On-Ramps + Rocket Launchers: Why successful startup ecosystems are T-shaped

By a happy accident of history — mostly because Bill Gates and Paul Allen were born here and Jeff Bezos moved here to start a company — Seattle is now one of a small handful of global hubs for technology innovation.

For both selfish and not-so-selfish reasons, I’d like it to stay that way, so I devote a big chunk of my time to reading, thinking and talking to people smarter than me about the care and feeding of innovation ecosystems.

Luckily, lots of really clever people also care about this topic — my friend Brad Feld is a tireless thinker and writer on the subject, and authors like Steven Johnson (Where Good Ideas Come From) and Edward Glaeser (Triumph of the City) have helped stretch my brain on how cities and innovation really work.

The basic recipe for an innovation ecosystem is deceptively simple:

In the global war for talent, the winning cities are the ones that consistently attract the most capable and highly-trained knowledge workers — spanning a diverse array of creative and technical disciplines — and make it as easy as possible for those people to interact.

Sounds easy, right? So why do so many cities try and fail to pull this off? And what do the successful ones do that the failures don’t?

While there is no ‘silver bullet’ solution to the problem, there is one pattern of success that seems to unlock the innovation capacity of a city more quickly and effectively than any other:

Successful innovation ecosystems outperform on two axes simultaneously: creating both horizontal “on-ramps” and vertical “rocket launchers” for entrepreneurs.  

How does each of these systems enable the other? Let’s start with the on-ramps…

The raw material of innovation is talent. By maximizing the velocity and frequency of random interactions among smart, creative + ambitious people, innovation hubs are able to churn out more innovative ideas, and to marry them with more extraordinary teams of entrepreneurs, than other markets can.

Big, densely-populated cities have a natural advantage at creating this kind of intellectual free-for-all — because they’re rich in jobs, entertainment and young single people, they constantly attract waves of new talent from less-stimulating corners of the globe.

The United States has over 50 urban areas with population densities of 1 million or more residents, but only a few of these have succeeded in creating vibrant environments for innovation and entrepreneurship. The entrepreneurial standouts among U.S. cities are those that have created effective on-ramps — institutionalized systems for fostering high-bandwidth interactions among their most talented residents.

On-ramps are by definition open + inclusive 

Because they seek to maximize creative ferment, on-ramps include the broadest possible range of people, and deliberately create opportunities for people with different skills, interests and backgrounds to swap ideas. Examples of effective on-ramps include:

  • Startup Weekend — “Get thee to Startup Weekend” is my default answer to any local entrepreneur who asks me how to find a co-founder, meet other entrepreneurs or just get in the flow of ideas. After a modest start here in Seattle, SW is now a global program with tens of thousands of alumni that puts on hundreds of annual events worldwide. Participation is open to anyone — hackers and hustlers, full-time entrepreneurs and the still-employed — maximizing creative randomness by design.

  • General Assembly — this New York-based program has played a pivotal role in energizing that city’s early-stage innovation ecosystem, and is now expanding its footprint to other leading tech cities worldwide. Combining co-working space, casual mentorship and high-quality professional education under one roof, the General Assembly model is intentionally cross-discipline and open to experts and newbies alike.
Dozens more of these “open platforms” exist around the world — mostly run by volunteer or non-profit organizations like Founder Dating, Founders Institute, Startup America, etc. — that understand the critical role of the horizontal axis in fostering innovation at the local level. 

Research universities, graduate and professional schools and other non-market institutions also play a critical role by attracting and mixing together bright people from around the world, some of whom will enter the local innovation market when they leave school.

But for all the good that these open, horizontal systems do to create fertile environments for innovation, their inclusive nature generally causes them to fail at three critical functions also required for entrepreneurial success: 

Successful innovation ecosystems match their open + inclusive on-ramps with closed + exclusive rocket launchers to provide the critical functions of screening, signaling and acceleration.
“Exclusive” and “closed” are dirty words in our egalitarian, meritocratic culture. But screening, signaling and acceleration are critical roles that elite institutions play in the marketplace of ideas and risk capital.

Accelerator programs like Y Combinator and TechStars are now harder to get into than Ivy League universities. Seed money may be plentiful right now, but raising Series A capital from a Tier 1 Valley VC is harder than it’s ever been (partly because of all those seed financings).

When it comes to startup accelerators or venture investors, the smaller the eye of the needle, the more valuable and effective the platform is likely to be.
No matter how talented the individuals may be, or how inspiring their vision, a vanishingly small number of startups at any given moment strike just the right balance of skills, insight, timing and execution required to create impact at scale. Successful innovation ecosystems require institutions whose sole function is to sift through all the creative ferment on the horizontal axis and select a small number of projects to drive upward with maximum velocity.

Let’s break each of these three “rocket launcher” functions down in more detail:

  • Screening is the first step — applying a rational set of filters to the raw exhaust of an innovation ecosystem in an effort to identify those teams and ideas with the most promise. The more different types of screeners the better — there are many different flavors of innovation, and many different ways of getting those innovations to market — as long as they effectively stop the weakest teams and ideas from progressing, and concentrate ecosystem resources on the few teams most likely to succeed. 

  • Signaling comes next — efficiently moving the best startups from the earliest stages through progressively steeper financing and performance milestones. Navigating this path successfully requires more than great execution by the founding team. Critical evaluation and public support from skilled, high-integrity market participants — startup accelerators, experienced mentors, angel and institutional investors, journalists, market analysts and channel partners — are essential aids to help downstream participants identify and support the most promising new innovations.

  • Acceleration is how competitive advantage is solidified — taking a startup’s natural advantages of speed and agility and piling on unfair levels of capital and human support to increase that company’s odds of domination in its market segment. Every institutional rocket launcher — from startup accelerators through the various tiers of venture and growth capital — is fundamentally a vehicle for conferring unfair advantage on its selected companies. The best startups stack their deck with the best acceleration vehicles available at every step along the way until they either fail spectacularly or the market capitulates and recognizes them as the winner in their chosen field.
The foundation of a healthy innovation ecosystem is its on-ramps — the friendly, inviting and inclusive points of entry that draw in the world’s most talented people. But the long-term health of the system requires effective rocket launchers that can help those people realize their biggest and most ambitious dreams.
Every time a big entrepreneurial dream comes true, the success of its founders and participants becomes the raw material that fuels the dreams of the next generation.

Each new generation of heroes, angel investors, mentors and leaders spawns another, even bigger generation of aspirants that follow behind. The cities that nurture this process over time — by fostering the establishment of effective local on-ramps and rocket launchers — are the ones that will win the global war for talent, growth and opportunity.