My Post column today looks at the importance of entrepreneurial clusters, and how you build them. Creating a critical mass of entrepreneurs, industry experience and expertise, along with mentoring/advising and investing communities, is considered a key component of modern industrial strategy.
As I like to say, borrowing liberally from Hillary Clinton, it takes a community to build a startup.
A reader, however, was somewhat annoyed that the story focused on the needs to technology clusters. I suppose that's because Waterloo region is Canada's best example of an entrepreneurial cluster - but there are good reasons for that.
So here is the writer's question, and my response:
Enjoyed your story on entrepreneurial clusters in the Post today... You know, it’s funny because whenever I read about financing for entrepreneurial companies, you’d think there was only one kind of business in the world – tech!
I always wonder how other kinds of companies attract attention and $$ ? Fashion, food, sports, etc.
You ask a good question. Silicon Valley has spent 20 years putting together protocols and structures around investing in tech startups. I don't think the sports, food or fashion industries have done the same.
But that's the point of creating clusters. We're building a wine cluster in Niagara, a mining cluster in Sudbury, fashion and design in Montreal - hopefully these communities will include smart and willing investors/mentors. A cluster is a community where each node complements the others.
Of course, the point of tech is it is highly scalable - one big win in 10 will make up for all the losers. It would be hard to find another industry that offers that kind of risk mitigation.
Having said that, I think a private company's best bet for capital is angel investors. Experienced entrepreneurs, some retired, some not, who enjoy investing in startups as a hobby, almost a sport. These guys are not usually members of the formal "angel" networks that have sprung up over the past decade - you have to hunt them down one by one. But they are usually known to each other, and to local lawyers, accountants and bankers, so you can often track them down just by having a solid business network.
And the advantage is that these angels usually invest in industries they already know, so they bring a lot of wisdom, experience and contacts to the table, as well as their cash.
So it's not an easy path, but doable. It's the way capitalism is supposed to work.