There is no doubt that Phoenix is rising and can become a hub for innovation. Traditionally most investments in Arizona have been real estate based and have undeniably shaped the state’s economic development policies. Risk adverse, these investors have long been distrustful of high-risk tech ventures.
Despite the lack of local funds available at the time, and the 2008/2009 economic crisis, over the past ten years, the Phoenix entrepreneurial scene has built itself from the ground up. From native tech companies, like InfusionSoft, making it big, to ASU Entrepreneurship + Innovation programs, to CO+HOOTS recently named the ?1 most innovative co-working space in the U.S., to PHX Startup Week, the #yesphx community, and many other participants, all the pieces of the puzzle slowly but surely are starting to come together.
Where are we now?
- Over 6,000 attendees attended the third edition of PHX Startup Week held in February of this year,
- Over two dozen incubators and co-working spaces. Mounting numbers of local and regional pitch competitions such as novel ASU Innovation Open. Rising number of angel funds including the latest addition, Arizona Founders Fund. Pit stop for DC-based VC tours like Rise of the Rest and Results Junkies
Yet just a little over $200 million of VC investments for Arizona startups in 2016. It sounds that what may have been lost in the hype is how sustainable the Phoenix ecosystem really is.
How do we build a unique and sustainable ecosystem?
In biology, per the Convention on Biological Diversity, (CBD), signed by almost 200 nations, an ecosystem has the following definition:
“Ecosystem” means a dynamic complex of plant, animal and micro-organism communities and their non-living environment interacting as a functional unit” (Convention on the Biological Diversity, 1992).
Per the definition above, an inherent quality of an ecosystem is the capacity to ‘interact as a functional unit.” In other words, no one has to lose for you to win! The more collaborative we are, the bigger the pie for everyone. By the end of 2016, #yesphx 2.0 launched its new website with the tagline “The world’s most generous community for entrepreneurs”. With a thousand strong Facebook group and an active Slack channel, it’s a work in progress. There are still a few components missing to bring this generous collaboration to complete fruition:
- There is currently no chart of the ecosystem mapping the entire landscape in terms of existing startups by sector and stage.
- There is no common platform listing all resources available, events and special interest group meetings.
Going back to the definition, to function properly, an ecosystem needs a ‘dynamic complex of plant, animal and micro-organism communities and their non-living environment’. Transposed to the business world, another inherent and necessary quality for a viable ecosystem is diversity.
Diversity of perspectives, experiences, cultures, genders, and age breeds innovation!
You don’t have to trust me on that. I am just relating in layman’s terms what the many studies and scholarly articles on the topic report. And we are not there yet! Progress has been made, yes. I reported last month that 50% of the ASU cohort, composed of some of their advanced tech startups I had the privilege to work with, were female founded. But just looking around us, most companies, investors, panel of experts, etc., don’t portray diversity. The rising diversity emerging in higher Ed born ventures has not permeated to the ‘real world’. If this rubs you wrong, get over it.
There are many organizations actively working to promote diversity but always from the perspective of the minorities i.e. providing resources to help them better assert themselves in the workplace.
This is an open call to the many local male influencers:
I am personally inviting you to actively and resolutely participate to promote this crucial element of our entrepreneurial scene. Let’s have a conversation and devise an action plan. Any effort is better than none. No shaming or guilt trip here. Just looking to work collaboratively towards what’s next.
Last but not least is to be honest with ourselves! A number of disappointed and angry feelings have been expressed after a certain panel of VCs commented on the state of the Phoenix ecosystem at the AZ Tech Innovation Summit held on March 23rd. I didn’t attend this event but unless, as an entrepreneurial community, we are elated with our results, isn’t that an indication that they have touched an emotional wound?
Regardless of what they say or didn’t say, there is one universal law in funding that goes like this: There is no shortage of money, only a shortage of sophisticated businesses.
Local success stories are ten years in the making and few and far in between. Let’s accelerate our most promising entrepreneurs and create density. That’s how the money will chase us!
- Starting a business doesn’t make you a startup: indeed, a startup is a newly formed business but it is designed to scale very quickly. If you have a product but not a readily scalable plan, you are not a startup. Ask yourself how you are going to get traction.
- Likewise, if you have a hobby as a ‘side-business’ with no scalable business model to support it, you are not a startup. You have a hobby as a side-business. Nothing wrong with that either.
Why these distinctions are important? Paul Singh, a Washington, DC. VC, said it best:
“There is a lack of VC funding in Phoenix because you make it very difficult for us to find you”.
Let the real startups rise above the noise. Let’s support them and talk about them so they can shine their light brighter. VC firms invest others’ people money thus have a fiduciary duty towards the members of the funds to produce the highest returns.
- Bootstrapping doesn’t equal getting everything for free. Bootstrapping means financing your venture without external help. If you have no knowledge of your critical path to market and of the financial runway it will demand, you are not bootstrapping but going along panhandling.
- Know thyself! All entrepreneurs, debutant and seasoned alike, you need to take a hard look at yourself, and often. Self-knowledge is key to your ability to leverage your powers in business. Your business will flourish only as far as you can grow.
- Not every advice is good advice! With all the hype over entrepreneurship, the quantity of information has gone way up while the quality has gone way down. Do your due diligence and understand when it makes sense! Experienced mentors or advisors will ask many questions before offering their advice and will be able to articulate the principle supporting it and why it applies to your specific circumstances.
One last thing…let’s measure how we are really doing.
There is always a buzz around newly created ventures but never any metrics regarding our failure rate. That’s the most honest feedback we can gift ourselves.
I have asked Diana Vowels, GM of Galvanize, her perspective on what it will take to build a unique and sustainable ecosystem:
“Phoenix is certainly rising as a hotbed of entrepreneurial activity, and is poised for long-term success. To sustain and grow the ecosystem, Phoenix needs to demonstrate success in three key areas:
• Talent: Educate and retain tech talent through non-traditional programs and retaining university graduates in AZ
• Capital: Increase funding both from AZ investors and out-of-state entities
• Track Record: Demonstrate success stories with currently funded companies
Clearly, these three are interdependent and fuel each of the others. The Phoenix community is positioned well; the only question I see is “Do we have grit and determination to make it happen?” My vote is yes.”
There is a real opportunity for Arizona entrepreneurial ecosystem to organically create sustainable success for the benefit of our community. Let’s not pump fake and pull that trigger already.
Be Intentional. Make an Impact. Be Generous.
Carine Dieudé is a Partner & Director of Strategy, and an Entrepreneurship Aficionado, at Altima Business Solutions: Capital Acquisition, Growth and exit strategies, Finances and Operations, for startup, small and medium-sized businesses.