Quote of the Day: Leading Myths About Entrepreneurship and Effective Start Up Communities

What are the leading myths about building more effective startup communities?

There are there common ones: 'We need to be more like Silicon Valley,' 'We don't have enough capital,' and 'Angel investors must be organized.'

For decades, cities have been proclaiming themselves the next Silicon Valley. That’s nonsense — cities — and the entrepreneurial leaders — should focus on creating the best startup community for their city, based on the unique attributes of their city. Learn from the amazing things in Silicon Valley, but instead of trying to be like Silicon Valley, be the best Boulder, or best Chicago, or best New York, or best Portland. You already have an identity as a city — you don’t need to be Silicon Alley or Silicon Slopes.

Next, there never is a balance between supply and demand of capital. Entrepreneurs shouldn't worry about this — instead they should focus on creating amazing companies. Capital will always find amazing companies. While there are many things that can be done over time to attract more capital to a region, the biggest thing is for entrepreneurs to actually go create some significant companies.

Finally, related to this is the notion that angel investors should be organized into formal angel investor groups. While this can be helpful, it’s often extremely harmful and stifling, as many angel investor groups try to look like small venture capital firms rather than acting like helpful angel investors.

(bold original) 

This is from Brad Field and Rich Florida as quoted by Paul Kedrosky at the Kauffman Foundation’s Growthology blog.

My comments:

On the myth of the next Silicon valley.

What is needed is an intensely competitive environment that will foster and reward the virtues of failure or risk-taking that encourages innovation.

In other words, entrepreneurship thrives best on economic freedom.

On the the fantasy of the equilibrium of capital.

The same argument has been used to justify government’s role on public works or infrastructure spending.

Economic freedom nurtures capital accumulation. As the great Ludwig von Mises reminds us “Progressive capital accumulation results in perpetual economic betterment.” As noted in the above quote, capital and great companies will co-exist, given an environment that is conducive to business or business friendly.

On groupthink in terms of Angel investors.

Groupthink, as explained before, reduces critical, creative and independent thinking as well as  individual responsibility and discipline, all necessary ingredients for entrepreneurship.

Groupthink fallacy applies not only to Angel investors but to the financial markets, as well as to other social activities, specifically magnified in politics.

Remember, entrepreneurship is foremost an art before it is science.