellow entrepreneurs, how many startup ecosystems are you part of — and how did you get into these arrangements?
Jackie Cohen is an award winning financial journalist turned turned financial advisor obsessed with climate change risk, data and business. Jackie holds a B.A. Degree from Macalester College and an M.A. in English from Claremont Graduate University.
