Building a sustainable business is not a one-person job. It requires collaboration and achievement from private and public sectors in developing an infrastructure that supports innovation. An entrepreneur's success lies in the availability of a cohesive economic and social system that promotes the growth and development of new ventures.
An article published in the Harvard Business Review on How to Start an Entrepreneurial Revolution states that entrepreneurs are more successful when human and financial resources, government policies, and support networks for business owners are accessible and in one place. Just like a person can't survive alone on an island, so can't a business. Empirical evidence suggests that a rich entrepreneurial ecosystem enables entrepreneurship.
Here are 4 proven reasons why ecosystems matter to building sustainable businesses:
1. How Cultural Aspects Develop A Robust Entrepreneurial Spirit
Research indicates a high correlation between cultural aspects and entrepreneurial performance. High-performance orientation, the degree to which standards, innovation, and high performance are valued and rewarded, directly affects entrepreneurial intention and the strive to achieve success.
Other cultural aspects such as:
Risk and failure tolerance.
Encouragement during the self-employment journey.
Availability of success stories or role models.
Positive images of entrepreneurship celebration of innovation; play a vital role in developing entrepreneurship roles within the defined region.
It's easier to build a sustainable business in regions where entrepreneurship is encouraged. Entrepreneurs can take advantage of local role models, get mentorship and learn from the success stories in the region.
It's no surprise why Silicon Valley has been so successful in producing the most successful startups in the world. Silicon Valley is home to 40,000+ startups and the origin of some of the biggest companies in the world, such as Apple, Google, Meta, Visa, and so many others.
2. Hiring the Best Talent
Companies have to pay close attention to the talent pipeline to maintain sustainable growth. It's crucial to have a steady workforce available when hiring needs arise. An established entrepreneurial ecosystem enables the building of channels to access the best employees. This could include partnerships with universities to build viable human resource pools.
An ecosystem also has facilities and or agents that provide access to talent through evaluation of skills, education, and any other element that creates a viable candidate.
If you are a young entrepreneur looking to hire for your startup, you're likely doing this independently. You can leverage the ecosystem to access pools of talent when needed. This will enable sustainability as your business scales.
3. Access to Funding
It's possible to start a business with minimal funding but not likely to start at zero dollars. While there are strategies to grow your business with limited finances, having access to funding can make the growth timeline a lot shorter. I like to think of funding as the catalyst to growth.
Successful entrepreneurs throughout history have taken advantage of the funding options within their access. This could include but is not limited to funding from early-stage angel investors, Venture Capitalists, and bank loans.
An established entrepreneurial ecosystem makes it easy for entrepreneurs to build sustainable businesses in the shortest time possible. To find out what funding options are available within your region, check federal and local agency's listings, local foundations, foreign aid for businesses, crowdfunding sources, read business blogs and attend networking events.
If these options aren't available, you could do it the old-fashioned way and pitch directly to potential investors within your region. You'll be surprised at how many resources you can acquire from Linkedin and local listings.
4. Governmental Support
A specified region's infrastructure and regulatory framework are one of the core pillars of a functional entrepreneurial ecosystem. Entrepreneurs can rip off multiple benefits for their businesses with a favorable framework and established infrastructure.
One of the elements of a favorable framework is government support. The level of government assistance to Small and Medium-sized Enterprises (SMEs) is crucial in laying the foundation for a functional entrepreneurial ecosystem in the region.
Different governments have different levels of assistance. For example, Singapore is the Silicon Valley of Asia and has one of the highest governmental supports for startups. Local startups in the area are eligible to acquire multiple cash grants and equity financing based on the qualification of the criteria set.
The government has invested in developing startup culture, providing up to 70% of the funding in some instances. Governmental support not only comes in the form of money. The policies regarding imports, taxation, and costs of doing business for foreigners could positively or negatively affect local businesses.
For example, if you're a small fashion business in New York, and your clothing and shoes are premium priced, without the proper regulations in place on imports, a businessman in China could easily acquire your target market by offering cheaper alternatives of the same quality.
Government regulations supporting and protecting entrepreneurs are essential in building a sustainable business. The importance of ecosystems in building sustainable ecosystems is immeasurable. While this article only covers the tip of the iceberg on using ecosystems, your business will have a better chance of being a successful venture if you implement these tips.
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