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The Entrepreneurial Ecosystem

January 22, 2016 10:19 am

The entrepreneurial ecosystem refers to the elements – individuals, organisations or institutions – outside the individual entrepreneur that are conducive to, or inhibitive of, the choice of a person to become an entrepreneur, or the probabilities of his or her success following launch.

VentureBeat_Digital_Media_Party_-_Baron_DavisThe concept of an entrepreneurial ecosystem refers to the collective and systemic nature of entrepreneurship. New firms emerge and grow not only because heroic, talented and visionary individuals (entrepreneurs) created them and develop them. But, new ventures also emerge because they are located in an environment or “ecosystem” made of private and public players, which nurture and sustain them, making the action of entrepreneurs easier.

For example, the existence of prior ventures, the availability of start-up financing mechanisms, a patent system and a culture tolerating failure, all facilitate the creation of new firms. Conversely, the ecosystem can hinder entrepreneurship as is the case in corrupt societies or if an entrepreneur tries to introduce a radical innovation when no technical standard yet exists.

Entrepreneurial Ecosystem Stakeholders

Organisations and individuals representing these elements are referred to as entrepreneurial stakeholders. Stakeholders are any entity that has an interest, actually or potentially, in there being more entrepreneurship in the region.

Entrepreneurial stakeholders may include governments, universities, private sector, family businesses, investors, banks, entrepreneurs, social leaders, research centres, military, labour representatives, students, lawyers, cooperatives, communities, multinationals, private foundations, and international aid agencies etc.

Six domains of an Entrepreneurial Ecosystem

An entrepreneurial ecosystem consists of elements that can be grouped into six domains:

1. A conducive culture (e.g. tolerance of risk and mistakes, positive social status of entrepreneur).
2. Facilitating policies and leadership (e.g. regulatory framework incentives, existence of public research institutes).
3. Availability of dedicated finance (e.g. business angels, venture capital, micro loans).
4. Relevant human capital (e.g. skilled and unskilled labour, serial entrepreneurs, entrepreneurship training programmes).
5. Venture-friendly markets for products (e.g. early adopters for prototypes, reference customers).
6. A wide set of institutional and infrastructural supports (e.g. legal and accounting advisers, telecommunications and transportation infrastructure, entrepreneurship promoting associations).

In order to explain or create sustainable entrepreneurship, one isolated element in the ecosystem is rarely sufficient. Governments, private institutions and individuals can evaluate whether they have a strong entrepreneurial ecosystem and what actions they should put in place, knowing that each entrepreneurial ecosystem is unique and all elements of the ecosystem are interdependent.

A healthy ecosystem

There are several key conditions that typically define a healthy ecosystem. The ecosystem:

  • Is tailored around its own unique environment – it does not seek to be something it isn’t.
  • Operates in an environment with reduced bureaucratic obstacles in which government policies support the unique needs of entrepreneurs and tolerate failed ventures.
  • Actively encourages and invites financiers to participate in new ventures – although access to money isn’t without barriers for those planning new business ventures.
  • Is reinforced, not created from scratch, by government, academic or commercial organisations.
  • Is relatively free from, or is able to change the cultural biases against failure or operating a business.
  • Promotes successes, which in turn attract new ventures.
  • Is supported by dialogue among various of the entrepreneurship stakeholders.

Makamba Online: African Entrepreneurship Exchange Breakfast

At the Entrepreneurship Exchange Breakfast to be hosted in Sandton, in February, Makamba Online and its African partners will provide reputable African panelists and key speakers who will help emerging entrepreneurs understand the entrepreneurial ecosystem. The discussion will break the topic into pieces so that entrepreneurs become more aware of their surroundings, and the ecosystem that already exists.

Entrepreneurs will have their business eyes clearly sharpened to see more opportunities, more growth areas, weaknesses and failures and most importantly how to deal with bureaucracy in new emerging markets.

Author: Gesture Chidhanguro

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