Industry Update
Opinion Article29 May 2018

Is an Entrepreneurial Ecosystem Beneficial for Startups?

By Margarita Cruz, Assistant Professor of Strategic Management and Entrepreneurship at Ecole hôtelière de Lausanne and Nicole Rosenkranz, Assistant Professor of Strategy and Entrepreneurship at EHL

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Nicole  RosenkranzNicole Rosenkranz

Innovation and entrepreneurship are clearly flourishing in Switzerland if the from Seedstars, a concept born in Switzerland bringing together investors, educators and innovators for emerging markets; Edouard Treccani from MassChallenge, a worldwide start-up friendly accelerator with emphasis on early entrepreneurs; and Karim-Paul Chibb, an EHL alumnus and the founder of Campus, a vibrant co-working space and start-up coach.

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Lausanne's ecosystem is something of a hidden gem as it offers entrepreneurs a range of services, network partners, and a state-of-the-art support-system. However, does mere availability of such resources mean entrepreneurs are able to benefit effectively from the ecosystem?

According to an article on 'How to Start an Entrepreneurial Revolution', published in the Harvard Business Review several years ago, entrepreneurs are most successful when they have access to the human, financial and professional resources they need.

More crucial though are government policies aimed at encouraging and safeguarding entrepreneurs, as well as support networks of entrepreneurs and experienced business leaders
who may be able to provide advice on tackling some of the challenges they're facing - particularly if they themselves have experienced similar obstacles in the past.

Such networking opportunities clearly bring benefits. Through events and activities, the ecosystem enhances the chances of meeting like-minded entrepreneurs, potential investors, as well as suppliers and partners. For young entrepreneurs starting out in hospitality-related industries, an ecosystem can provide access to customized financial, legal or IT solutions.

However, it's easy to misjudge the value of an entrepreneurial ecosystem if we just focus on the number of start-ups in an area or the amount of available funding as indicators of the chances of ventures not only surviving but thriving.

Unfortunately, research shows that simply creating opportunities to raise funds or meet other entrepreneurs and business leaders is not enough.

What then makes an ecosystem strong and sustainable?

Collaboration with other start-ups, the ability to share the experiences of successful companies in the industry, training, and transparent access to resources are among the elements that will produce an effective ecosystem.

According to Seedstars, the challenges facing entrepreneurs are more apparent in emerging markets. Along with financial resources and professional mentorship, entrepreneurs seeking to make a difference in their societies also require basic facilities such as co-working spaces.

For instance, Seedstars recently built a number of co-working and co-living spaces for Latin American entrepreneurs.

Laure de Peretti told the panel session that, having got seed capital, some of these entrepreneurs also needed an adequate place to develop their ideas, which - without Seedstars - they could not easily afford. She also highlighted that leapfrogging is a common practice in emerging markets, making access to the resources available in the ecosystem difficult for entrepreneurs.

The way we see it is that you have the culture in an ecosystem, the environment, and the opportunity. These are the three big pillars. It's not only the people in it, or the structure, it's also the culture. - Laure de Peretti, Seedstars.

"In emerging markets you have leapfrogging, which is huge in the culture of emerging markets. It's jumping from one industry to another one super quickly." For example, she said, some villages in Africa had moved to solar kits from using gas or fire as an energy source, instead of switching to electricity.

And the verdict? The panelists all agreed that the ecosystem is a necessary, but insufficient condition for success.

It's up to the founders of start-ups to take the initiative and branch out and activate the networks they are part of. That's because they often spend more time and money, and hire more employees than necessary, mainly because they are unaware of what is available elsewhere. While the lean start-up movement is now about a decade old, we still find today that many founding teams don't take the time to seek the support they need to reduce costs, provide seed funding, or access to crucial knowledge.

Interestingly, according to Laure de Peretti, the more difficult the environment - as experienced by some of the founders in her portfolio - the more successful they are in making use of the ecosystem. That said, entrepreneurs in places like Lausanne and Switzerland should take full advantage of all the available infrastructure on offer to access training, nurture their networks, and collaborate with other founders - who are, more often than not, facing similar issues.

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Margarita Cruz

Dr. Margarita Cruz is an Assistant Professor of Strategic Management and Entrepreneurship at Ecole hôtelière de Lausanne. In her research, Margarita studies the role of authenticity in influencing entrepreneurial attempts such as entry of new organizations and new product introduction. In the classroom, Margarita likes to bring state-of-the-art trends and practices about the entrepreneurial and strategic scene in the hospitality and F&B industries.

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Nicole Rosenkranz

Nicole’s research interests lie in examining the importance of organizational and role identities in shaping strategic responses that drive entrepreneurial behavior and ultimately organizational change. She regularly conducts field research studying the processes by which managers and employees innovate or adapt strategies, and how they affect change at the organizational level.

More from Nicole Rosenkranz
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