On the heels of my return from Phoenix Biosciences Core and a talk about the Arizona startup ecosystem, Texas announces ARPA-H funding, Advanced Research Projects Agency for Health supporting transformative biomedical and health breakthroughs. It didn’t luck into it with a last-minute pitch deck and a prayer. Four major cities put aside their egos, formed a coalition, and outmaneuvered the coasts at a game the coasts invented. 

Thomas Graham, founder of Crosswind Media & Public Relations and the strategist behind the Coalition for Health Advancement and Research in Texas (CHART), wrote in the Dallas Morning News that Texas “licked partisan politics and regional rivalries” to land one of the most coveted bioscience investments in the country. He described a tone of collaboration across Houston, Dallas, Austin, and San Antonio, noting, “We compete, but we also collaborate.” Graham framed the dynamic between Texas cities as something close to “co-opetition,” a balance of healthy competition paired with intentional collaboration to win against other states, not each other. I say, “finally,” with a sigh of relief about Texas. He’s right; that spirit is rare and it matters enormously. When the Dallas Regional Chamber’s Kelly Cloud was asked to highlight recent developments in the Dallas economic development landscape, she paused and responded: “How much time do I have?”  Let’s look at why.

Because Graham’s article, and the institutional wins he rightly celebrates, tells a story to which I want to add. Where I focus, is among the questions that should follow every announcement of a new hub, a new $6.5 billion Eli Lilly investment, or a new CPRIT allocation: what does it mean for the startups, the venture capitalists, and the entrepreneurs? Not the research. Not the recruitment of established pharmaceutical firms and not the real estate, but for our slice of an economy where risk is highest. The people who are building the companies that will either commercialize the science emerging from these institutions or watch that science get licensed, shelved, or exported to Boston.

That question, is the one few answer honestly because the answer is complicated, uneven, and in some cases, embarrassing relative to the scale of the institutional assets. So, let’s answer it.

The Institutional Foundation Is Formidable (and That’s the Easy)

Texas’ bioscience infrastructure would make most countries jealous, let alone most states. CPRIT (the Cancer Prevention and Research Institute of Texas) is a $6 billion initiative, making Texas the largest state funder of cancer research in the nation and the second-largest public funder behind only the National Cancer Institute. As of August 2025, CPRIT has awarded more than $3.9 billion through over 2,148 merit-based grants across 149 Texas institutions, organizations, and companies. One county alone has received $2.3 billion of that, roughly 60 percent of the total. CPRIT allocates approximately $70 million annually specifically for company investments through milestone-based contracts, covering SEED, therapeutics, diagnostics, and new technology company awards. That is non-dilutive capital (meaning founders don’t give up equity for it), and it flows through a legitimate peer-review process that should be the envy of every state in the country.

The Texas Medical Center in Houston is the largest medical complex on the planet. UT Southwestern, in Dallas, is a research powerhouse that attracts federal funding at scale. Dell Medical School at UT Austin only opened in 2016 and has already begun reshaping the capital city’s life sciences trajectory. San Antonio generates more than $44 billion annually through its bioscience and healthcare sectors and houses the Texas Biomedical Research Institute alongside a substantial military medical community through Brooke Army Medical Center. The ARPA-H Customer Experience hub at Pegasus Park in Dallas sits within a $2.5 billion national health innovation network. UT San Antonio’s Barshop Institute just secured up to $38 million from ARPA-H for the first nationwide clinical study in healthy longevity. The proposed Dementia Prevention and Research Institute of Texas (DPRIT), modeled after CPRIT, would add another $3 billion if approved.

But ingredients don’t cook themselves and as I’ve looked to other hubs of innovation in health, we want to look to the strengths and weaknesses of what we can cook. A state that accumulates this much institutional firepower while leaving the startup pipeline structurally incomplete is a state building a mansion on a dirt road.

Where the Startups Actually Are

The 2025 Austin Bio & Health Report, authored by Jason Scharf and Jani Tuomi, documented that Austin alone is home to over 1,100 bio and health companies, employing 21,000 people, and generating a total ecosystem valuation of $77 billion, a staggering 45 percent surge in 2025 alone that pushed total value growth to a 52 percent compound annual growth rate over the last eight years. Venture capital investment has reached $1.6 billion in bio and health sectors in 2025 alone, vaulting Austin to 6th nationally in health sector VC funding, up from 18th in less than a decade, with only roughly $100 million separating Austin from overtaking legacy hubs Los Angeles and San Diego. Bio and health now capture one in five venture dollars invested in Austin, up from just 12 percent. The report identifies multiple companies that have crossed $100 million in valuation alongside several unicorns valued above $1 billion, with 665 additional startups below the $100 million threshold forming the base of the pipeline. The top five investment deals of 2025 tell the story: Function Health at $298 million Series B, Curative at $150 million Series B, Harbor Health at $140 million, Ollin Biosciences at $100 million Series A, and Alleviant Medical at $90 million. 

But they also conceal a pattern that anyone who has studied startup ecosystem capacity building will recognize. Most of that value is concentrated at the top; the middle is thin and the bottom, the aspiring founders, the first-time biotech entrepreneurs, the researchers who have commercializable science but no idea how to form a company, that population is largely underserved.

Dallas healthcare startups raised $448 million in 2025, with notable companies including Osteal Therapeutics, MicroTransponder, ReCode Therapeutics, and Colossal Biosciences (which recently became Texas’ first decacorn at over $10 billion in valuation). Houston closed out 2025 with significant biotech funding rounds alongside its energy-tech corridor. The Texas Medical Center Innovation’s 2025 Accelerator for Cancer Therapeutics supports over 50 startups advancing immunotherapy, diagnostics, and targeted cancer drugs.

The 2025 Report frames these cities as the “Texas Bio Triangle,” one interconnected mega-region powered by four distinct hubs. The VC funding breakdown across the triangle tells an important story: Austin led with $1.6 billion, Dallas-Fort Worth contributed $218 million, San Antonio $151 million, and Houston $108 million, for a combined total of $2.07 billion in health sector venture capital across the state. Austin is positioned as the tech-enabled innovation and commercialization hub; Houston as the home of foundational discovery and clinical trials at the Texas Medical Center; San Antonio as the center of applied research and military medicine; and Dallas-Fort Worth as the scale, distribution, and financial gravity of what is being called “Y’all Street.”

Jason Scharf, the early-stage bio and health investor who co-authored that report and hosts the Austin Next podcast, has been one of the most consistent voices making this exact point. Scharf, who previously held leadership roles in strategy and market intelligence at Illumina, BD, and Amgen, would likely tell you something that echoes what he’s said publicly, “An ecosystem isn’t built when a giant established player moves in. It grows and thrives by helping the companies already here go from scrappy beginnings to real winners, even unicorns. That is how Austin’s Bio & Health stack went from a small outpost to a hub of real significance.” He’s been hammering the thesis that Austin’s path isn’t to recruit big pharma but to grow its own, and he’s correct. The lesson from Boston and the Bay Area wasn’t that big companies moved there; it was that startups grew there, and the big companies followed.

Anna Sizova, an Austin-based physician, pediatric endocrinologist, and HealthTech innovation leader who connects founders, investors, clinicians, and global partners across 40+ countries through her community IMPACT-HEALTHTECH, frames the challenge plainly: “Texas has the institutions, the patients, and the science. What it’s still building is the translation layer; people who understand both clinical development timelines and startup velocity. Founders need someone who can help them navigate FDA pathways, de-risk their regulatory strategy early, and avoid spending their runway on mistakes the pharma and CRO world solved decades ago. That gap between a university breakthrough and a fundable company with a real development plan is where most of this potential quietly disappears.”

For Sizova, this isn’t abstract. As a physician who has spent over two decades at the intersection of clinical research, global health, and the startup ecosystem, she has watched brilliant science stall not for lack of funding, but for lack of translation; the kind that only comes from someone who has stood inside a clinical trial and inside a pitch room. Her work building IMPACT-HEALTHTECH, co-founding an AI surgical startup, and mentoring founders through programs like Nucleate has made that gap clear: the distance between a published paper and a funded company with a credible IND pathway is vast, and most ecosystems have almost nothing filling that space.

The Venture Capital Landscape: Promising but Incomplete

Texas’ venture capital ecosystem for biosciences is real, growing, and rapidly maturing, though still not fully proportional to the institutional assets it appropriately should be capitalizing. S3 Ventures, the largest and longest-serving VC firm born in Texas, manages over $1 billion in assets across healthcare technology and B2B software and just closed a $250 million Fund VIII. Silverton Partners brings over $700 million under management. ATX Venture Partners, PTV Healthcare Capital, and LiveOak Venture Partners all play active roles in early-stage health and biotech.

The 2025 Report reveals substantial new venture capital dry powder entering the Austin bio and health market: 8VC closed a $998 million Fund VI, Sante Ventures raised a $330 million Fund V, and Virtue VC launched a $56 million Fund II. The report identifies 13 venture capital firms with bio and health as their sole investment focus in Austin (including 4D Capital, Create Health Ventures, HealthQuest Capital, KdT Ventures, Sante Ventures, TEXO Ventures, and Virtue VC), eight additional firms with bio and health as a key focus (including 8VC, Next Coast Ventures, and S3 Ventures), and 19 more that have made bio and health investments.

That capital stack is diversifying and deepening in ways that were simply not true two years ago.

Bios Partners, a venture capital firm explicitly focused on identifying advanced biotech in overlooked and under-invested U.S. markets, directly addresses what they call “geographic favoritism” in venture capital, the well-documented tendency of capital to concentrate on the coasts. Their thesis is that great science is evenly distributed throughout the country, but venture funding is not. They’re right.

National firms have significantly increased their Texas activity: Sequoia Capital, Andreessen Horowitz, and Kleiner Perkins have all made Dallas investments in 2024 and 2025. The influx of national capital has helped Texas startups scale more quickly, but it has also driven up valuations and created a dynamic where the very best deals flow upward to coastal capital while the middle tier of promising-but-not-yet-flashy startups struggles to find appropriate funding locally.

This is exactly the pattern I’ve written about extensively. Venture capital avoids your startup ecosystem not because investors are ignorant of what’s going on but because the ecosystem hasn’t built the density of deal flow, the mentor infrastructure, and the market-readiness preparation that makes investing rational. When I talk about why startup ecosystems fail because of investors, I’m not blaming VCs for being cautious, I’m blaming the ecosystem infrastructure for not making caution unnecessary. You can’t yell at money for being rational, you have to make your region so structurally sound that money has no excuse not to show up.

Startup Development Organizations: The Good, the Missing, and the Siloed

The organizational infrastructure supporting bioscience startups in Texas is a mixed bag. Some of it is excellent but much of it is fragmented. And a disturbing amount of it is doing the same thing three other organizations are already doing, in isolation, while using the word “collaborative.”

BioAustinCTX serves as the Central Texas life science industry organization, working to bring together entrepreneurs, infrastructure, capital, and talent. The ACC Bioscience Incubator provides wet lab space and connections. The Texas Medical Center Innovation operates accelerators in Houston. The Biotechnology and Healthcare Industry Alliance of North Texas (BHIANT) focuses on workforce development and industry partnerships.

A significant infrastructure development that the 2025 Report highlights is The Domain, in Austin, emerging as the bio and health district. The University of Texas has opened 10,000 square feet of Innovation wet labs there, and the $2.5 billion UT Medical and MD Anderson campus has pivoted from its originally planned downtown location to The Domain, with new zoning unlocking future development. This is precisely the kind of purpose-built, density-creating infrastructure that bioscience startups need; not another coworking space with a microscope on the shelf, but actual wet lab facilities near research talent with room to grow.

But here’s the problem, and it maps precisely to Consideration #1 the 10 Considerations of why startup ecosystems fail: silos destroy throughput. Universities run their commercialization programs, Chambers run theirs, Incubators build cohorts in isolation, and Government agencies maintain parallel databases. Everyone “supports entrepreneurship,” yet founders navigate a maze where every door leads to a different map. In the biosciences, this fragmentation is even more damaging because the cost of entry is higher, the timelines are longer, and the regulatory complexity means that a founder getting the wrong advice at the wrong time doesn’t just waste six months; they can waste years and millions of dollars pursuing a regulatory strategy that was never viable.

The 10 Considerations Applied to Texas Biosciences

Let me walk through the 10 Considerations framework as it applies specifically to the Texas bioscience startup economy, because this is the operating manual for what Texas needs to address if it wants the startup layer to match the institutional layer that Graham and others rightly celebrate.

1. Overcoming Silos. Texas biosciences suffers from the same fragmentation problem every ecosystem does, except the stakes are higher. CPRIT operates in one lane, BioAustinCTX operates in another, and TMC Innovation runs its accelerators without enough structural connection to what Austin or Dallas are doing for early-stage founders. The ARPA-H hub in Dallas should, theoretically, create connective tissue across all four cities, but that depends entirely on whether anyone architects that connection deliberately. Graham’s “co-opetition” framing is wonderful; it needs to become operational through shared CRMs, unified mentorship standards, and consistent deal-flow pipelines that move founders to the right resources regardless of which city they started in.

2. The Missing Middle. This is Texas biosciences’ biggest vulnerability. The state has excellent resources for nascent researchers (CPRIT grants, university tech transfer offices, incubator space) and excellent resources for established companies (ARPA-H partnerships, TMC infrastructure, state incentive programs). Between those poles sits a canyon. The high-growth, pre-scale biotech startup that has initial data but needs mentorship, capital-readiness preparation, B2B customer access, and regulatory strategy support; that company dies in the gap more often than it survives it. The missing middle is where Series A funding should live, where fractional CSOs and regulatory affairs executives should be available, and where applied R&D partnerships with pharma companies should be actively brokered. Most of that doesn’t exist at scale in Texas; it needs to.

3. Funding the Actors. Every bioscience ecosystem in Texas relies on a handful of people who are doing the connecting, mentoring, and advising work that makes the system function: Most are underfunded. Many burn out. Cities pour millions into ARPA-H bids and corporate recruitment incentives while asking the people who actually run the startup programs to survive on sponsorship revenue and ticket sales. Stable, multi-year operational funding for ecosystem builders is not a nice-to-have, it’s infrastructure. Treat THEM like infrastructure or watch the infrastructure collapse.

4. Measuring Outcomes, Not Activity. Texas loves a summit and it loves a ribbon-cutting but let’s be fair, I can say the same of everywhere. Who doesn’t love a press release about a new innovation district? (Never mind the fact that press releases never reach anyone anymore). These aren’t outcomes. Outcomes are funding per capita in biosciences. Or number of biotech startups reaching $1M, $5M, and $10M in revenue. Look to new angel investors activated per year in life sciences or to exits and liquidity events. Measure local corporate procurement awarded to local biotech startups. If your bioscience ecosystem metrics look like event attendance and media impressions, you are measuring the wrong things, and your policy decisions will reflect that. This is explained extensively in why startup cities need to measure outcomes, not activity and in my book Startup Ecosystems.

5. Collaboration as Culture. Graham’s article celebrates collaboration at the state level for big institutional wins and Texas should be celebrated for that exceptional accomplishment.  Collaboration at the startup level, where individual organizations share mentor pools, cross-refer founders, and integrate communications channels, that’s where the work gets hard and where most ecosystems fail. Stanford’s research on ecosystem performance shows that trust and informal collaboration networks are strong predictors of early-stage innovation output. Texas biosciences needs standing ecosystem roundtables that include startups, not just institutions.

6. Include the Invisible Talent. The OECD warns that untapped entrepreneurial potential disproportionately exists among people outside established networks. In Texas biosciences, this means the clinical researchers, the post-docs, the nurses and healthcare administrators with deep domain knowledge who have never been told they could be founders. What I saw in Phoenix, Arizona, is that they’re recognizing and fixing this.  It means immigrant scientists on visas that make starting a company structurally difficult. It means the majority of people who never get invited to the summit in Austin (which reminds me, read about civic storytelling because a massive problem in most ecosystems is that no one even knows that such things are going on; please, everyone, learn how marketing works now and fix how you promote things). The stage cannot keep featuring the same handful of executives. More as to talent, use founder-assessment tools rather than resume filters. The best bioscience startups will come from people who don’t look like founders yet.

7. Architect Environments for Performance. Biotech startups need wet labs, BSL-2 facilities, prototyping resources, and access to clinical trial infrastructure. They need these things at startup-friendly price points, not at rates designed for Pfizer. The ACC Bioscience Incubator in Austin is doing this and TMC Innovation in Houston is doing this, but the gap between what exists and what’s needed is enormous, particularly outside of Houston. Workspace design, mentorship availability, early customers, and even psychological safety (biotech founding is isolating and grueling) determine whether founders move fast or stall.

8. Align Government, Academia, and the Private Sector. This is where Graham’s ARPA-H coalition model is genuinely instructive. The bow tie analogy I’ve used extensively applies perfectly here (applied a little differently): Texas invests heavily in on-ramps (programs, grants, accelerators) but often fails to tighten the knot where founders transition into revenue, customers, and capital. Universities produce research without commercialization pathways that actually work at speed. Government offers incentives but not deal flow. Investors wait for traction that can’t materialize without the infrastructure investors are waiting to see. Breaking this cycle requires shared KPIs across all partners and ecosystem stewards with actual authority to coordinate across institutions. Texas did this in ARPA-H and needs to do it for startups.

9. Accelerate Innovation by Unlocking Local Competitiveness. Texas biosciences has real comparative advantages.

• Houston owns clinical infrastructure and patient diversity
• Dallas owns diagnostics, medical devices, and now ARPA-H
• Austin owns the convergence of health tech and the “bio innovation tech stack,” as Scharf calls it
• San Antonio owns longevity science, military medicine, and infectious disease research

These are defensible regional strengths. If each city doubles down on its strengths rather than generically chasing “biotech” as a category, the state will develop the kind of focused ecosystem that outperforms generic ones. Saying “we do biotech” is like saying “we do tech.” It means nothing meaningful to the fact that people who work bio (or tech) don’t do the same things. Saying “we are the national leader in neurotech” (Austin’s case) or “we own cell and gene therapy manufacturing” (Dallas-Houston’s case) means everything.

10. Adapt, Don’t Copy. Texas should not try to be Phoenix or Boston, it’s not, I’m just stating it because it’s one of the 10 considerations and when ecosystems try to model what works elsewhere, they tend to fail. Do not try to replicate the Bay Area biotech model, which was built on decades of NIH proximity, Genentech’s founding mythology, and a real estate market that has since priced out most of the founders who would start the next generation of companies. Texas’ model should be built on Texas’ strengths: no state income tax, lower cost of living, massive patient populations for clinical trials, CPRIT’s non-dilutive funding model, the state’s economic development plan, and the cultural willingness to take risks that Graham described in his article. Adapt global best practices; don’t copy them. The regions that rise are not the ones that copy, but the ones that translate.

The Policy Gap That Nobody Wants to Talk About

Startups Are Not Small Businesses (here is a Texas Startup Policy Blueprint for Unlocking Capital) explored in Startup Economic Policy That Matters for Entrepreneurs, bears repeating here because biosciences magnify the problem. Texas does not formally distinguish startups from new businesses in its policy architecture. Fewer than roughly 10 to 15 percent of governments worldwide do this in law, policy, or administrative design. The Organisation for Economic Co-operation and Development has been explicit for more than a decade that high-growth, innovation-driven firms behave differently from small and medium enterprises and require different policy instruments, capital structures, and timelines.

In biotech, this distinction is even more critical because the timelines are longer, the capital requirements are higher, and the regulatory complexity means that a founder cannot “lean startup” their way through an FDA approval process. A biotech startup is not a small business with a microscope; it is an experimental venture operating under conditions of extreme uncertainty with capital needs that dwarf most startups by an order of magnitude. Treating it the same as a new restaurant opening in a Texas strip mall is not just unhelpful; it’s negligent. Texas’ overall policy trajectory is favorable (no state income tax, a business-friendly regulatory environment, growing research investment), but the lack of startup-specific policy instruments means the state is leaving enormous potential on the table.

Scharf noted in an interview with the Austin Monitor that policies like HB 1709, which sought to regulate business uses of artificial intelligence, could dampen enthusiasm for companies who see AI as critical to identifying health trends and creating new treatments. That’s the granular, sector-specific policy attention that bioscience startups need and rarely get. When your state legislature is debating AI regulation without understanding that 40 percent of your health tech startups depend on machine learning for their core product, we have a policy literacy problem.

Next for Texas Biosciences

Graham concluded the news of ARPA-H by saying, “The opportunity now is to make that the rule, not the exception.” He was talking about, I think, statewide alignment. I vehemently agree with his conclusion, and I’d extend it further: the ARPA-H coalition model worked because it had leadership, specificity, shared goals, and accountability. Apply that same model to the startup ecosystem itself and Texas biosciences goes from being a state with great institutions that happens to have some startups, to being a state where great institutions exist because the startup pipeline feeds them.

Concretely, that means establishing a bioscience-specific startup development organization (or empowering an existing one) with a mandate to coordinate across all four major cities. It means CPRIT explicitly partnering with startup accelerators and incubators to create warm handoffs from grant recipients to founder development programs. It means building a functioning bow tie where the knot connects university research, regulatory strategy support, clinical trial access, and early-stage capital into a single navigable pathway for founders. It means treating ecosystem builders like infrastructure, not volunteers. It means measuring whether startups are actually surviving, growing, and generating returns; not whether an annual summit had good attendance.

Thomas Graham wrote that “the future of biosciences in Texas is not just promising. It is already here.” The 2025 data says he’s righter than even he may have anticipated. Garheng Kong, Founder and Managing Partner of HealthQuest Capital, captured it well in the 2025 Report: “Austin brings together a rare mix of strengths that make healthcare innovation possible at scale. You have leading technology talent, a growing device, diagnostics, life sciences ecosystem, forward-looking health systems, and access to capital, all in one market. What excites me most is the entrepreneurial mindset here.” And Claudia Lucchinetti, Dean of Dell Medical School, framed the broader ambition: “What’s happening in Austin isn’t just the growth of individual companies. It’s the creation of a new model for how a region advances human health. We’re aligning research, clinical care, education, and innovation in ways that rarely happen in the same place at the same time.”

On the institutional side, Texas is demonstrably a national leader; on the startup side, the trajectory just crossed its own inflection point. A $77 billion ecosystem that grew 45 percent in a single year is not a state still figuring things out; it is a state where the flywheel is turning and the question has shifted from “will this work?” to “how do we make sure the infrastructure keeps pace with the momentum?” The materials are not just on-site; they are being assembled at speed. The blueprint is being drawn by people who actually understand what they’re building. Whether it becomes the definitive model for bioscience entrepreneurship outside the coasts depends on whether the ecosystem builders, the policymakers, and the capital allocators treat this moment with the seriousness it deserves. But for the first time, the data says the bet is working.

If you’re a founder in Texas biosciences trying to figure out why the ecosystem simultaneously looks amazing on paper and feels like it could serve you better in practice, you’re paying attention, and you’re right to expect more, because more is coming. You’re paying attention and I want to celebrate you for that, encourage you get more involved, comment, and raise your expectations even higher. If you’re an investor wondering why the deal flow doesn’t yet fully match the institutional momentum, the answer tends to be, and is here, in the infrastructure between the lab and the cap table. And if you’re an economic development professional reading this and nodding, stop nodding: let’s start filling in the gaps. The playbook exists.

The post The Entrepreneurship in Texas Biosciences appeared first on Startup Economist.

Ninety percent of startups fail, and the standard response from the startup industry encouragement because we “learn from failure.” The work I do in legislative affairs and ecosystem development is oriented precisely to improving that number, and a recent trip to Phoenix reminded me that the cities doing interesting things are not the ones trying to replicate the Bay Area playbook, they’re the ones that know better.

I was in Phoenix last week for a fireside conversation with Brian Ellerman at Phoenix Bioscience Core, a 30-acre life sciences innovation district in downtown Phoenix. Ellerman is Executive Director of XLR8 (pronounced “Accelerate”), a scale-ready startup program housed at PBC, the vice chair of Desert Angels (ranked number one in the Southwest and fifth nationally among angel groups), and a doctoral candidate at Arizona State University researching entrepreneurship education and entrepreneurial ecosystems. His career spans founding companies in the ’90s healthcare space, a successful exit, 15 years in pharmaceutical executive leadership (including a global role in technology scouting that put him across the table from VCs, accelerators, and startups worldwide), and now a deeply intentional effort to fix what doesn’t work in how Arizona builds companies.

If his personal mission sounds like me, I appreciate that you’ve been getting to know my motivations.

90% of startups failing isn’t a benchmark of encouragement, it’s the baseline of mediocrity. Unchanged since 1995, we must focus on what doesn’t work.

Our conversation was part of a broader circuit during Arizona Tech Week, but what made it notable was where it led; not into the usual “how do we attract more VCs” fantasy that plagues most ecosystem conversations, but into something far more diagnostic the likes of which I want to be having in every city.

Arizona Ranks Fifth in Policy. So Why Isn’t It Winning in Venture Capital?

I published The Best and Potential States for Startups: A Policy-First Look at Who’s Helping Founders not long before this event, ranking all 50 U.S. states on policy conditions for entrepreneurship using the Tax Foundation’s State Business Tax Climate Index, the ALEC-Laffer State Economic Competitiveness Index, and the Mercatus Center’s RegData. Arizona landed fifth! Not California (no surprise), not New York (which wasn’t far behind California), not even Texas (which, despite its mythology, has meaningful regulatory friction of its own). Arizona. Idaho. Tennessee. Utah. These are the states where founders face the least structural resistance from their own government.

That raises a question that should make us uncomfortable: if Arizona’s policy environment is among the best in the country for founders, why isn’t Arizona leading in venture capital? Why isn’t it leading in startup-driven job creation? Why are New York and California still dominant when their regulatory and tax environments are, by the numbers, terrible for entrepreneurs?

Brian’s answer was appropriately blunt, “We might be a city of five and a half million, give or take, in the whole area,” he said during our conversation, “Even then I don’t think there’s sufficient density to be able to put too many bets on the table.” He paused. “The key is not to try to be all things to all verticals and industries, but rather to try to figure out exactly where those strengths are and to try to devote as much of our time and attention to those as we can.”

This is an observation that cities everywhere need tattooed on their plans. Every mid-tier metro in America has declared itself a “tech ecosystem;” Austin has done it, McKinsey encourages it, Washington wants it, and the UN pushes for more. The regions that actually succeed are the ones that stop doing it and pick a lane. Phoenix’s lane, sitting inside the bioscience core surrounded by three state university programs, a genomics pioneer in TGen (Translational Genomics Research Institute), Banner Health, Phoenix Children’s Hospital, and a growing cluster of emerging life science companies, is healthcare: Health tech / Life sciences / Precision medicine. The physical presence is on the ground.

Years ago, I wrote Work, Live, and Play in a Futuristic Phoenix, back when ASU’s collaboration with the Herberger Institute was exploring how life in the Valley might look decades into the future. That vision is materializing, and it’s materializing not because anyone waved a wand but because the PBC represents what many of us keep telling cities to do: build density in a specific sector, not a generic “innovation district” that’s really just a coworking space with nicer furniture and a cafeteria.

Optionality, Which Sounds Like a Buzzword, is Better Workforce Development

One of the concepts I brought into the Phoenix conversation is something I call optionality, and I should clarify what it means because I introduced it in Startup Ecosystems, and frequently use the word, but it’s not common parlance in the economy.

Optionality is perhaps the most underappreciated factor in why Silicon Valley works and most other places don’t.

If you’re a startup founder in Silicon Valley working on consumer social media and your company fails (as 90% of them do), what happens? You go get a job at another social media company. You join another startup. You consult. You angel invest with the money you made from the last exit. The entire ecosystem is structured so that when one thing fails, there are other things to fall back on, other rungs on the ladder, other opportunities within the same sector. That’s optionality.

It’s important that you don’t think of it as a startup or Silicon Valley thing though. Consider working in Banking in New York. When laid off, do you have to hope for a sales gig in a fashion company or can you shift into the hundreds of other banks, into a parallel career in accounting, or pivot to work in a hedge fund?

Now move our founder to Tucson or Boise or Little Rock – Company fails… What do they do? Social media at corporate scale isn’t there. There are no other startups hiring in that space. A founder either leaves the city or leaves the industry. The venture capitalist looking at that deal from San Francisco sees exactly this risk and passes. Not because the founder is bad and not because the idea is bad but because if the company fails, the ecosystem has no safety net to catch the human being, which means the risk is structurally higher than it would be in a market with optionality.

You don’t work in “marketing” and I don’t work in “tech” – those are roles. The work we do is in a sector relevant our skill, experience, and personal interest.

This is what the VCs were actually saying when they told cities they “couldn’t find deal flow.” They weren’t saying the founders were incompetent; they were saying, “We can’t find sectors where, when the entrepreneurs fail, they have other opportunities. They don’t have jobs to fall back on. They can’t start another startup because they can’t afford to. They can’t find local capital in that sector.” The VCs, by and large, were saying, we invest in Commerce SaaS and aren’t paying attention to many other sectors because yes, they should come to Silicon Valley, where we have options for the entrepreneurs to take these risks.”

If you work in healthcare, you’re not going to pivot into video games because there is a job there.

Downtown Phoenix is, from my point of view, addressing that more accurately, more meaningfully, than most cities. You have three universities with health sciences programs feeding talent in and around PBC. You have hospital systems providing both employment and potential customers. You have research institutions like TGen creating IP that could (with the right commercialization pathway, which is a separate headache we’ll get to) spin into companies. You have AZBio reporting that Arizona’s bioscience industry employed over 40,000 people across more than 3,600 establishments in 2023, with average wages 53% above the private sector average, and attracted $281.8 million in venture capital. That’s an actual labor market in a specific vertical where a failed founder can find another job, start another company, or pivot without leaving town.

Brian agreed, though he framed it differently. “We are really saying the same thing,” he said, “in the sense that if something doesn’t work out, are there other things for you to go to? And in a dense sector, they are. That optionality exists.”

A Capital Gap Is a Misdiagnosis (Stop Repeating It)

Almost every city that calls me says the same thing, “We need more capital.” It took me maybe half a dozen of those conversations to realize that cities were doing what bad founders do: They weren’t listening. What they were hearing is that founders were saying they can’t raise capital. “I can’t raise capital. I’m struggling to raise capital. There’s no money here.” The city hears that and says, “Got it. That’s the problem. We’re going to focus on helping raise money, attracting investors.” And then they host a demo day, invite some VCs to sit in the audience, and nothing happens because that is not how capital works.

Josh Lerner and Ramana Nanda’s landmark study, “Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn” published in the Journal of Economic Perspectives, demonstrated what those of us on the ground already knew: venture capital concentrates in places that have already demonstrated high-quality deal flow, human capital, and infrastructure. Capital follows. It does not lead. Cities that try to attract VCs before building the underlying ecosystem are doing it backwards, like installing traffic lights and hoping cars materialize.

Brian zeroed in on a related problem: the failure to distinguish between risk capital and development capital. “We need better definitions and clarity when funding is going to something,” he said. “If it’s meant as risk capital, okay, that means it’s at risk. It could go away. Well, that tends not to be a very popular choice when it’s coming out of the tax base.” His point is critical and underappreciated in policy discussions around startup funding. Public money labeled as “startup investment” is almost never structured like actual venture investment; it comes with political constraints, committee approvals, and an expectation of safety that is antithetical to the entire premise of risk capital. The result is that public funds get deployed as development capital (money to build stuff, support programs, fund research) while being marketed as risk capital (money to bet on startups that might fail). The confusion matters because it leads cities to believe they’re funding entrepreneurship when they need to stay in their lane of infrastructure or cultural impact; those are different jobs with different return profiles and different accountability structures.

The challenge for Phoenix, or anywhere, is not a lack of capital (Scottsdale is right over there). There’s wealth in this metro area. Entrepreneurship is driven by access to opportunity, not access to money per se. The question is why the money isn’t moving into startup investment, and the answer is almost always that the ecosystem is missing something: experienced mentors who know what failure looks like, startup development organizations that serve founders instead of collecting rent, sector-specific networks that give VCs confidence in the deal flow, and optionality for the humans involved. Fix those things and the capital shows up. I’ve watched it happen in Austin, where the city has gone from basically zero venture presence when I arrived in 2008 to overtaking Boston in seed-stage capital.

Why Letting People Leave Is Not Losing

One of the more refreshing things Brian shared during the event was his “boomerang philosophy.” Most cities panic when they see talent leaving; they treat it as a crisis. They try to chain people in place with tax incentives and hip neighborhoods and promises that “the scene is growing.” Brian’s take: let them go.

“We don’t need to look for reasons to chain people to this place and say you cannot leave, you must stay here,” he said. “Let them go. That’s cool by me because actually it’s sort of like a finishing school. You can go to one of those other places, whether San Francisco, right? Their density is like a nuclear weapon. They use density as a tool to be able to impact and succeed in ways that we don’t have; that density doesn’t exist here. And I’m cool with that.”

The boomerang part is what makes this work: create an intentional landing pad so that when those people realize their Bay Area apartment costs more than a Phoenix mortgage, when they’ve built their network and sharpened their skills, they have something worth coming back to. This is, incidentally, not a new idea. Ecosystems with returning diaspora members outperform those trying to build everything from scratch.

The distinction Brian draws between Tucson and Phoenix is instructive here. “Tucson’s fantastic to start,” he said. “And then as soon as those same people who started the company come to me and say, ‘All right, we’re starting. I think we need to grow.’ I’m like, ‘Get out. You need to go to Phoenix.'” Not because Tucson is bad. Because Tucson doesn’t have the density of customers, partners, investors, and co-workers in the sectors that matter for scaling. And Phoenix, specifically the PBC corridor, is building that density in life sciences in a way that most cities only talk about.

University Tech Transfer Is Broken (And Everyone Knows It)

We got into university tech transfer during the conversation, and as I wrote in Universities Aren’t Commercializing Innovation, They’re Taxing It, this is the topic where people in the room always look at everyone else sideways like we’re saying something we’re not supposed to talk about. Everyone knows the model is busted; almost nobody says so when the university administration is within earshot.

Brian separated the problem into two pieces, which I found helpful. The first piece is tech transfer as it applies to university employees: faculty, staff, graduate students whose inventions belong to the institution. The second piece, which Arizona handles better than most states through specific legislation entitling students to their own inventions, is student entrepreneurship, which the tech transfer office cannot assist with unless the student assigns rights to the university.

On the employee side, Brian’s had a vehicle analogy. “The invention is the paper,” referring to it being merely the idea (more or less). He added, “You’ve got to construct the right vehicle to carry the right payload. Universities create such a fragile wrapper around that payload, around invention, that it breaks the moment it hits contact with market forces, with investors.” And he explained why: the incentive inside the university is to do more research, get more grants, attract more graduate students. Not to build companies, not to create jobs, and not to generate venture-scale returns; the machine optimizes for inputs (research funding) rather than outputs (commercialized innovation).

AUTM’s own data confirms this which I absolutely love because I know I pissed them off a little when said that university patent development was broken. I ran an analysis of startup economic policy and found that universities disclose tens of thousands of inventions annually, but only about 3 to 5% result in the formation of a startup; the share that become viable, venture-scale companies is necessarily much smaller.

“I would be willing to concede that university tech transfer offices are building a bunch of small businesses, not startups,” Brian said, and he drew the same distinction I’ve been pushing for years between startups and small businesses, two fundamentally different economic animals that governments and universities insist on treating as the same thing. “When I put my investor hat on and I look back at how many companies we’ve invested as a group in Arizona-based spinouts from the universities,” he continued, “it is a very small number compared to, let’s see, 65 companies that Desert Angels has invested in in the past five, six years. So, they’re not making investable companies. They’re making small businesses that maybe someday they figure out how to deliver that payload, build it with the right chassis.”

My question of whether founders should try to work around tech transfer offices or try to reform them from within got an interesting response. Brian’s advice: don’t avoid it. “I’ve watched that game play out,” he said. “And in the end, the university is still going to be able to make some claims to how that came to be. And now you’ve got this really ugly situation where you have a university wanting to claw back.” His point is that the best tech transfer offices are the ones that make themselves useful enough that founders go through the process willingly, rather than running from it. That’s a higher bar than most TTOs currently clear, but it’s the correct framing.

The deeper issue, which I raised and which I think the public should be angrier about, is that this is taxpayer money. Research funding flows up through state and federal channels, gets passed to university systems, and results in roughly 1% of the research being commercialized in some meaningful way. The economics show a net loss at most institutions. The offices fund the research, fund the professors, fund the school. And the actual job creation, company formation, and economic impact that the public was presumably paying for? Mostly missing.

Remember my frustration that 90% of startups fail? Read those percentages differently… that’s roughly 98% of funded research that fails to do anything more than sit on shelves.

Team vs. Environment: The 60/40 Split That Should Embarrass Us

Our conversation turned to consider a more provocative question given the policy research placing Arizona 5th in the country. If a great team drops into a terrible policy state and a weak team drops into Arizona, who wins?

The answer is still the team. Research on startup success factors consistently shows that cofounder characteristics (complementary skills, tenacity, adaptability, domain expertise) outweigh environmental factors. The team is the 60 to 70% of the equation.

What should make ecosystem builders furious is the fact that the team still wins in a bad environment means that most environments are still failing to add meaningful value.

If Arizona’s policy ranking is fifth in the nation and yet a great team in a policy-hostile state can still outperform an average team in Arizona, what does that tell you? It tells you that the operational layer, the accelerators, the mentorship networks, the startup development organizations, the culture, is still not pulling its weight.

That’s why 90% still failing pisses me off.

Since Brad Feld’s book catalyzed a wave of startup ecosystem building roughly 15 years ago, cities have been pouring resources into programs, spaces, and events. And what we’ve found, which I cover extensively in Startup Ecosystems, is that most cities still run these things very poorly.

• Mentorship is not discerning (we let anyone who’s ever built a website be a “tech advisor” to a startup).
• Accelerators are nothing more than coworking spaces with a curriculum stapled on.
• Angel groups operate as social clubs where a community decides to invest in something, and everybody goes along with it.

This should anger you because the answer should be that strong policy states like Tennessee, Idaho, and Arizona are leading in venture capital and startup-driven job creation. They aren’t. And the reason is that the operational infrastructure between a good policy environment and a funded, scaling company is still broken in most places.

“I want to see a culture of radical candor,” Ellerman said. “If you don’t have almost a spirit of just being honest about ‘that’s a bad idea, stop what you’re doing and go do anything different,’ then what you end up with is enablement. And two, three years go by before finally someone is honest.” He referenced his own LinkedIn profile, which reads “calling babies ugly since 1999.” The culture of niceness in startup communities, particularly in the South and Southwest, is itself a structural liability. People won’t tell founders the truth because it feels impolite. The result is that founders waste years on ideas that anyone with pattern-matching experience could have flagged in the first meeting.

Anybody who tells you what you should do is probably wrong. These are startups, if we knew what worked, I’d go be a billionaire and stop standing on stage talking to people. But we very often know what doesn’t work. We know certain marketing approaches are dead on arrival. We know certain tech stacks won’t scale for what you’re doing. We know when a business model has been tried and failed a dozen times. The people who are meaningful in your ecosystem are the ones who point that out. Stop wasting your time on X. We know X doesn’t work. That’s the value. Not “here’s the answer,” but “here’s everything that isn’t the answer, so stop burning cash on it.”

What Phoenix Gets Right (and What’s Still Missing)

Phoenix’s Phoenix Bioscience Core is doing several things that align with what the research and evidence suggest about effective startup ecosystem development. First, it’s sector-specialized. Healthcare, life sciences, precision medicine. Not “tech.” Not “innovation.” A specific sector with specific employers, specific investors, specific customer bases, and specific talent pipelines. Second, it’s physically co-located. Three state universities with relevant programs, hospital systems, research institutions, and emerging companies are sharing a 30-acre campus, density by design. Third, with Brian’s XLR8 program, it’s addressing the scale gap. He built the program after systematically checking existing programs in the state against a readiness spectrum and finding that nobody was serving companies at stage six (post-product-market-fit, pre-Series A scale). “Everybody said we don’t know of anything out there that fills that particular need,” he said. “So that’s where we targeted.”

The missing pieces, and Brian was honest about these in such a refreshing way, I didn’t want our talk to end. If you’re not honest about the challenges, you can’t work to overcome them. One here? The exit pipeline is thin. “Are we going to see a whole bunch of Phoenix-based companies IPO in the near future? I don’t think so,” Brian said. The conversion of university research into venture-scale companies is still hampered by the same tech transfer dysfunction that plagues universities nationally. And the storytelling, the narrative infrastructure that makes an ecosystem credible to outside capital, is still underdeveloped.

That last point came up right at the end; storytelling is a critical piece of the puzzle that every city, almost every founder, and most investors actually stinks at. No one cares about the press release. No one cares about the events calendar. No one cares about the founder who raised a bunch of money (raising money is not a success metric, and Brian made this point forcefully: “I was an investor in that company. I didn’t get a dime back. So as far as I’m concerned, I’ll never invest in that person again. But that’s the person that gets held up because they successfully raised. Wrong metric.”). What people care about, what resonates and gets retold, are meaningful stories. Who exited? How? What did they build that mattered? Celebrate outcomes, not activity. Curate the heroes who actually delivered returns, created jobs, solved problems, not the ones who were best at raising rounds.

The question now is operational. Can Phoenix build the mid-stage support systems (B2B customer access, fractional executives, applied R&D partnerships, capital-readiness preparation) that bridge the gap between a promising company spinning out of a lab and a company that a Series A investor will back? Can it build a culture where radical candor is the norm and not the exception? Can it attract and retain the experienced operators who serve as the mentorship backbone of every ecosystem that actually works?

• Brian’s XLR8 program is a bet that the answer is yes, specifically for scale-ready companies in the PBC’s life sciences corridor
• The policy environment is favorable
• The physical infrastructure is real and growing
• The institutional alignment between three universities and the state’s healthcare industry is structurally better than what most metros can claim

We got together to unpack Startup Ecosystems and get to know Arizona. What we walked away with was clarity about execution, not more programs, not more events, not more press releases about innovation, but the hard, unglamorous work of connecting founders to buyers, connecting research to market demand, and connecting capital to companies that have earned it.

If you’re building or advising an ecosystem and you haven’t audited your city against the considerations that actually matter for startup economic development, you’re guessing. If you’re a founder in Phoenix working in life sciences, health tech, or precision medicine and you haven’t connected with what’s happening at PBC, you’re leaving structural advantage on the table. And if you’re an investor who still thinks “deal flow” means waiting for a warm intro from your Stanford roommate, you’re missing what’s being built in places like Phoenix while your asking about valuations in San Francisco.

We walked across the street to Samsara after the event where ecosystem building discussion continued, as it tends to; if we’re being frank about it, that happening is when you know you’re with the people putting what matters to making it work for others.

The post Phoenix Not Copying Silicon Valley is the Winning Lesson appeared first on Startup Economist.

I sat across from a founder last week who spent the first eight minutes of his pitch explaining how hard everything had been. The fundraising was brutal, their cofounder quit, and the product pivoted three times. By minute ten he finally got to the business. Had I been at my best, I would have cut him off at 45 seconds, but I was being courteous; more accurately, I was chewing on an idea that my friend Hans had planted in my brain the week previous, watching it now play out in real time. This founder’s startup wasn’t bad, what they had committed was introduced to me as a 16th-century lesson in confidence.

He was broadcasting his suffering as though it were evidence of his worthiness.

The word for what he lacked has been around for about five hundred years: sprezzatura 

Coined by Baldassare Castiglione in his 1528 book The Book of the Courtier. Castiglione defined it as “a certain nonchalance, so as to conceal all art and make whatever one does or says appear to be without effort and almost without any thought about it.”  The book became one of the most widely circulated texts of its era; by 1903, it was found in a dozen languages. The courtier Castiglione described was expected to be skilled in arms, rhetoric, music, dance, and politics. But the skill itself wasn’t the point; the point was making it look like second nature. According to the Count in the text, if the courtier’s preparation is discovered, “it quite destroys our credit and brings us into small esteem.” 

The moment the audience sees you trying, you’ve already lost.

The single clearest tell I’ve found that separates founders who close from founders who flounder is something none of them can articulate but all of them demonstrate or fail to demonstrate: sprezzatura. Studied carelessness. The art of concealing art. Not because deception is the goal, but because the depth of preparation is so thorough that the presentation of it becomes invisible. The business just makes sense when you hear it. The founder just seems to know.

If you’ve ever watched a founder nail a pitch and thought, “that looked easy,” you were watching sprezzatura. If you’ve ever watched a founder sweat through 47 slides of text-heavy PowerPoint while narrating their personal trauma and asking you to believe in the dream, you were watching the absence of it. And I promise you, the investor on the other side of that table can tell the difference in about four seconds. Why GOOD incubators make you practice your pitch is that the first impression a founder makes is a leading indicator; what they lead with, how they open, what they emphasize first, tells everyone in the room how they think, what they value, and where they’ll stumble.

Sprezzatura is what makes that first impression land as competence rather than performance.

What Sprezzatura Is Not (Because You’re Already Confusing It)

Sprezzatura is not “fake it till you make it.” That’s performing with confidence you don’t have, it’s cosplay. Elizabeth Holmes wore a black turtleneck and dropped her voice two octaves and fooled a lot of smart people for a while, and the fact that she explicitly copied Steve Jobs’ iconic look tells you everything about the difference between imitation and the real thing. Holmes faked the aesthetic of mastery without possessing any of the underlying substance. That’s not sprezzatura; that’s fraud with wardrobe choices.

Steve Jobs, on the other hand, was the genuine article. His presentations looked effortless because they were ferociously rehearsed. Walter Isaacson’s biography revealed that Jobs asked designer Issey Miyake to make him about a hundred identical black turtlenecks, enough to last for the rest of his life, eliminating wardrobe decisions entirely so he could focus mental energy on what mattered. His product launches were legendary not because he was a naturally gifted speaker (he worked at it obsessively) but because he refined every detail:  One word on the screen, a pause, applause. You never saw the forty rehearsals, you just saw a man who made technology feel inevitable.  The effort was monumental while the display of effort was zero.

Italian fashion icon Luciano Barbera described sprezzatura as “quiet confidence or low-key style,” saying the most forceful statement is understatement. In menswear, sprezzatura shows up as the tailored suit worn without a tie, the shirt collar left slightly open, the pocket square stuffed casually rather than folded into origami. I found that the concept caught mainstream attention thanks to House of Gucci, where the Italian aesthetic of bold, unbuttoned elegance reminded a global audience that looking like you didn’t try is actually a discipline. I was reminded of Tom Ripley and Dickie Greenleaf in 2024’s fantastic Ripley; the man in the impeccable suit who appears to have gotten dressed in three minutes spent an hour selecting those specific textures, those specific proportions, that specific amount of “carelessness.” Rolling up shirt sleeves with natural precision rather than stiffness, mixing patterns in a way that suggests innate taste rather than rigid calculation; the appearance of effortlessness achieved only through deep knowledge of the rules you’re appearing to break.

If you can’t see how this maps to startups, you haven’t been paying attention to my series of articles helping people communicate better than a pitch deck template.

Your Pitch Screams “I’m Trying Too Hard”

Good pitch work has never been about raising capital. It’s about constructing a story so coherent, so aligned with your capabilities and your market and your actual challenges, that it compels action from everyone who hears it. Emphasis on “actual.” The narrative doesn’t paper over weaknesses, it contextualizes them inside a structure that makes the whole venture feel inevitable.

That inevitability IS sprezzatura applied to business.

The founder who walks into a room having done that work doesn’t need to perform; they describe reality, and the reality is compelling. The numbers come out naturally because they’re internalized, not memorized. The hard questions get answered without flinching because the founder has already wrestled with them privately – almost all of you fail this. The competitive landscape gets acknowledged without the weird defensive energy that comes from founders who say, “we don’t really have competitors” (which, as I’ve written about in how I know your pitch is bad, is one of the fastest ways to lose a room). The entire conversation feels like a discussion between peers, not a supplicant performing for capital.

Contrast that with the founder I see constantly: over-rehearsed, script-dependent, and visibly rattled the moment someone asks a question. That founder has done preparation, sure, but the wrong kind. They prepared for a performance, not for mastery. They filled out the pitch deck slides because that’s the limit of what the local Accelerator knew how to teach them what mattered.  Castiglione would have spotted the difference in seconds. The Count’s advice was that by obscuring his knowledge, the courtier gives the appearance that his presentations “sprang up from nature and truth rather than from study and art.”  The best pitches feel like truth, not theater and not demo day karaoke.

Delivery must feel like a casual conversation rather than a keynote.  That’s thousands of hours of thinking and doing compressed into something that looks like you just showed up and started talking. Founders need to understand that this is what they’re competing against for attention, for credibility, for trust.

Hustle Culture Is Sprezzatura’s Mortal Enemy

American startup culture is, in many ways, specifically designed to destroy sprezzatura since we celebrate the grind. We post screenshots of 4 AM Slack messages like they’re war medals and we share “day in the life of a founder” content that’s struggle tourism that makes others feel good. The entire mythology of the founder as a suffering hero (a mythology I’ve picked apart in Founder Burnout or the Wrong Fuel?) valorizes visible effort. Pain is treated as proof of commitment while exhaustion is treated as evidence of worthiness.

Castiglione would have found this repulsive. Not the work!  They worked incredibly hard. 

The advertisement of it. 

A courtier who bragged about how many hours he spent practicing his swordsmanship would have been laughed out of the room. You practiced for years and then you walked into the duel and made it look like you’d been born with a blade in your hand. The point is that in competitive environments where reputation determines outcomes, the person who makes it look easy wins. Not the person who works the hardest, and definitely not the person who talks the most about how hard they work, but the person who converts their preparation into an appearance of natural competence.

I keep thinking about this in the context of what I see at SXSW every year; founders roaming Congress Avenue, practically vibrating with anxious energy, business cards in hand, trying to corner anyone who looks like they might write a check. Compare them with the founders I actually enjoy talking to: the ones who are relaxed, curious, asking questions, having actual conversations. The relaxed ones invariably have better businesses. Not because relaxation causes success, but because they’ve done enough work on their venture that they don’t need to perform urgency for strangers. Their confidence isn’t theatrical, it’s structural. It comes from having a narrative that holds together, economics that make sense, and a team that addresses the obvious gaps.

The Effective Founders Project, which assessed more than 900 startup leaders across 40 countries, found something that sounds counterintuitive until you think about it through the lens of sprezzatura: the most effective founders are actually less confident than the least effective founders. The overconfident founder is broadcasting certainty they haven’t earned. They’re performing, not operating. The effective founder has internalized the complexity, done the actual homework, and presents with the kind of measured clarity that reads as competence precisely because it doesn’t oversell. The Dunning-Kruger effect (where the least skilled are the most certain, and the most skilled underestimate themselves) is essentially the empirical validation of what a Renaissance Italian wrote five centuries ago.

Sprezzatura is an Organizational Operating System

Sprezzatura is NOT a presentation trick!  It’s an organizational design principle.

A startup that operates with sprezzatura is one where the internal machinery is so well-organized that the external experience feels seamless. The customer doesn’t see the three-person team pulling all-nighters. The investor doesn’t see the spreadsheet that took forty hours. The partner doesn’t see the internal pricing debate. What they see is a company that appears to work.

That appearance isn’t a lie; it’s the product of alignment.

This is why I push so hard on narrative as organizational alignment rather than narrative as pitch performance. My framework forces founders to derive Mission, Vision, Value Propositions, Culture, and Values from the same foundational story. When those layers are coherent (and Mission and Values are fixed bookends while Vision, Value Propositions, and Culture evolve between them), the company operates with an internal consistency that makes everything downstream look effortless. The pitch feels natural because it’s a description of what’s actually true. The customer experience feels seamless because the team isn’t improvising around misaligned priorities. The hiring works because the culture isn’t aspirational word salad on a wall but an operating reality candidates can feel walking through the door.

So much alignment underneath that the surface stays calm.

Contrast that with the startup where the CEO tells investors one story, the CTO tells engineers another, and the sales team is freelancing a third narrative entirely. We see this constantly. That startup is the courtier who trips during the dance, drops his sword, and then loudly explains to the duke that he’s been very busy lately. Nobody’s buying it. The dissonance is visible. And visible dissonance is the death of trust. We teach startups to pitch to investors even if they don’t want venture capital BECAUSE the exercise forces a level of internal rigor that benefits every other relationship the company has. That rigor is the hidden work.

The resulting clarity is the sprezzatura.

The MVP Problem (Again, Because You’re Still Getting It Wrong)

This also reframes the entire conversation about MVPs, a conversation most of the startup world continues to botch. The conventional interpretation of “minimum viable product” seems to be, “build a crappy version of your thing and throw it at the market.” That is anti-sprezzatura. That is walking onto the stage with an untuned instrument, playing badly, and telling the audience you’re still learning.

 Good luck collecting tips (still wonder why investors aren’t writing checks!?)

As I’ve beaten this drum in You Can’t Buy an MVP and Lean Startup Is Wrong… or You Are, your MVP is not the minimum viable product. It’s the minimum viable proof. Proof that you can do the thing that isn’t obvious about you as a founder. If you’re technical, your MVP proves you can create demand. If you’re a businessperson, your MVP proves you can execute. 

The founder who launches a buggy app with a “we’re in beta!” disclaimer plastered across the header is, by contrast, announcing that they haven’t done the work. And while the startup ecosystem has conditioned us to forgive this (because “iteration!” and “fail fast” and other slogans that have replaced thinking), the market is less generous. Customers don’t care about your learning curve and investors don’t care about your growth arc; they care about what’s in front of them. Right now. And what’s in front of them should look like it was easy, even when it wasn’t.

An Analogy That Actually Works?

I’m drawn to media industry analogies in startup lessons: how a film or band might teach us things that matter.  Fashion is a step out of my wheelhouse but as I compared Hans to the latest founder of the week who was clearly uncomfortable talking, sprezzatura makes the concept tangible in a different way; the art of looking like you got dressed without thinking while having, in fact, thought about every single detail.

The founder with sprezzatura does not announce his style; choices gently display mastery. Every “casual” decision was deliberate.

Now think about your startup’s external presentation: Your website, your deck, your product onboarding, and your customer support responses. Do they feel like someone who knows what they’re doing, or do they feel like someone who’s winging it with Canva templates and ChatGPT boilerplate? The founder who takes the time to get the details right (clean copy, coherent visual language, a product experience that doesn’t apologize for itself) is doing the startup equivalent of choosing the right linen jacket. Signal competence through details that most people can’t consciously articulate, but everyone can feel. Pre-tied bowties, clip-on ties, and pre-folded pocket squares are the pitch deck that’s obviously template-driven and too polished in the wrong ways (stock photos, buzzword-laden slides, a financial projection that’s clearly a hockey stick pasted over fantasy). That signals that the founder doesn’t actually know the business well enough to present it in their own voice.

The Renaissance Was a Startup Ecosystem

Renaissance Italian courts were competitive talent markets where dukes competed for the best courtiers, painters competed for commissions, and advisors competed for patronage. The entire system ran on reputation, relationships, and the ability to demonstrate capability without appearing desperate. Replace “duke” with “lead investor,” “courtier” with “founder,” and “patronage” with “term sheet,” and you have a reasonably accurate description of the modern VC ecosystem. 

Castiglione’s insight was that in environments where reputation determines survival, the person who makes it look easy wins.

Five hundred years later, nothing about that dynamic has changed. Nothing. The founders who raise capital, attract talent, close customers, and build durable companies are overwhelmingly the ones who make it look like those outcomes were always going to happen. That’s not delusion, that’s what real preparation looks like from the outside.  You can’t paste composure over incompetence. The courtier couldn’t show up at the joust having never ridden a horse and then “act casual.” He could only be casual if he’d already mastered horsemanship.

 Applied to your startup:

Know your numbers the way you know your own phone number. Revenue, burn rate, unit economics, CAC, LTV, runway. When an investor asks about margins, the answer should come out of your mouth the way a jazz musician plays. Because the thinking already happened, at 2 AM, over a spreadsheet. Repeatedly.

Build the narrative before you need it. The startup framework I’ve refined through years of work with thousands of founders exists for this purpose. It forces you to answer six fundamental questions in an order that maps to reality rather than PowerPoint convention. When you’ve done that work, you don’t “prepare for the pitch.” The pitch is just a description of what’s already clear. 

Stop performing your struggle. I cannot overstate this. I’m not saying pretend everything is fine. I’m saying that when someone asks how things are going, there’s a difference between “We’re working through X challenge and here’s our approach” and “Oh my god, it’s so hard, we’re drowning, but we believe in the dream.” One conveys competence while the other conveys a founder who probably does need to be replaced. 

Invest in the team so the operations look seamless. A startup where every customer interaction is mediated by the frantic, sleep-deprived CEO is a startup without sprezzatura. A startup where the team handles things with consistency and professionalism because the culture is clear and the processes work? That’s a company that looks like it was easy to build but wasn’t. It looks that way! And in competitive markets, appearance of ease creates trust, which creates opportunity, which creates the outcomes that justify the effort.

Does your startup look easy? Not because it IS easy (building a venture is one of the hardest things a person can do, and I’ve spent enough years watching people do it to know this viscerally) but because you’ve done the work necessary to make it appear that way? If the answer is no, the fix isn’t cosmetic. A new slide template won’t save you. A speaking coach won’t save you and you don’t have a presentation problem. You have a foundation problem. 

• The narrative isn’t coherent enough.
• The economics aren’t internalized.
• The team alignment isn’t there. 

Fix those things, and the presentation takes care of itself, because when you actually know your business, explaining it feels as natural as breathing.

Five centuries ago this was written and I doubt this startup book is on your bookshelf. Go do the work that makes the exhaustion unnecessary to hide because your experience with what you’re doing is so practiced that you’re telling it like it is.

The post Sprezzatura: The Art of Overcoming Imposter Syndrome appeared first on Startup Economist.

Samuel Morse’s first telegraph message, sent from Washington to Baltimore’s Mount Clare Station in 1844, asked, “What hath God wrought?” Nearly two centuries later, Baltimore is still wroughting. The city gave us the first commercial railroad, the first dental school, the bottle cap, the Linotype machine, rubber surgical gloves, and the national anthem has now spent the last decade assembling something that most outside the I-95 corridor haven’t yet noticed: a startup ecosystem with structural advantages, serious institutional backing, and a cultural DNA rooted in a distinctly Baltimore brand of grit, invention, and refusal to be ignored.

I want to talk about my look at Baltimore startups because it sits in the region of the United States where ecosystem builders have been putting a lot of consideration into the Research and IP heavy orientation of the northeast while economic development attention on innovation and entrepreneurship can’t ignore the proximity of cities here.

Baltimore Startups’ Ecosystem

Baltimore is wedged between Washington, D.C. and New York but as I wrote about Bellevue near Seattle, if you’re still benchmarking your city against Austin or Silicon Valley, you might be missing the point that proximity matters.  With what Baltimore has going on with its Equitech framework, its federal tech hub designation, and its growing density of startup development organizations, we have here a startup ecosystem building a knowledge economy that doesn’t just produce companies, but actually aligns with the people who live there. 

Too many cities are building things that look like startup ecosystems while the underlying throughput resembles a two-lane frontage road at rush hour. Baltimore is not immune to that failure mode. But it’s also further along in confronting it honestly than most, and the raw materials it has to work with (world-class research institutions, proximity to two of the largest metro economies on Earth, federal R&D spending that leads the nation, and a cultural identity forged in invention) give it a foundation that plenty of self-proclaimed “innovation cities” would kill for.

A City That Has Always Built Things First

Baltimore’s relationship with innovation is geological. Understanding why the startup ecosystem exists requires understanding that the city has been producing firsts since before anyone thought to use the word “ecosystem” in an economic context.

The Baltimore and Ohio Railroad, launched in 1830, was the first operational passenger and freight railway in the United States which historian Herbert Harwood Jr. called, “the moonshot of the 19th century.” Baltimore’s merchants and bankers, terrified that the Erie Canal would divert trade to New York, did what entrepreneurs do: they built infrastructure nobody had built before, at a scale nobody had attempted, and in doing so laid down the first link in what would become the national railroad network. The B&O didn’t just move goods; it moved the U.S. mail for the first time (1838), it partnered with telegraph companies to string the first communication wires alongside rail lines, and it played a pivotal role in the Union’s Civil War logistics. We’ve frequently noted the implication of a startup community being the communication platform, the supply chain, or the pipeline, and it might be said that Baltimore proved it first.

The Ellicott brothers invented the dredging machine in 1783 to deepen Baltimore’s port channels. Ottmar Mergenthaler invented the Linotype machine in 1886, which didn’t just change printing; it caused American newspaper readership to explode from 3.6 million to over 33 million in its first decade. William Painter invented the bottle cap in 1891 (Crown Cork and Seal Company, still headquartered in the region). Horace Hayden and Chapin Harris founded the Baltimore College of Dental Surgery in 1840, the first dental school anywhere, while at Johns Hopkins Hospital, William Halsted’s development of rubber surgical gloves in 1889 (initially to protect a nurse’s chapped hands; sometimes the best inventions start with solving the wrong problem) revolutionized surgical sterility. The Ouija board was patented in Baltimore in 1890 (cool!). Jacob Fussell opened the first commercial ice cream factory in 1850. 

• The electric streetcar
• The submarine
• Duckpin bowling
• Old Bay seasoning (invented by Gustav Brunn, a German-Jewish refugee, around 1940). 

Robert D. Morrow designed the first home video tape recorder in the 1960s.

The list goes on, but the principle is consistent: Baltimore doesn’t wait for someone else to prove a concept before it builds. It is a city of first movers, not fast followers. Ecosystems that produce first movers attract attention, talent, and capital in ways that copycat cultures never do.

The city’s artistic and cultural lineage reinforces this in ways that hopefully also remind you that startup communities do NOT thrive because of tech, they thrive because of the creative class. Baltimore produced Billie Holiday, Eubie Blake, Thurgood Marshall, Edgar Allan Poe, and the Afro-American Newspaper (the first Black-owned newspaper chain). The Baltimore Symphony Orchestra, established in 1916, was the first publicly funded municipal orchestra in the country. Oriole Park at Camden Yards, opened in 1992, launched the “retro ballpark” revolution that reshaped professional sports architecture nationwide. This is a city that sets trends.

The city’s jazz scene is a renaissance, anchored by organizations like the Baltimore Jazz Alliance; a living example of how cultural infrastructure and entrepreneurial energy feed each other. When a city produces art, music, and invention simultaneously, it’s doing something right about the relationship between risk-taking and community. A city’s creative culture and its startup culture are not different things wearing different hats; they are the same muscle expressed through different instruments. Jazz, by the way, is the most entrepreneurial art form ever invented: improvisation within structure, real-time collaboration, relentless iteration, and the absolute requirement that you show up and perform without a safety net. Sounds like a startup to me.

Baltimore’s Economic Foundation: Geography, Institutions, and Federal Gravity

Unlike anything else on the East Coast, Baltimore’s macroeconomic position is the reason the startup ecosystem has structural potential that most mid-size cities simply cannot replicate. The city sits at the center of the Baltimore-Washington corridor, giving it functional proximity to two of the largest and most influential metro economies in the world. Washington, D.C. provides unmatched access to federal agencies (the National Security Agency at Fort Meade, the National Institutes of Health in Bethesda, the Social Security Administration headquartered in Woodlawn, and the Centers for Medicare & Medicaid Services), defense contractors, and policy infrastructure. New York provides capital markets, media, and the density of commercial networks that turn products into categories. 

Baltimore sits between them with lower costs, a deep talent pipeline, and a chip on its shoulder.

The Greater Baltimore Committee reports that the region has over 450 tech startups and more than 50 capital providers, with more than $780 million in venture capital raised throughout 85 deals in a recent year. That doesn’t put Baltimore in the top tier of U.S. venture markets, but it puts it firmly in the category of cities where the capital infrastructure exists and is growing, not just aspirational. The Brookings Institution ranked the Baltimore metro area as one of the world’s “knowledge capitals,” alongside San Jose, Seattle, and Zurich, based on productivity of innovation centers, talented workforces, and elite research universities.

Baltimore’s economy surpassed $50 billion in economic output in 2023. The Johns Hopkins institutions alone account for nearly 94,000 jobs and $15 billion in economic output in Maryland. The University of Maryland, Baltimore’s nearly 1,200 faculty received $692 million in extramural funding in areas including cancer, genomics, vaccines, neuroscience, and regenerative medicine. Maryland leads the nation in federal R&D spending per capita. If you’re a life sciences or biotech founder, there is no better corridor in which to build than the one that runs from Baltimore to Bethesda; though, I’m going to keep watching Phoenix and Raleigh Durham.

Notable companies headquartered in the region include Under Armour, T. Rowe Price, McCormick & Company, Sinclair Broadcast Group, Brown Advisory, CareFirst BlueCross BlueShield, and Legg Mason. The presence of these anchor employers matters because, as I’ve argued in my work on how startup cities attract talent, entrepreneurs need the safety net of being able to fall back on employment when ventures fail. A city with deep employer infrastructure creates the conditions for risk-taking; a city without it produces founders who leave at the first sign of difficulty.  In the book you should be reading, Startup Ecosystems, we explain this as optionality.

In 2023, the Baltimore region was designated as a federal Regional Innovation and Technology Hub under the CHIPS and Science Act, one of 31 such hubs nationally. The Baltimore Tech Hub’s focus is on predictive healthcare technologies at the intersection of artificial intelligence and biotechnology.

Maryland Governor Wes Moore has been vocal about positioning the state as a leader in tech-driven economic growth; at Techstars’ Equitech Demo Day, Moore remarked, “At the center of that mission is tech entrepreneurship. When you create a new tech platform; you don’t just create wealth for yourself, you help others solve problems.”

The government’s role here is not to create entrepreneurship (it can’t; that’s a misconception I’ve dismantled repeatedly in startup ecosystem policy work), but to create the policy infrastructure that allows entrepreneurship to scale. Maryland does this better than many states through TEDCO, the Maryland Innovation Initiative, the Pava LaPere Innovation Acceleration Grant Program, and direct investment through the State Small Business Credit Initiative. 

“The Baltimore Uprising and The Wire are part of the city’s story, but they do not define Baltimore’s future or its potential. Baltimore is a city of builders, innovators, and first movers,” Charmaine Nokuri, arts activist and owner of Allegiance Branding shared with me, “a place where creativity, resilience, and economic possibility have always existed beneath the headlines. We’re rewriting the narrative with grit, genius, and global impact!”

The Startup Development Organizations Here: Putting in the Work

Baltimore’s cast of characters is unusually deep for a city its size, which is a strength, but depth without coordination can be crowding. Here is the landscape, as much as I can find.

UpSurge Baltimore is the most consequential ecosystem builder in the region. Founded as a Public Benefit Corporation to propel Baltimore into the top tier of innovation cities, UpSurge coined the term “Equitech” to describe its framework: an industry-agnostic approach focused on building an innovation economy where all belong. Equitech is a structural thesis that diverse teams, leaders, and perspectives are force multipliers in company growth. UpSurge brought Techstars to Baltimore, operates the weekly Equitech Tuesday networking event, publishes ecosystem data through its partnership with EcoMap Technologies on BMore Tech Connect, and recently integrated with the Greater Baltimore Committee under CEO Kory Bailey’s leadership. That integration is strategically important because it ties the startup ecosystem directly to the region’s most influential private-sector advocacy organization, giving startups a voice in policy conversations that would otherwise be dominated by established corporate interests.

TEDCO (Maryland Technology Development Corporation) is an independent instrumentality of the State of Maryland and it is one of the most comprehensive state-level startup investment engines in the country. TEDCO provides pre-seed funding through its Builder Fund and Social Impact Funds, venture-stage investment through its Venture Funds ($500K to $1.5M), the Maryland Innovation Initiative (technology transfer from qualifying universities), the Cybersecurity Investment Fund, the Technology Commercialization Fund, and the Concept Capital program for underrepresented entrepreneurs. In late 2025, TEDCO CEO Troy LeMaile-Stovall announced a $50 million international partnership with Taiwanese investment organizations to open global markets for Maryland startups, including plans for International Startup Exchange Centers in both Taiwan and Maryland.

Emerging Technology Centers (ETC) Baltimore which, under Executive Director Dr. Arti Santhanam, ETC has empowered over 700 startups and recently launched the ETC Venture Hub at Connect Labs Baltimore for early-stage life science companies. ETC’s recent co-investment in JuneBrain, a wearable AI-powered retinal imaging platform, is the kind of targeted, domain-specific investment that connects Baltimore’s biotech strengths with AI capabilities.

Impact Hub Baltimore, led by Executive Director Dana Cole, is a nonprofit social enterprise that serves as a coworking space, innovation lab, and civic forum for social entrepreneurs, small businesses, and community builders. They run a co-leadership model that reflects a values-driven organizational structure that mirrors the collaborative ethos they cultivate in the community where their Grow Program is designed for individuals dedicated to advancing progress and innovation.

Cole is, by multiple accounts from the Baltimore community, leading a piece of the renaissance happening in the city. She represents a class of ecosystem builder that doesn’t get enough credit nationally: the operator who shows up consistently, makes space for founders who don’t have a Rolodex, and does the connective work that venture-stage organizations depend on but rarely fund.

Johns Hopkins Technology Ventures (JHTV) supports the university’s researchers and inventors in licensing, patenting, and commercializing their creations. FastForward U, the university’s student entrepreneurship hub, was renamed the Pava Marie LaPere Center for Entrepreneurship in 2024 in honor of the EcoMap Technologies co-founder whose life and tragic death became a defining moment for Baltimore’s tech community. More on that shortly.

bwtech@UMBC is a research and technology park at the University of Maryland, Baltimore County, offering incubation and accelerator programs with particular strength in cybersecurity and IT. The SCALEUP Maryland program, presented by bwtech@UMBC in partnership with Impact Principals, helps Maryland-based businesses grow beyond $500K in annual revenue.

StarTUp Accelerator at Towson University provides an eight-week cohort-based fellowship with mentorship, a $10,000 equity-free stipend, and access to university resources.

Conscious Venture Lab has supported nearly 30 companies across various fields, and Healthworx, the innovation and investment arm of CareFirst of Maryland, operates at the intersection of healthcare and innovation, creating, co-creating, and investing in companies improving healthcare quality, accessibility, and affordability.

Betamore (now pivoted), Digital Harbor Foundation, Coppin State University’s new material fabrication facilities, Morgan State University’s role in the Maryland Innovation Initiative, and Loyola University Maryland’s Simon Center for Innovation and Entrepreneurship round out a landscape that is remarkably dense for a city of Baltimore’s size. The challenge we look to find in startup ecosystems is usually not a lack of organizations but whether they operate as a network or as independent fiefdoms; we’ll look, in our assessment forthcoming.

Capital: From Angels to Venture Funds

The funding landscape in Baltimore and the broader Maryland corridor is more developed than outsiders assume, though it still has critical gaps.

Angel Investors and Networks. Baltimore Angels is the region’s primary organized angel group, focused on profitable investment in the regional entrepreneurial ecosystem and advancing early-stage innovators. The Abell Foundation, operating since 1954, has a venture capital fund specifically targeted at Baltimore startups and broader community improvement. Dingman Angels (associated with the University of Maryland), the Mid-Atlantic Angel Group, Chesapeake Emerging Opportunities Club, and Mountain Maryland Angel Investors expand the angel footprint regionally. Individual angels including Ron Gula (Gula Tech Adventures, focused on cybersecurity), Dave Troy (20+ startup investments), and Jason Palmer (managing partner at DreamIt Ventures) bring domain expertise and mentorship alongside capital.

Venture Capital. The roster of active VC firms is substantial. ABS Capital Partners is likely the region’s anchor growth-stage firm. JMI Equity has raised over $7.5 billion since 1992. New Enterprise Associates (NEA), headquartered in the D.C. area, is one of the world’s largest VC firms managing around $25 billion in committed capital, with deep Maryland ties. TCP Venture Capital operates the Propel Baltimore Fund for early-stage technology companies willing to locate in Baltimore City. TDF Ventures manages a $200 million permanent pool of capital focused on enterprise infrastructure, software, and services. QuestMark Capital is an expansion-stage firm with four funds and 60+ investments. Inner Loop Capital focuses on pre-seed and seed at the intersection of infrastructure software and AI. Early Charm Ventures, Russell Street Ventures, W Ventures, RareBreed Ventures (pre-seed fund investing in overlooked markets), and Epidarex Capital (early-stage life science ventures) fill various stages and sectors.

Institutional and Government Capital. TEDCO’s multiple funds, the Healthworx Accelerator (over 20 investments), and Lockheed Martin Ventures (a $200 million evergreen fund plus a $100 million early-stage fund) provide capital that bridges commercial and strategic investment. The Maryland Equitech Growth Fund, legislated in 2023, creates a state-backed fund aligned with the diversity-as-competitive-advantage thesis that UpSurge pioneered.

The capital gap, asTechnical.ly reported and as anyone working in the ecosystem will tell you, is in the Series A to Series B transition (an entire chapter about this gap is explained in Startup Ecosystems). The Baltimore-Towson area saw $122 million in venture capital fundraising activity in one recent year, compared to $2.98 billion in nearby Washington, D.C.. That gap is lack of capital; it’s about the number of investors who can lead rounds at the $5 million to $20 million range. Baltimore can start companies. It can, increasingly, seed companies. But the missing middle (getting companies from seed to growth) is where the most economic value leaks out of the region. This is a structural problem I’ve analyzed in every ecosystem I study.

Pava LaPere: A Legacy That Redefined What Baltimore Means

You cannot write honestly about the Baltimore startup ecosystem without writing about Pava LaPere. The 26-year-old co-founder and CEO of EcoMap Technologies was murdered in September 2023, devastating the community she had done more to build than almost anyone her age in any U.S. city.

LaPere founded EcoMap Technologies while still an undergraduate at Johns Hopkins. The company builds AI-powered platforms that enable organizations to create central digital hubs for their ecosystems, making information accessible to people who historically didn’t have access. At the time of her death, EcoMap employed over 30 people, mapped over 70 unique ecosystems, and had raised over $7 million in venture funding. She was a Forbes 30 Under 30 honoree. She had founded TCO Labs as an undergraduate to spur entrepreneurship on campus, created Innov8MD to connect university ecosystems across Maryland, and helped build the grassroots student movement that eventually became FastForward U at Johns Hopkins.

Sherrod Davis, LaPere’s co-founder who stepped up as CEO, wrote in his letter to the community: “I grew up in northeast Baltimore witnessing a world where economic elevation was rare for even the hardest working people.” His commitment to carrying forward LaPere’s vision is entrepreneur DNA being preserved and amplified.

Governor Moore signed the Pava LaPere Legacy of Innovation Act, creating new programs to provide grants to student startups in Baltimore and connect technology startups from Baltimore-area universities with capital and resources. Johns Hopkins renamed its student entrepreneurship center the Pava Marie LaPere Center for Entrepreneurship. EcoMap launched the PLACE (Pava LaPere Award for Cultivating Ecosystems) Builders fellowship program with Forward Cities to empower changemakers building equitable entrepreneurial ecosystems nationally. Josh Ambrose, director of student ventures at Johns Hopkins, said of LaPere: “We would be hard-pressed to find another student in the history of this university who did so much to create resources for student entrepreneurs.”

Pava LaPere was fearless in the way that Baltimore, at its best, has always been fearless. The fact that her company, EcoMap, now powers BMore Tech Connect in partnership with UpSurge and Fearless Solutions is proof that ecosystems are, ultimately, built by specific people who refuse to accept that things have to stay the way they are. Every startup city has a few of these people, the question is whether an ecosystem is structured to produce more of them, or whether it depends on the heroism of individuals who eventually burn out, move, or (in the worst case) are taken from us.

Where Baltimore Leads and Where It Can Improve

I use a framework of ten considerations for startup ecosystem capacity building when I audit ecosystems. I applied this framework to New York City recently, and I want to apply it here to Baltimore with the same rigor. This is not a report card, it’s a diagnostic. Every consideration comes with what Baltimore does well and where it needs to push harder.

1. Overcoming Silos: Shared Infrastructure and Community

Baltimore has made significant progress here. The integration of UpSurge Baltimore with the Greater Baltimore Committee is a structural move toward coordination that most cities never make. BMore Tech Connect, powered by EcoMap Technologies, provides a single digital platform for startup resource navigation. The Techstars Equitech Accelerator, Equitech Tuesday, and the GBC consortium’s 38-member coalition for the tech hub application all demonstrate that Baltimore organizations can collaborate when the stakes are high enough.

Where Baltimore does well: institutional willingness to merge and coordinate (the UpSurge-GBC integration is rare nationally), a shared “Equitech” brand that gives disparate organizations a common vocabulary, and physical gathering points like Impact Hub Baltimore that create organic cross-pollination.

Where Baltimore needs improvement: too many organizations still operate their own mentor pools, their own demo days, their own investor networks, and their own CRMs without sharing data or pipelines. What happens is that a founder at one program may not know about another opportunity or event happening relevant. The ecosystem needs a single intake funnel, not just a directory. Every startup development organization should be obligated to promote the others and share mentors freely, or they’re contributing to the silos they claim to be breaking.

2. The Missing Middle: Widening the Gap Between Early Startup and Established Company

This is Baltimore’s most critical structural problem and it’s the same problem I identified in New York (though for different reasons). Baltimore can start companies and it increasingly attracts seed capital, but the transition from seed to Series A to growth is where companies either leave the region or die. The $122 million in local VC fundraising activity compared to D.C.’s nearly $3 billion tells you exactly where the gap is.

The increasing number of Baltimore companies participating in national accelerators create some bridge capital, we can do more here. The Healthworx model of a corporate innovation arm co-investing alongside institutional capital is smart because it pairs money with market access.  Baltimore needs more structured commercialization pathways (not more pitch events), more Series A-capable local lead investors, and a deliberate strategy to keep companies in the region after they raise growth capital. 

3. Secure Long-Term Funding and Incentives for Ecosystem Builders

Sustainable entrepreneurial ecosystems depend on sustained investment in intermediary organizations and local leaders. Baltimore’s ecosystem builders are, like ecosystem builders everywhere, underfunded relative to the corporate recruitment incentives that cities routinely deploy. Impact Hub Baltimore earns 50% of its revenue through market operations, which is admirable but also means it has to hustle constantly for the other 50%. TEDCO’s state funding is substantial but political cycles create uncertainty. UpSurge’s integration with GBC provides more financial stability but ties the organization to a larger corporate agenda.

Baltimore’s ecosystem builders need multi-year operational funding, not annual grant cycles. Events are not outcomes. These people are infrastructure, not event planners; fund them like infrastructure. Cities pour millions into corporate recruitment incentives while asking ecosystem builders to charge $25 tickets to a startup event just to keep the lights on. Baltimore is not exempt from this misallocation.

4. Measuring Outcomes, Not Activity

Cities love to count things that are easy to count: events, meetups, demo days. If activity were the same thing as value creation, every city with a monthly pitch night would be a company building machine. Baltimore tracks some of the right metrics (UpSurge reports tracking 486 technology startups, venture capital raised, and startup distribution by sector), but the ecosystem still tends to celebrate launches rather than survivals, headcounts rather than revenue growth, and demo days rather than follow-on capital.

I’d love to see more see published, founder retention rates (three+ years in region), follow-on capital raised (especially Series A+), revenue growth of supported companies, percent of rounds including local investors, and job creation specifically by startups (not small businesses broadly, because conflating them distorts policy). If public dollars are allocated to accelerators and innovation districts, public leadership has a fiduciary responsibility to demand return on investment that isn’t in the form of “we hosted something.”

5. Culture and Behaviors That Make Collaboration Natural, Not Forced

This is where Baltimore has a genuine, organic advantage that no amount of programming can manufacture. Inc. Magazine reported that Baltimore entrepreneurs “fight to make it a better startup city, and city in general.” Elizabeth Burger of Johns Hopkins Technology Ventures told Inc.: “If someone they know asks [for] a meeting, they will clear their schedule.”

The Equitech framework is a choice. When UpSurge’s Jamie McDonald says “equitech is about building an innovation economy where all belong,” and when Governor Moore shows up at demo days, and when Pava LaPere’s legacy gets institutionalized through legislation and a renamed center, those are cultural acts. They signal to founders what kind of city this is.

The pay-it-forward culture is real and repeatedly documented. The density of social-impact-oriented startups (EcoMap, Fearless Solutions, many Techstars Equitech cohort companies) reflects a community where commercial success and community benefit are not seen as trade-offs. The Baltimore Jazz Alliance, the arts community, the cultural institutions; they create a city where creative risk-taking is normal, not exceptional.

6. Including the Full Spectrum of Talent

Baltimore’s Equitech thesis is explicitly about this, and it’s the city’s most distinctive strategic position nationally. Sherrod Davis at EcoMap co-founded Baltimore Tracks, a coalition of Baltimore-based technology and tech-enabled company leaders committed to increasing opportunities for people of color in technology. TEDCO’s Concept Capital program provides convertible notes ($25K-$50K) specifically for socially and economically disadvantaged and rural-based founders.

The real test is inclusion at the cap table, the board seat, and the exit. If underrepresented founders raise pre-seed but can’t access Series A, the ecosystem has created a leaky pipeline with equity at the entrance and attrition at the middle. More of the data on follow-on capital by founder demographic to explore.

7. Architecting Environments That Enable Peak Performance

This is about physical infrastructure AND digital infrastructure.

Baltimore has an increasingly strong physical footprint.  Where the city does well is in the diversity of physical spaces (lab space, coworking, maker space, university facilities), meaning founders at different stages and in different sectors can find appropriate environments. 

Where every city needs improvement: innovation is not a real estate play. The physical spaces need to be connected by programming so that a founder in a BioPark lab can seamlessly access mentors from Impact Hub’s network or capital from TEDCO’s pipeline without navigating five different intake processes. Solvable.

8. Aligning Government, Academia, and the Private Sector Around Shared Outcomes

The federal tech hub consortium (38 members) demonstrated that Baltimore can align these sectors when pursuing a specific goal. TEDCO is an independent state instrumentality that bridges government funding and private-sector execution while the Maryland Innovation Initiative is a legislated partnership between the state and five universities (Johns Hopkins, Morgan State, UMD College Park, UMD Baltimore, and UMBC).

Governor Moore’s policy engagement with the tech ecosystem is active and visible, far more than most ecosystems.

9. Accelerating Innovation and Reducing Risk by Unlocking Local Competitiveness

Baltimore’s competitive advantages are clear: life sciences (84 of 486 tracked startups), cybersecurity (25 startups, drawing from NSA proximity and defense talent), advanced manufacturing (22 startups), aerospace and defense, and an emerging position in quantum technology through the University of Maryland’s National Quantum Laboratory at Maryland (QLab). The UpSurge Ecosystem Report provides detailed sector breakdowns that reveal a region with genuine depth in anchor sectors and emerging opportunity in adjacent areas.

That’s how you do it everyone.  You’re not a startup city.  You’re not a tech hub.  You’re life sciences, advanced manufacturing, cybersecurity, and aerospace (or whatever it is that you are and are not in your region)

What to work on? Specialization needs commercial infrastructure, not just research infrastructure.  This is the northeast challenge and opportunity I mentioned at the start. Invention and innovation create the spark and draw attention; specialization multiplies attention by attracting the exact experience, networks, and buyers who turn a spark into a compounding flywheel. Baltimore has the research spark, it needs more structured paths from lab to market, including proofs of concept with buyers, pilot programs with hospital systems, and procurement pathways that don’t require founders to sell into federal contracting bureaucracies to get their first customer.

10. Adapting Global Best Practices for Local Realities

Baltimore coined its own framework (Equitech) and built a movement around a distinctly local thesis. The Techstars partnership was adaptation, not replication. TEDCO’s $50 million international partnership with Taiwan is an attempt to adapt global market access for a Maryland-specific context. Impact Hub Baltimore is part of the global Impact Hub network but operates autonomously with programming rooted in Baltimore’s specific needs.

This is intellectually honest in a way that most ecosystem branding is not. This is narrative design.

I’d advise Baltimore study which practices from peer ecosystems (Pittsburgh’s robotics cluster, Nashville’s healthcare ecosystem, Austin’s density model) can be transplanted and which can’t (or shouldn’t). Baltimore should be sending operators, not just leaders, to the convenings where people like me find ourselves.

Excellence in Operations: Mentors, Success Stories, and Founder Recruiting

Across all ten considerations, one theme emerges: the quality of the ecosystem depends on the quality of the people operating it and the mentors and success stories they can deploy. An accelerator with mediocre mentors is just a room with a schedule. A pitch event without investors who write checks is theater. A co-working space without programming designed to create collisions between founders and the people who can actually help them is just a shared office with better furniture.

Baltimore’s mentorship infrastructure benefits from institutional depth (Johns Hopkins faculty, TEDCO advisors, Healthworx industry connections, defense and cybersecurity domain experts from the Fort Meade corridor) but suffers from the same problem every mid-size ecosystem faces: mentor fatigue. The same 20 people get asked to mentor in every program. The pool needs to be actively expanded through deliberate recruitment of operators from anchor employers (Under Armour alumni, T. Rowe Price alumni, Johns Hopkins Health System alumni), returning diaspora (Baltimore natives who built careers in New York or D.C. and might be coaxed back), and national-caliber mentors who can be attracted through the Techstars network or TEDCO’s international partnerships.

Success stories need to be told loudly and repeatedly. Pava LaPere’s story is powerful but incomplete if the Baltimore founder the national press names is someone lost to us all. Isaac Kinde’s $2.15 billion exit, for example, with Thrive Earlier Detection (a cancer diagnostics company born out of Johns Hopkins and UMBC’s Meyerhoff Scholars Program) is the kind of success that should be on billboards.

Baltimore’s greatest pitch is livability and cost relative to the D.C. and New York markets, combined with institutional access that would cost millions in other corridors. A biotech founder can work with Johns Hopkins researchers, access NIH-funded labs in Bethesda, hire cybersecurity talent trained in the NSA corridor, and live in a city where the cost of living doesn’t require a Series B just to pay rent. 

At an inflection point, Baltimore has the institutional infrastructure in place, a cultural thesis to study as a best practice, and anchor sectors (life sciences, cybersecurity, predictive health) aligned with federal investment priorities and global market demand.  The gaps are real: missing-middle capital, mentor pool depth, outcome measurement, and the operational coordination needed to turn a collection of strong organizations into a true network. But these are design problems, and design problems have design solutions. They are boring, technical, structural, and effective. 

Which is exactly what Baltimore has always been good at building: things that work.  The last time Baltimore sent a message that changed the world, it traveled by telegraph. The next one should travel by startup when, unlike Morse’s message, it won’t be a question, it will be proof.

The post Baltimore Is Not Waiting for Permission to Be a Startup City appeared first on Startup Economist.

The average cost of building an MVP is $0. You read that correctly. Not “$0 if you squint,” not “$0 with an asterisk.” Zero dollars. Let me restate it clearly since I keep getting asked, “How much does it cost to build an MVP?” Nothing. If you’re uncertain of that answer, we have more evidence that the startup ecosystem has mislead how you think about what an MVP actually is.

The entire industry around “MVP development” has become a racket. Development agencies will quote you $10,000 to $50,000 for startups, and up to $150,000 or more for complex builds. Estimates land between $24,000 and $96,000, with an average time to market of four to five months. These are real numbers being charged to real founders who are spending real money to build the wrong thing. They are building solutions; they are not building MVPs. The distinction is not semantic, which I’m prone to push on; it is the single most expensive misunderstanding in entrepreneurship.

I wrote about this extensively in Lean Startup Is Wrong… or You Are, where I made the case that your MVP is not supposed to prove functionality; it is supposed to prove demand. Dropbox did not build file syncing software to test their hypothesis. Drew Houston made a video. A video. The waiting list went from 5,000 to 75,000 people overnight. That was the MVP. The software came later, after they had already proven people wanted it. But founders keep ignoring this, and agencies keep cashing checks, and the startup failure rate hasn’t budged in twenty years. The conventional wisdom says 90% of startups fail. It said 90% in 2002 when I started my first startup, and it says 90% now. If startup ecosystems and MVP developers were meaningfully delivering, that number would have changed. It hasn’t. Either the methodology is wrong or you’re doing it wrong; I wrote an entire book about why it’s not the founders.

How Much Does it Cost to Build an MVP?

Your MVP is the minimum viable proof that you can convert a sufficient volume of paying customers (or at least willing-to-pay customers), competitively, for a thing you intend to build. It is NOT the thing itself. It is proof that the thing has a market. And more importantly, your MVP is proof that YOU can do the thing that is not obvious about you as a founder. This is where the two perspectives diverge, and where our conversation really gets useful.

“The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” – Eric Ries; Lean Startup

Building on lean-manufacturing principles that originated at Toyota, early definitions of “viable” focused narrowly on whether something functioned – could it work at all? Ries meaningfully added the context of customers, but most seem stuck in the idea that proof of customer demand requires a developed solution while at the same time, I want to push your understanding further since what we’re attempting to build here is a company, not just a product for which customers will pay. Can your venture create the volume, competitively, from those customers in the market?

Like a mere idea for which founders are hoping to find investors to start, expecting an MVP to prove your *startup* is valuable, without establishing a competitive advantage and ability to grow while creating value, is wasting your time.

The Engineer Who Can Build Anything (but Can’t Prove Anyone Will Buy It)

You are the technical founder. You can code. You can architect systems. You can ship product. Congratulations; in 2026, so can a reasonably motivated twelve-year-old with access to ChatGPT and a free Replit account. The ability to build software is no longer a differentiator. I made this point in Michael Jackson and the Startup Delusion: Why Tech Isn’t What Creates Value; the startup world confuses building with creating value, and they are not the same thing. Jackson did not walk into a studio hoping to figure out the music; he had the entire arrangement in his head before the session musicians touched an instrument. He was the product, and the product was marketing, brand, storytelling, and influence packaged into something the market wanted.

You, the engineer, have the opposite problem. You can build the instrument. You can tune it perfectly. But nobody is showing up to the concert because you never figured out how to fill seats. Your MVP, then, is not another app; your MVP is proof that you can generate demand and convert it. The entire point of your minimum viable product is to demonstrate the capability you obviously lack: marketing.

Here is what that looks like, and it costs nothing:

A website with a landing page. Not an application and not a platform, a single page that describes the problem you solve, who you solve it for, and a button that says, “Sign Up” or “Join the Waitlist” or (better yet) “Buy Now” at a price point. You can build this with Carrd for free, with WordPress for free, with a static HTML file hosted on GitHub Pages for free. The page does not need to do anything other than capture intent. If 1,000 people visit and 3 sign up, you have learned something. If 1,000 visit and 300 sign up, you have learned something radically different. If nobody visits at all, you have learned the most important thing: you have no idea how to get appropriate attention, which means you have no business building a product yet. Why would you?? Your *startup* will fail.

A newsletter. Substack is free. Buttondown is free. You start writing about the problem space your startup addresses. Not about your startup (nobody cares about your startup); about the problem. You build an audience of people who have the problem you intend to solve. If you cannot get 500 people to subscribe to a newsletter about the problem, you have no evidence that 500 people will pay for your solution to that problem. The newsletter is the MVP. It proves demand exists and that you can reach it.

A social media group or community. A Facebook Group, a Discord server, a Slack community, a subreddit. You build a gathering place for people who share the pain point you are targeting. You moderate it. You provide value. You watch what they talk about, what they complain about, what they wish existed. This is not “building in public”; this is market research that doubles as audience development. It costs zero dollars. If you cannot get people to join a free community about the problem, why would they pay for your solution to it?

You can’t do this?! What ethical compass is driving you forward thinking that anyone should take a risk joining you, let alone investing in you, if all you can do is invent something and put it out there? That’s not a company!

A “Buy Now” button that does not yet deliver. This is the part that makes many leery of how to do this, and I love it. Put up a landing page with a price and a purchase option. Use Stripe (free to set up, you only pay when someone actually pays you). Use Gumroad. Describe what you intend to build, price it, and see if anyone pulls out their credit card. If they do and you cannot yet deliver, you refund them, thank them, and now you have validated demand at the highest possible level: someone was willing to give you money. That is not a survey. That is not a “great idea!” from your mom. That is a credit card. Peter Drucker observed decades ago that only two things create value in business: innovation and marketing. As I explored in How, Not Just Why, Startups Fail, marketing is the distinguishing work between those two, and if you have to sell, you have not done the marketing to make selling unnecessary.

For the engineer, none of these things require writing code. That is the point. Your code is not what is in question. What is in question is whether you can find customers, create demand, build an audience, and convert interest into revenue. Proving that is your MVP, and it costs you $0.

The Business Founder Who Can Sell Anything (but Can’t Prove They Can Get It Built)

Now flip the lens. You are the MBA, the salesperson, the marketing whiz, the “ideas person.” You have domain expertise, industry connections, maybe even customers who have told you they want what you are describing. You have a pitch deck and a Canva account and a LinkedIn following. What you do not have is a product. And the question every investor, advisor, and potential cofounder is silently asking about you is: can this person actually get something built, or are they just another talker with a slide deck?

No one funds ideas!!!!!

Your MVP is not a polished application either but your MVP has to prove that you can translate your vision into something functional. Not perfect, not scalable, not enterprise-grade. Functional. And in 2026, the cost of proving that is also $0, because the tools available to non-technical founders have obliterated excuses.

AI-powered builders like Bolt.new, Lovable, and Replit all offer free tiers that let you describe an application in plain English and generate working code. These tools provide free tiers with daily or monthly credits where you can build and deploy simple apps without paying. You describe what you want, the AI generates it, and you have a functional prototype to put in front of users. Is it production-ready? No. Does it need to be? Absolutely not. It needs to prove that you can get something built. That is the capability in question for you.

OpenClaw, the AI agent framework that went viral in early 2026, surpassed 100,000 GitHub stars and became a viral tool in the developer community. You can run it with free-tier AI models through Ollama for literally zero cost. It can write code, manage files, automate tasks, and build functional prototypes. The barrier to “getting something built” has never been lower in human history.

But the same landing page and newsletter strategy applies to you too, just for different reasons. When you build a landing page with a sign-up and payment option, you are not just proving demand (which you probably already believe exists because of your domain expertise). You are proving that you can create something tangible. A website that captures emails and processes payments is a built thing. It is small, but it is real; it is functional. It demonstrates that you can go from concept to execution without needing a CTO on day one, and that signal matters enormously to investors and potential technical cofounders.

Marketing is not something you tack on after product development. Marketing is the lens through which product development happens. For you, the business founder, the twist is that building something (anything) is the lens through which your marketing credibility gets proven; you need both, and you can start both for free.

The MVP Mistake Everyone Makes

The mistake is thinking the MVP is the actual solution. It is not. It was never supposed to be. Eric Ries defined it as the version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least effort. Somewhere between Ries writing that and founders reading it, “least effort” got interpreted as “limited version of the full product” instead of “not the product at all.” A 2018 study found that startups using MVPs incorrectly focus on the product rather than the business model, which limits learning and prolongs time to market.

Steve Blank, the intellectual godfather of the entire movement, never said “build a product, then validate it.” He said, “get out of the building.” As we explored together in Better Startup Idea Validation, overwhelmingly most founders do not actually do this. They Google some stats, talk to five friends, call it customer discovery, and then burn three months building something nobody asked for. Worse, as I pointed out telling you to Stop Trying to Validate Your Startup Idea, the best founders are not looking for affirmation; they are searching for the truth. Validation is the wrong frame; invalidation is the useful one. You should be running at every wall to see which ones collapse under pressure, not looking for the walls that hold you up.

The engineer needs to prove they can attract and convert customers: A landing page, a newsletter, a community, a payment button, done with free tools, proves that. The business founder needs to prove they can get something built: AI app builders, open-source agents, no-code platforms, all free, prove that. In both cases, the thing you built is not the solution you hope to bring to market. It is proof that you are capable of doing the thing that is not obvious about you. The engineer proves they can do marketing. The business founder proves they can ship product. The solution comes later, after you have earned the reason to build it by demonstrating you can do everything we perceive you can’t.

The notion that an MVP costs $15,000 to $150,000 is an artifact of founders who have been taught (badly) that the MVP is a stripped-down version of the product. The MVP is a stripped-down version of the business. A landing page that captures intent. A newsletter that builds audience. A community that reveals pain points. A payment button that tests willingness to pay. A prototype built with AI tools that proves you can execute. None of it costs money. All of it costs effort. And the effort is the point, because the effort itself is what demonstrates to investors, cofounders, and the market that you are not just another founder with a dream and a pitch deck and absolutely no evidence that any of it will work.

Marketing is leading startups again, faster than you think, because the rise of AI, no-code tools, and open-source platforms has commoditized product development. A single founder can now build and launch a product that rivals large corporations (you can argue I’m wrong, but I’ve seen 6 no-code founders do that very thing, just in the last few days). The cost advantage is gone and the technical moat is gone; what remains is whether you understand the market, whether you can reach it, and whether you can convert it. Proving that is the purpose of an MVP.

If you are struggling with what that looks like for your specific situation, the question to ask in the comments is not, “what should I build?” but “what about me, specifically, does the market have reason to doubt?” Answer that, and you will know what your $0 MVP needs to be.

The post You Can’t Buy an MVP appeared first on Startup Economist.

You learned something in elementary school that ruined your ability to communicate as a founder: Who, What, When, Where, Why, and How. That’s the order they taught you, and it’s wrong. Not wrong in the sense that those aren’t the right questions (they are, and they’re the First Principle questions that matter), but wrong in the sense that the priority in which you were taught to think about them is out of order for anyone trying to build, sell, lead, or fund a venture. Most founders walk into a room and say what they’re building and how it works; and then they wonder why the room doesn’t care. The room doesn’t care because you skipped the part that makes anyone care.

Years ago, I wrote Raising Capital: The Perfect Startup Pitch to make a point that has become more clear since; six elementary questions every founder must answer are Why, Who, When, Where, What, and How, in that order. That article laid the groundwork of the startup framework; now, a spreadsheet, the methodology, and the thinking behind it, because since then I’ve refined a framework that does more than just organize a pitch. It organizes a startup. It produces your mission statement, your vision, your value propositions, your culture, your pitch deck, your elevator pitch, and your startup narrative, all from one living document. I’ve used this with thousands of founders, but I’ve always hesitated to write it up; it works, but my experience with it is in person, walking through it, answering questions, and teaching. It works because it forces you to answer the questions your brain already knows how to ask; it just reorders the priorities to match reality instead of the second-grade lesson that oriented the way you think.

The Startup Framework

Having taught this again just this week, let me share it with you as best I can try, here. What happens in person is that founders work through this with me, and I can see the light bulb go off in faces as it dawns on people why the Problem / Solution oriented elevator pitch fails. If you don’t arrive at that conclusion through this article, let me know in the comments, reach out, and let’s talk about what you’re working on so I can further refine how this might reach others.

The framework lives in a three-tab spreadsheet. Tab one is the Worksheet, where you answer the questions. Tab two is Mission / Vision / Values, where those answers translate into the guiding principles of your organization. Tab three is Pitching, where all of it maps to Guy Kawasaki’s 10-slide pitch deck and becomes the narrative you take into the world. If you skip straight to tab three (and most of you will try), you’ll produce the same garbage pitch deck you already have. This is sequential work. It’s also iterative work; you will go back and forth, refine, contradict yourself, realize you don’t actually know the answer to something you thought was obvious, and that discomfort is the whole point.

The Worksheet: Answering What You Think You Already Know

Let’s create your own: the Worksheet is a grid with six rows and four columns. The rows are WHY, WHO, WHEN, WHERE, WHAT, and HOW. The columns shift the lens from internal to external with the first column just being your row labels. Next to that, the first column of the work is about your team (and by extension, your earliest believers and angel investors). The second column is about your market (customers, demand, the people who will pay you money). The third column is about your stakeholders (advisors, partners, supply chain, community, industry, and investors).

Think of it like a Rubik’s cube where each face represents a different audience. Now, you tend to try to speak to your audience but because your cube is all mixed up, you never present a cohesive side to anyone; no one can discern the cube itself. What we need to uncover is that the underlying structure is of your venture is the same set of questions regardless of the side presented.

The goal is not to write essays. The goal is to fill in each cell with the minimally relevant information that makes that one intersection clear. One box. One audience. One question. If you can’t say it concisely, you don’t understand it yet. Your startup has a story problem and that story problem almost always traces back to a founder who has confused complexity with depth.

WHY is the first row because it’s the row that determines whether anyone in the room leans forward or checks their phone.

• Column one: why are you and your team passionate about, committed to, and experienced with what you’re doing? This is not a mission statement (yet). This is the raw, honest answer.
• Column two: why does the market need this? This is where your Problem/Solution Statement lives, but I want you to think about it as market need, not just “a problem someone has.” Consider existing alternatives. If nothing exists that does what you’re proposing, ask yourself if the absence of a solution is evidence of a problem or evidence that nobody cares.
• Column three: why will stakeholders care? Stakeholders are not just investors. They’re advisors who will give you time, partners who will integrate with you, communities that will support you, and yes, eventually, investors who might fund you. Why would any of those people care about what you’re doing?

Simon Sinek made a career out of telling people to start with why, and while I think his framing has become a bit of a bumper sticker at this point, the underlying logic is sound. People don’t buy what you do; they buy why. The problem is that most founders think their “why” is their personal passion story, it’s not. Your why has three dimensions (team, market, stakeholders), and if any one of those dimensions is empty, your venture has a structural weakness that no amount of product development will fix.

WHO is the second row, and it matters more than most admit because it either gets buried in founders not being confidence in themselves or their experience (i.e. imposter syndrome) or the lack of really understanding their market.

• Column one is team: document completely your background, experience, skillsets, roles, former companies, and the commitments of your team. Not a resume. An argument. Why are these specific humans the right humans to execute this specific opportunity? Techstars famously reinforced that team is the only thing that matters, and yet, as I’ve pointed out repeatedly, most pitch decks stick the team slide at the very end as though it’s a footnote.
• Column two is customers: describe, as specifically as possible, the people who will pay money for what you’re doing. Not “small businesses” or “millennials.” Real people, with real behaviors, in real contexts, spending real money. There could be more than one group.
• Column three is partners: companies, industry collaborators, educational institutions, anyone who could support or amplify what you’re doing.

WHEN splits into a grid within the grid. You need to address both your market and your startup across past, present, and future. Most of you fail to do this in as much as this is how you shape the evidence that you know what you’re doing; you know the past and future of your market, and have aligned what your startup has, is, and will be doing accordingly.

For your market: what’s the history of this space? What companies, technologies, and investors have shaped it? What does it look like right now, the major players, the emerging ones, the technology in place? And what’s your assessment of where it’s going?

For your startup: what have you accomplished so far? Where are you right now (and be honest, brutally so – this framework is not a sales pitch to make you look good! These are the facts)? And what does the future look like in stages? This is where you define what success looks like and, critically, what an exit would entail. Timing is one of the most overlooked variables in startup success. Founders routinely fail to communicate the market dynamics that make now the right time for their venture. Bill Gross, founder of Idealab, analyzed hundreds of startups and found that timing was the single biggest factor in success, accounting for 42% of the difference between success and failure (more than team, idea, business model, or funding combined). His TED talk on the subject has been viewed millions of times, and yet most founders still can’t answer the question “why now?”

WHERE has three dimensions (still our three columns). Geographically: why are you located where you are? What advantages does your city, state, and country provide? This isn’t about bragging on your coworking space; it’s about demonstrating that you understand the resources, talent, industry connections, and community that your physical location provides. As explored in why where matters and the role of shared philosophies in industry formation, your location is an argument about your venture’s viability, not a line item on your pitch deck. Platforms: where does the market connect with you? Your website, your app, your social channels, your code repositories, your physical stores. Document all of them. Market: where will you find your customers and partners, how will you reach them, and how will they find you?

You might notice now, if my explanation of this is clear, that while our second column of information is oriented to the market, and our first rows of that column are about the customer and market, it’s here in asking where, that we find the market in the third column. This is because our columns are setting up the talking points to orient your story to what needs to be established and proven to be meaningful to the next audience. That third column is the stakeholders and investors… the second column is the market itself, so in asking about your startup, Why and Who, we need to know that to go after the right audience. Our investors and stakeholders, need it established such that now you explain Where they’re found and how you’re going after them.

WHAT is the row that every founder wants to lead with and shouldn’t. I know you do this, and you know you do this; you introduce yourself or start your pitch by introducing the startup and telling us what it does. I want you to hold that I mean to say this kindly, though it might not seem nice, “we don’t care. (yet)”

• Column one: now you can explain what you’re doing. What your business is. What it does. This is usually what you know best and what you blurt out to people over coffee, which is precisely why it doesn’t belong at the top. Without the preceding context, “what” is just a feature list.
• Column two is the business model, and here’s where founders consistently screw up: your business model is NOT just how you make money. Explain the entire cycle, from how people discover you, to how they buy, to how you deliver, to how other parties and technologies are involved, to how you maintain customer relationships. If you can’t map the full loop, you don’t have a business model; you have a revenue hope.
• Column three is ROI: what is the return on investment to everyone involved? Everyone means you, your advisors, your partners, your stakeholders, and your investors. How will each party derive value back from the effort, time, reputation, work, and capital they invest?

HOW comes last because it’s the least important question for any initial conversation, which is the opposite of what 90% of founders believe.

• Column one: translate what it is into how it works. This is where mockups, demos, and walkthroughs live.
• Column two: get as detailed as possible about making money; profit margins, lifetime value, the various costs that distinguish how customers pay you and what that results in.
• Column three: how do you find, connect with, appeal to, work with, and deliver returns to investors? And notice, “investors” here doesn’t necessarily mean venture capitalists. These could be business partners, grant agencies, or whatever form of capital is put to work on your behalf. As I noted in why we teach startups to pitch to investors even if they don’t want venture capital, the exercise of thinking through investor expectations is a stress test for your entire business, not a fundraising exercise.

You fill this out. Then you go back and revise it. Then you realize that something you wrote in the WHEN row contradicts something in the WHO row, and you fix both. Then someone on your team reads it and points out that your WHERE doesn’t support your HOW, and you rethink your go-to-market. This is a living document. If you treat it like a homework assignment you complete once and file away, you’ve wasted your time and mine. Your spreadsheet should look something like this.

Startup Mission, Vision, Values: Crafting Your Startup

That was our first worksheet. I encourage keeping it as a standalone worksheet because it serves as a living document that you should share with your team, advisors, and friends; looking at it, without your explanation, they should be able to completely understand what you’re doing, why, and how to help.

Create a second tab to start translating everything you just documented and into the guiding principles of your company. This isn’t an exercise in corporate platitudes; it’s a structural mapping. This structure matters more than most people realize, because there are five layers derived from the elementary questions, overlapping; they share rows which might help you appreciate that failing to elementary questions cleanly (i.e. the foundation) causes the failure of the rest of your structure as a venture. They cascade through the middle of the framework like shingles on a roof, and the pattern of that overlap is what makes this a living system instead of a checklist.

Your Mission Statement draws from WHY and WHO. Why you exist. Who you are and for whom. Your unwavering mission should be derived from why your team cares, why the market needs this, why stakeholders will engage, and who is involved in making it happen. A mission statement is not a marketing tagline. It’s the thing that doesn’t change even when everything else does. If your mission changes every quarter, you don’t have a mission; you have a mood. Mission is fixed.

Your Vision draws from WHO, WHEN, and WHERE. It overlaps with Mission at the WHO row and extends downward into the contextual questions. Vision explores how you will accomplish that mission for the foreseeable future, accounting for your team composition, your timeline, and your positioning. Vision changes as the company evolves, as your team changes, as you enter new markets or phases. A new CTO joins. You expand from Austin to New York. The three-year roadmap shifts because the market shifted. Vision evolves, and that’s expected, because the rows it draws from (who, when, where) are inherently dynamic through the columns of facts.

What we can also pull from this framework are your Value Propositions drawn from WHO, WHEN, WHERE, and WHAT. Notice the overlap: Value Propositions share three rows with Vision (WHO, WHEN, WHERE) and extend one row further down into WHAT. These are the messages you use to introduce and sell what you offer to different audiences. Value propositions are fluid. They change constantly and they should. What you say to a potential enterprise customer in Q1 is not what you say to a strategic partner in Q3. The underlying mission hasn’t changed, but the value proposition has to meet the specific expectations, interests, and goals of who you’re speaking with, right now. This is the layer most directly tied to sales and marketing messaging; it’s audience-specific by design.

Exciting about this is that it also uncovers your company Culture, drawing from WHEN, WHERE, WHAT, and HOW. Culture overlaps with Value Propositions at WHEN, WHERE, and WHAT, and extends further down into HOW. Culture is influenced by when you are in your company’s development, where you work, what you do, and how you do it. As I’ve explored in the relationship between philosophy, culture, and industry, culture isn’t something you declare in an employee handbook. It’s the emergent result of shared philosophies expressed through daily work. Your company culture draws up from what and how you work because it’s influenced by where you work. Now, you were probably thinking that your How facts seem to explain how the solution works, how the business model works, and how that matters to stakeholders, and you’d be correct. So how does that correlate with culture? Culture is oriented to how you’re willing to work, what you’re doing, and what you won’t do. For example, if your How about investor engagement establishes that you don’t want venture capital and you intend to bootstrap, or you that you are determined to stay focused on being a Social Impact oriented venture, that defines cultural qualities of the company. Culture evolves as the team changes, as the product develops, as the company grows. A 5-person team working out of a garage in 2024 does not have the same culture as a 50-person team in an office in 2027, even if the mission and values haven’t budged. This should become more evident in how this framework helps define your values…

Shared philosophies, Your Values, draw from WHAT and HOW. These are your unwavering philosophical commitments about what you do and how you’re willing to do it. Like the mission at the top, values at the bottom are fixed. You either believe in transparency, or you don’t. You either prioritize customer success, or you don’t. You either operate with integrity in how you handle investor relationships or you don’t. Values don’t bend to market conditions or team composition.

Now look at the shape of this. Overlapping like cascading brackets down the right side of the framework. Mission (fixed) covers WHY and WHO. Vision (evolves) covers WHO, WHEN, and WHERE. Value Propositions (fluid) cover WHO, WHEN, WHERE, and WHAT. Culture (evolves) covers WHEN, WHERE, WHAT, and HOW. Values (fixed) cover WHAT and HOW.

The top and bottom are the bookends; they’re permanent and they define the boundaries. The three middle layers (Vision, Value Propositions, Culture) share the middle rows of the worksheet and move, breathe, and adapt as the company evolves. WHO through WHERE is the most contested territory; three layers overlap there simultaneously, which is precisely why those middle elements are the ones that shift when a new co-founder joins, when you enter a new geography, when the market shifts.

Oliver Whitham captured a version of this alignment in a piece about tech culture that referenced this framework: philosophy drives culture, culture drives values, values drive vision, vision drives mission. The extremes are concrete. The middle evolves. And what you say to anyone (your value propositions) shifts with context, drawing from the most dynamic center of the framework while remaining anchored by the permanent layers above and below.

Take a look and then keep reading, there’s more!

The Startup Pitch Tab: Turning Answers into Narrative

A third tab, also separate on purpose, is where this framework delivers. It’s also where most founders start and shouldn’t, because pitching well only works when the first two tabs are done.

I have a guarantee for you: there is no accelerator in the world that teaches this. This was put together because they don’t. When you’re working through your 10 slide pitch deck, you’re taught to use an existing template, fill in the slides, and then work with advisors until it sounds right. It almost never does because no one works with you on the narrative design, the facts of the venture, and how they work together.

Put together three sections. On the left, the same six-row, three-column grid you already filled out. In the middle, your explanation of how those rows map to what you’ve written as your Mission, Vision, Value Propositions, Culture, and Values (the five layers you just derived in tab two). And on the right, we’re going to work out your Elevator Pitch and the Startup Pitch.

The Elevator Pitch is 30 seconds to one minute. The purpose is not to close a deal, secure funding, or explain your product. Recall that I nicely conveyed previously, “we don’t care (yet).” This is where that should ring true… can you imagine walking into an elevator with group of random people, and saying, “Hi, I’m Jane Doe, founder of My Startup, we fix this problem that I’m going to tell you about.”

I’m embarrassed for you even thinking that that’s how you start out your pitch. The brains of your audience are all thinking, “okay…? Get to what matters.”

The purpose is to engage anyone, any audience, such as a random person in an elevator, so that they want to talk more. Your neighbor. Your grandparent. The barista. Your auto mechanic. This is the message your entire team should be able to repeat in their sleep. This is the message that goes out in introductory emails, that you use at happy hour, and critically, that someone else should be able to repeat about you to accomplish the same outcome: making anyone want to know more.

How? Appreciate that overwhelmingly, most people don’t care HOW what you’re doing works. Most people won’t even care WHAT you’re doing; at least, not in 30 seconds. And WHERE? Where makes for great conversation but it won’t hook anyone with excitement. Your elevator pitch is a distillation of WHY, WHO, and WHEN into a single statement, nuanced slightly with your value proposition. The elevator pitch will change a little based on circumstances (when and where you’re giving it), so the goal is a WHY/WHO/WHEN core that is essentially always the same but can be adjusted depending on context. Notice how this bleeds just a bit into the value proposition layer; your elevator pitch should and will shift based on circumstances, which is exactly what a fluid value proposition is designed to accommodate.

The Startup Pitch is where the third tab of this framework explicitly maps to a 10-slide pitch deck, not as a pitching format but as a diagnostic tool. I like encouraging you use Guy Kawasaki’s but because, as I argued in The Better Startup Pitch Test, the Kawasaki deck’s value is not that it’s an ideal template; it’s that it forces concise thinking and exposes narrative gaps. Here’s how the mapping works:

Slides 1 and 2, the Problem/Opportunity (or “Problem Solution Statement”), draw directly from WHY and WHO in the framework. This is your reason for existing and the people who need what you’re offering. And here’s where the framework gives you an advantage that a blank slide template never will: you’ve already answered these questions from three perspectives (team, market, stakeholders), so your problem statement isn’t one-dimensional.

Slides 3 and 4, the Underlying Magic, draw from WHO, WHEN, and WHERE. This is where you demonstrate what makes you uniquely positioned to win. Your team’s background, the market timing, the platform and geographic advantages. If you filled out the worksheet honestly, this slide writes itself.

Slides 5, 6, and 7, covering Business Model, Go-to-Market, and Competitive Analysis, draw from WHO, WHEN, WHERE, and WHAT. These are the mechanics of your venture, informed by your understanding of the market’s past, present, and future, your customer and partner landscape, and what you’re actually built. Most Go-to-Market and Competition slides are garbage (click those to learn why); those weaknesses trace directly back to empty cells in this worksheet.

Slides 8, 9, and 10, covering Projections, Use of Funds, and the Ask, draw from WHEN, WHERE, WHAT, and HOW. The financial logic and investment thesis only make sense when grounded in everything that preceded. Most pitch decks fail before investors ever say no in part because your projections fail because you’ve been taught by some finance advisor to do arithmetic in a Pro Forma, instead of understanding and explaining causality. If you filled out the HOW row of the worksheet honestly (particularly the “Makes Money” and “Investors” columns), your projections have a causal foundation instead of a b.s. financial model that’s really rather irrelevant at this stage.

And then there’s the Team slide. The Kawasaki template puts it near the end so you can see why I like his approach but want you to reorient the final. The startup framework pushes you to move it to slide 2 or 3. If team is what most investors invest in (and it is), does it not make sense to establish credibility before asking anyone to evaluate the rest of your pitch? WHO is the second row for a reason. The audience should know who they’re listening to before they’re asked to believe anything else. This alone separates a pitch informed by this framework from the template-followers who put their headshots on slide 9 like an afterthought.

Notice the flow from beginning to end: WHY, WHO, WHEN, WHERE, WHAT, HOW. The pitch deck, done correctly, follows the same trajectory as the framework. You’re not arranging slides; you’re telling a story in the order that human brains are wired to receive it. Poor narrative positioning can reduce fundraising effectiveness by up to 70%, so cut it out! Look, even if my framework here is less than ideal, you know from experience that what you’re doing isn’t working, stop it.

This Is Narrative Design, Not Pitch Practice

The mistake nearly everyone makes is treating “pitch work” as though its purpose is to orient a founder toward investors and funding. Your Startup Has a Story Problem, good pitch work has never been about raising capital. It’s about organizational clarity delivered through narrative. The framework doesn’t produce a pitch for your audience, it produces a narrative about your venture that is coherent, complete, and compelling to everyone: your team, your customers, your partners, your advisors, your community, and yes, your investors (not necessarily VCs!).

You don’t pitch for difference audiences; you sell to different audiences. The distinction matters because a startup pitch is explaining the venture, not closing a customer or investor; selling, the value propositions of your work, are where resonance with audiences matters. Value propositions adjust, emphasis shifts, the elevator pitch nuances depending on context; but you can only make those adjustments when the underlying narrative is locked. If your story changes depending on who’s in the room, you don’t have a narrative; you have a collection of half-truths stitched together with hope, and everyone in every room can feel it.

A perfect pitch is one that works for everyone because the narrative underneath it is true, complete, and structurally sound. The criteria investors use to evaluate deals map almost perfectly to the criteria that make a story compelling to any audience. Team credibility. Market opportunity. Timing. Differentiation. Financial logic. Exit potential. These aren’t just investor concerns, they’re human concerns; if your story satisfies the most skeptical audience you’ll ever face (investors), it will work on everyone else, because as convincing a venture capitalist to allocate millions is categorically harder than anything else you’ll do in sales or marketing.

This three-tab spreadsheet is not a pitch deck template. It’s not a business plan. It is elementary school questions you’ve known your whole life, reorganized in the right priority, answered from three perspectives, and translated into the five organizational layers and narrative structure that make a company legible to the world. Your pitch deck is only capably accurate when these questions are answered. The mission statement is only authentic when these questions are answered. The value propositions are only resonant when these questions are answered. The culture is only coherent when these questions are answered. And the values only hold weight when they’re grounded in what you actually do and how you’re actually willing to do it.

If you’ve read all of this and you’re thinking about skipping the Worksheet and going straight to your pitch deck, go ahead; do not email me, I’m not going to help you with the same pitch deck junk that people me receive a dozen times a day. Go ahead, and keep wondering why the room doesn’t lean in. Or sit down with six questions you learned when you were seven years old, answer them honestly, and discover that the pitch was never the problem. The problem was that you never did the work that makes your story compelling.

That in mind, do email me. I run through this as a lecture at universities, a session in incubators and accelerators, and consulting with startups and companies. What cell in this framework can’t you fill out? That’s the gap that’s killing your venture. If you can’t figure out which one it is, that’s probably worth a conversation.

Curious how to share this with others? This is the visual that might be meaningful:

The post The Startup Framework: A Better Pitch through Storytelling appeared first on Startup Economist.

Congratulations! You have a pitch deck.
So does every other founder about to fail.

Provocation aside, let’s take that thought seriously, that roughly 90% of startups die, and the overwhelming majority of those dead ventures had a pitch deck, went through an accelerator, followed a template, and still couldn’t get anyone to care.

CB Insights has run postmortem analysis on failed startups for years, and the number one killer (after bad teams) is consistently “no market need,” cited in roughly 35 to 42% of failures. That is not a technology problem and it’s not a capital problem. Is it a storytelling problem? Your startup narrative sucks.

The founder could not influence the right people that there was an opportunity worth pursuing.

The mistake nearly everyone makes (founders, advisors, accelerators, the whole cottage industry of startup theatre) is treating “pitch work” as though its purpose is to orient a founder toward investors and funding. Worse, designers happily offer pitch deck services as though the quality of your slides has anything to do with your success. Work on your pitch, polish your deck, and get ready for demo day! And so, founders dutifully arrange twelve slides, memorize their lines, and walk into a room prepared to perform a transaction: I need money, here is why you should give it to me.

That framing is wrong, and it poisons everything downstream.

Good pitch work has never been about raising capital. Good pitch work is narrative design: the discipline of constructing a story so coherent, so aligned with your capabilities, your market opportunity, and your actual challenges, that it compels action from everyone who hears it. Not just investors. Everyone. Customers, team members, journalists, advisors, partners, your skeptical uncle at Thanksgiving. When the narrative is right, it works on all of them, because a great narrative operates the same way a great story does. It is not a sales pitch. It is not a proposal. It is not a plea. It is a story that people want to be part of.

What is Narrative Design?

Narrative design is a term borrowed from game development and interactive media, but its roots go back to the oldest human technology we have: storytelling. Joseph Campbell published The Hero with a Thousand Faces in 1949, articulating what he called the “monomyth,” (which, if you read my last article, you’ll be familiar with what led me to this article): a universal pattern underlying heroic tales across every culture and era. Campbell described that a hero ventures forth from the ordinary world, faces decisive challenges, and returns transformed with something of value to share. George Lucas credited Campbell directly for the structure of Star Wars and Christopher Vogler adapted Campbell’s work into a practical screenwriting guide that Hollywood has used for decades.

From The Odyssey to The Matrix, from Harry Potter to The Hunger Games, the structure persists because it maps onto something fundamental about how human brains process information.

And there is neuroscience to back this up; Paul J. Zak, a neuroeconomist at Claremont Graduate University, published research in Harvard Business Review demonstrating that character-driven stories trigger the release of oxytocin in the brain, a neurochemical associated with trust and empathy. His lab found that the amount of oxytocin released predicted how willing people were to help others, including donating money. Zak’s peer-reviewed work in Cerebrum further showed that a story must first sustain attention through tension, and if it does, viewers and listeners come to share the emotions of the characters and continue mimicking those feelings and behaviors afterward: a measurable, replicable neurological response.

So, when we talk about narrative design for startups, we are not talking about making your slides prettier or rehearsing your three-minute pitch for demo day. We are talking about constructing a story that activates the same cognitive and emotional pathways that make people care about Luke Skywalker’s father, or root for Katniss Everdeen, or cry when the robot in a Pixar movie learns what sadness means. You are building a narrative architecture that, when done right, makes everyone in the room want to know what happens next. That is what gets people to invest, to buy, to join, to write about you, to help.

Stop Pitching to Investors, Enlighten Everyone: The Disjointed Story Problem

Most founders are not telling one story because they have been taught (mistakenly) to know your audience and speak to them. Rather, that’s not mistaken, it’s very appropriate AFTER you first have one clear and consistent narrative. What founders are doing now is telling four or five different stories to four or five different audiences, and none of those stories are the same.

• They sell to customers with one narrative: “We solve your problem, here is our product, look at these features.”
• They pitch to investors with another: “Here is a massive market, here is our traction, give us $2 million.”
• They plead with potential team members using a third: “Join us, it will be amazing, we have a great culture.”
• They send a fourth version to journalists: “We are disrupting the [insert buzzword] industry.”
• And they sit down with advisors and share a fifth, usually the most confused version of all, because by that point even the founder does not know what the actual story is.

The result of this fragmentation is not just inefficiency; it is incoherence. And people can hear it. Investors sit through your pitch and sense the gaps. They usually can’t articulate what feels wrong, but something does, and their instinct is to say no (or more commonly, to say “come back when you have more traction,” which is investor-speak for “I do not believe you”). Potential team members hear your recruitment story and it does not match what they read on your website, which does not match what they heard from someone who attended your demo day. Customers try your product and the experience does not align with the promise. Journalists ignore your press release because it reads like a proposal, not a story anyone would want to tell. Advisors cannot actually help you because they do not have a clear picture of what is really going on; you have given them a highlight reel instead of a narrative.

I have written about this problem extensively and explored how the conventional pitch deck format (Problem, Solution, Market, Competition, Team, Ask) actively encourages this fragmentation. The format trains you to present information in categories rather than in a narrative arc. It is a filing system, not a story. And when you organize your thinking as a filing system, you end up with a venture that communicates like a filing system: compartmentalized, disjointed, and forgettable.

Consider what each of your audiences actually wants and notice how their needs converge far more than you think. Potential team members are not joining for the salary (if your startup can even offer a competitive one); they want a big outcome; they want equity in something that matters. That is the same thing investors want. Customers do not just want a problem solved; they want confidence that the company behind the solution will still exist in two years and will keep improving. That requires the same organizational health and market positioning that investors evaluate. Journalists will not cover your startup because you asked nicely; they will cover you because there is a story their readers will care about, which means your narrative has to be genuinely interesting. Advisors cannot help you navigate challenges they do not understand, and they cannot understand them if your story keeps shifting depending on who is in the room.

One story, told well, and aligned to reality. That is narrative design, and it is the forcing function that aligns your entire venture. Not a pitch; a narrative.

Alejandro Cremades and the VC Scorecard That Might Prove the Point

Which brings me to someone whose work I want to highlight, because he has inadvertently created a better narrative design framework, and he did it by thinking like an investor, not a storytelling coach.

Alejandro Cremades is a serial entrepreneur, author of The Art of Startup Fundraising (published by Wiley, with a foreword by Barbara Corcoran), and co-founder of AC8 Partners, an M&A and fundraising advisory firm. He previously built CoFoundersLab into a community of over 500,000 founders across 234 countries before it was acquired. He has spoken at Wharton, Columbia, and NYU. The man knows fundraising. He has been on both sides of the table and helped thousands of founders raise capital.

What Cremades has been doing lately on LinkedIn has been fun to watch since I write… He creates these crisp, visual breakdowns of how venture capital actually works, and one in particular caught me. It is called “Inside A VC Memo: How Investors Actually Evaluate a $5M Seed Deal.” It is a scorecard format, grading a fictional company across six categories: Team, Market Size, Competition, Edge, Metrics, and Exit Potential. Each category gets a letter grade and a rationale.

Cremades wrote alongside it: “This is how investors actually evaluate a $5M seed deal. Not with hype, but with structured thinking.” He went on to note that team and market lead the decision, that weak competition does not equal advantage, and that early metrics can be forgiven if the upside and exit potential are strong enough. His bottom line: “VCs invest on asymmetric upside, not perfection.” (exactly what I wrote in Startup Ecosystems)

That framework is useful for founders trying to understand how investors think. Obviously.

But I can’t help noticing that the scorecard does something far more important than decode VC decision-making. It tells us, inadvertently, how to structure a startup narrative.

The Scorecard as Narrative Design: Six Acts of a Startup Story

Look at the order of Cremades’ scorecard. Look at it carefully because the sequence is not arbitrary, and it maps almost perfectly onto the principles of effective storytelling, including Campbell’s monomyth

Act One: Team. The scorecard starts here, and so should you. Investors evaluate the team first because, as the research consistently confirms, team is the leading determinant of startup success or failure. But think about this from a storytelling perspective.

Every compelling story begins by developing its protagonist. You have to know who Luke Skywalker is before you care about the Death Star. You have to understand Frodo’s quiet life in the Shire before the ring means anything. You have to root for Tony Stark’s arrogance before his transformation matters. Your founding team is the protagonist of your startup’s story. If you cannot make people care about the people behind this venture (their credentials, their motivation, their unique capability) then nothing that follows will land. You are asking an audience to invest time, money, trust, or attention in characters they have not been given a reason to believe in.

In the Cremades scorecard, the team gets an A-minus: ex-Goldman, Stanford background, the founder is also a creator in the space. The risk noted is that this is a first-time founder with unproven execution. That is great narrative tension, by the way. Experienced, credentialed, deeply connected to the problem, but unproven. That is interesting. That makes me want to know more. An A-plus team with no risk is boring; there is no tension, and without tension, the brain does not release oxytocin, and without oxytocin, there is no emotional engagement. A flawed hero is a more compelling hero; besides, a perfect hero is a lie.

Act Two: Market Size. Now that we know the characters, we need the setting. Every story needs a world in which the action takes place, and the scale of that world determines the stakes. Our startup operates in the creator economy, a $100 billion-plus market with tailwinds from the shift to creator-led businesses. That is the world of the story. It tells us where the heroes are operating and, critically, why the quest matters.

A story set in a tiny, static world is not very interesting. A story set in a massive, dynamic, shifting landscape creates urgency and possibility. When you tell your market story, you are not just citing a TAM number for investors; you are establishing the scope of the adventure for everyone. Team members need to know the arena is big enough to justify their commitment. Customers need to know the market is real enough that your solution will be supported. Journalists need a market narrative that their readers find relevant.

Act Three: Competition. Every good story needs an antagonist, and every startup needs a clear competitive landscape. What Cremades flags is telling: 100-plus competitors in the link-in-bio space, low barriers, fast copy potential. The venture gets a C here. The conventional instinct is to downplay competition (“we don’t really have competitors” is something I hear from founders so often that I have written specifically about why it is one of the easiest ways to flop a pitch).

From a narrative perspective, the villain is essential. How do we know there is an opportunity to seize if there is no adversary? How do we feel urgency if there is no threat? The Empire gives the Rebellion meaning. Voldemort gives Hogwarts purpose. Your competitors give your venture context. A crowded landscape with low barriers is not a reason to quit; it is the narrative tension that makes your edge (Act Four) matter.

Act Four: Edge. Campbell called this the “boon,” the gift or weapon or insight that the hero gains through the journey. In startup terms, it is your competitive advantage, your moat, the thing you have that others do not. Our edge in Cremades example is an all-in-one creator store approach that replaces multiple tools (Kajabi, Calendly, etc.), earning a B-minus because the defensibility is weak today.

In the monomyth, this is the point in the story where the hero has crossed the threshold, faced trials, and gained something unique. If you do not articulate your edge, your audience cannot frame in their minds how you are going to win. And “win” is not just an investor word; it is what customers need to believe (this company will outcompete and outlast), what team members need to believe (this venture has a shot), and what journalists need to see (there is a reason this company matters). Your edge is not a slide. It is a narrative turning point.

Act Five: Metrics. This is where most founders get the storytelling completely wrong. They think metrics are KPIs: revenue numbers, user counts, growth rates. Those matter, but from a narrative perspective, metrics serve a different and more important function. They are the trials, the scars, the evidence of the journey.

Could Luke Skywalker have been credible as a Jedi without getting beaten, losing his hand, failing, training in the swamps of Dagobah, and learning the hardest possible lesson about his own father? Would we believe the story if he had not suffered? Superman discovers his kryptonite. Katniss Everdeen never wanted to be a hero and had to be dragged into the arena. Ellen Ripley loses everyone she cares about. Harriet Tubman endured slavery and violence before she became a liberator. The hero, real heroes note (which is why I dropped in Tubman), who have never struggled aren’t known; they are a fantasy, and fantasies do not generate trust.

Our startup gets a C on metrics: very early traction, strong NPS (80-plus, meaning high user love), but no strong revenue or scale yet. That is not a failing grade in storytelling terms, it’s character development. That is a protagonist who has been tested, has learned something real, and is not pretending to have all the answers. When you present your metrics as scars rather than trophies, you create the authenticity that Zak’s research shows triggers trust. Should we believe your story if you are full of bluster and confidence with nothing to back it up? No. We should not. And investors, customers, and team members alike can smell that inauthenticity.

Act Six: Exit Potential. What is the outcome of the story? What happens if the heroes succeed? What is lost if they fail? Our startup gets an A here: clear potential acquirers (Shopify, Amazon), a large TAM supporting a $100M-plus outcome, and even an IPO scenario in the upside case. This is where the narrative resolves. In storytelling, the resolution matters because it is what gives meaning to everything that came before. The audience needs to know what success looks like and why it matters, not just financially, but structurally. For investors, exit potential is obvious. But for team members, this is the answer to “why should I give years of my life to this?” For customers, this is “will this company grow into something that makes my investment in their product worthwhile?” For partners, this is “is there a future here that justifies our collaboration?”

Why This Order Matters More Than Any Pitch Template

Notice what Cremades’ scorecard does NOT start with. It does not start with Problem and Solution.

I personally loathe Problem/Solution as a leading framework for a pitch, and I have said so many times. The conventional pitch template tells you to open with a problem and then present your solution, and it sounds logical until you think about it for more than thirty seconds. You are walking into a room of strangers and saying, “Here is a problem” and “We know the solution.” You have told me nothing about who you are, why I should trust you, where this is going, or why I should care. You have opened a story by describing the setting and the conflict before I know the characters. That is not how stories work. That is not how trust works. That is not how human cognition works.

Cremades’ framework starts with Team, because that is how investors actually think, and it happens to also be how narratives actually function. We explored this in the Bell Mason Diagnostic (a tested methodology for evaluating startup viability) organizes twelve factors across four dimensions, and when you reorder those factors to follow effective narrative principles rather than categorical convenience, you end up with a structure remarkably similar to what Cremades presents.

NFx, the venture firm, through James Currier, published 23 rules of storytelling for fundraising and made the point bluntly: “As a Founder, you are the Chief Storyteller. You need to convince investors, employees, customers, partners, and journalists to give you the resources you need, and you do that with your story, your narrative.” They also observed that most founders default to the “Hero Founder” narrative template because they like to talk about themselves, not because it is the most effective approach. The effective approach is an integrated narrative where the founder, the market, the competition, and the journey are woven into a single coherent arc.

That is what Cremades’ scorecard gives you. Not a pitch template. A narrative design framework. And the fact that it is framed as how VCs evaluate deals makes it the ultimate forcing function.

You are not designing a story for investors; you are designing a story that is stress-tested by the most skeptical audience you will ever face, and if it works on them, it will work on everyone else too.

The Forcing Function: Why the Hardest Audience Makes the Best Story

Investors are, without question, the most difficult audience to convert. They hear hundreds or thousands of pitches. They are professionally skeptical. They are evaluating not just what you say but what you do not say, and they are comparing you (consciously or not) to every other founder who has ever walked through their door.

Research published on GoNarrative found that poor narrative positioning can reduce fundraising effectiveness by up to 70%, while companies that excel at storytelling achieve conversion rates three to four times higher than industry averages.

Stop there. If you are reading THIS article, my article, with skepticism or disregard, FFS, “companies that excel at storytelling achieve conversion rates three to four times higher than industry averages” Start over at the beginning and read again.

This is why the purpose of good narrative work is not to raise capital. The purpose is to create a story so tight, so coherent, so aligned with the reality of your venture, that it survives contact with the most demanding audience. That process of refinement builds a narrative that can withstand VC scrutiny, giving you have, as a byproduct, created something that:

• Aligns your team around a shared understanding of what you are doing and why.
• Gives customers a reason to believe you are worth their trust and their money.
• Gives journalists something worth writing about, because it is actually a good story, not a corporate press release.
• Gives advisors enough clarity to actually help you, because they know what is really going on, what is working, what is not, and where you need support.
• Creates internal alignment on priorities, because the narrative demands that you know your edge, acknowledge your weaknesses, understand your market, and be honest about your metrics.

That is not a pitch! That is organizational clarity delivered through the most powerful communication technology humans have ever developed: a well-told story.

A Brief History of Why Startup Narrative Design Works

Humans have been telling stories for at least 30,000 years and almost certainly for much longer than that through oral tradition. Campbell’s monomyth draws on mythology from every inhabited continent. The structure persists because it maps onto the way human brains process and retain information. Zak’s neuroscience work confirmed what storytellers have known intuitively: tension sustains attention, character identification triggers empathy, and resolution motivates action.

The Holloway Guide to Raising Venture Capital wrote, “If you can’t get an investor emotionally interested in what you’re building, they will not invest in your company.” Dr. Howard Gardner, a professor at Harvard’s Graduate School of Education, called stories “the single most powerful weapon in a leader’s arsenal.” Michael Skok at the Harvard Innovation Labs teaches founders that the pitch is not a performance; it is a conversation, and the narrative is what makes that conversation compelling.

The startup world has somehow managed to take this ancient, neurologically validated, universally effective communication framework and reduce it to a twelve-slide PowerPoint template that opens with “Here is a problem.” We took the most powerful tool for human persuasion and turned it into a TPS report. That is genuinely impressive in its wrongness, and it is killing ventures that might otherwise have lived.

A Better Startup Pitch

Use Cremades’ scorecard as a narrative outline. Not because it is the only valid framework, but because it represents how the most demanding audience in your ecosystem actually processes information, and because its structure accidentally (or perhaps deliberately) maps onto the narrative principles that make stories work.

Start with your team. Make me care about the protagonists. Tell me who they are, what makes them credible, and (critically) where they are vulnerable. A perfect team slide is boring (it’s bull); an interesting team slide is a character introduction.

Establish the world. Show me the market, not as a number on a slide, but as a landscape with dynamics, tailwinds, and forces that create the conditions for your quest. The market is the setting, and a vivid setting pulls people in. This is what I mean when I argue that media is capital; your ability to frame the world you operate in is itself a competitive asset.

Introduce the antagonist. Acknowledge your competition openly, specifically, and honestly. A founder who says “we have no competition” is a screenwriter who says “my story has no conflict.” No conflict, no story, no interest.

Reveal your edge. Show me the weapon, the insight, the strategic advantage that makes you capable of this quest. Do not assume I will figure it out; tell me, because competitive advantage is what distinguishes a startup from a science project.

Show your scars. Present your metrics not as a trophy case but as evidence of the journey. What did you learn? Where did you get beaten down? What did the market teach you? Vulnerability is not weakness; it is the narrative mechanism that creates trust.

Close with what the outcome means. Not just the financial return, but the significance. What changes if you succeed? What does the world look like?

The Startup Story You Are Actually Telling

Your startup is a story whether you design it to be or not; the question is whether it is a good one. A good story has a compelling protagonist, a world with stakes, an antagonist that creates tension, a unique capability that creates hope, evidence of the journey that creates trust, and a resolution that creates motivation. A bad story has a PowerPoint with “Problem” on slide one and “Solution” on slide two and a confused founder wondering why nobody seems to care when they get to the climax of the Go-To-Market slide.

I have spent years exploring why pitches fail, what causes startups to die, and how storytelling and marketing are the actual capital that most founders are ignoring. The ventures that get traction, funding, talent, press, and momentum are the ones with a narrative that works. Not a pitch and not a deck, a story.

If you are sitting there right now with a pitch that is not working, the problem is probably not your slides, your data, your traction, or even your product. The problem is probably that you are not telling a story. You are filing a report. And nobody, in the history of human civilization, has ever been moved to action by a report.

Stop pitching. Start telling a story. And if you are not sure whether your narrative actually holds together, ask yourself this: would someone who has never heard of your company, your industry, or your technology want to know what happens next? If the answer is no, you do not have a narrative problem. You have an everything problem. And the good news is that a well-designed narrative is the single most efficient tool for diagnosing and fixing it.

The post Your Startup Has a Story Problem appeared first on Startup Economist.

Every founder goes into the woods. We hike into a psychological space where the rules of the ordinary world stop applying, where the things you believed about yourself and your market get tested by forces you didn’t anticipate, and where coming home means becoming someone you can’t fully explain to the people who watched you leave. Stephen Sondheim wrote a musical about this in 1988 and called it Into the Woods. You might have seen the movie. Most people think it’s about fairy tales; it’s about you.

I had the joy of watching a stage production, years ago, and found myself doing what I always do: watching a story unfold and realizing it had nothing to do with fairy tales and everything to do startups (I’m a dork like that). The kid playing Red Riding Hood was bouncing around the stage, grabbing pastries from the Baker, completely oblivious to the Wolf’s real intentions. The audience knows what she doesn’t. The Wolf’s song of seduction makes it obvious that what’s coming isn’t charming; it’s predatory. And yet Red skips right into it because the Wolf is, as she later observes, “nice.” She goes willingly. She gets consumed. She comes out the other side and delivers the most founder-relevant line in the entire show: “He showed me things that I never had seen.”

Experience brings wonder. It also brings scars. And if you’ve started a company, you know these aren’t different things.

The Woods Are Not Optional

Sondheim’s woods are not just a setting, they’re an obvious psychological symbol of the unconscious, and I’d argue they’re also the most accurate representation of what pre-revenue startup life actually feels like. Dark. Unfamiliar. Full of things that might eat you. Maurice Sendak would call it “where the wild things are,” and those wild things (your doubts, your ignorance about unit economics, the co-founder disagreements you’re pretending don’t exist) must be befriended and integrated into the psyche before you can build anything durable. The Baker’s Wife, in Into the Woods, says it perfectly when she tells her husband, deep in their quest, “You’re different in the woods.” He’s surer, more daring, and much more open-hearted. The defamiliarization of the woods creates a space for growth that the ordinary world never provides.

Sound familiar? Every founder I’ve worked with has had a version of this moment. You leave your comfortable job, your predictable income, your understood identity, and you walk into the woods of entrepreneurship, where nobody knows your title, nobody cares about your resume, and the only thing that matters is whether you can survive long enough to learn what the woods are teaching you. As I’ve written about the habits of highly successful entrepreneurs, entrepreneurship demands the discipline to turn questions into numbers, tradeoffs, and constraints. The woods demand the same thing while being wary of more wolves.

Joseph Campbell documented this pattern decades before Sondheim staged it. In The Hero with a Thousand Faces (1949), Campbell described what he called the monomyth: a hero ventures forth from the world of common day into a region of supernatural wonder, fabulous forces are encountered, a decisive victory is won, and the hero comes back with the power to bestow boons on his fellow man. I love exploring how a generation of entrepreneurs was inspired by this thanks to Star Wars. Separation, initiation, return, and accomplish, every culture tells this story. Every founder lives it, whether they recognize it or not. The call to adventure is the problem you can’t stop thinking about. The threshold is the day you file your articles of incorporation. The ordeal is every pitch that goes sideways, every customer who ghosts you, every board meeting where someone asks why your burn rate looks like the wood on fire.

But Sondheim does something Campbell’s framework misses, and it’s the part that matters most for founders: he focuses on the aftermath. Not the quest itself but what happens when the quest succeeds and you’re standing there holding exactly what you wished for, wondering why it doesn’t feel the way you thought it would.

Nice Is Different Than Good

One of the most wonderful lines in Into the Woods belongs to Red Riding Hood after her encounter with the Wolf. She tells the Baker, simply, “Nice is different than good.” The Wolf was nice; charming, even. He made promises, he paid attention, he seemed interested in her well-being. And then he ate her. The word nice in Sondheim’s vocabulary is the veneer that conceals either disregard or danger, and if you’ve spent more than a few months raising capital, you’ve met plenty of wolves wearing nice.

Cinderella, in the show, discovers the same thing from a different angle. She wishes to go to the festival, she meets Prince Charming, and then she does something most fairy tale heroines don’t: she runs away. Why? Because as she tries to describe him to others, all she can muster is, “He’s a very nice prince.” Nice. Not good. Not real. Not someone who understands what she actually needs. She marries him anyway, which sets up every disillusionment in Act II, and if that isn’t the most accurate description of a founder taking the wrong investor’s money, I don’t know what is.

I’ve watched this script play out in real time. A founder meets an investor who says all the right things: “We love your vision,” “We want to be partners,” “We’re founder friendly.” Nice. And then the term sheet arrives, and it’s a different story. Perhaps you’ve joined an accelerator that took equity while pretending it was a better deal, and then you sit in the coworking space expecting help, only find events and office hours. Or you close a round and the board seat gets filled, and suddenly the “partner” is asking why you haven’t hit revenue targets that were never realistic in the first place. There is a distinction between investors who buy proof versus those who invest in belief; some investors want to see revenue traction, defensible margins, and a path to predictable multiples, and in many contexts, that’s appropriate. But when they dress it up as partnership while pricing your desperation, that’s the Wolf in a nice suit.

Sondheim’s Witch calls this out with the kind of bluntness that every founder needs to hear: “You’re so nice. You’re not good, you’re not bad, you’re just nice. I’m not good, I’m not nice, I’m just right.” The Witch is the advisor who tells you what you don’t want to hear. She resonates with me. She’s the market that doesn’t care about your feelings. She’s the data that contradicts your pitch deck and she’s not trying to be liked; she’s trying to be accurate. And most founders, like most fairy tale characters, would rather listen to the nice Wolf than the right Witch.

You Know Things Now That You Never Knew Before

Each of the main characters in Into the Woods follows the arc from innocence to experience. Red learns about predation. Cinderella learns about the emptiness of getting what you wished for. Jack, the boy who traded the family cow for beans, has the most mystical experience of the three. He climbs the beanstalk, encounters giants, and comes back fundamentally altered. His song “Giants in the Sky” is the best reflection of a founder’s post-funding psychological state I’ve ever encountered in any medium: you think of all the things you’ve seen, you wish that you could live in-between, and you’re back again, only different than before. After the sky.

That “different than before” is the part that the startup industry refuses to talk about. The Kauffman Foundation has shown that entrepreneurial persistence, not initial funding, is the strongest predictor of eventual startup survival, passion and perseverance for long-term goals. But what startup frameworks never address are the costs of the transformation itself. Jack doesn’t just come home with gold. He comes home as someone who has seen giants, who has been to a place no one around him can understand, and who now has to live in a world that looks the same but feels completely different. As Jack himself says, “You know things now that you never knew before.”

Here’s one thing most don’t know that you probably didn’t know before

Investor Jerry Neumann just wrote about this in Colossus. Co-Author of Founder vs. Investor (with Elizabeth Joy Zalman), Neumann touches on something I’ve been asking for decades. Why do we celebrate that 90% of startups fail, as encouragement to founders that it’s difficult, without appreciating that we’ve been saying “90% of startups fail” since the 90s? At what point does all the work make a difference? This is the underlying premise of the Startup Ecosystems book; that despite accelerators, methodologies, research finding correlations with founder success, and studies exposing why startup fail, shouldn’t more startups survive?? And then ecosystem builder Eric Harry asks, “is the work actually working?” No! We’re not applying what we know.

I wrote about this big idea in The Startup of You: companies pivot, markets change, capital moves, but a human being carries their history, their losses, their love, their resilience into every room they enter. That is the real startup and our economy doesn’t lean in on who we are. The research from Oxford, University of Technology Sydney, and the University of Melbourne that I covered when examining founder personality traits found that about 8% of people worldwide possess personality traits conducive to being successful founders. Eight percent. The rest aren’t deficient; they just aren’t wired for the woods. And the ones who go into the woods anyway, without the wiring, without the preparation, without the self-awareness? Those are the ones who get eaten.

Careful the Things You Say

Sondheim saves his knife for the finale when the Witch, who has spent the entire show trying to protect her daughter Rapunzel from the wolves in the woods (literally and figuratively), delivers the show’s thesis in “Children Will Listen.” And if you’re a founder who mentors other founders, who runs an accelerator, who advises startups, who shapes economic development policy for a city, you need to sit down and actually absorb what Sondheim is saying in this song.

“How do you say to your child in the night, nothing’s all black, but then nothing’s all white? How do you say it will all be alright, when you know that it mightn’t be true? What do you do?”

What do you do? What do you tell the first-time founder sitting across from you at office hours? Do you tell them the truth, that 90% of startups fail is misleading but the actual odds are still brutal? Do you tell them that the average age of successful founders is 44, which means if they’re 23, they’re statistically playing against the house? Or do you tell them what’s nice? Do you nod and smile and say, “Great idea!” because being encouraging is easier than being honest?

“Careful the things you say, children will listen. Careful the things you do, children will see and learn.”

The ecosystem builders, the accelerator directors, the government officials allocating innovation budgets, the VCs writing Medium posts about product market fit when they don’t even know how to find it; these are the adults in Sondheim’s metaphor. The founders are the children. Not because founders are childish but because they are, by definition, entering the woods for the first time. They will listen to what you tell them. They will model what you show them. They will internalize the stories you tell about success and failure, and those stories will shape whether they survive. Sondheim lyrics warn: “What do you leave to your child when you’re dead? Only whatever you put in his head. Things that your father and mother had said, which were right for they, too.”

Some of us have been explicit about this problem for years: governments keep insisting they’re “supporting entrepreneurship,” yet the tools they fund are usually the bureaucratic equivalent of a pep rally. Innovation hubs with free Wi-Fi, pitch competitions, and motivational speakers who read the same three startup books as everyone else. These things create the appearance of activity but deliver outcomes only for the handful of founders who already know how to navigate. The rest? They listened. They heard “build it and they will come.” They heard, “quit your job and be an entrepreneur.” They heard “you need to be in an accelerator,” without any context of which one, if it’s any good, and how it will help them. And they acted on it, because children will listen.

“Children may not obey, but children will listen. Children will look to you for which way to turn, to learn what to be.”

The Witch distinguishes between listening and obedience. The best founders don’t obey their mentors; they shouldn’t (adherence in entrepreneurship is death by committee), but they do listen, absorb, and internalize the perspective they’re given. They question! When the advice is garbage (pitch competitions as validation, vanity metrics as traction, disregarding marketing because you’re not ready), the founders who listened build companies that reflect the garbage they were taught. As I’ve explored in why startups (and startup ecosystems) fail to gain traction, most of fail because your narrative doesn’t build trust, urgency, or credibility. And that’s because no one taught you how narrative actually works; they taught you a pitch template, and they taught that because it’s all they know.

Wishes Are Children

The most haunting of the finale comes not from the Witch’s solo but from the ensemble: “Wishes are children.” A wish, like a child, like a startup, is a living force that you set loose in the world, and it will take its own path whether you like it or not. A wish, Sondheim tells us, will “come true; not free.” Spells, tales, even casual words may linger past what you can see and turn against you. By equating storytelling with spellcasting, Sondheim shares the thesis I’ve been arguing for years: narratives shape reality. Media is capital. Your story is the spell you’re casting, and if you’re careless with it, it will turn against you.

This is why the comparison between Into the Woods and the founder’s journey isn’t cute or literary; it’s structural. The Baker and his wife undergo trials analogous to modern-day startup development in their quest to have a child (the startup equivalent of product-market fit: something alive that you made, that needs you, that will eventually outgrow you). Jack goes on a mundane errand to sell the cow (pivot the business model) and ends up meeting a pair of giants (the market opportunity is bigger than you thought) and stealing their gold (first revenue, validation, proof of concept). How can any of them not be profoundly altered by the experience?

And then Act II happens. Dreams fulfilled.

In Act II of Into the Woods, every character has gotten what they wished for. Cinderella married the prince. Jack has gold. The Baker and his wife have their child.

And everything falls apart.

The Giant’s Wife comes down the beanstalk seeking revenge, the princes turn out to be unfaithful (of course they do; they were “nice,” remember, not good), and the characters have to reckon with the consequences of the very wishes that drove them into the woods in the first place. From another song, American Pie and the Moment Every Founder Loses the Music: startups do not die from lack of effort, talent, or capital, they die because the conditions that made the music play in the first place were systematically dismantled by the very success the founders pursued.

“Careful the wish you make; wishes are children. Careful the path they take; wishes come true, not free.”

Every founder who has closed a funding round and then immediately felt the weight of dilution, board expectations, and the realization that the money comes with strings knows this feeling. Every founder who shipped a product, got initial traction, and then discovered that scaling requires an entirely different skill set than building knows this. Why do you think the conventional wisdom that investors want to replace founders was born? The wish came true, it was not free, and now you’re in Act II, where the Giant’s Wife is stomping around your formerly idyllic kingdom, and you have to deal with it without the Narrator (who gets sacrificed to the Giant early in Act II, because in the real world, the person who tells you the story is never the one who has to live with the consequences).

Tamper with What Is True

“Guide them, but step away. Children will glisten. Tamper with what is true, and children will turn, if just to be free.”

The instruction is paradoxical and meaningful to everyone in the startup ecosystem – advisors, investors, and founders, we don’t have the right answers! Guide but step away. Don’t hover. Don’t control. Don’t pretend you can manage the outcome. But also, critically, don’t lie. I like to advise but constantly saying to founders, “I have no idea what you should do, but I know what doesn’t work.”

“Tamper with what is true and children will turn, if just to be free.” The moment you sell founders a false narrative (that the Accelerator is right, that MVP-first is always right, that bootstrapping is romantic instead of the baseline it always was), they will eventually discover you lied, and they will turn. Not out of malice, but out of the basic human need for self-determination that psychologists Edward Deci and Richard Ryan identified in Self-Determination Theory: autonomy, competence, and relatedness drive sustained motivation. Tampering with truth undermines all three.

William Blake understood this two centuries before Sondheim staged it (yes, let me add another history lesson). Blake’s Songs of Innocence and of Experience, published in 1789 and 1794, challenged the dominant educational literature of his time, which emphasized moral lessons and cautionary tales. Blake asserted that children’s impulses were naturally good, but that the admonishment to “be good” often meant squelching those impulses in the name of conformity. Cinderella asks the same question in the show’s opening number: “What’s the good of being good if everyone is blind?” The startup equivalent is the entrepreneurial personality, the 8% who can’t not do what they do, being told to write a business plan, find a co-founder, validate the market, apply to an accelerator, follow the template.

What’s the good of following the template if the template was never designed for how you think? What good is it if it doesn’t work?

Blake’s Witch equivalent, the Nurse in “Nurse’s Song” from Songs of Experience, watches children at play and projects her own disillusionment onto them: “Your sun and your day are wasted in play, / And your winter and night in disguise.” That’s the VC who’s been stung too many times and now only funds safe bets. That’s the ecosystem leader who insists on “proven models” because they’ve confused risk aversion with wisdom. The Witch in Into the Woods has the same impulse; she wants to protect Rapunzel from the wolves. “Stay a child while you can be a child.” But the song knows better: children will listen, and if what they hear is fear, they’ll either obey it (and never go into the woods at all) or rebel against it (and go in completely unprepared).

Blake’s most relevant poem for founders is “A Poison Tree.”

“I was angry with my friend; I told my wrath; my wrath did end. I was angry with my foe: I told it not; my wrath did grow.” The poison plant grows, fed by false smiles and crocodile tears. Every founding team that avoids hard conversations about equity, roles, vision, and values, is growing a poison tree. Every accelerator that gives positive feedback to avoid uncomfortable truths is growing a poison tree. Every ecosystem that celebrates starts without measuring outcomes is growing a poison tree. Blake never used the word “nice,” but he would have recognized its toxicity immediately.

Careful Before You Say “Listen to Me”

Sondheim’s final instruction: “Careful before you say, ‘Listen to me.’ Children will listen.”

That line should be tattooed on the forearm of every person in the startup ecosystem who presumes to advise, invest in, or build policy around entrepreneurs. You have no idea how much weight your words carry to someone in the woods for the first time. You think you’re having a casual office hours conversation; they think you’re the oracle. You think you’re offering one perspective among many; they think you’re telling them the truth about whether their startup will work. And if you’re wrong, if your framework is outdated, if your experience is from a different era or sector or geography, they will build on the foundation you gave them, and it will crack, and they will not blame you. They’ll blame themselves because children will listen.

I am guilty of this. Every advisor is. The number of times I’ve held office hours with founders who push back with certainty on my feedback, is astounding. But the ones who don’t push back worry me more, because they took what I said and treated it as gospel, and I’m not gospel. I’m one voice. The most dangerous thing in the startup ecosystem isn’t bad advice; it’s advice delivered without the caveat that it’s just one person’s perspective. “Careful the tale you tell; that is the spell,” Sondheim equates storytelling with spellcasting because both have the power to bind. The narrative you give a founder becomes the architecture of their company.

If the story is wrong, the building is wrong.

Blake’s The Tyger asks the question that every founder eventually faces: who made this? Who is responsible for the ferocity and beauty of what you’ve created? “Tyger Tyger, burning bright, In the forests of the night, What immortal hand or eye, Could frame thy fearful symmetry?” In interrogating the Tyger about its origins, Blake asks what might never arise outside the woods. The theater, stories, are one frame for that. So is a startup. So is a city’s startup ecosystem. So is a founder sitting in a garage trying to make something out of nothing. It’s only explored in the woods where lives intertwine, stories come together, and children learn about wolves and dreams coming true.

Into the Woods, but Mind the Past

The great genius of Into the Woods is that it allows us to be at once inside and outside the woods, to give ourselves for a time within while returning home braver and wiser. Blake’s Book of Thel follows a young girl permitted to visit the underworld “to enter and to return,” in this tradition of classical heroes. She shrieks and retreats. A debate continues whether her retreat represents wisdom (refusing to enter a cycle that will consume her) or immaturity (refusing to take the risk of living in the real world). Every would-be founder who attends a startup weekend, reads a few books, talks to a couple of VCs, and then goes back to their corporate job has had a Thel moment. Maybe that’s wisdom. Maybe it’s fear.

The thing is that the woods don’t judge.

For those who stay in the woods, who keep going after Act I’s wishes have been granted and Act II’s consequences have arrived, Sondheim offers the Baker.

The Baker loses his wife. He loses the Narrator, most of the community’s infrastructure, and he’s left holding a child (the startup, the mission, the thing he wished for) with no instructions. What does he do? He tells a story. He sits down and begins: “Once upon a time…” Because stories are the only infrastructure that persists after everything else collapses.

Founders aren’t just solving problems; they’re reframing reality. They’re worldbuilders. And the ones who fail are usually the ones who build a product without ever building belief.

“Into the woods, then out of the woods, and home before dark.”

That’s the wish but reality is messier; you go into the woods and the woods change you. Home doesn’t look the same when you return because you’re not the same. You know things now that you never knew before. And the people who stayed home, who watched you go and worried and waited, they won’t understand what you saw. They can’t. They weren’t there.

But if you’re lucky, if you’re honest, if you’ve survived the Giant and the Wolf and the princes who turned out to be charming but not good, you get to do something the fairy tales never cover: you get to tell the story to the next person heading into the woods. And when you do, for the love of everything you’ve learned, be careful. Careful the things you say and careful the things you do because children will listen. They will look to you for which way to turn, to learn what to be. And the spell you cast with your tale, whether it’s a pitch deck template, an accelerator curriculum, a government innovation policy, or a quiet word at office hours, the spells don’t expire when you leave the room.

Sondheim and Blake knew, the question that struck me hearing the song Children Will Listen again, is whether we do.

Wondering whether to go into the woods or stay where it’s safe? I can’t answer that for you. Nobody can. But I can tell you this: the woods are where you find out what you’re made of. They’re where nice gets separated from good. They’re where wishes come true but not free. And they’re where you discover, maybe for the first time, that the most dangerous thing in the forest was never the Wolf or the Giant. It was the story someone told you about who you were supposed to be.

The post Nice Is Different Than Good: What Founders Learn Too Late appeared first on Startup Economist.

I have a lot of conversations about the economy. In conference rooms, in government offices, at accelerator demo days, at city halls from Austin to Zagreb.

Most of them end the same way: everyone in the room nods, someone says, “this is exactly what we needed to hear,” and then little changes. We need to ask why. As I considered who to talk to about Startup Ecosystems with first, of course the mind turns to the press or perhaps a notable startup influencer, one thinks of book sales and reach, but that’s not why I wrote and published; I wrote for me, from my experience, and for my community. So, when I ran into Thom Singer, CEO of the Austin Technology Council as we supported friends during SXSW, the answer was obvious, I want to talk to my home, I want the first questions to come from a leading voice of the Austin tech community, and I want my experience here to resonate first. The host of the Austin Tech Connect podcast sat down with me to talk about the book on Startup Ecosystems: Understanding Why Startups Thrive and Ecosystems Fail, he didn’t let me get away with easy answers, and I didn’t offer any.

Press play here, listen, and read on about why this matters.

Why Fix Startup Ecosystems

The Austin Technology Council has been holding Austin’s tech community together since 1992. ATC began as the Austin Software Council, founded by Dr. George Kozmetsky and the Austin Technology Incubator, as a grassroots effort to bring together entrepreneurs, engineers, investors, and civic leaders to support software startups and grow the tech community. Kozmetsky, for those who don’t know him, was one of the co-founders of Teledyne and the dean of UT Austin’s business school, not exactly a hobbyist. The ATC that Thom Singer now leads is the institutional successor to that original deliberate act of community design, and it’s part of a continental network: TECNA — the Technology Councils of North America, a federation of more than 60 highly collaborative technology councils and trade associations in the US and Canada that, in turn, represent more than 22,000 technology-related companies in North America.

This is for whom the book was written, regional leaders steering tech policy such as Philadelphia Alliance for Capital and Technologies‘ Dean Miller, Christina Fox from TechAlliance of Southwestern Ontario, and Technology Association of Iowa‘s Brian Waller. It was written for people like Sara Fraim, Deon Gordon, Kara Lowe, Chris Berry, Yvonne Pilon, Kelly Schulz, Larry Williams, Jennifer Young, and Michael Schutzler; yes, that’s a list dropping names but it’s intentional, these are the people who, alongside Thom Singer, are helping shape policy affecting the economy through technology, and I published to optimize that for entrepreneurs. These are the people I want you to connect with and support while they support us.

I raise this because the central argument of Startup Ecosystems is that ecosystem success is almost never accidental and almost always structural. The problem is never effort, and the problem is rarely intention; the problem is design. ATC got the design right early. Most cities are struggling to figure it out, and yet, we know what to do; we’ve learned what to do.

Thom opened our conversation by asking me what prompted the book: why now, why this, why put my years of this work into print. The answer is in what I wrote when the book launched: every city I’ve walked into with a whiteboard and a room full of earnest people asking the wrong questions, every founder I watched optimize for applause instead of customers, every policy meeting where the metrics were designed to avoid the truth rather than reveal it; all of that found its way into Startup Ecosystems. The book I wrote is the book I needed twenty years ago when I was the person in those rooms trying to figure out why the stated goal and the actual outcome kept diverging so dramatically.

This is not the kind of startup book that tells you to hustle harder or believe in yourself until the market cooperates because when we’re honest about the fact that almost all founders will fail, we need to set aside encouragement and address the causes of that. What I wrote is closer to what one early reader described as “an operating manual,” specifically: an architectural examination of why startup ecosystems fail structurally along with what to do differently.

I get in trouble in some rooms and standing ovations in others. Both reactions confirmed the thesis.

One of the threads Thom and I pulled on in the interview is something that connects the book to two others that have landed recently, and that I think belong in the same conversation. The first is Angela Duckworth’s Grit: The Power of Passion and Perseverance. Duckworth is a University of Pennsylvania psychologist whose research established, empirically, what most people in entrepreneurship claim to already know but consistently fail to practice. As she put it in her TED Talk (which has been viewed tens of millions of times and is worth rewatching if you haven’t revisited it recently), “one characteristic emerged as a significant predictor of success. And it wasn’t social intelligence. It wasn’t good looks, physical health, and it wasn’t IQ. It was grit. Grit is passion and perseverance for very long-term goals. Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years.”

The startup world applies Duckworth to founders, and reasonably so. What almost nobody applies it to is the ecosystem itself. The organizations that build durable innovation infrastructure (tech councils, accelerators, incubators, economic development bodies) are not gritty. Most of them are optimized for annual funding cycles, press releases, and metrics that can be achieved without fundamentally changing whether startups thrive. The ATC, having operated since 1992, we find exceptions to that. The organizations that are not still around in three years, five years, ten years after their launch press release was written? Those were enthusiasm dressed up as grit. Duckworth’s research is blunt about the distinction: “enthusiasm is common; endurance is rare.”

The second book is Runnin’ Down a Dream: How to Thrive in a Career You Actually Love by Bill Gurley, which I have to disclose I have a personal appreciation for; Gurley is Texan, UT Austin MBA, Benchmark general partner, and a person whose thinking I’ve followed for years. I’ve written about him and his intellectual influence on how I think about venture markets isn’t something I’m shy about. Gurley’s research shows that 6 in 10 people are likely to regret their career choice years down the road. Family pressure and a broken education system push too many young people onto a conveyor belt where the destination is a small subset of idealized “safe” jobs.

The culmination of Gurley’s decade-long project to unpack the components of success, Runnin’ Down a Dream identifies six principles to flourish in your chosen career: the antidotes to career regret – Chase your curiosity, Hone your craft, Develop mentors in your field, Embrace your peers, Go where the action is, and Always give back. Go where the action is resonates differently when you’ve spent two decades watching founders try to build companies in ecosystems that were not designed for them to succeed in. The best founders eventually leave those places. They move to Austin, or New York, or to wherever the density of capital, talent, mentorship, and peer networks is high enough to actually compound their effort. Too many founders stay and wonder why it’s so hard, so we’re here to answer that.

Gurley and Duckworth, read together, make the same argument from two directions: the individual who succeeds is the one who finds the thing they are genuinely obsessive about, commits to it with marathon-length stamina, goes to where the best peers and mentors are, and builds the relational infrastructure to make that commitment sustainable. Substitute “startup ecosystem” for “individual” and the argument doesn’t change. What Thom Singer has built at the ATC, and what TECNA represents across 60-plus member organizations, is exactly that peer infrastructure; the ecosystem equivalent of Gurley’s principle that embracing your peers is one of the six non-negotiable foundations of sustained success.

I’ve been asked before what I think most people get wrong about Austin specifically. I’ll give you the same answer that drove the book: Austin’s success is frequently cited as inspiration for other cities and almost never correctly diagnosed as a model. People see the outcome and try to replicate the surface, the coworking spaces, the startup week, and the announcement about being the next Silicon Valley (a phrase that should be retired by ordinance at this point), without understanding the decades of accumulation of deliberate design decisions that made Austin’s ecosystem structurally different. Austin’s innovation economy today is the result of collaboration between organizations like ATC, S3 Ventures, the Chamber, Austin Technology Incubator, Triton Ventures, LiveOak Venture Partners, Founder Institute, AngelouEconomics, IC2, Silverton Partners, Opportunity Austin, The University of Texas, and thousands of visionary contributors. You can’t replicate that in three years. You can, however, understand what it is and start building the right thing with the right time horizon; which is precisely what Startup Ecosystems is designed to help with.

The book doesn’t tell Austin it has nothing to learn (that’d be both comfortable lie and a ridiculous assertion of any city). It tells every ecosystem, including Austin, that complacency is the mechanism by which successful economies stall. If we’re being frank, some of Austin’s messages have been a little disjointed from reality; the brand of “Austin” can exceed the realities on the ground. I’ve said that before, intentionally provocatively, because that’s the kind of conversation that makes an ecosystem actually function rather than merely perform. A community that can’t have that conversation is a community on its way to becoming a case study in my second edition.

The Thom Singer I spoke with on Austin Tech Connect has been writing books about relationships and networking, running ATC, and hosting a podcast that has put him in conversation with an enormous range of people who are building Texas; he came to the interview with genuinely curious questions and that’s what I wanted first. Singer has had a long career promoting community, collaboration, and conversations, and his podcast has featured interviews with over a thousand business leaders, focused on discovering how the most successful people get farther across the gap between potential and results. That framing, the gap between potential and results, is essentially the same problem Startup Ecosystems is trying to solve at a regional level. Potential is not the scarcity. Design is.

If you are a founder in Austin, or anywhere else, trying to understand why your ecosystem does or doesn’t work for you, go listen to the episode. If you are an investor who has ever sat in an economic development meeting wondering whether any of this activity actually produces better outcomes for the companies you’re backing, you too, it’s right here. If you are a policymaker or economic development professional who is still measuring success in jobs announced rather than companies that survived their fifth year, definitely go listen to the episode, and then maybe sit with the discomfort of what that implies about the metrics you’re currently using.

The book is on Amazon. The episode is on Austin Tech Connect. There are rooms full of nodding heads still out there. The question is whether you want to be in it, or whether you want to understand why it keeps producing the same outcome.

The post I Wrote the Book on Startup Ecosystems. Austin Technology Council’s CEO Wanted the Full Story. appeared first on Startup Economist.

There is a moment, somewhere between finishing a manuscript and holding the printed thing in your hands, when you realize the book was never really about the subject.

It was about you.

Not in the self-indulgent sense, not a memoir dressed up in economics. But in the sense that everything I have spent the last two decades doing, every city I’ve walked into with a whiteboard and a room full of earnest people asking the wrong questions, every founder I’ve watched optimize for applause instead of customers, every policy meeting where the metrics were designed to avoid the truth rather than reveal it, all of that found its way into Startup Ecosystems. And now it is real, and it is published, and it is available on Amazon, and I am not sure I have ever felt more exposed in my life.

I want to talk about that for a minute before I talk about the book.

The Thing No One Tells You About Writing a Book

People who have not written a book assume the hard part is the writing. It is not. The writing is labor; it is craft and structure and revision and the relentless discipline of cutting sentences you love because they do not serve the reader. That part is work, and work I understand.

The hard part is the silence afterward.

You spend months, in some cases years, constructing an argument that represents the most honest version of what you believe. You lay it out in sequence; you strip away the hedging, the qualifiers, the comfortable ambiguity that lets you respond if someone pushes back. You say what you actually think, in writing, with your name on it, knowing that the people you respect most will read it and form judgments you cannot control.

And then you wait.

That silence is where the real vulnerability lives, not in the act of creation, but in the act of release. Because a book is not a conversation; you do not get to clarify in real time, you do not get to read the room, and you do not get to soften anything once it is printed. It sits there, permanent, saying exactly what you meant and occasionally what you wish you had said differently.

I have spent most of my career being direct. Anyone who has read this site, attended a talk, or sat across from me discussing a startup, knows that I do not soften structural truths to protect feelings. But there is a difference between being direct in a room where you can see people’s eyes and being direct in 300 pages that will outlive the conversation.

This book is the most honest thing I have ever made, and honesty, it turns out, is terrifying when you cannot take it back.

What Startup Ecosystems Actually Is

Let me be clear about what this book is not: it is not a playbook and it is not the kind of startup book that tells you to hustle harder and believe in yourself until the universe cooperates.

“What Brad Feld’s Startup Communities did to accelerate entrepreneurship in cities, this, nearly 15 years later, reads like an operating manual to make them more effective for founders.” 

Startup Ecosystems is an architectural examination of why startup ecosystems fail structurally, why capital behaves the way it does, why marketing is the most misunderstood discipline in entrepreneurship, and why most regions measure the wrong things with such consistency that it seems intentional.

It proceeds from a simple observation that I have validated across dozens of cities and countries over the last fifteen years: the problem is never effort, and the problem is rarely intention; the problem is design.

Ecosystems are designed. Whether anyone sat down and drew the blueprint or not, the incentives, metrics, legal architecture, and cultural norms of a region produce exactly the outcomes they were built to produce. When those outcomes disappoint, the reflex is to blame individuals.

• The founder lacked grit.
• The investor lacked vision.
• The policymaker lacked courage.

That framing is lazy, and it is wrong.

Systems behave according to their incentives. If you want different outcomes, you redesign the system. You do not give a motivational speech and hope the architecture cooperates.

That is what this book is about, and I wrote it because I got tired of watching the same mistakes repeat in city after city while everyone involved remained convinced they were doing something new.

Why I Wrote It Now

I have been saying versions of this argument for years, in articles, in talks, in rooms where the audience nodded politely and then went back to planning another hackathon. The ideas were not new to me, and they were not new to the people who have followed my work. So why a book, and why now?

Because scattered arguments do not compound.

An article makes a point, while a talk creates a moment, but a book builds an architecture. It forces you to connect the pieces, to show how capital formation relates to talent mobility, how marketing discipline connects to fundraising behavior, how policy architecture shapes whether density can even emerge. A book demands that you stop treating these as isolated problems and start treating them as a system.

I also wrote it because I realized that the people who most need this argument are not the ones reading my newsletter or this blog. They are the policymakers who have never questioned why their innovation metrics feel productive, but their entrepreneurs struggle. They are the founders who have been told that the problem is their pitch deck when the problem is the ecosystem that trained them to build the wrong one. They are the investors who sense that something is off in emerging markets but lack the economic development perspective to address it.

A book travels where a blog post does not. It lands on desks, gets passed between colleagues, and sits on shelves where it can be returned to when the comfortable explanations stop working.

I wrote it now because comfortable explanations are failing faster than they used to, and the cost of pretending otherwise has become impossible to hide.

The Part That Is Personal

I will not pretend this book is purely analytical. It is not.

There is something deeply personal about spending years inside systems that reward appearance over substance and then deciding to name it publicly. Every chapter in this book represents a moment where I chose clarity over diplomacy, where I said what the room did not want to hear, where I risked relationships with institutions that prefer to be celebrated rather than examined.

“The book will be welcomed by those truly concerned with improving or establishing an ecosystem. It will not be welcomed by those whose motivations are self-serving, inadvertent or by-design. As I read, and re-read sections, I found myself highlighting things I have observed in my own ecosystem and share those here… some/many may strike you as familiar or controversial as well. I found myself in controversy at first read and agreement when I re-read.” – Tej Dhawan; Managing Director of Plains Angels in Iowa

I have lost work because of positions in this book. I have strained relationships. I have sat in meetings where my analysis was received not as insight but as insult, because telling a region that its innovation strategy is theater dressed as policy is not the kind of feedback that earns standing ovations.

I did it anyway, because the alternative was complicity. The alternative is accepting so many startups failing.

If you have ever been in a room where everyone is performing agreement while the data screams that something is broken, you understand the weight of that choice. You can stay quiet and keep the relationship, or you can say what you see and accept that some people will never call you back.

I chose to say what I see. I chose it a long time ago, and this book is the fullest expression of that choice.

Who the Startup Ecosystems Book Is For

If you are a founder, this book will change how you think about signal, demand, and narrative. It will explain why capital feels scarce even when you are doing everything the ecosystem told you to do, and it will reframe what “everything” should actually include.

If you are an investor, it will clarify why certain regions compound and others stall, why deal flow quality varies independently of deal flow volume, and why the structural conditions of an ecosystem matter more than the charisma of its founders.

If you are a policymaker, it will challenge the metrics you rely on, the programs you celebrate, and the comfortable assumption that more activity produces more value. It will not be comfortable reading, and that discomfort is the point.

With this, we are connecting dots. Adding to my support of Founder Institute, I’m joining Startup Champion Network‘s Policy Committee, with peers from Make Startups and Right to Start, while making plans with Global Entrepreneur Network to be part of their next LatAm event on April 30th and at the Global Entrepreneurship Congress (GEC) in Doha, Sept 21-24.

If you are someone who cares about how economies actually work, who has ever suspected that the gap between what institutions say and what they produce is not accidental, who has ever felt the quiet frustration of watching systems reward motion while punishing consequence, this book was written for you.

What I Hope Startup Ecosystems Does

I do not expect this book to be universally liked, and I did not write it to be; I wrote it to be useful.

Useful the way a structural audit is useful: not flattering and not comfortable but clarifying. The kind of clarity that lets you stop wasting time on initiatives that feel productive and start investing in conditions that compound.

I hope it gives language to the frustration that founders carry when they sense the ecosystem is broken but cannot articulate why. I hope it gives local leaders and public official permission to question metrics they inherited rather than defend them. I hope it gives investors a framework for evaluating ecosystems with the same rigor they apply to companies.

Most of all, I hope it shifts the conversation from blame to design.

We do not have a courage problem in startup ecosystems. We have a design problem. And design problems have design solutions, solutions that are boring, technical, structural, and effective.

Truth Underneath

There is something I have learned over the course of writing this book that I did not expect, and it has nothing to do with economics.

I learned that the things worth building take longer than you want, cost more than you planned, and reveal parts of yourself you were not sure you wanted anyone to see. I learned that discipline is not the absence of doubt but the willingness to continue in its presence. I learned that clarity, real clarity, the kind that lets you say exactly what you mean without hedging, is a form of intimacy that most people spend their entire lives avoiding; I’m racing toward it.

I learned that consequence is not just an economic principle; it is a personal one.

You can spend years in motion and mistake it for progress, you can surround yourself with activity and mistake it for meaning, and you can optimize for visibility and mistake it for impact. And then one day you sit down and ask yourself the same question this book asks about ecosystems: what is this actually optimized for?

The answer is not always what you hoped.

But the question itself is the beginning of something better, because once you see the design, you can change it. Not the world’s design; yours. Your priorities, your tolerance for discomfort, your willingness to stay in rooms that challenge you rather than rooms that confirm you.

The startup of you, as I wrote recently, operates beneath every venture and every title and every transaction. This book is evidence of mine.

Startup Ecosystems Is Available Now

The book is published. It is available on Amazon, in print, and it represents the complete-for-now expression of what I believe about how entrepreneurial economies actually work.

If it challenges you, that is the point. If it frustrates you, examine whether the frustration comes from disagreement or from recognition. If it changes how you think about a single decision, about a program you run, a company you fund, a policy you champion, or a career you are building, then it did what I wrote it to do.

Innovation without consequence is theater.

Entrepreneurship with consequence is the willingness to let what isn’t working die so that what could work has room to exist.

This book is about consequence, and I am grateful, more than I expected to be, that it finally exists outside my head and in the world where it can do some good.

Tej Dhawan added on goodreads, “The conclusion to this book is probably the most powerful set of statements distilled from the preceding chapters. Ecosystems that thrive and compound are those where vanity metrics are replaced by KPIs that capture, distill and present reality. They aren’t afraid of acknowledging failures, welcome pivots to strategy, discipline and execution, ensure frequent collisions between founders, and create an environment conducive to talent mobility. I loved this book because it articulates the many frustrations I have felt in taking part in building our own ecosystem and observing the repeated failures.”

Thank you for reading. Thank you for the years of engagement, challenge, disagreement, and support that made this work possible.

Now let’s get to work.

The post I Wrote the Book I Needed to Read Twenty Years Ago appeared first on Startup Economist.

Days into SXSW, eyes look weary and voices are starting to gravel. Leading up to major events like this one, there are always a host of livestream events, blog posts, and newsletters (my own included) offering suggestions to make the most of the experience; now I’m awake in the middle of the night thinking about the experience. I wore a space hat much of this weekend while stepping into another role for myself, developing Space Force Association in Texas, so with my attention on aerospace, I couldn’t help but think about founder fuel.

What if what Entrepreneur Experience isn’t Burn Out but the Wrong Fuel?

Most of what gets written about founder burnout treats it as a stamina problem, as though the fix is sleep, meditation, balance, or finding a co-founder. And yes, those might help, but that is really a set of suggestions to deal with, our perfect example, the overwhelm and excitement of what we’re in the middle of in Austin this week; such things won’t fix what I’m thinking about here.

A suffering most founders experience is not a function of how hard they’re working, it’s a function of what they’re working for.

That burnout requires very different fixes.

Building From Desperation Burns Dirty

Pain is good ignition, but it is a terrible propellant.

Many founders are building to escape something such as a broken economy, a bad boss, a paycheck that doesn’t fit, or a life that feels off. That motivation gets us started, fast, but it runs out. Once you’ve escaped the thing you were escaping, we need a second stage booster the likes of which I keep hearing about, and without that, we find ourselves in freefall; a startup built to prove a point to an audience that likely isn’t even paying attention.

I’ve sat across from enough founders in enough pitch presentations to spot it in founders. A bitterness shows up in their tone. It shows up in how they talk about competition. It shows up in how they explain why the market hasn’t moved yet, as though the world owes them something for the suffering. Investors who pass on it aren’t wrong; resentment doesn’t scale, and the ones who’ve been doing this long enough can smell it.

This morning, I found a study from Raphael Amit and Aitan Muller that draws a line between two types of founders: “push” entrepreneurs, whose dissatisfaction with their circumstances pushes them into a venture, and “pull” entrepreneurs, who start because the opportunity itself is genuinely compelling. Exactly what sits in my mind right now, so I dug a little deeper only to discover this push or pull motivation is considered quite a bit. Ricardo Martínez-Cañas, Pablo Ruiz-Palomino, Juan José Jiménez-Moreno, and Jorge Linuesa-Langreo looked into it and found that the push factors increase individuals’ perceptions of risk and undermine their ability to recognize opportunity – not just that the fuel is bad, , you’re actively degrading your own judgment if you’re pushed into what you’re doing..

You think the problem is the market, or the investors, or the timing, after all, that’s what we frequently expose as challenges, because indeed, those things are real. But a founder running from pain filters everything through fear, and fear is a terrible lens for opportunity recognition. Every obstacle reads as confirmation of why things aren’t working, every week of slow growth translates as the universe agreeing with your worst self-assessment, and every investor pass is proof that you were right maybe you can’t do this.

You need a vision that pulls you, not a fear that pushes you.

There’s a version of entrepreneurship that is intrinsically motivation, in that the distinction of an entrepreneurial person is self-motivation; the work is compelling independent of outcome and you mission would still make sense to you even if nobody validated it yet. That’s a founding mindset that actually works. Not because it’s more virtuous, because it’s more durable. The number of bad outcomes startups experience is higher than most people are told (it’s not that 90% fail, it’s that you will fail many times and you work through new possibilities and solutions). The only thing that gets you through them is a reason to keep going that doesn’t depend on external confirmation.

Isolation Isn’t a Problem

Every founder complains about the loneliness at some point; friends who don’t get it, family worries, and you feel like you’re doing this on your own. We seek communities of peers in our search for morale support, a measure of validation, and encouragement, but a group of peers in the same boat don’t really help us with our situation.

Instead? Stop treating the independence like a flaw.

The isolation of entrepreneurship is a direct consequence of doing something most of the people around you cannot yet see or understand. Your friends aren’t withholding support, they’re working from different information. They see the risk and the sacrifice and the forgone salary, and they respond rationally to those things. You can’t be frustrated with them for that.

Entrepreneurship is a personality trait, not a career choice. A study of 22,000 startups found about 8% of the population has the psychological profile we’d actually call entrepreneurial: a need for novelty, reduced modesty, openness to risk, heightened energy. The other 92% aren’t deficient, they’re just not wired for this particular game, and they will naturally respond to what you’re doing with worry or confusion or gentle suggestions to get a real job.

Expecting your community to understand the founder’s burden is like asking someone who’s never read a map to confirm your route is correct. Even among other founders, no one is experience what you are experiencing.

The solution, I think, isn’t to find more supportive friends, it’s to stop waiting for your existing circle to validate what they can’t perceive. That expectation isn’t fair to them, and it’s corrosive to you. The loneliness itself is the crucible required to burn off the parts of your old identity that can’t carry the weight of a business. It is not a punishment and it isn’t an unfortunate reality, it’s the process.

What you actually need is refinement of the often cited “find your tribe” advice: other people who are actually in a much more similar circumstance. Founders who are more likely competitors because they’re passionate about, experienced with, and seeking opportunities in, the same sector of your startup. Good accelerators exist in this distinction too; not just a startup accelerator, but, say, an accelerator for aerospace. The point here isn’t the program, it’s being in the room with people for whom the risk similarity isn’t just other startups, it’s startups dealing with nearly the same issues.

That Voice at 2 am

The internal monologue we experience both motivating us to keep working in the middle of the night and running through inadequacies is not irrational noise that needs to be silenced with affirmations or a better morning routine. That is what the wellness content says, but I wonder if it’s wrong.

That voice is your old identity, your younger self, doing what our brains do when threatened; fighting for survival while you are actively trying to outgrow it.

Think about what building a company actually requires of you as a person. The habits that made you a good employee are mostly wrong for this and the social scripts you developed to function in a corporate environment are wrong for this. The self-conception (competent, reliable, someone who knows what they’re doing) is fundamentally incompatible with the reality of being a founder in the early stages, which involves an extraordinary amount of not knowing what you’re doing.

Steve Blank defined a startup as a temporary organization searching for a scalable and repeatable business model. If that’s true, then a human life is also a search. You are doing the same thing to yourself as a person that your company is doing as a venture: searching, iterating, and testing assumptions that mostly won’t hold. This is not a character flaw, it’s what this is.

The mistake is confusing this development for a determination.

“You’re not good enough yet for what this needs,” so you seek morale support, you blame audiences, and you express anger at investors failing you. But that’s accurate. What you’re in the middle of is the process of becoming what you and your venture need to become. The voice isn’t lying to you about where you are. it’s just wrong about what that means.

Entrepreneurship carries real mental health burdens that don’t get talked about nearly enough. Opposition, doubt, repeated failure, and the cognitive dissonance of being fixated on fixing something that most people don’t believe needs fixing, those are structural features of this, not personal failures. Understanding that distinction matters, practically, because it changes how you respond to the hard periods. They are not evidence that you are wrong, they are evidence that you are doing something that hasn’t been done.

What Actually Sustains Founders?

Research on startup co-founders finds that the dimensions sustaining entrepreneurial motivation over time (significance, autonomy, identity, challenge, resilience) are driven far more by intrinsic motivation than external validation.

That, if the work isn’t meaningful to you independent of outcome, you will not survive the number of bad outcomes this requires. And there will be a lot of them; not because you’re doing it wrong, because that’s what this is.

Founder burnout reframes needs to be reframed not just as overwork, but as a breakdown in the systems that sustain motivation and resilience. When the underlying meaning falters and recovery breaks down, energy collapses into entrepreneurial fatigue uniquely tied to the venture itself.

That last part is my point about similar sector connections: uniquely tied to the venture. Founder fatigue isn’t generic burnout; it isn’t fixed by a vacation. It’s specifically about the deterioration of meaning in the work itself, which means the only thing that actually addresses it is reconnecting with why the work is worth doing, not whether it will succeed, not whether it’s going well, but whether the problem you’re solving is one you and others genuinely believe in.

If the answer to that is still “yes,” you’re not burned out, you’re running on the wrong fuel.

No founder worth the name waits around to “see” the data before taking the leap — the true founder operates on belief before proof. But belief in what is our operative question. Belief in the escape? That deteriorates immediately. Or belief in the problem you’re solving, the market you’re building, the thing that would still be worth doing even if it takes a decade?

This is also, incidentally, what investors are actually evaluating at the early stage, whether they articulate it that way or not. Marc Andreessen has argued that by the time you can see traction, you’re too late. What they’re reading for before the traction exists is whether the founder’s conviction is intrinsic or reactive; whether they’re building toward something or away from something. The pitch that comes from genuine pull reads completely differently from the one that comes from desperation or even desire, and experienced investors feel the difference immediately.

Change the Fuel, Not the Engine

This is supposed to be hard. That is not a problem to be solved! It’s the mechanism that keeps out everyone for whom the mission isn’t real enough. If it were easy, the outcome wouldn’t be worth anything, and frankly, you wouldn’t be interested in it.

Perhaps founder burnout comes from focusing on what you’re leaving behind as you are trying to solve a problem in the economy, you’re also solving for what you were but now need to be. The suffering most founders describe (the isolation, the doubt, the creeping bitterness) is almost always worse in founders who are running away from something than in founders who are running toward something. Same market, same rejection rate, same sleepless nights: Different fuel sources and different results.

Start focusing on who you are required to become to pull this off. That reframe is not motivational content, it’s orientation. The version of you that exists right now is not sufficient for what you’re building, that’s the point, that’s what the process is for, and the sooner we get comfortable with that development arc, the less the difficulties read as failure.

You’re not burned out; you’ve built a solid engine and you’re just running it on the wrong fuel.

The post Founder Burnout or the Wrong Fuel? appeared first on Startup Economist.

At SXSW 2026? We’ll be convening a Tech + Policy Meetup at Cosmic Saltillo, Sunday, March 15th at 2 pm – RSVP Here

If you work in economic development, run a government affairs office, manage a legislative portfolio, or sit in any room where startup policy gets discussed, tune in. The people with the most structural power to change whether entrepreneurship succeeds or fails in a given city, state, or country are rarely the people in the conversation when that conversations happen. This is a design flaw; and the cost of it is measurable, in jobs not created, companies not formed, capital that moved somewhere else.

Government doesn’t just enable entrepreneurship. It defines whether entrepreneurship is really even possible. Which is to say, of course it is, entrepreneurs will make it work, let’s explore if you’re actually helping.

Before a founder incorporates, they need contract law. Before they issue equity, securities regulation weighs in. Before they protect an invention, we need to understand IP frameworks and support. Before they open a bank account, access credit, or hire their first employee, your government has already shaped every one of those transactions through the rules it wrote, the licenses required, and the friction it either removed or embedded into the process. The idea that government only matters once startups reach become companies is a fiction that lets policymakers off the hook for the ventures that never made it to scale in the first place. Government is involved from day one; the question is whether that involvement makes formation easier or harder.

Right now, by most measures, it makes it harder than it needs to be. 92% of U.S. voters say it’s difficult to start a business today, and 94% of voters, across party lines, agree that it’s vital to America’s future that everyone has a fair chance to start and grow a business, according the Government Leader Playbook by America the Entrepreneurial. Cross-partisan agreement at 94% on any economic question in American politics is statistically implausible under normal circumstances. That it exists here, and that the policy environment for startups remains as friction-laden as it does, tells you everything about the gap between political rhetoric on entrepreneurship and what legislators actually put into statute.

That gap is what policy professionals exist to close and if you’re not already doing that work, this week in Austin is a moment to start.

The case for why this work matters starts with a number most economic developers can recite; young firms account for about 20% of overall employment but create almost half of new jobs on average throughout the world. Innovation by young firms significantly contributes to aggregate productivity growth, accounting for half of it in the United States. That’s the OECD’s own analysis, not a think tank press release or a venture capitalist’s pitch. A category of firm (startups) representing one-fifth of employment is generating nearly half of all net new jobs. This was known over a decade ago, the data hasn’t changed, but most policy hasn’t either.

The mechanism connecting government action to startup outcomes is more direct than policymakers typically acknowledge. Countries with the lowest economic freedom scores had just slightly more than one new private entrepreneurial venture per 1,000 people, while countries with the highest economic freedom scores achieved a rate of new venture formation of more than six per 1,000 people, according to Russell Sobel’s research from the Center for Growth and Opportunity. Six times the rate of new venture formation. The difference isn’t culture, it isn’t geography, it isn’t access to talent in the abstract, it’s the policy environment: the structure of taxes, the volume of regulatory restrictions, the friction embedded in business formation, the rules governing capital access. These are things governments control directly. Which means policymakers who claim to support entrepreneurship while leaving those variables unexamined are not actually supporting entrepreneurship; they’re celebrating it, which is considerably less useful (trust me, we have enough celebration)

The stifling effect of regulatory burden, complexity, and uncertainty is particularly challenging for fragile startups, which lack the resources and scale of larger firms over which to absorb and amortize the costs of compliance. From the Center for American Entrepreneurship, whose proposal for a “regulatory on-ramp,” a reduced compliance framework applied to new businesses for their first five years, is one of the few policy innovations in this space that actually maps to how startups operate. U.S. regulatory agencies issued nearly 35,000 final rules over the past decade, 1,961 of which were economically significant, with annual costs exceeding $200 million. Regulations designed to govern companies with legal departments, compliance teams, and predictable revenue streams apply exactly the same burden to three-person seed-stage startups generating no revenue at all. That’s not policy failure through malice; it’s policy failure through category error (startups are not new businesses).

California had 403,774 regulatory restrictions on the books in 2022, roughly eleven times the number in Idaho, the least regulated state. Volume doesn’t automatically mean bad outcomes, specificity can protect founders as well as constrain them, but as a proxy for compliance burden on early-stage companies, restriction count is a reasonable starting point for any policy review oriented toward startup formation. Texas, worth noting with so many in Austin this week, is simultaneously tax-competitive and among the five most heavily regulated states by total restriction count. The gap between Texas’s reputation and Texas’s regulatory reality is a conversation happening at the Capitol right now.

The capital access challenge is where government’s role is most frequently misunderstood, usually in two directions simultaneously. Governments that invest directly in startups are doing the work of venture capitalists, which they are neither equipped nor positioned to do well. The better-documented and more replicable role is structural: designing accredited investor rules that don’t exclude qualified local investors through arbitrary net-worth thresholds; creating tax incentives that make angel investment economically rational in smaller markets; establishing SBIR and similar mechanisms that reduce the risk profile of early-stage technical research; funding infrastructure such as spaces and platforms explicitly for founders; and ensuring that securities regulations enable the regional fund formation that emerging ecosystems actually need to develop their own capital base. Lower business regulatory, tax and bureaucracy burdens; better access to commercial infrastructure; ease of entry to markets and government programs are essential for developing entrepreneurship, according to Research Policy analysis from David Audretsch, Alessandra Colombelli, Luca Grilli, Tommaso Minola, and Einar Rasmussen, of 43 countries over nearly two decades.

That’s the list. It doesn’t include more pitch competitions, more coworking spaces, or more innovation districts with free Wi-Fi and no measurable outcomes. It includes structural policy choices that governments make or don’t make and that produce observable, measurable results.

The distinction between startups and small businesses deserves its own conversation, because the conflation of those two categories is responsible for a large share of why entrepreneurship programs underperform. As I’ve written extensively here, the OECD has been explicit for more than a decade that high-growth, innovation-driven firms require different policy instruments, different capital structures, and different timelines to impact than small and medium enterprises. Of the total jobs created by new companies, approximately 50% are created by high-growth startups with high scaling potential, which represent only about 1 to 5% of all new firms by count. If you are allocating policy resources proportionally to firm count rather than firm impact, you are systematically underinvesting in the companies responsible for half of all net new job creation while spreading your budget across the vast majority of firms that, however valuable locally, do not drive the economic transformation you are reporting to elected officials that you’re pursuing.

Defining startups in statute, separately from traditional small businesses in all tax, grant, and investment language, is the minimum viable policy intervention for any jurisdiction serious about this distinction.

A brief I put together with TexCap Policy Institute in 2025, makes three foundational recommendations that any state or city could operationalize regardless of its current ecosystem maturity: define startups in statute; coordinate regional venture development by connecting incubators, accelerators, venture studios, universities, and corporate labs with economic development offices; and establish startup-focused curriculum distinct from small business programming for both founders and potential investors. This is a minimum infrastructure for a government that actually wants to compete for the next generation of high-growth companies, and they require legislative action rather than administrative goodwill.

The public affairs dimension of this, meaning the direct engagement between startup ecosystems and legislative and regulatory processes, is where the policy professional’s role becomes most consequential. Startups are getting crushed by politics, not product, startups like Plaid and Chime grew not just by building better banking interfaces, but by navigating federal regulation like Dodd-Frank and the CFPB. In ClimateTech, breakthroughs are constrained by permitting, tax incentives, and carbon credits, policy bottlenecks, not product problems.

The sectors generating the highest-value startups right now, AI, climate tech, fintech, biotech, are also the sectors with the highest regulatory uncertainty. Founders in those sectors are spending time and capital on compliance before they’ve generated revenue, which is a structural policy failure that has a structural policy solution. It requires someone in the room with legislators when those rules get written. Startup Development Organizations have a responsibility to shape policy, to influence university curriculum that still thinks a business plan is a final project, to show up when cities make zoning, broadband, or workforce decisions that will either unleash the next Canva or kill it before it begins, and to get in the room with legislators when they debate tax structures that disincentivize growth.

None of that happens without the people whose professional mandate is this kind of coordination. Economic development professionals, government affairs specialists, legislative staff, and city and state officials who work on competitiveness and investment attraction are the only people with simultaneous access to both the policy levers and the ecosystem context needed to do this well. Founders don’t have time to lobby while building their companies. Investors are focused on portfolio, not statute. The policy professional is the connective tissue between the entrepreneurial ecosystem and the legislative environment it operates inside, and the work of that connection, done consistently and with empirical grounding rather than political theater, is what actually produces the kind of startup-friendly environment that attracts capital, retains talent, and drives the job growth that economic development was supposed to produce in the first place.

If any of this is the work you’re trying to do, or the conversation you’ve been trying to find your way into, two things are happening in Austin this week that you shouldn’t miss.

American House at the Texas State Capitol (Thursday, March 12, 2:00 PM – 6:00 PM) puts policy professionals and ecosystem builders in the same physical space as legislators to bring the conversation about startup policy into the halls of government where it belongs. This is not a pitch event. It’s a policy event. It is WAITLISTED now but register in case you make it in. I’ll be there.

This Sunday, March 15th, we’re hosting an informal meetup specifically for policy professionals, economic development leaders, and ecosystem builders who are in Austin, at 2 pm. No agenda, no panels, no keynotes. Just the people who do this work finding each other in the same room and starting the collaborations that usually don’t happen because nobody created the context for them. If that’s you, register here and reach out to me on LinkedIn.

The question isn’t whether government should be involved in entrepreneurship, it already is, at every stage, in every market, through every rule it writes and every friction it either removes or leaves in place. The question is whether the people with the power to shape that involvement are in the right rooms, talking to the right people, with enough empirical grounding to push past the ribbon-cutting instinct and toward the structural reforms that actually produce outcomes.

The post Founders Can’t Scale What Government Won’t: Policy Infrastructure Entrepreneurship Needs appeared first on Startup Economist.

If you ask most people which states are best for startups, they’ll rattle off California and New York because that’s where the money has historically pooled, understandably now too, Texas. That’s a bit like saying Las Vegas is a great place to build wealth because rich people go there. The concentration of capital in a place doesn’t tell you whether that place is structurally designed to let you keep what you build; in fact, I just published a popular set of steps every ecosystem needs to take, particularly those without much wealth and with few resources available (take a look here). Let’s talk about startup ecosystem development policy…

100,000 people are arriving in Austin, Texas this week, for SXSW, and with dozens of countries sending delegates, running “Houses,” and learning, my primary focus is policy discussion as it pertains to entrepreneurship. With that in mind, welcome, everyone, not only to Austin or even Texas, welcome to the United States.

92% of U.S. voters say it’s difficult to start a business today. At the same time, 94% of voters, across party lines, agree that it’s vital to America’s future that everyone has a fair chance to start and grow a business. That, from the Government Leader Playbook by America the Entrepreneurial, led by Kim Lane, Victor Hwang, and John Bridgeland, with Right to Start, exposes that despite the United States being incredibly efficient and effective in startups, maintains both concern and optimism about the future.

“Innovation thrives when entrepreneurs have clear pathways, strong support systems, and access to the right resources,” shared Melissa Saavedra, one of the founding states, in her capacity as director of the Office of Entrepreneurship in Nevada. “As a Founding State, Nevada is reinforcing the right to start a business by investing in policies and programs focused on removing barriers, expanding opportunity, and empowering entrepreneurs in every corner of the state to turn ideas into lasting economic impact.”

For leaders throughout the world, I wanted to take a closer look at the question of IF California, New York, and Texas are best, that other states have advantages, and how policy shapes how states proceed, so that you might better discern where to focus your attention on the U.S. What follows is a policy-first breakdown of which states are actually structured to support entrepreneurship and which ones sort of treat startups like a revenue source. We’re going to draw from three distinct empirical data sources, each measuring a different dimension of how governments either enable or impede the people trying to build something. Understanding what those sources actually measure (and where each falls short) is as important as the rankings themselves.

The Three Data Sources Behind Rankings States in Entrepreneurship

The first source I pulled is the Tax Foundation’s 2026 State Tax Competitiveness Index, which has been published since 2003. The Index evaluates how well states structure their tax systems by comparing each state across more than 150 variables in five major areas of taxation: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. The Index does not purport to measure economic opportunity or freedom, or even the broad business climate, but rather tax competitiveness. A well-structured code doesn’t guarantee a thriving economy; it removes one category of headwind. Note, there is a reasonable counter-argument to using this, from the Institute on Taxation and Economic Policy, which notes that on nearly every economic measure, New Jersey outperforms Wyoming (by a long shot) because New Jersey has top-notch public schools, robust transportation infrastructure and other public goods because of revenues raised by the very taxes that land it in the bottom spot here. Structure matters, but it doesn’t make up the entire picture of what a founder needs.

The second source is Rich States, Poor States: the ALEC-Laffer State Economic Competitiveness Index, now in its 18th edition. Co-authored by Reagan economist Dr. Arthur B. Laffer, economic policy expert Stephen Moore, and ALEC Chief Economist Jonathan Williams, the index uses 15 equally weighted economic policy variables to rank states’ economic outlooks. Those variables include, essentially, the full stack of policy choices that determine operating friction for employers. Granted, I want to consider startups, not established employers, but startups endeavor to become companies so, future challenges weigh in. The critique of this index, by the Economic Opportunity Institute, finds that Laffer’s rankings have zero positive correlation to economic indicators such as state GDP growth but that’s a lagging indicator of startups, and our work here is enabling entrepreneurs; the ALEC-Laffer index is useful for understanding which states have actively chosen low-friction policy positions.

The third source is Mercatus Center’s State RegData project at QuantGov. Researchers there developed QuantGov, an open-source machine learning and text analysis platform for analyzing regulatory text, which can process large quantities of regulatory documents and allowed researchers to create State RegData, a dataset that includes various dimensions of state regulation such as volume, applicability, and complexity. They fed every state’s regulatory code into a machine learning pipeline and counted actual regulatory restrictions; instances of words like “shall,” “must,” “may not,” “required,” and “prohibited.” There were 403,774 regulatory restrictions on the books in California in 2022, which is roughly eleven times greater than the number of restrictions in Idaho, the least regulated state. This is measuring volume, not rule quality, which is an important distinction. More restrictions do not automatically mean worse outcomes, sometimes specificity protects founders too. But in aggregate, rule volume is a proxy for compliance burden, and compliance burden is a credible proxy for the cost and time drain on early-stage companies that have neither money nor legal staff to spare.

As a sanity check, the Institute for Justice’s License to Work study, which maps occupational licensing burdens by state. The legal requirement to get government permission to practice a trade or profession before you can legally charge anyone for your work, is one of the most egregious friction points for new business formation. It’s not a startup issue in the venture-backed sense (let’s be honest, entrepreneurial people tend not to care), but it matters enormously for the broader entrepreneurial ecosystem, including the freelancers, service providers, and small business owners who form the economic foundation that eventually produces the talent pools and customers that startups need.

The Ten Best States in Startup Ecosystem Development Policy

This will be fun, because I expect (and in fact hope), this will surprise most

Utah sits at the top of the ALEC-Laffer Economic Outlook rankings and has done so for years. That reflects deliberate and sustained policy choices. Utah’s leaders have consistently championed pro-taxpayer reforms, from enacting flat personal and corporate income taxes to eliminating estate and death taxes, with forward-thinking property reform further cementing the state’s reputation as a national model for economic competitiveness. For founders, this policy matters because progressive structures create marginal-rate cliffs that punish exactly the success you’re working toward (i.e. see what California and Washington are considering). The challenge for Utah’s ecosystem is talent density; the state still struggles to attract and retain the senior engineering and marketing talent that coastal hubs have in abundance, and it doesn’t yet have the density of domain-specific investors that specialized startup communities need. Fixing that requires a coordinated culture-industry pipeline strategy and, I think, an aggressive diaspora recruitment: bring back the Utah natives who went to build in San Francisco and give them a reason to come home.

Tennessee is perhaps the most interesting case on the best list precisely because its improvement is so recent and so sharp. Tennessee ranked 38th in the Tax Foundation’s tax competitiveness index in 2020 and now ranks 8th; after reducing the rates of its corporate gross receipts tax, improving its treatment of business expensing, and fully phasing out tax on individual interest and dividends income, it is one of eight states to have no individual income tax. That’s a dramatic structural transformation in five years. Nashville has been building real ecosystem momentum, and policy changes like this are what enable that momentum to compound rather than stall out as companies grow. What Tennessee needs now is more risk capital depth; the angel and early-stage VC community is still thin relative to what the deal flow will require as the ecosystem matures, and the state should be actively working to attract fund managers and family offices that are willing to deploy in the local market.

By the way, when I refer to the gaps, a fair question is how I know. My work here is assessing ecosystems throughout the world, you can get a brief of how I do that here and I’ll explaining it in detail in my forthcoming book, Startup Ecosystems.

Indiana ranks third and consistently lands in the top ten for competitiveness. Indiana has done the blocking-and-tackling work of maintaining a low, stable corporate tax rate and a regulatory environment that doesn’t make hiring feel like a liability exercise. The Midwest gets condescended to in startup discourse, which is a mistake (visit Midwest House at SXSW and talk about it); Indianapolis has genuine industry clusters in life sciences and agtech that can support real venture activity. The gap is ecosystem density: not enough accelerators, not enough specialized advisors, and not enough late-stage capital to keep companies from having to relocate to close a Series B. Indiana’s most actionable lever is building anchor institutions that prevent brain drain by giving talent a reason to stay post-exit.

North Carolina ranks fourth and is one of the more compelling cases for ecosystem growth because it already has the talent infrastructure that other high-outlook states lack. The Research Triangle (Raleigh, Durham, Chapel Hill) sits adjacent to three research universities that produce both technical graduates and faculty-led spinouts; this is rare and most universities in the U.S. are struggling with tech transfer. North Carolina’s policy posture has improved materially over the past decade. The ecosystem gap is risk capital density in the state-specific sense; a lot of Triangle-area companies find that to raise a meaningful Series A or B, they still have to pitch in Boston or New York. Seeding a state-level fund-of-funds structure to attract emerging VC managers to the market would accelerate what is already a strong trajectory.

Arizona has been working hard on the policy stack, and the Phoenix metro in particular has become a legitimate second-tier startup market driven by migration from California and a deliberate city-level effort to build density around fintech, healthcare, and semiconductor manufacturing. The state’s ranking reflects a consistently low-friction environment. The under-exploited asset here is Arizona State University, which is arguably the most entrepreneurially active public research university in the country by volume (Go Devils!). The ecosystem gap is converting that activity into real company formation: too many ASU spinouts never get past the SBIR-grant stage because they don’t encounter the right venture operators early enough – we’re going to explore the adverse implication of grants in my book. Building more structured founder-in-residence and EIR programs at the university commercialization arms would change that.

Idaho is an unusual case because it represents one of the most dramatic deregulatory efforts in recent American history. Governor Brad Little, who was sworn in at the beginning of 2019, issued two executive orders (the Red Tape Reduction Act and the Licensing Freedom Act) which helped the state cut or simplify 75% of regulations, and in 2020 he followed up with executive orders that forced an annual review of regulations and consolidated 11 separate agencies into a new Division of Occupational and Professional Licenses. I’ve explored Idaho in depth before so you can read that and see how we do that, here. That’s a governor using administrative machinery to reduce compliance burden systematically. The Boise ecosystem has grown meaningfully as a result, attracting tech workers priced out of Seattle and San Francisco. The challenge is converting those transplants into founders rather than remote employees. Boise needs a stronger Series A ecosystem and more founder communities that give transplants a reason to start something local.

South Dakota and Wyoming are interesting edge cases because they top the tax competitiveness rankings primarily on the strength of what they don’t tax. Both lack income taxes, and both are among the least regulated states by Mercatus’s restriction count. Honestly, neither has a meaningful startup ecosystem yet, which is itself a signal: policy is necessary but not sufficient. What they have is a blank canvas, and the playbook for both is similar: build connected innovation cultures, attract a handful of sector relevant anchor companies with significant impact on entrepreneurs, and foster funds of first dollars that gives local founders a reason not to flee to Denver or Minneapolis. The foundations are in place; the ingredients on which to focus are density and intentionality.

Florida has been absorbing an enormous inflow of capital, founders, and fund managers since roughly 2020. Miami in particular has become a legitimate node in the venture capital network rather than just a lifestyle destination for tech workers who like warm weather. The policy environment supports this. The challenge for Florida’s ecosystem is that a lot of what’s moved there is financial capital and fintech rather than deep technology, and the state’s research university system, while large, hasn’t historically been a major source of commercializable IP. Deepening the startup pipeline by adding existing programs that develop founders (not small businesses and not entrepreneurship studies) would help Florida’s startup activity mature from “capital-friendly” to “innovation-driven.”

Texas is simultaneously tax-competitive and actually among the five most heavily regulated states in the country by total restriction count. Interesting, that you might be able to see my motivations since I live in Austin; still, it makes the list of better states. If you’re building a construction-tech company in Texas, you will encounter a regulatory environment that is absolutely not as light as the state’s marketing suggests. If you’re building a software company, the tax and labor environment is genuinely competitive. The ecosystem is by now well-documented since so many of us have been actively doing so (which should be an example of what to do where you live: map, expose, and promote); Texas has the capital, the talent, and the deal flow to function as a legitimate tier-one market. The state still needs to address what we call the “missing-middle” (fund formation ideal post seed and still risk tolerant before Private Equity), power grid reliability issues, which is a material business continuity risk that affects all the data center growth, and manufacturing-adjacent startups in ways that get papered over in the boosterism.

The Ten States with the Most Upside in Startup Policy

Before we explore, I could just as easily have gone with what that headline implies, The Ten Worst States for Startup Policy, but the thrust of entrepreneurship and the culture in which we work, making it so distinct from business and corporate development, is that we fix the problems. In policy matters, for startups, challenges mean opportunity.

This list, in several cases, is a story of states that have mistaken the presence of innovation for the presence of a supportive policy environment, and which are now discovering the difference as capital and talent begin to relocate.

New York is dead last in tax competitiveness rankings for structural reasons: a complex, multi-bracket income tax structure, high corporate rates, and a compliance burden that functions as a permanent operating overhead for any company that scales there. New York City remains a genuine innovation hub in fintech, media, and fashion-tech, supported by talent density and network effects that policy cannot easily replicate. But that explains why companies start in New York, not why they stay, and the data on headquarters relocation tells its own story about where companies go when they’re large enough that the bill becomes material. The fix is politically difficult because New York’s fiscal structure is built on the assumption of taxing concentrated wealth but structural reform of the kind Tennessee accomplished is possible and would improve the ecosystem’s long-term substantially.

New Jersey is interesting as I referred to it as we began; driven by high income, corporate, property, and unemployment insurance taxes, New Jersey’s proximity to New York means it functions partly as an overspill market, but the policy environment makes it hard for companies to scale there independently. The most actionable reform for New Jersey would be addressing its corporate tax structure, which is punitive at exactly the point (profitability and growth) where you want companies to be investing back into headcount and R&D (which you do) rather than paying rates that rank among the highest in the nation.

California is where you should be both shocked that it’s here on our list, and at the same time not surprised if you’re paying attention to all the talk of migration from California. The most regulated state in the country, with 403,774 regulatory restrictions (roughly eleven times greater than the number of restrictions in Idaho). It’s genuinely true that California has produced the majority of the most valuable technology companies in history while ranking near the bottom of every business-friendly index. The explanation isn’t that the indices are meaningless, it’s that California’s ecosystem has historically operated on network effects, talent density, and risk capital concentration that are strong enough to overcome structural policy disadvantages. The question is whether those advantages are durable, or whether they’re eroding as capital and talent become mobile in ways they weren’t in 1995. Outflow suggests the latter. California’s most important ecosystem intervention is not tax reform (though that would help) but addressing the housing cost crisis that makes it impossible for early-stage founders without inherited wealth to survive the pre-revenue stage of company building. Founders, you don’t get funding to start.

I want to pause here as we start to get repetitive in the assessments. From the top three, let’s be brief about the rest.

Connecticut ranks 47th on tax competitiveness and scores among the highest-burden states for occupational licensing, hitting founders on both ends simultaneously. The proximity to Yale is an underexploited asset; targeted licensing reform and a more competitive corporate rate would close the gap between institutional potential and actual company formation.

Maryland is actively making things worse; there really isn’t a different way to put it if we’re being honest. The state adopted what the Tax Foundation called the most aggressive package of tax increases in the nation during 2025, including a new top marginal individual income rate of 6.5%, a 2% surtax on high earners’ capital gains, and a 3% sales tax on B2B digital services. Taxing B2B digital services in a state trying to attract tech companies is the policy equivalent of putting a toll booth on your driveway. Maryland’s DC-corridor location gives it a natural govtech and defense-adjacent advantage that its own legislature keeps undermining.

Washington at surprises people because of Seattle’s genuine tech density, but the structural explanation is that Washington implemented a new 9.9% capital gains rate and increased its estate tax from 20 to 35 percent, tied for the nation’s highest. A capital gains tax is a direct burden on the outcome founders are working toward, and a high estate tax discourages the intergenerational wealth transfer that funds angel rounds. Seattle needs more angels, not fewer.

Minnesota, Massachusetts, Vermont, and Hawaii round out the list with high burdens and significant licensing friction. Massachusetts warrants a specific note: Boston’s biotech cluster is elite, driven by the MIT-Harvard-Longwood concentration that has no real peer. Policy environments are nearly hostile and yet ecosystems thrive anyway, because we all try despite circumstances; this is why this list of opportunities is so important, you can interpret this (me) as negatively criticizing or you can look at these states as where there is tremendous potential.

For Startup Ecosystem Builders…

The most important point here is that policy is infrastructure, not atmosphere. When a state ranks poorly, it isn’t just a score on a spreadsheet, it represents real friction that falls hardest on founders with the least capital to absorb it. A $500,000 seed-stage company dealing with high costs, complex multi-bracket compliance, and licensing friction, let alone regulations that handicap upstarts and disruptors, is operating with a structural disadvantage relative to a comparable company in a state that has eliminated those headwinds. Jared Walczak wrote about wins-above-replacement framing: a well-structured code won’t make Wyoming a metropolis, nor will poor structure make Manhattan a ghost town, but policy structure does play a role in a state’s economic successes or failures, and often a substantial one.

For economic development professionals specifically, the playbook that emerges from this data is not simply “cut taxes,” so don’t infer that from much of my emphasis on that here. The states showing the most improvement (such as Tennessee and Florida) did it through structural reform: simplifying the code, eliminating bracket complexity, moving toward flat rates, and addressing specific friction points that burden founders. You can disagree with the intentions politically or even socially, but we’re here to talk about what drives entrepreneurship.

The best states still have meaningful ecosystem gaps that policy alone can’t fill: talent pipelines, risk capital density, anchor institutions, and founder communities, while the challenged states have real ecosystem assets that policy is actively undermining. Both situations are fixable with the right combination of political will and strategic coherence which, admittedly, is why I’m publishing a deeper dive in Startup Ecosystems.

If you’re a founder evaluating where to build or an investor looking at where the next generation of underpriced ecosystems will emerge, the combination of improving policy trajectory and existing institutional assets is signal worth tracking. Tennessee’s trajectory over five years is a more useful data point than California’s current rankings. Idaho’s deregulatory momentum matters more for the next decade than its current startup density. The best investment in an emerging ecosystem isn’t always the one with the best score today, it’s the one where the policy vector is pointing in the right direction and the gap between structural potential and current performance is widest.

That gap is where the real opportunity lives.

The post The Best and Potential States for Startups: A Policy-First Look at Who’s Helping Founders appeared first on Startup Economist.

I was asked this past week, by someone in a very economically challenged city, how they can start something without the resources so many others have when starting out.

Data on this is more encouraging than the startup world wants to admit so the question drove me to want to help make sure everyone knows that financial circumstances aren’t actually much of a challenge. A 2020 study published in Business Horizons found that poverty is a circumstance, not an endemic characteristic, and that “although they confront more imposing obstacles, those in poverty are otherwise as capable as anyone else of starting a business.” The Goldwater Institute found that for every one percentage point increase in the number of entrepreneurs in a state, the poverty rate drops two percent. Follow that? Increase the number of entrepreneurs a measly 10% and poverty drops by 20%. Then we have research by Neil Lee and Andrés Rodríguez-Pose which confirmed that entrepreneurship is accessible everywhere and success brings measurable income increases for everyone; startups can sell beyond their immediate geography, which in a digital economy means virtually any software or services venture, generating income increases for the broader community, not just the founder.

But what I found in most of the research, notice, is really about how entrepreneurship in rural and underserved communities helps lift a community out of poverty. That’s not quite the same as the question asked of me, “how, when we don’t have the money?”

None of that research was conducted in Palo Alto. It was conducted in places that look a lot more like Arkansas, Mississippi, Louisiana, West Virginia, and Alabama. Like rural Appalachia and inner-city Detroit. Like Lagos, rural India, peripheral cities in Mexico, and the overlooked edges of Romania and Bulgaria. These are the places where these facts are most urgent, but having proven it matters, how?

Might it be true that there, counterintuitively, the conditions for building something new may be more favorable than they appear?

The Cost of Building Has Effectively Hit Zero

Building a startup today requires a laptop and internet access. At minimum, both are available at most public libraries and many civic centers. AI is accelerating the cost drop dramatically; vibe coding, coined by Andrej Karpathy in early 2025, describes the practice of describing what you want in plain language and letting AI handle the technical implementation, the reality is that accessible, low-cost or free building tools have already existed for decades. Let’s clarify something here, that doesn’t have to mean coding software or web services. We’re also talking about building newsletters, websites, and tools to help grow. Those tools have reached a point where the gap between “I have an idea” or “I don’t know how” and “here is a working product” has collapsed from months to hours, and the cost has collapsed toward free.

Friends with zero software development experience are building in a weekend, at essentially no cost, what used to take teams and weeks. And doing that isn’t exceptional anymore. Sites like Bolt.new, Lovable, and Replit now generate entire applications (with databases, user authentication, payment integrations, and deployment), from a plain English description. Amjad Masad, CEO of Replit, has noted that “75% of Replit customers never write a single line of code.” Founders still get quotes from development agencies for half a million dollars to build something and that’s misleading everyone because no founder should ever be paying to get started! Moreso now, using AI tools, they validate the concept and get something to market that they can market and sell. That gap, between what building used to cost and what it costs now, disproportionately benefits people who never had access to expensive technical resources in the first place. Hire later, pay later, when proven. As a community, show it’s possible and let everyone try, because inspiring that it’s accessible overcomes that frustration that it isn’t.

A useful frame for understanding technology is that it is, at its core, the process of making things better, more affordable, and more accessible. What happens over time to every technology is commoditization; supply increases so much that the price falls through the floor. A 10-year-old laptop is worth almost nothing monetarily, yet it runs every tool described above. Smartphones a generation behind the current model are months from landfills despite being fully functional. WordPress, which is how this site was built roughly 25 years ago without any coding knowledge, was free then and remains free now. The negativity is what holds communities back, “Oh, that doesn’t really work,” or “that tech isn’t that capable,” is a mindset disregarding the fact that even if not now, it will be in 6 months; that, even if not perfect, people can accomplish more now than ever before. The trajectory of building costs has been pointing toward zero since the 1970s. For founders in places that couldn’t access expensive infrastructure before, that trajectory is not a problem, it’s becoming an advantage.

Isn’t the Absence of an Ecosystem a Problem?

The places that developed startup infrastructure early (the coworking spaces, the accelerators, the angel networks, the demo days) developed that because it was necessary at the time.

The cost of building was high, coordination was difficult, and distribution required physical proximity to customers and press. None of those constraints apply the same way anymore, and in some respects the communities that built heavy infrastructure around those old constraints are now dragging that infrastructure behind them like an anchor (the number of large space “startup hubs” that end up cannibalizing founders because they themselves can’t pay rent, is astounding); spending resources maintaining institutions that solved problems that no longer exist at the same scale.

A community in rural West Virginia or Lagos that hasn’t built that infrastructure yet isn’t behind, it’s unencumbered. The question isn’t how to replicate what Austin or Berlin did a decade ago; it’s how to build for the current cost structure, which looks radically different from the one that produced those ecosystems.

The SBA has documented that low-income areas are home to 2 out of every 9 workers but only 2 out of every 30 businesses with employees. That gap is not a capability gap, the research is clear that it isn’t, it is an information gap, a permission gap, and an ecosystem gap; the communities around those potential founders have not yet built the support structures that make the difference between a fragile early venture and one that survives long enough to scale. That is fixable, and it doesn’t require replicating Silicon Valley, it requires understanding what support structures actually matter now, not what mattered fifteen years ago.

The Capital Question Is the Wrong Question

Every conversation about startups in underserved communities eventually arrives at the capital question. “We can’t find investors. There’s no VC here. We need a seed fund.” This is the wrong frame, and it consistently leads communities toward the wrong solutions. Heck, speaking with every city, they tell me they are “struggling with attracting capital” but what they’re really saying is, “our founders here are saying they can’t raise capital, so we’re deciding that the issue is a lack of capital.”

No one is pointing out that they’re wrong.

Both the founders and the local leaders are wrong. Founders saying they can’t find funding generally fall in the camp of thinking they need funding because they don’t know what to do, evident in the fact that they aren’t attracting it. Cities saying they need to attract funding are merely saying that because it’s what they hear from those very founders. Both are wrong.

Capital arrives where opportunity creates value, it doesn’t arrive in this regard as an act of charity toward places that need it. Venture capital operates like a wholesaler in a two-sided market: it curates startups and delivers them to institutional investors seeking returns. If the startups in a given region aren’t yet compelling enough (fundable, scalable, and defensible) capital has no rational incentive to show up regardless of how much the community needs it. Trying to attract investment before building genuinely investable companies is the startup ecosystem equivalent of trying to attract Walmart to a community that has no need for one.

The reason capital seems inaccessible in most underserved communities comes down to one of two things: either the startups haven’t been developed sufficiently to warrant it, or challenges remain that make investment riskier than it needs to be. Neither of those problems is solved by recruiting angel investors or hosting pitch competitions, they’re solved by building the community structures that produce better startups: experienced mentors who can be found, potential team members who can be connected, and founders who understand the difference between a startup and a small business (not the same thing and shouldn’t be given the same advice).

What cities, community builders, and economic development offices in these regions need to be doing is fixing the gaps in the ecosystem, not throwing money at the problem. The gaps are almost always the same: conflating startups with businesses and giving both bad advice, failing to connect founders with mentors and peers, and (most pervasively) enabling wrong assumptions about what building actually requires. It doesn’t require a degree. It doesn’t require a tech hub. It doesn’t require existing capital. It requires the marketing discipline to understand a market well enough to build what it actually wants, and the community infrastructure to support founders while they’re figuring that out.

What Scaling Actually Requires

Scaling a startup (and ecosystem), which is the part that most founders in underserved communities feel is out of reach, is a matter of understanding and executing on marketing, which is not the same as advertising or promotion. Marketing is the work of the market: understanding what customers want, at what price, in what form, through which channels, and why they would choose this over anything else available to them. Most founders in any community, well-funded or not, skip this work. They build what they want, what they think customers need, or what they’re technically capable of, which produces products that solve problems no one was urgently trying to solve. This failure mode is not correlated with income or geography; it happens everywhere, funded heavily and unfunded entirely.

Most cities, fail to actually understand what their “customers” want and need in this regard, because as I’ve noted, founders say it’s “capital” so city customer discovery in developing startup ecosystems invariably concludes, “we need to work on capital.” This is misleading feedback that marketers can suss out with a little first principles thinking (essentially, asking further, “why do you need that?”)

The mechanics of scaling, once a marketing foundation is in place, are largely free. An audience of 500,000 is achievable without spending a dollar on paid distribution, through content, through social media groups and newsletters, through platforms like Medium, Substack, Reddit, and LinkedIn that provide distribution infrastructure at no cost. Distribution is free. Even a target market being in another region or another country, is irrelevant. The founders in Lagos and rural Romania who are building scalable software ventures are not distributing locally, they are distributing globally, using the same free tools available to anyone with internet access.

Building scale into the solutions is an important part usually neglected, things like: referral mechanisms, community features, mobile-first design, and retention hooks, the structures through which users drive growth without requiring paid acquisition. One more piece is building with a genuine competitive advantage, and that advantage rarely lives in the solution itself; it lives in the team, the go-to-market strategy, relationships with partners or policymakers, or early mover positioning in a market that doesn’t yet have a clear leader. None of these require capital to design. Can you see how a founder and a startup ecosystem can determine and go at those? They require thinking, market research, and iteration, all of which are available to a founder in West Virginia at exactly the same cost as a founder in any city that considers itself a startup hub.

The Places That Seem Left Out Are Not Behind

In the 1990s and early 2000s, most startup knowledge, experience, and mentorship was geographically concentrated. Other places simply didn’t have it yet. Around the 2010s, as people, knowledge, and experience migrated and as distribution of information became effectively universal, some cities caught up; Austin, Nashville, Chicago, and others emerged as legitimate ecosystems not because they received capital injections but because the knowledge and community infrastructure developed. The places still feeling left out are not behind because building there is impossible, they’re behind because the wrong assumptions: that it requires capital, that it requires a tech hub, that it requires credentials and connections. This has been allowed to persist without challenge, and because the local institutions that could correct those assumptions have instead reinforced them by focusing on the wrong solutions, many cities are stuck.

The founders most likely to build something durable from a disadvantaged starting point are not the ones waiting for resources. They are the ones paying close enough attention to their own context to see opportunities that better-resourced founders in more established ecosystems simply cannot see, because they don’t live there. That contextual knowledge, that proximity to underserved markets, that firsthand understanding of what’s missing in a community… these are not handicaps! They are advantages, and the founders who recognize them as such are the ones who tend to build something worth building.

The startup infrastructure your region doesn’t have, likely isn’t what you actually need. What you need is what has always built scalable companies: a real understanding of a real market, the discipline to build what that market wants rather than what you wish it wanted, and enough community around you to keep going when the inevitable hard parts arrive. Two of those three things are entirely within reach right now, in any community, with the tools currently available at effectively zero cost.

Ten Things Your Community Can Do Right Now

Okay, so that’s a lot of bluster. And in complete fairness, I’m not in such circumstances, but I’m pissed off that founders struggle and that when we know (KNOW) that entrepreneurship and startups lift a community out of poverty, shame on us all for not doing more, effectively. Drawn from the playbook for building effective startup ecosystems, do this, right now…

1. Create one shared space and one shared calendar. Start a free Facebook Group or WhatsApp group for every entrepreneur, support program, SBDC, and local business owner in the region. Put everything in one place. Stop letting five organizations run five separate email lists that never talk to each other. One list. One place. Free.

2. Run a weekly open “office hours” session at the library or a local diner. The founders stuck between idea and first revenue need someone to talk to who has built something. Let me be clear though, no consulting and no providers of service! This is mentorship and if anyone helping is seeking clients, they need to be held out. Find three people locally who have run any kind of business and put them in a room every week. No curriculum, no agenda, just questions and answers. Free.

3. Start a peer group, not a program. Find six to ten founders at a similar stage and put them in a room monthly to share what’s working and what isn’t: no speakers, no presentations, no guest experts. Peer accountability consistently outperforms formal programming for early-stage founders and costs nothing to run.

4. Ask your SBDC, chamber, and any local support program one question: is anyone making money yet? Add that single question to every check-in and meeting. Not how many workshops people attended. Whether the businesses are producing income. Track it and share it publicly. What gets measured gets managed; right now, most communities are measuring the wrong things entirely.

5. Bring founder education to your city. Not an accelerator! Not a small business development program! Not marketing classes! Not coding classes! We have learned how to teach people to be founders, that’s what you need; the methodology works, the curriculum is established, and you can more or less just launch it.

6. Go to where people already are. Church halls, community centers, barbershops, the parking lot of the hardware store on Saturday morning; don’t wait for founders to find your program (because odds are you’re not promoting it well!). Show up where the community gathers and ask what people are trying to build. The talent that never shows up to events or registration pages is there.

7. Use your public library as a coworking space. Most public libraries have free meeting rooms, free internet, free printing, and free access to all the tools online. Designate one afternoon a week as an open working session for anyone building something. Ask the library director (they will almost certainly say yes, because no one ever asks).

8. Email your state economic development office, your nearest university extension program, and your local government economic development contact on the same day. Ask each one the same question: what resources exist for early-stage startup entrepreneurs in this zip code? You will get three different answers pointing to programs that don’t know each other exist. Connect them. That coordination role is almost always vacant and costs nothing to fill.

9. Find the one thing your region does that nowhere else does as well. Timber, agriculture, healthcare, a specific immigrant community with global trade ties, proximity to a military base, a particular manufacturing legacy; every region has something. Identify the one industry where local founders have knowledge and relationships an outsider couldn’t replicate and focus all startup conversations there first. A generalist tech hub takes a decade to build from nothing while serving generically. Building on existing local competence produces solutions in weeks.

10. Partner with an existing global model rather than inventing your own. Contact Founder Institute, Startup Grind, or explore a venture studio model with 9point8 as we did for Abilene, Texas. These organizations have frameworks, curricula, networks, and credibility already built. Bringing an existing model to your community is faster, cheaper, and more effective than building a local program from scratch with no track record and no network to draw from.

The startup infrastructure your region doesn’t have, likely isn’t what you actually need

I was asked this past week, by someone in a very economically challenged city, how they can start something without the resources so many others have when starting out. The answer is that perceiving that entrepreneurship requires resources is wrong.

The post What if the Poorest Places Are Actually the Best Places to Start a Startup Right Now? appeared first on Startup Economist.

I once crossed paths with Bill Gurley, author and venture capitalist, so long ago and so briefly that I couldn’t reconstruct the details if I tried. The startup ecosystem was smaller then, known names were less frequent, and it was easier to recognize people; it was a lot like my experience in Austin as it boomed – from a small city where everyone connects to what we have here now. Generally, in our sector of the economy, unless you’re a founder pitching, you shake hands, say something cordial, and move on.

Two decades later, he’d gone to being the guy behind Uber, OpenTable, Zillow, and Stitch Fix; a run that makes most VCs look like they’re playing an entirely different sport. So, when I found myself watching him take the stage in Austin with Matthew McConaughey talking not about fund returns or portfolio strategy but about how to build a life doing work you actually love, I cleared my schedule from editing my own book.

This wasn’t a celebrity moment; this was a parent moment.

I have three kids, and whatever else you want to say about spending twenty-plus years helping entrepreneurs figure out what they’re building, advising investors on where to put capital, and working with economic development professionals trying to understand why talent moves toward certain places and not others, the thing that really keeps me up at night is simpler and more personal than any of that. I want my kids to find work that fills them, not work that funds a lifestyle they wandered into by default, not a job title their parents can explain at dinner parties. I want them to run toward Monday mornings. I want joy to come before obligation, love before labor, and a dream pursued before the conveyor belt of tests, applications, colleges, and “safe” choices narrows their whole perception of what’s even possible.

Watching McConaughey tell the story of calling his dad, sweating, terrified of admitting he was going to drop out of law school to pursue film, brought this to life. His dad’s response, after McConaughey said “Yep” to being sure that’s what he wanted: “Well, don’t half-ass it.” That’s it. That’s the whole parenting manual right there. No lecture about risk, no pivot to a backup plan, no “but what about job security?” Just the confidence to say: if that’s the dream, go run it down properly. McConaughey entertainingly noted that when he was in college, he started laughing at different things in films and crying at different things than most of the people around him; instead of being embarrassed by that, he learned to embrace it as the signal that he was wired differently for that medium.

That’s what “know what you are” actually looks like, and it’s a lot messier and earlier than most career advice acknowledges.

Gurley, asked when he realized he was a category of one, described studying best practices in his field and then relentlessly working to figure out how to get above them, particularly on Wall Street. Not just to master the conventional game, but to understand it thoroughly enough to see where the ceiling was and then figure out what was above it. That’s a different posture than most people bring to their careers, which tend to involve learning the rules and then executing them competently, rather than treating the rules as a floor to push off from.

I’ve been fortunate. This work (exactly this: the startup ecosystems, the founders, the capital formation, the writing and teaching and advising and building) is what I’ve wanted to do. It’s not a grind I endure between vacations; it is, if I’m being candid, a privilege I don’t take lightly. The conventional wisdom that 90% of startups fail genuinely pisses me off that we’re not doing better by founders given what we know. Which made that evening in Austin feel less like a book launch and more like a confirmation of something I’ve been living without having the right framework to articulate. Bill Gurley, it turns out, spent a decade building that framework.

The Book Itself Before I’ve Even Finished It

Let me be straightforward: I haven’t finished Runnin’ Down a Dream yet. I’ve started it but it was 10 pm when I got home and I wanted to write about what it means to a parent.

When Bill signed my copy of the booked asking my name, there was no question that my response was, “Actually, this is for my kids.” I was at the launch event, and I’ve been digging into it from every angle available, which, given that it’s already generating the kind of endorsements that most business books couldn’t dream of, isn’t hard to do. Gurley described it himself as a passion project of almost ten years, aimed at giving people the motivation and the methods for thriving in a career they actually love. Ten years. On a single question. That’s either obsession or a man who understood, through his own experience, just how much the answer matters.

Nearly six in ten people would do things differently if they could start over. That’s not a productivity problem and isn’t a skills gap; that’s most of the workforce sitting inside a professional life they chose wrong, or more precisely, that got chosen for them by a system designed to sort and place people rather than help them figure out what they’re actually built for. Gurley himself was one of them. Computer science degree, MBA from UT Austin, landed at a prominent tech company, and was promptly bored out of his mind. He left, started over, and ended up at Benchmark making some of the best bets in venture capital history. Boredom was the signal. Most people spend decades ignoring signals exactly like that, “Young people find it easy to postpone what you really want to do.”

Easy to postpone; not impossible to find, not unclear about. Easy to postpone, because the system makes postponement feel responsible. Parents push kids toward economically safe lanes. Extracurriculars get stacked not because a kid loves them but because every other kid is doing them, a dynamic that Jonathan Haidt and Greg Lukianoff captured precisely in their critique of modern parenting culture, describing a “resume arms race” where families drive kids into endless activities to pad college applications, not because those activities reveal or cultivate genuine passion. I have observed this a lot since my move from Michigan, growing up, to Texas now, faulting Texas that, “everyone seems to pick one sport so they excel at it.” I praised Michigan where I was in art, music, theater, debate, track, swimming, and more; without realizing that the difference wasn’t Michigan vs. Texas, it was generationally different parenting. Gurley framed the endpoint of the new race, “Getting in this lane of focus to get into the limited spots for the seemingly better jobs.” That lane gets narrower the longer you stay in it, and by the time you’re forty and finally sitting down to ask yourself what you actually love, it can feel like the question arrived too late.

Except it’s never too late, which is the whole point of Bert’s story told on stage: someone handed Bert a blank sheet of paper and told him to write what he loves to do on the left side, and what he’s good at on the right side, then circle whatever appeared on both sides. Bert did it at forty, and what he circled made its way to Tito’s Handmade Vodka, which became one of the great American entrepreneurship stories. Forty years old, blank sheet of paper, two columns. That’s the whole exercise. The tragedy isn’t that people do this at forty; it’s that almost nobody does it at all.

Daniel Pink’s research on regret found that regrets of inaction outnumber regrets of action two to one, and the ratio gets worse with age; the “what ifs” compound over time in a way that actions taken (even ones that failed) simply don’t. Pink puts it, when people are young they have roughly equal action and inaction regrets, but as they age into their thirties, forties, fifties, and beyond, inaction regrets take over completely and the overwhelming category of those inaction regrets involves boldness: the risk not taken, the path not started, the thing they really wanted to do that they kept finding reasons to postpone. Gurley’s entire book is, in a sense, the preemptive treatment for that specific category of regret.

Six Principles to Thrive in a Career You Actually Love

From that experience, and from a decade of research on what actually separates people who love their work from the 60% who’d take a do-over, Gurley distilled six principles: chase your curiosity, hone your craft, develop mentors in your field, embrace your peers, go where the action is, and always give back. None of those are complicated. Heck, it sounds like what I tell entrepreneurs. Yes, they are harder than they sound, as every single one runs counter to the default career advice most people actually receive, which is basically a variation of “find something stable, build credentials, and don’t take unnecessary risks.”

The curiosity principle is the foundational one and the most misunderstood; it doesn’t mean dabble in many things, it means find the subject that makes you read one more paper at midnight without anyone telling you to, “Fascination matters more than talent. What differentiates you is being insanely fascinated with a subject, so that continuous learning comes for free.” So that continuous learning comes for free. When you’re fascinated, you don’t have to manufacture discipline or force yourself through professional development modules; the learning happens because you literally cannot stop. The correlation between obsession and success isn’t actually financial motivation or upward mobility; it’s that when you’re obsessed, learning is a form of entertainment rather than labor. “Would you learn more about what you love than watching Netflix?” Gurley asked the Austin audience. That’s the test. That’s fascination, and you have to be fascinated in what you do.

James Clear, whose Atomic Habits is probably the most widely-read behavior change book of the past decade, called the unifying thread of success across every case study in the book “the relentless hunger to learn about the thing you love.” Hunger, not curiosity in the hobbyist sense, but the kind that turns into craft, which turns into the depth of expertise that makes someone genuinely hard to replace.

Gurley’s instruction to “study the history of your field” resonated with me personally, and not just as advice; it’s something I live. I’m obsessed with the history of entrepreneurship and venture capital, and Gurley’s point was obvious when framed: when you walk into a room and you know why things are the way they are, when you know the history and the evolution and the failures and the pivots that created the current landscape, you demonstrate a depth of obsession that nobody in that room can fake. Then, he said, study the edge too, the newest trends and technology, the frontier of your domain. History plus edge. That’s what “insanely fascinated” actually looks like in practice; it’s not just enthusiasm; it’s the accumulated context that makes your judgment qualitatively different from someone who started paying attention recently. Which person would you hire? Which founder would you fund?

The peer group principle tends to get under-weighted, I think, as everyone focuses on mentorship because it sounds right (and granted, develop mentors in your field is Gurley’s 3rd principle). Your peer group isn’t just your social circle; it’s your ambient standard: you normalize the work ethic, the ambition, and the expectations of the people you spend the most time around. Surround yourself with people who are obsessive about getting better, and obsession becomes unremarkable in the best way. Daniel H. Pink, who wrote Drive and has spent significant time researching motivation, said the book “replaces vague advice with vivid human stories and delivers a bracing call to act boldly in every part of our lives.” The peer group principle is that your friend group isn’t static; you have to go find the people with whom you’ll thrive, which takes you directly to principle five.

“Go where the action is” sounds obvious until you examine how many talented people are living in places, working in organizations, and spending time in rooms where nothing interesting is happening. Geography and proximity still matter. Despite globalization, remote work, and quarantine throwing us for a loop, many of us have been saying this incessantly to both workers and founders: where you are together matters. The density of ambition still matters. My home being Austin isn’t an accident, and the people who ended up here made deliberate choices to be in a place where ambitious, curious, builder-type people are the norm rather than the exception. That’s a career strategy, and it’s one that most people never execute consciously because they’re optimizing for cost of living or proximity to family or some other variable that has nothing to do with where their field is alive.

We heard about Tony Fadell, who invented the iPod and co-invented the iPhone before building Nest, shared of Runnin’ Down a Dream: “Schools never teach a ‘how to find work you love’ class. Bill Gurley clearly maps the path with sharp insights and real tools.” That’s accurate, and it’s also a fairly damning observation about what education has been doing with itself for several generations. You can spend four years and six figures learning to execute someone else’s system, while never being asked once what you’re actually built for. This is where my passion intersects with this treatise on careers, where entrepreneurship intersects with identity and where the most important career decision isn’t which company to join but whether you’ve ever honestly answered Bert’s two-column question.

One more principle that deserves its own moment isn’t actually a principle in the book, it caught my attention as McConaughey and Gurley shared thoughts with the room, “always have a side hustle.” I hear founders-in-waiting constantly explain why they can’t start anything while they’re employed, as if employment is a condition that precludes exploration. That reasoning is wrong, it’s an excuse, and more importantly it’s a missed shot.

A side hustle isn’t a distraction from your career and it’s not cheating on your employer (hell, if it is, they probably deserve it); it’s a second bet on yourself, a low-stakes laboratory for figuring out whether what you think you love actually holds up under the pressure of real work. You do want to work for a company that supports you, right? You should take two shots at success instead of one, and you learn faster than anyone sitting around waiting for the right moment (which is a moment that never actually arrives).

The McConaughey corollary to all of this: “Know that ‘no’ is part of the hustle.” And Gurley’s version: “Channel rejections in the right direction, as motivation. Turn failures into energy.” These aren’t affirmations; they’re operational instructions for how to metabolize the inevitable friction of doing something ambitious. The people who treat rejection as information rather than verdict are the ones who compound opportunity; everyone else treats the first no as confirmation of a fear they were already carrying.

The AI Disruption Is Real, and the Obsessives Will Be Fine

The career conversation in 2026 has developed a serious anxiety disorder about AI and automation, and the fear isn’t entirely misplaced. The WEF Future of Jobs Report 2025, surveying over 1,000 employers representing 14 million workers across 55 economies, projected 92 million job displacements by 2030 alongside 170 million new roles created, a net gain of 78 million jobs. Fear performs better on social media than nuance so course we’re all worried about AI taking our jobs; the 170 million new roles get buried in the anxiety. But Gurley shared, AI doesn’t threaten the people who are genuinely obsessed with their craft; it obliterates the people who were filling seats.

McKinsey’s research indicates that current technologies could theoretically automate roughly 57% of U.S. work hours but concludes that this figure measures technical potential in tasks, not the inevitable elimination of jobs. Tasks get automated; jobs held by people with genuine craft and genuine curiosity evolve. What AI is actually doing is making one thing extremely legible that was previously harder to see: the difference between someone who is genuinely obsessed with their field and someone who is tolerating their role. The tolerators are getting automated while the obsessives are getting amplified.

A founder who has been running toward a specific problem for years (reading everything, building prototypes, talking to customers at weird hours because they can’t stop thinking about it) has something AI cannot fabricate: accumulated context, pattern recognition, and the weird specific insight that comes from deep engagement with a domain over time. AI is a force multiplier for people who already have something worth multiplying. Gurley’s six principles, followed, produce exactly that kind of person; and in an economy where the premium on genuine expertise is accelerating rather than declining, that’s not a comforting platitude, it’s a structural advantage.

_{And keep in mind, expertise is NOT picking the right career path and it isn’t getting into the resume arms race, it’s finding your obsession so that you constantly learn, you put yourself in the left lane (as Gurley puts it), you think of work as your vacation (as did McConaughey).}

The people who followed their curiosity into deep craft long before AI arrived are the ones who now look prescient. The ones who spent twenty years in a lane they didn’t choose are the ones for whom automation feels like a threat rather than a tool.

This is why the AI disruption conversation and the “find work you love” conversation are the same conversation. The Industrial Revolution’s arc is the useful frame: it destroyed specific jobs and created entire categories of economic participation that nobody could have described in advance. Two-thirds of today’s U.S. jobs didn’t exist in 1940. The people who got churned out were those whose only asset was availability for repetitive tasks; the people who found their footing had craft, genuine investment in their work, and the adaptability that comes from actually caring about a domain. AI is running that same play, faster. What’s genuinely different this time is that the automation of rote work opens up precisely the territory that Gurley’s principles point toward: deep curiosity-driven expertise, relational intelligence, creative judgment, and the domain-specific pattern recognition that makes someone a founder of their own future rather than a functionary in someone else’s.

What I Heard for Our Children

The parent version of all of this is actually simpler than the entrepreneurship version. Every parent optimizing for their kid’s college acceptance or job security or starting salary is essentially betting that the credentialing system understands the future better than their kid’s own obsessions do; given that six in ten people would start over if they could, the credentialing system’s track record is as bad as Startup Development Organizations keeping the average at 9 out of 10 startups failing.

McConaughey’s question from the stage near the end, “What can parents do better?” And Gurley’s answer was simple, “Create an experience where they can explore as much as possible.” Not structure, not extracurricular stacking, not the resume arms race: exploration. The goal of parenting, if Gurley’s decade of research is directionally right, isn’t to manufacture a competitive candidate; it’s to create enough exposure that a kid finds the thing that makes them obsessive before the conveyor belt decides for them.

What Gurley is arguing, and what that Austin evening crystallized, is that the playbook for a life you won’t regret is knowable. It’s not mystical; it’s six principles, grounded in real research, tested against people who are genuinely at the top of fields as varied as restaurant empire-building, NBA franchise management, and talent representation.

Gurley’s own framing of what burnout actually is cuts through a lot of the conventional wellness-industry noise around it: “We’ve taught how to do the grind, but not how to find what they adore doing. Competing against someone who does love that work, you’re going to fall behind.”

Burnout isn’t a resilience deficit; it’s what happens when people grind at something they never loved in the first place, against competitors who do love it and therefore never experience it as grinding at all.

“Step off the Conveyor Belt”

I want my kids to know that the conveyor belt is real, and it is specifically not designed with their particular obsessions in mind. I want them to understand that boredom in a role that’s supposed to be a dream come true isn’t ingratitude; it’s a signal worth listening to before twenty years have passed. I want them to take Bert’s blank sheet of paper seriously, preferably before they’re forty, and I want them to find Austin (or wherever the version of Austin is for their domain): the place where people like them are gathered, running at the same problem with the same hunger.

As for me, I already found that. It’s exactly this, the writing, the advising, the ecosystem building, the frameworks for how founders and investors and communities figure out what they’re actually supposed to be building. That’s the reason Gurley’s book resonates with me that most career books don’t. He’s not describing an aspiration, he’s describing the mechanism behind something that, when you’re living it, feels less like work and more like you finally stopped fighting yourself.

Runnin’ Down a Dream is worth a copy, and if you’re a founder, an investor, or anyone trying to build something that matters in this economy, it’s worth having the conversation it provokes with the people around you. If you’re in economic development or venture capital trying to figure out why some communities produce concentrated talent and others just produce resumes, the answer probably has less to do with tax incentives and more to do with whether you’ve built a place where people running down a dream can find each other. You can dig further into how startup ecosystems actually form if you want my architecture behind that intuition.

The post What It Means to Run Down a Dream appeared first on Startup Economist.

SXSW is here in as much as if you’re coming, you’re curious what to consider. If you’re still treating it like a trade show where you badge-tap your way through panels and collect business cards, you’re behind. The conference this year sprawls across Austin March 12–18, 2026 (before in fact), with all four festivals (Innovation, Film & TV, Music, and Comedy) running concurrently for the first time ever. This is one of the most economically dense weeks on the planet for anyone serious about startups, venture capital, or the future of technology.

Let’s not waste it

I’ve written before about how SXSW became what it is, from a scrappy music showcase in 1987 to the event where Twitter launched in 2007, where Google, Facebook, and Uber once treated it like a product release date, and where Austin itself crystallized its identity as a global hub for innovation. That history matters because it tells you why you should be here and what you’re actually navigating. The badge is not the conference, and the conference is not the value; this is neither your typical trade show nor film & music festival so if you’re planning as you might that, you’re doing it wrong. The value is in knowing exactly where you want to be and when, hustling from place to place, and making connections; this is to help you do that without wandering around the Hilton lobby hoping to run into Garry Tan.

Speaking of which, Garry Tan, President and CEO of Y Combinator, is one of this year’s featured keynote speakers and is co-emceeing the SXSW Pitch Award Ceremony alongside Josephine Chen of Sequoia Capital. SXSW Pitch, running March 13–14 at 110 E. 2nd St., appears to have an 80%+ alumni funding rate and 730+ alumni companies that have collectively raised over $22 billion. If you’re a pre-seed or seed-stage company and you are not in that room, you have a very good reason for being somewhere else, and it had better be a compelling one. When that’s done, join me at the Hilton where I’m officially involved to meet and mentor (details).

Disclaimer, because I’ll miss something (even things friends are hosting!): COMMENT. If there is something not here, add it; you know better than to think anyone can actually keep track of everything.

Before You Even Think About the Badge

The mistake most first-timers and even seasoned attendees make is assuming SXSW begins when SXSW says it begins, it doesn’t (heck, I’m at events throughout this week but I live in Austin). The real deal-making starts earlier, and the satellite events (most free or independently ticketed, requiring no badge) are often where the most substantive conversations happen. I’ve argued this for years: as one commenter in my piece on the changing dynamics of SXSW put it, “the real value to startups was in going to the VC and sector specific events, parallel to SXSW; despite that, unfortunately, too many get tied up into the startup events and stuck in a bubble of just chatting with other founders.”

That’s the trap, don’t fall into it.

Monday, March 9 is an unofficial launch for locals thanks to Austin Technology Council’s Gateway. “This is the one event where you see old time Austin tech and newcomers (and everyone in between) coming together to celebrate the Austin Tech Ecosystem.” While out of town techies are always welcome, this party is purposely held before the crowds arrive to bring the focus on people who come from all areas of our tech ecosystem.

Tuesday, March 10 kicks things off with the Founders & Investors BBQ (6–8pm, location TBD), followed immediately by the two-day AI Startup Rodeo running through the 11th. If you’re in AI and you’re not showing up to a purpose-built pre-SXSW gathering for AI founders and investors, ask yourself why you bought a badge at all.

Wednesday, March 11 is essentially a full Pre-SXSW day. Startup Mania via Startup Grind runs all day. Network Before the Noise: Defense + Innovation Social (5–10pm) is exactly what it sounds like and relevant given the defense tech money flowing. Founders N’ Funders: SXSW VC Reverse Pitch on Thursday the 12th at 6–9pm flips things (VCs pitch back to founders) and is precisely the kind of format that cuts through the nonsense of standard networking.

Get to these.

The Sessions Worth Your Time (And the Mindset to Approach Them)

SXSW’s official Innovation Conference runs with badgeholder access across the Hilton Austin, JW Marriott, Marriott Downtown, Fairmont, Courtyard Marriott, Thompson Hotel, and The Line Hotel. The full session-level schedule lives at schedule.sxsw.com and requires a login; get the SXSW GO app on iOS or Android for managing reservations and navigating last-minute venue changes.

While you’re doing that, set up a WhatsApp Group for friends and coworkers because when we’re on the ground, it’s a lot of messaging to figure out where to be.

The programming is enormous. So, here is my filter: attend sessions where the speaker has skin in the game and primary data, not just a title and a TED talk.

Amy Webb’s 2026 Emerging Tech Trend Report is one of those. Webb is CEO of the Future Today Strategy Group and her annual tech forecast at SXSW is among the most attended sessions every year for good reason; it’s empirical, specific, and she’s been right enough times that dismissing her is malpractice.

Garry Tan’s conversation session is relevant not just for the Y Combinator connection but because what YC says in public about the funding environment tends to ripple through seed-stage valuations for the following twelve months.

Rana el Kaliouby and Bob Safian on human-centric AI is worth attending if only because el Kaliouby has built and sold AI companies (she co-founded Affectiva, acquired by Smart Eye for $73.5M) and thus has perspective that most panelists discussing “the future of AI” lack. Safian ran Fast Company for a decade, so he knows how to ask the question the audience actually needs answered. I’m a fan because as the Media goes, so goes most things; I just wrote about what we need to consider in startups, with AI, thanks to what happened to Netflix and Spotify, check it out here.

Matthew Prince’s session, “The Internet After Search,” is frankly the session title on the entire program for anyone in digital media, SEO, or platform-dependent business models. Prince is Co-Founder and CEO of Cloudflare, a company that sees a non-trivial fraction of all internet traffic. His view on what happens to the web when AI replaces search is not a thought experiment because it’s happening; it’s a business continuity question for a significant percentage the everyone online.

For investors specifically, “How Crypto Is Building New Capital Markets for Everyone” (Pedro Miranda, Solana Foundation + Rodolfo Gonzalez, Foundation Capital) and “The Internet of Value Meets the Internet of Intelligence” (Li Fan, CTO of Circle + Mallun Yen, Operator Collective) strike me as having the most current articulation of where blockchain and AI are converging in terms of capital formation. Whether you believe in crypto or not is beside the point, the capital markets are changing, and these are the people engineering the change.

On the policy side, The Hon. Michelle K. Lee, former Director of the USPTO, speaking on AI policy and intellectual property is not optional for any founder building on AI-generated content, AI-assisted code, or any product where IP defensibility will be tested in the next licensing cycle. The legal landscape around AI and IP is in active flux and the person who ran the patent office has an informed view you cannot get from a tweet thread. I need to be here, I’ve been increasingly aggressive that patent policy and commercialization work needs to change.

The “Reclaiming Our Humanity in the Age of AI” panel with Karen Hao (NYT bestselling author of Empire of AI), Timnit Gebru (Founder, DAIR Institute), and John Palfrey (President, MacArthur Foundation) will be crowded and contested and probably the most passionately debated session of the week. I hope. Attend if you want to understand the regulatory and ethical headwinds building against major AI, because those headwinds will eventually become policy, and policy becomes your operating constraint.

Mark Roberge’s “The Science of Scaling” (Co-Founder, Stage 2 Capital) is one that sounds like a sales pitch for marketing but isn’t. Roberge literally wrote the data-driven playbook for HubSpot’s sales organization before becoming a VC, and Stage 2 Capital focuses specifically on the revenue side of scaling. If you’re post-product-market fit and struggling to know when and how to scale GTM, this is worth two hours of your conference schedule.

Research universities sit behind many of the world’s most transformative technologies but turning discovery into a scalable company remains one of entrepreneurship’s hardest paths (trust me, I know, I keep pissing off tech transfer offices by pointing it out). University of Michigan is hosting, with Mike Psarouthakis, Jim Adox, Charlie Childs, and Ramses Alcaide, Spinning Out: What it Takes to Build a University Startup.

A Couple of Exhibitions: What’s Worth Walking Through

The International Innovations Expo runs March 14 in the Manchester Ballroom at the Fairmont and is the global-facing showcase of things like Korean beauty, 3D printing, international tech.

The Emerging Tech Expo picks up from there in the same venue and is more forward-looking, the companies here are earlier, scrappier, and more interesting for anyone doing early-stage diligence or looking for co-investment signals.

The XR Experience (March 15–17, Congressional Ballroom, Fairmont) is worth half an hour of your time even if you’re skeptical of VR/AR (which, most of us are): dozens of projects, 17 in competition, and the world premiere of Layers of Place: Austin, an MIT Open Documentary Lab AR project built into Austin’s actual public spaces. Interesting use of location-based AR at a conference and it will give you a faster intuition for where spatial computing is in the adoption curve.

The Satellite Events That Actually Matter (Organized by Day)

Let me be direct: most conference events are forgettable by design. The hotel ballroom with “Austin-inspired” cocktails is not a networking event, it’s a branding exercise for the sponsor selling you something. What makes SXSW magical is that most experiences are more organic, cultured, and experiential. Here are a few..

Thursday, March 12: South by South Hold’Em, Founder Investor Showdown (5:30–10pm) is the kind of structured competition format that breaks through the awkward “so what do you do” death spiral of standard networking. Founders N’ Funders: VC Reverse Pitch (already mentioned) when VCs pitch back to founders about why their fund is worth taking money from, you learn things about investor priorities that no due diligence call will give you. The Innovation Opening Party at Brazos Hall (7–10pm, 204 E. 4th St.) is the home base for Innovation badge holders all week; go on opening night to get your bearings, then use the daily noon–10pm Clubhouse access strategically rather than aimlessly. More, Miranda Pomeroy, Emily Samar, and Ted Velie are hosting Midwest House, which is always exceptional.

Friday, March 13: Equitech Texas Welcome Breakfast (11am–12:30pm) if you’re focused on diversity in tech capital is both substantive and well-connected thanks to Laurie Felker Jones. Brave1 Invest Demo Day Austin (9am–1pm) for defense tech, one of the hottest categories in venture right now, and Texas has become a meaningful node in that ecosystem. Pitch Roast Live SXSW (6–8:30pm) is exactly what it sounds like, and I’ve had a half dozen people ask me if I’ll be roasting (I haven’t been asked); this will be more educational than most official pitch sessions precisely because the roast format forces founders to confront their own weaknesses in real time. This will be a busy day, also get to Frontier House x LaFamilia VC Mixer because of their huge collaboration with LaFamilia Foundation, Eleven Wall Ventures, Camelback Ventures, Build in Tulsa, OneSixOne Ventures, BLK Wine Fest, Carta, and Ohio Startup Network. Finally, Geek Ventures, MatchPlay, Boop.me, and FirstGlance, are bringing founders, investors, builders, and operators together in Austin for a curated SXSW experience at MATCH HOUSE.

Saturday, March 14: Founder Fest Austin (11am–5pm) and Going BIG in Texas at Slovak House (noon–8pm) are worth stacking if you’re doing international market development work or looking for cross-border deal flow – Q-Branch, one of the venues, is among the more impactful places in Austin.

Sunday, March 15: From Raise to Reality: Lessons from Recent Series A Founders (4–6pm) which is not a panel of people who raised ten years ago. These are recent Series A founders talking about what the market actually looks like right now. Emerging Managers + Founding GPs Omakase (6–9pm) is a next-gen VC community event and is directly relevant to the thesis I’ve laid out before: most investors are wasting their time ignoring emerging fund managers. The deal flow, the sector expertise, and the access that emerging managers provide is structurally superior for early-stage investors who actually want returns.

Monday, March 16: Microsoft for Startups: Founder x Funder Dinner (5–7:30pm) is a dinner, not a panel, which means smaller room, higher signal, better conversation. Our Path Forward: Insights from Austin Tech Leaders (2:30–5pm) is worth attending if you want to understand where Austin’s ecosystem is heading after a few years of recalibration; the post-pandemic hangover, the housing pressure, and the questions about whether Austin can sustain its innovation identity are real conversations happening. One more (for now), New Mexico House, which I’ve been digging into because of their work in Quantum, come say hi, I’ll be around.

Tuesday, March 17: Asia x Austin Summit (noon–9pm, Austin Asian Chamber of Commerce) for anyone building cross-Pacific deal flow or partnership infrastructure. This one is consistently underattended by the people who most need to be there. Meghan Hendley Lopez, John Zozzaro, and Felipe Lopez, with AuremIP, are unveiling its full platform across both visual art and music in an intimate gathering of investors, collectors, and cultural leaders.

The Music Festival: Yes, It’s Relevant to You

I swear by all that is tech, if you aren’t in on the creative side of SXSW, I might be so harsh as to say you’re not an entrepreneur. If you’re a founder or investor who dismisses this or film, you’re misunderstanding the role of culture, creativity, and the arts, in startups, and shame on you. Austin IS SXSW, the city’s creative culture is the fuel that made it a startup hub in the first place, and the music festival is the connective tissue between creative and entrepreneurial risk-taking.

The Rolling Stone Future of Music Showcase (March 12–14, ACL Live at the Moody Theater) is the high-signal music program. Lola Young after winning a Grammy for “Messy.” Fuerza Regida in música mexicana, one of the fastest-growing genres in recorded music right now, and directly relevant if you’re in music tech, streaming, or Latin market expansion. BigXthaPlug and the 600 Entertainment artist takeover is what makes A&R scouts, MusicTech founders, and media investors pay attention to who’s building.

Sips & Sounds (Coca-Cola’s independent festival at Auditorium Shores, March 13–14) brings Christina Aguilera on Friday and Calvin Harris on Saturday. Both are irrelevant to your term sheet; both are exactly the kind of thing you do at 9pm when your brain can no longer absorb another conversation about LLM fine-tuning.

The Music Opening Party at Stubb’s Amphitheater (Thursday, March 12) features The All-American Rejects in their first-ever SXSW appearance. If you want to understand why Rivian is sponsoring a rock band’s SXSW debut rather than an AI summit, you understand something about brand positioning.

British Music Embassy with PPL and PRS For Music, the BPI, the Department for Business & Trade (DBT), the British Council, PRS Foundation and BBC. Now in its 19th edition, BME stages have previously played host to Olivia Dean, Sam Fender, Little Simz, Jungle, and The 1975. 

In this case, I really want to know where YOU WILL BE so share with us.

The Film & TV Festival: Where the Money Is Increasingly Going

Penske Media Corporation’s stake in the event, and the concurrency of all four festivals this year (meaning film, music, innovation, and comedy run simultaneously) reflects a deliberate repositioning of the conference as an entertainment industry event as much as a tech one. I’ve written about the potential this creates.

For founders and investors, the film program is a window into where content, IP, and media capital is flowing. Film & TV Awards run March 18 (the final night), with short film winners in narrative, documentary, and animated categories earning Oscar eligibility.

SXSW EDU and the Crossover Day

SXSW EDU runs March 9–12 with March 12 designated as Crossover Day as EDU and SXSW Innovation programming deliberately merge. If you’re building in edtech, workforce development, AI tutoring, or any product touching learning infrastructure, this is the day to be at the Convention Center with your badge. The joint sessions on AI in education and workforce skills are where education policy people, Google DeepMind researchers, and founders who are actually building in the space are in the same room (a configuration that doesn’t happen anywhere else – you might say this happening is the WHY SXSW pitch to your boss).

Some of the Practical for Newbies

For the first time in its history, every festival runs concurrently. That’s a deliberate evolution by an organization that has been rethinking its structure and identity in real time. Founders, investors, and ecosystem builders, the concurrency is actually an advantage: the range of people you’ll encounter in any given venue on any given evening is wider, more eclectic, and more serendipitous than it’s been in years.

The tips often repeated: comfortable shoes, comfortable clothes (only politicians wear suits), be flexible and move, meet people, lots of water, business cards (lots), go with the flow, and follow WhatsApp Groups and X when you’re on the ground for real time direction.

Most importantly: your plan will break by Tuesday morning and that’s fine. The best thing that ever happens at SXSW is the conversation you weren’t scheduled to have.

What are you actually trying to accomplish in Austin this week? If you haven’t figured that out before you land at AUS, do it on the plane; SXSW rewards the prepared and punishes the aimless, and you didn’t come this far to wander.

Want to connect here in Austin? I’ll be all over the place, so hit my official office hours or better: follow me, connect with me, and subscribe, I’ll keep the updates coming.

The post SXSW 2026 Guide for Founders, Investors, and Ecosystem Builders appeared first on Startup Economist.

I find myself more oriented to media than most. I am a huge live music fan extending well beyond concerts and festivals into even musicals and Broadway. My career started in advertising by way of Yahoo! when “online” was little more than a concept. I was among the first with Netflix, familiar with The Pirate Bay, and a huge fan of movies. So, when startup ecosystems started waking up to the benefits of specialization, pushing MediaTech was the obvious direction in which I could lean on my experience to help cities stop thinking in broad terms such as being a “tech hub” and instead focus on being FinTech, AgTech, or MedTech, to draw from the market of talent, experience, and connections available there.

This isn’t about media. This is about what tech and founders might appreciate by better understanding it.

Who actually owns the pipe?

That question has been at the center of every media war since the first radio signal was transmitted, and it’s the same question that will determine whether your AI-forward startup is a real business or an expensive hobby. Streaming (both music and television) spent the last thirty years working out the answer the hard way, and software is about to learn the same lesson, at scale, on fast-forward, courtesy of AI. Founders. all, pay very close attention to the story of Spotify.

Radio Waves, Broadcast Towers, and the First Pipe War

When Guglielmo Marconi demonstrated radio transmission in 1895, nobody was thinking about business models; technology was the spectacle. But by the 1920s, commercial radio stations in the United States had figured out something that still seems to elude most entrepreneurs: whoever controls the transmission frequency controls the audience, and whoever controls the audience controls the money. The Federal Radio Commission, established in 1927 and later reorganized as the FCC in 1934, existed precisely because radio spectrum is a finite physical resource (a literal pipe with limited bandwidth) and someone got to decide who got to use it.

The medium was free to listeners. Advertising paid for everything; distribution was the actual product, because distribution was scarce. Listeners weren’t customers, they were users, they were the market, being funneled to ad dollars to fund the pipe. This is the first and most important lesson in the long history of media: the pipe is never just infrastructure; the pipe is the business.

Television inherited the same logic. Over-the-air broadcast television, funded by advertising, reached American living rooms for free (sort of, you bought the TV, the content cost nothing). The FCC allocated channels, the networks bought the airwaves in effect, and the system created ABC, NBC, and CBS as dominant cultural institutions. Scarcity was real and enforced by physics and regulation simultaneously. Content mattered, of course, but distribution was the moat.

Cable television cracked that open (well, more accurately, closed) in ways nobody fully anticipated. The technology was straightforward enough: instead of transmitting signals through the air, you ran coaxial cable into homes, which allowed for more channels and better signal quality. HBO launched in 1972. By the 1980s, cable was reshaping American television consumption entirely. The key shift wasn’t technical, it was economic and structural; cable operators weren’t using publicly owned airwaves, they were running their own wire. They could charge for access directly and suddenly, the pipe that had been “free” (subsidized by advertising and regulated as a public good) became a subscription product with steadily rising prices.

Between 1995 and 2020, cable and satellite television prices rose at roughly three times the rate of general inflation. The average American cable bill went from around $22 per month in 1995 to over $100 by the mid-2010s. Satellite offered competition but not a fundamentally different economic model; it was still a proprietary pipe with controlled access and escalating fees. What had been a public utility of the airwaves was replaced, channel by channel, with a controlled-access toll road.

Piracy Is Always a Business Model Failure, not a Moral One

When people stopped being willing to pay $120 a month for 500 channels of which they watched 12, they found another way. Napster launched in 1999 and immediately demonstrated what happens when you charge too much for a pipe and then make the content digitally distributable: people build their own pipe. BitTorrent, released in 2001 by Bram Cohen, gave pirates a decentralized distribution mechanism so efficient that the entertainment industry’s legal response couldn’t keep up with the technical reality.

Piracy is not primarily a morality problem, is a pricing and distribution problem. People did not pirate music because they hated artists, they pirated music because the CD was $18 for one or two songs they actually wanted. Evidence in the demand, people love the artists and the music. People didn’t torrent HBO shows because they wanted to steal from studios, they torrented because they didn’t want to pay $140 a month for cable to access the two shows worth watching. Every mass piracy event in the history of media has followed the same pattern: distribution became too expensive, too fragmented, or too controlled, and someone built an alternative pipe.

The entertainment industry’s response? Litigation, DRM (Digital Rights Management, which is the technical system that restricts how you can copy or share digital content), and lobbying for legislation, each, efforts that address the symptom rather than the disease. The RIAA sued Napster into oblivion and the MPAA went after individual file-sharers. None of it worked at scale, because the economic incentive for piracy remained intact. The pipe was just too expensive.

Netflix and the Broken Promise of One Affordable Pipe

Netflix launched its streaming service in 2007 and, for a glorious and brief window of time, actually solved the problem. For $7.99 a month, you got an enormous library of films and television shows, no commercials, no cable contract, no satellite dish. It was an obvious value proposition, and it worked spectacularly. Reed Hastings understood something the cable industry had forgotten: if you make the legal alternative appropriately priced and convenient enough, most people will use it rather than pirate. He was right.

The studios noticed. Of course, rather than leaning in on what worked, they made it complicated.

Disney, WarnerMedia, NBCUniversal, Paramount, and Apple all watched Netflix build a $100 billion business on top of their content and concluded, albeit correctly, that they were leaving money on the table. Beginning around 2019, the streaming wars began in earnest. Disney+ launched in November 2019 at $6.99 per month. HBO Max (now Max) followed while Peacock, Paramount+, Apple TV+, and Discovery+ arrived in rapid succession. The content that had made Netflix so compelling (the Disney films, the HBO shows, the Universal catalog) was pulled back into proprietary platforms.

By 2024, a consumer who wanted access to the full range of prestige television was paying for Netflix, Max, Disney+, Peacock, Paramount+, and Apple TV+ simultaneously. The combined monthly cost, depending on ad-supported tiers and bundling, approached or exceeded the cable bill that had driven people to cord-cut in the first place. And the user experience got worse: you now needed to remember which show was on which platform, manage six different apps and six different accounts, and deal with the peculiar rage of finding that something you watched last month has moved to a different service.

Admit it, streaming television sucks now.

Nobody is racing to subscribe to Paramount+ for Star Trek: Strange New Worlds and then cancel once they’ve watched it, then resubscribe when Star Trek: Academy drops. That’s not a streaming economy; that’s a cable bundle that requires more passwords and bills. The unitary promise of Netflix (one affordable pipe for everything) was broken by the studios the moment they understood that controlling their own pipe was more valuable than the licensing fees Netflix was paying. Peter Drucker’s maxim that the aim of marketing is to know and understand the customer so well that the product sells itself applies here in reverse: the studios understood their customers well enough to know they’d pay for fragmented access, because the alternative was pirating or simply not watching.

Music Made the Same Mistake, and It’s Terminal

The music industry ran the similar playbook, with familiar consequences, and Joel Gouveia’s recent Substack piece “The Death of Spotify: Why Streaming is Minutes Away From Being Obsolete” puts the structural problem better than almost anything else written on the subject recently. The piece is worth reading in full; here’s what matters for this argument.

Music distribution followed the same arc as television. Vinyl records required physical manufacturing and physical retail: the labels owned the format and the distribution. When RCA introduced the 45 RPM vinyl format and also manufactured the record players that played them, they were vertically integrated in a way that made the business completely legible: you controlled the product from recording session to living room turntable. Philips invented the compact cassette and owned PolyGram Records. Sony co-invented the compact disc with Philips and manufactured the Walkman.

As Gouveia writes, quoting a VP at Warner Music Canada: “For the first time in history, we (the majors) don’t control the entire means of consumption.” That is the entire story of every media industry disruption, in one sentence. It’s why you need to understand the implication in startups.

Napster destroyed the CD business model not because music became worthless but because the marginal cost of digital music reproduction dropped to zero while the price remained $18. iTunes, in 2003, offered a partial solution: $0.99 per song, legitimate, easy. It worked well enough to stop the bleeding without stopping the underlying structural shift. Spotify arrived in 2008 in Europe (2011 in the US) with the streaming model: all the music, one subscription, $9.99 per month. It was Netflixian in its logic, and it was enormously successful by the metric of subscriber growth.

But here’s where the music industry’s version of the streaming trap differs from television’s, and it’s where Jimmy Iovine’s observation is broadly devastating when understood. As Gouveia’s piece explains at length, Iovine (co-founder of Interscope Records, co-creator of Beats by Dre, architect of Apple Music) told David Senra on the Founders podcast (Episode 391) something that we have to talk about, “The streaming services, to me, are minutes away from being obsolete.”

Iovine’s reasoning is structurally relevant, not nostalgic. Unlike television, where Netflix differentiated itself by owning original content (you need Netflix to watch Stranger Things; you need HBO to watch The Last of Us – which we hate, granted, but that’s not the point here), music streaming services have no differentiation at all. As Iovine put it plainly on the podcast: “Right now, music streaming is a utility. All the services are exactly the same, they do the same trick. If one of them lowered their price the rest are toast, because there’s no unique offering.”

Spotify, Apple Music, Amazon Music, and Tidal all offer the same 100-million-song library. There is no music you can get on Spotify that you cannot also get on Apple Music. The product is identical. The only things that differ are UI design choices and algorithmic playlist curation; neither of which constitutes a durable competitive moat. What Iovine and Gouveia are describing, in marketing terms, is a commodity: a product so undifferentiated that competition occurs entirely on price, and whoever has the lowest cost structure wins.

The financial mechanics of this make it worse and are really what got me thinking about the implication to entrepreneurs. As Gouveia explains in his piece, music streaming operates with inverted economics compared to a normal SaaS business. Spotify pays out roughly 70% of every dollar of revenue back to rights holders. That cost scales linearly with subscribers (every additional stream costs money, unlike Netflix’s fixed-cost content model. Iovine “The streaming services have a bad situation, there’s no margins, they’re not making any money.” This is why Apple, Amazon, and Google can sustain music streaming losses indefinitely (they’re selling hardware and Prime memberships and cloud services) while Spotify, as a standalone streaming company, is in a structurally compromised position.

And it’s also why, as Gouveia argues, the only artists who survive the coming reckoning are the ones who build direct ownership of their audience; their own pipe to their own fans. A platform doesn’t want you to have a relationship with your fans; the platform wants your fans to have a relationship with the platform. Say that again this way, “A platform doesn’t want you to have a relationship with the solution; the platform wants you to have a relationship with the platform.”

Spotify guards listener data the way a cable company guards subscriber data: because that data is their moat, not the content.

Software’s Version of the Same Story

Software made the same journey, just on a slightly different timeline and with one significant structural wrinkle that made the parallel less obvious until recently. For most of the 1980s and 1990s, software was sold on physical media (floppy disks, then CD-ROMs) through retail channels. Microsoft’s dominance in that era was partly about the quality of Windows and Office, but substantially about the exclusive agreements with PC manufacturers (OEMs, Original Equipment Manufacturers) that put Microsoft software on every machine before anyone switched it on. The pipe was the retail shelf and the hardware bundling agreement; control the shelf, control the market.

The internet changed the distribution model for software just as profoundly as it changed it for music. When you could download a product directly, the physical retail channel became irrelevant. This enabled piracy of software at scale; warez sites and peer-to-peer networks distributed cracked versions of Photoshop and Microsoft Office to millions of users who would never have paid the retail price. Notice, now Google, actually selling something else just as in music, gives such solutions away for free. It also enabled something more important in the long run: the SaaS (Software as a Service) model, where instead of selling software as a product you installed, you sold access to software running on your servers, billed on a subscription basis.

SaaS solved the piracy problem; you can’t pirate a subscription to Salesforce. There’s nothing to copy. The software lives in the cloud; you’re buying access, not a product. It also created the most favorable business economics in the history of software: high gross margins, predictable recurring revenue, low incremental distribution costs. Andreessen Horowitz spent a decade funding SaaS companies on exactly this basis, because the economics were genuinely superior to any previous software business model.

But while SaaS was solving the piracy and distribution problem for software companies, it was simultaneously concentrating the internet’s value in fewer and fewer hands. Google owned search. Facebook owned social. Amazon owned e-commerce and, increasingly, cloud infrastructure. Apple and Google together owned mobile app distribution. The internet that had briefly been a genuinely open network (where anyone could put up a website and compete on roughly equal terms) became a series of platform oligopolies, each controlling their own pipe to hundreds of millions of users.

This is the context in which debates about Net Neutrality and Section 230 of the Communications Decency Act should be understood. Net Neutrality, the principle that internet service providers must treat all internet traffic equally, without throttling or prioritizing traffic from companies that pay extra, is fundamentally an argument about who controls the pipe at the infrastructure level. FCC Chairman Tom Wheeler, when implementing the 2015 Open Internet Order, stated that the policy would ensure “that no one (whether government or corporate) should control free open access to the Internet.” That order was repealed in 2018. The fight has never stopped because the stakes never changed: control of the pipe at the infrastructure layer is worth hundreds of billions of dollars.

Section 230, which provides internet platforms with immunity from liability for third-party content posted on their services, is a different kind of pipe argument. As Yale Law School’s Journal of Law & Technology published in a landmark paper by Adam Candeub, both Net Neutrality and Section 230 “reflect a historically typical ‘regulatory bargain’ first found in common carriage, the body of law that has regulated transportation and communications networks for centuries.” The argument about whether Facebook and X should be treated as neutral platforms (protected by 230) or as editorial publishers (liable for what they host) is, at its core, an argument about who controls the flow of information and on what terms.

The pipe, again.

Blockchain and Web3 emerged in the late 2010s as the tech industry’s answer to the concentration problem. The theoretical promise of decentralization (there is that word again) removing the intermediary platform (the pipe controller) and allowing peer-to-peer transactions verified by distributed consensus, is genuinely interesting as an idea. If you could rebuild social networks, financial services, and software distribution on decentralized protocols, no single entity could hold the chokepoint. The practice was messier; most blockchain applications replicated the same centralization dynamics in new wrappers. The platforms that launched “decentralized” applications still controlled the user experience. Crypto exchanges became the same kind of concentrated intermediaries as traditional financial institutions. The pipe problem proved more durable than the technology that claimed to solve it.

Vibe Coding, AI, and the Moment Software Becomes the Music

Which brings us to now. And to the thing that should make every founder who is building an “AI-powered” product think.

Vibe coding, a term coined by Andrej Karpathy, co-founder of OpenAI, in February last year, describes the practice of using AI to generate software through natural language prompts, without the developer needing to write or even fully understand the underlying code. As Karpathy wrote in the original viral post that spawned the concept: there’s a new kind of coding “where you fully give in to the vibes, embrace exponentials, and forget that the code even exists.” It was the Word of the Year for 2025. Merriam-Webster added it as trending slang in within weeks. It is reshaping who can build software and how fast.

According to TechCrunch reporting on Y Combinator’s Winter 2025 cohort, 25% of startups in that batch had codebases that were 95% AI-generated. A February 2026 analysis by Kristin Darrow found that 84% of developers reported using or planning to use AI tools in their workflow, with iOS app releases up roughly 60% year-over-year in late 2025. I’m meeting founders at networking events who have built deployed apps in a weekend, and they don’t know how to code. The cost and time required to prototype new products has dropped significantly. Tools like OpenClaw, Cursor, Lovable, Replit, and Bolt.new have made it possible for non-engineers to ship functional software in days rather than months.

On the surface, this is fantastic.

Democratization of software development is genuinely useful.

But why you’re reading with me is what I’d call the Spotify Test.

If every music streaming service offers the same 100 million songs and is therefore indistinguishable, what happens when every SaaS product can be built by anyone with a prompt and an afternoon?

If the music is the commodity, the platform that delivers it becomes the commodity too; except that the platform still has to charge you, while the music costs nothing to reproduce. Spotify’s structural trap is that the product it delivers (music) is available from every competitor at identical price and quality, while the cost of delivering it (licensing fees) is non-negotiable. Now apply that to software: if your AI-powered project management tool can be replicated by a competitor over a weekend, or built directly by a sophisticated user using Claude or GPT-4 or Gemini, what exactly is your product differentiation?

As I shared in my recent analysis of predictors of startup failure: “It’s like [X] but with AI!” isn’t a pitch; it’s a confession that your product can be recreated in ten minutes by anyone with access to ChatGPT. If your differentiation disappears when OpenAI ships a new feature, you don’t have a moat, you have a timer.” That was written before vibe coding went mainstream; the timer is now much shorter.

Krish Venkataraman wrote with Techstrong.ai that the AI commoditization problem is stark: “A majority of enterprises today are using OpenAI’s GPT-4 as their foundational model, mostly through Microsoft’s Azure AI service. Anthropic, Mistral and Cohere are also popular but less widely used. The performance of these foundational LLMs doesn’t differ widely, which basically means they are all using the same technology.” The analogy they use is Oracle versus IBM databases; both broadly similar, neither constituting significant differentiation on its own.

This is the musical streaming problem, translated into software: when the underlying technology (the AI model) is available to everyone at commodity pricing, and when the ability to deploy that technology in a product context (vibe coding) no longer requires a software engineering team, the product you build with it is not a moat.

It’s a demo. And demos, unlike products, are not businesses.

The Pipe, the Channel, the Platform, and the Code

Let’s start exploring the hook in my headline. What do we do about it? Marketing and business strategy have long recognized that distribution is not ancillary to value, it often is the value. A framework that makes this concrete distinguishes between the pipe, the channel, the platform, and the code.

The pipe is the fundamental infrastructure through which everything flows: the radio spectrum, the cable wire, the internet backbone, the smartphone operating system, the AI model API. Whoever owns the pipe extracts rent from everything that flows through it. The FCC knew this about radio. The cable companies learned it about coaxial wire. Apple learned it about the iOS App Store, which takes 30% of every digital transaction as a fee for access to the pipe. OpenAI is learning it about the API access to GPT-4.

The pipe generates the most durable, highest-margin revenue in any media or technology ecosystem, because it’s the prerequisite to everything else.

The channel is the distribution mechanism that sits in the pipe: the broadcast network, the cable system, the streaming platform, the social media algorithm, the app store category ranking. Channels aggregate audiences and direct attention. They are extremely valuable during the period when they have leverage over both content providers (who need the audience) and consumers (who need the content). They lose power the moment either side develops an alternative. Netflix was a channel until the studios took their content back. Spotify is a channel that loses power every time an artist builds a direct-to-fan income stream through Patreon or Bandcamp or Discord.

The platform is the product layer: the software, the interface, the experience, the specific application of the underlying pipe and channel infrastructure. This is where most startups operate, and where most startups mistakenly believe they have a durable business. Platforms derive power from network effects (the more users, the more valuable the platform to each user), from switching costs (how painful is it to move your data, your workflow, your relationships to a competitor?), and from brand trust. Platforms without genuine network effects or switching costs are perpetually vulnerable to better-funded or better-distributed competitors building the same thing.

The code is the specific implementation; the software that runs the platform. For most of the SaaS era, proprietary code was a meaningful competitive advantage. Writing a good algorithm was hard while building a complex database schema that worked at scale required years of engineering. Software engineering talent was expensive and scarce. All of these factors made the code itself something worth defending. Vibe coding is in the process of making that entirely untrue. When your code can be replicated by a competitor with a good prompt and a Cursor subscription, the code is not the moat.

I once wrote about startup distribution, “attention follows distribution. And distribution doesn’t come from hope. It comes from relationships.” The failure mode I described – startups failing in silence because they never built real distribution – is now going to become catastrophically more common as AI makes it trivially easy to build a product while leaving the harder problems of distribution and market ownership completely unsolved. The most important priority for any startup isn’t the product itself, it’s the marketing, which in its true definition means understanding the market, the customer, the distribution, and the competitive position before building anything.

Even if you disagree with me about marketing, appreciate that what is happening when you vibe code and release that app, is that thousands of others are looking at it, able to *freely* do it better. So, let’s not call it “marketing,” call it defensible distribution.

Is Being an AI-Forward Company a Commodity Position?

Apply the streaming lesson directly; in music streaming, the undifferentiated product (100 million songs available on every platform) means the platform itself becomes a commodity competing on price, UX, and algorithm quality, none of which generates the kind of durable competitive advantage that sustains a high-margin business. In software, AI is now making the code itself the undifferentiated product; every startup can access the same foundation models. Every startup can use vibe coding to build applications faster. Every user who is sophisticated enough will, in short order, be able to build their own customized version of your product for their own specific needs, at near-zero marginal cost.

This is not hypothetical. Kristin Darrow’s analysis of vibe coding’s state characterizes it in appreciating that vibe coding lowers the barrier to generating software. It does not eliminate the need for accountability. “The future norm is likely to be that organizations that traditionally would never have coded anything themselves are going to start creating purpose-built custom [software] given the ease of doing so.” Organizations that were your customers yesterday will be your competitors tomorrow, because they can now build what they were buying.

The pitch “we use AI to do X better than existing tools” has a half-life. OpenAI will add a feature, Anthropic will update a model, and Google will ship a product that does what you’re doing natively inside Google Workspace. If your value proposition is that you apply AI to a problem, and AI is now democratically accessible, you are Spotify with a library of 100 million songs that every other platform also has. The question is not whether this will happen, the question is how fast and whether your business model survives it.

Startup failure predictors: “If your differentiation disappears when OpenAI ships a new feature, you don’t have a moat, you have a timer.” The answer to the commodity problem is not to be better at using the commodity, the answer is to own something the commodity cannot replicate.

How Founders Actually Survive This

Return to what Gouveia concludes about music: the artists who survive are the ones building direct ownership of their audience. They are capturing phone numbers, building Discord communities, selling vinyl and merchandise directly to fans who care about them specifically, not about music as a utility. They are shifting their focus from the “ATM machine” model (feed the algorithm, hope for playlist placement, receive fractions of a cent) to ARPF: Average Revenue Per Fan. The question is not how many people stream your song; the question is how much revenue you extract from the people who actually care about you.

For startup founders, the translation is direct. The question is not how many users your AI product has. The question is what proprietary asset (what pipe or at least channel) you own that cannot be replicated by a competitor deploying the same AI tools you’re using.

There are four places where durable competitive advantage still exists in an AI-commoditized world, and they map directly onto the media history we’ve traced.

Own the data. Proprietary data is the closest thing software has to the pipe. If your product generates and compounds data about your specific customer context (their workflows, their organization, their historical patterns) that data cannot be replicated by a competitor starting from scratch. The model may be identical; the data trained on your customer’s specific reality is not. This is why Salesforce isn’t primarily threatened by vibe coded CRM alternatives (which I might remind, are free to make): the switching cost is fifteen years of customer relationship data, not the CRM software itself. If your AI product generates meaningful proprietary data as a byproduct of its use, you have an asset. If it doesn’t, you have a feature.

Own the distribution. Distribution is not a marketing aftterthought, it is a structural asset. A startup that has built an engaged audience, through content, community, category-defining thought leadership, or channel partnerships, has something a well-funded competitor cannot simply purchase overnight. The media companies that survived streaming disruption did so because they had recognizable brand assets (HBO, Disney) that commanded consumer loyalty independent of the distribution pipe. If your company is identified with a specific problem, a specific community, or a specific approach to a market, that identity creates distribution pull that the next AI tool doesn’t automatically inherit.

Own the methodology. In a world where the code is a commodity, intellectual property in the traditional software sense means less. Methodological IP, the proprietary process, experience-based curriculum, framework, or workflow your product implements, means more. This is why consulting firms with strong methodologies still exist alongside automated versions of their services. McKinsey’s value is not primarily the PowerPoint slides or the spreadsheet models; it’s the diagnostic methodology and the client trust that methodology has built over decades. If your product is an implementation of a genuinely novel approach to solving a problem, a proprietary methodology that produces better outcomes than competitors’ implementations of the same, that is defensible. If your product is a generic prompt wrapper around an existing model, it is not.

Own the relationship. This is Gouveia’s core argument to artists and one I’m reinforcing to entrepreneurs because it applies to software companies whether you agree with me entirely or not. The platform does not want your customers to have a relationship with you, the platform wants your customers to have a relationship with the platform. If your customers’ primary loyalty is to an app store category rather than to your specific product, you are in the same position as a musician dependent on Spotify’s editorial playlists. You are subject to the algorithm, and the algorithm has no loyalty. Building direct customer relationships (real ones, with high engagement and personal accountability) through an exceptional TEAM that is also a series of irreplaceable relationships, is the most durable and least replicable competitive moat in a commoditized market. It’s also the one most startup founders systematically underinvest in, largely because you don’t know how and you refuse to prioritize marketing, because it’s slow, doesn’t look impressive in a deck, and doesn’t fit neatly into a CAC/LTV spreadsheet.

I made an argument you should read in Why Startups Fail to Get Enough Attention which is the distribution relationship challenge: startups should be “stitching yourself into the ecosystem… strategic alliances, co-marketing partnerships, integrations, distribution deals.” This is not tactical promotion or paid advertising, this is building a pipe. Every integration you complete with a platform your customers already use is a distribution agreement. Every Public Private Partnership you enter with other entities is a multi-layered channel agreement. Every partnership with a community your customers belong to is a networking relationship. Every co-authored piece of research that establishes your company as the authority on your category is a distribution asset.

None of this shows up in a product demo. All of it is what actually determines whether a company survives the transition from novel to commodity.

Content is Valuable but the Pipe is Invaluable

The streaming wars taught us that content is valuable, but the pipe is more valuable. That the platform is where the money is made, but only until someone builds a better pipe. That differentiation evaporates faster than anyone predicts, and that when it does, what remains is whoever owns the customer relationship and whoever controls the distribution.

AI is doing to software what Spotify did to music: democratizing the product to the point where the product itself no longer differentiates. If you are building a company in 2026 whose primary value proposition is that it uses AI, you are building the equivalent of a music streaming service with a library of 100 million songs. I’m sure your songs are amazing! The question is why someone would pay to access them through you rather than through the next service or simply build their own playlist.

Peter Drucker identified that only two things create value in a business: innovation and marketing. In the age of AI commoditization, “using AI” is no longer innovation; it is table stakes, the equivalent of “we use a relational database” or “we have a mobile app.” The innovation is what you do with the AI that nobody else is positioned to do: the proprietary data, the distribution relationship, the methodological advantage, the community ownership. The marketing is how you make that difference legible and compelling to the specific people for whom it matters.

And whoever owns the pipe still wins. That was true in 1927, it was true when Comcast laid cable, it was true when Apple launched the App Store, and it will be true when your well-funded competitor shows up with a vibe coded version of your product next quarter.

The only question worth asking as a founder right now is a simple one: what exactly do you own that the commodity cannot replicate? If you don’t have a clear answer to that, you don’t have a startup, you have a timer.

The post How Streaming Shows That AI Is Making the Product a Commodity, Here’s How Startup Founders Survive appeared first on Startup Economist.

And no, I don’t mean your Series A.

Some wonderful conversations lately about energy. That it connects all things… that it’s the origin of the universe… that matching frequency is how people find partners, close friends, and love. There’s a word that gets thrown around startup ecosystems like cocktails at a launch party – passion – when the word we should actually say is startup energy. I think we’ve been using the wrong word.

Passion is fleeting. It’s what you feel because you’re energized to fix or startup something, it’s the buzz at the pitch competition, the after-party, the aha moment in the shower. Energy is something different entirely. Energy is what gets the product shipped at 2am, what holds a founding team together through the first pivot, what makes an investor lean forward across the table. Passion is a feeling while energy is a force and connection.

And here’s the thing about forces: the physics of them are well understood. We’re just not applying the lessons to entrepreneurship.

The Invisible Forces Running Your Startup

At the turn of the 20th century, a Polish physicist named Marie Curie was doing work that most of her contemporaries didn’t believe was possible; two-time Nobel laureate, the first woman to win one, the only person in history to win the prize in two different sciences. She worked in a leaky shed with barely any funding, routinely dismissed by the academic establishment, her health slowly deteriorating from radioactive exposure she didn’t fully understand. And yet she pressed on.

Why? Because she had glimpsed something real.

“The invisible forces of nature are revealed through energy,” Curie said.

Think about that for a moment in the context of your startup. The invisible forces (market pull, timing, cultural momentum, founder conviction) these don’t show up in your pitch deck. They can’t be quantified in a spreadsheet. But every experienced investor will tell you they can feel them walking into a room. Curie was describing physics, but she could have been describing the difference between a startup that has it and one that doesn’t.

The energy in your venture, between cofounders, between the product and its users, between your team and the mission, is the invisible force that either pulls everything together or slowly tears it apart. You can’t fake it and you can’t buy it with runway. If you’re honest with yourself, you know immediately which one your startup has.

Match the Frequency, or Miss the Market

Most founders approach fundraising, recruiting, and go-to-market like they’re filling out a form. They optimize the slides from a template while polishing language with practice. They talk to some advisors to work out objection handling. And they wonder why it doesn’t connect.

Let’s talk about Albert Einstein (who needs no introduction, though his biography still surprises people), who spent the last 30 years of his life chasing a unified field theory, trying to reconcile the behavior of the very large with the behavior of the very small. He never quite got there (how very entrepreneurial of him). But along the way he articulated something that remains one of the most useful mental models for entrepreneurs:

“Everything is energy. Match the frequency of the reality you want.”

That is strategy.

What Einstein is describing is coherence; the frequency of your startup (how you show up, what you prioritize, the story you tell, the team you build, the users you serve) either matches the market reality you’re trying to inhabit, or it doesn’t. You can want to be a category-defining B2B SaaS company at the frequency of a lifestyle business. You can want enterprise customers while operating at the frequency of a feature shop. The signal you’re broadcasting and the reality you’re claiming to build are either in sync, or they’re noise.

Investors feel this mismatch before they can explain it. “Good founders, wrong market,” they say. You hear it all the time because I know you do, “talk to customers,” which is really just a soft no because they don’t believe you’ll get there. It’s, “great market, but I’m not sure about the team.” What they’re actually saying, in the vocabulary of physics, is: the frequency doesn’t match.

Before your next investor meeting, your next hire, your next product decision, ask yourself: What frequency am I operating at and does it match where I say I’m going?

Matter Is Energy, So Is Your Company

In 1900, Max Planck made a discovery that broke physics and then rebuilt it from scratch. He was trying to solve a relatively boring engineering problem (how to make lightbulbs more efficient) when he stumbled into the quantum world. Planck discovered that energy doesn’t flow continuously; it comes in discrete packets, quanta, each one indivisible.

The implications were so radical that Planck himself resisted them for years. He’d spent decades working within classical physics, and here was his own math telling him the universe didn’t work the way anyone thought. He eventually accepted it, won the Nobel Prize in 1918, and launched the era of quantum mechanics.

“Every form of matter is energy,” Planck said.

Entrepreneurs, think beyond metaphor.

Your company is not a concept. It is energy made tangible; the founders’ conviction crystallized into code, into product, and into culture. Every hire you make is an energy decision. Every partnership, every market you enter or exit, every investor you take money from. You’re not building a company; you’re building a field, and everything you pull into it takes on the frequency of what you’ve established at the center.

This is why culture is not a ping-pong table and free breakfast tacos. Culture is the energy of the founding team extended outward into every system and decision the company makes. And like Planck’s quanta, it comes in discrete packets; each decision either reinforces the field or degrades it. There is no neutral. Every hire, every pivot, every “we’ll let it slide this time” is a packet of energy added or subtracted from the whole.

The question isn’t whether your company has energy. It does. The question is whether you’re being intentional about what kind.

If You Want to Understand Your Startup, Think in Terms of Energy

Nikola Tesla is the patron saint of founders who were right too early. He invented alternating current (the electrical system that powers essentially everything on earth) and died broke, in a New York hotel room, with a company that no longer bore his name. Edison stole the spotlight; Westinghouse profited; Elon borrowed it; Tesla worked in the voltage of a reality that wouldn’t catch up to him in his lifetime.

But Tesla wasn’t bitter, he was obsessed with something bigger than credit or cash. He believed, at a foundational level, that the universe ran on principles most people hadn’t yet learned to perceive.

“If you want to understand the universe, think in terms of energy,” Tesla said.

Substitute “startup ecosystem” for “universe” and you have the best piece of advice anyone has ever given founders, and almost nobody is using it.

When you think in terms of energy, your model for evaluating everything changes. The right investor isn’t the one with the biggest check, it’s the one whose energy adds to the field rather than complicates it. The right market isn’t the biggest TAM, it’s the one where your energy matches the pull. The right team isn’t the most credentialed, it’s the one where the combined energy is greater than the sum of the parts.

Tesla built a wireless transmission tower in Wardenclyffe, New York, trying to transmit energy (and information) across the globe without wires, decades before the internet was a concept. He failed to finish it but the idea of it, distributed, wireless, and universally accessible, eventually became the world we live in. His energy outlasted his execution.

Your startup’s energy should outlast you too. The founders you are shapes the company you build, which shapes the ecosystem you contribute to, which shapes the next generation of founders. This is the actual mechanism of how startup ecosystems grow.

Startup Energy More Than Passion

You stop treating energy as a soft concept and start treating it as a management discipline.

Audit your energy inputs. Who do you spend time with? Every conversation is an energy exchange. The investors who drain you, the advisors who cloud your thinking, the cofounders you’re conflict-avoidant with, these are energy problems, not personality problems. Solve them accordingly.

Protect your resonant frequency. As a founder, you set the base frequency for your company. That means your practices, habits, focus, and emotional state are operational variables, not personal luxuries. The startup world’s obsession with hustle culture gets this exactly backward; it treats the founder as an endlessly renewable resource when in fact founder energy is the scarcest resource in any early-stage company.

Recognize coherence as competitive advantage. When your product, your team, your go-to-market, and your story all operate at the same frequency, something remarkable happens: people feel it, users evangelize without being asked, investors move faster, and talent recruits itself. This isn’t magic, it’s coherence, and it compounds.

Build for transmission, not just reception. Tesla wanted to transmit energy freely across the world. The best startups don’t just accumulate value; they transmit it. To users, to ecosystems, to the next generation of founders who will build on what you started. Think about the energy your startup puts out, not just what it takes in.

The Physics of Building Something That Matters

Curie’s invisible forces. Einstein’s frequencies. Planck’s quanta. Tesla’s transmission.

Four scientists who changed the world with four ways of thinking about energy that map, with precision, onto the challenges founders face every single day.

The startup community talks endlessly about metrics, capital, product-market fit, and growth curves. All of it matters but none of it matters as much as the energy at the center of what you’re building.

You already know whether your startup has it. You feel it (or you feel its absence) every morning when you open your laptop. The investors you most want will feel it too, usually in the first five minutes. The team members who become your best people felt it when they took the call.

The physics haven’t changed since Curie worked in her leaky shed, since Einstein scrawled equations on a blackboard in Bern, since Planck reluctantly concluded that the universe was made of discrete packets of energy, since Tesla stood in a field trying to transmit power through the air.

Energy is the thing. It always has been: Match the frequency. Build the field. Transmit.

The post Energy Is the Startup Resource That Actually Matters appeared first on Startup Economist.

Cities love to count things that are easy to count: events, meetups, demo days. “Startups Launched.” Celebrating press releases. If activity were the same thing as value creation, every city with a monthly pitch night would be a company building machine.

It isn’t.

The discipline gap in startup ecosystem development is measurement, not dashboards full of vanity metrics, but actual startup ecosystem metrics and economic outcomes. If you’re a nerd about venture capital, innovation policy, and long-term regional competitiveness, like I am, you don’t measure things going on, you measure consequences.

The late Clayton Christensen wrote in “The Innovator’s Dilemma” that good management requires metrics aligned with outcomes, not process theater. In startup cities, too many have institutionalized process theater. Now, in fairness, I write a lot about the fact that you’re doing it and it’s not helpful, but I’ve never explicitly advised what to measure.

Startup Development Organizations (i.e. Accelerators) Should Be Judged on Outcomes, Not Butts in Seats

If your accelerator’s annual report highlights “number of cohorts,” “mentor hours,” and “demo day attendance,” it’s telling you it doesn’t know its role.

The job is not networking.
The job is not even launching companies.
The job is not startup meetups.

The job is increasing the probability of venture-scale success.

The National Bureau of Economic Research has shown that high-growth firms disproportionately drive net job creation in the U.S. economy. That is a target. That’s not the only thing to do! But it’s an appreciation of why I focus on “startups” – not small business formation and not lifestyle companies. There is nothing at all inherently wrong with those! They’re just not my specialty, and specialization matters (if you have business consultants driving your startup ecosystem, they’re probably harming more than helping). “Startup Accelerators” are in the business of facilitating the rapid growth and capitalization of startups.

An accelerator that produces 40 LLC filings, but zero Series A rounds has not succeeded; it hosted a workshop. The expectation should be explicit: survival, scale, capital, revenue growth, and regional stickiness. If those aren’t moving, the model is broken.

Cities Must Demand the Same from Themselves

What I want to talk about though is just about accelerators, it is about the ecosystem. Framing this around “Accelerators” helps focus your attention on the distinction between startups, new businesses, and companies, of which you want all! The metrics and expectations of each are not the same and so easily started in a city’s look at startups is asking how the Accelerators are delivering.

City councils, chambers of commerce, economic development offices, and trade associations often report “engagement.” Engagement is not an outcome; it’s actually a cost center in the operational cost of hosting such things.

If public dollars are allocated to accelerators, venture studios, startup grants, or “innovation districts,” then public leadership has a fiduciary responsibility to demand return on investment that isn’t in the form of “we hosted something.”

Most regions ignore this and default to participation metrics because they are politically safer. Activity is politically safer than value: value can fail while activity always looks like you’re trying.

The Startup Ecosystem Metrics That Actually Matter

If you want a city that creates those higher job creation companies, competes for venture capital, retains founders, and compounds wealth, measure these.

Startup formation rate per capita is useful because it normalizes ambition across population size. Raw startup counts flatter large metros, and its flaw reflected in why the venture capital investment data frequently flaunted is essentially useless when it shows Silicon Valley and New York at or near the top (well, duh.). Per capita formation shows whether entrepreneurship is culturally embedded.

Startup survival at 2 and 5 years forces long-term accountability. The U.S. Bureau of Labor Statistics notes that about 50 percent of small businesses survive five years. Startups are riskier; tracking survival clarifies whether support systems increase odds.

Revenue growth of supported companies reveals actual market validation. Revenue is proof that customers, not opinions, believe in the product.

Jobs created by startups, not small businesses broadly, isolates the high-growth impact. Conflating startups with restaurants distorts policy. They are not the same economic instrument.

Follow-on capital raised, especially Series A+, is one of the cleanest indicators of startup ecosystem health because pre-seed is local optimism (too often only tracked); series A is external validation. When outside investors wire capital, they have conducted diligence.

Percent of rounds including local investors matters because ecosystems collapse when local capital does not participate. If every serious round is led entirely from elsewhere, your city is exporting ownership.

Founder retention, three or more years in-region, tests whether you are building stickiness or subsidizing churn. If founders leave after seed funding, your ecosystem is the farm team.

Second-time founders launched locally may be the most underrated metric because a part of how we identify fundable ventures, or simply the founders more likely to be successful, is that they’ve already tried and they’re doing it again. Previously successful entrepreneurs have materially higher success rates in subsequent ventures. Retaining and recycling that talent compounds advantage.

Time from incorporation to first revenue forces programs to focus on commercial traction more than pitch polish.

Time from seed to Series A tests capital efficiency and quality of preparation. If your average is drifting upward, something is misaligned in mentorship, customer access, or product-market fit.

Commercial contracts signed with local anchor institutions connects startups to real procurement pathways. Universities, hospitals, utilities, and Fortune 1000 headquarters are not sponsors, they are customers. If your region cannot convert institutional density into contracts, it is wasting an advantage.

Private capital leveraged per $1 public funding is the most politically defensible metric available because if you’re underwriting your ecosystem but investors aren’t involved, something is off. It translates ecosystem performance into fiscal language legislators understand. If $1 of public capital catalyzes $8 of private investment, you have a multiplier; if it catalyzes $0.70, you’re subsidizing.

Founder Net Promoter Score – ask whether they would build in-region again. This surfaces qualitative ecosystem health. NPS, as it’s also known, is widely used to assess loyalty and advocacy. If founders would not recommend building in your city, you have a structural trust problem. If founders aren’t a fan of a local program, you have something to fix. Important in this one is rigor around statistical significance and reach – too many run these survey questions through a newsletter or through a specific organization, resulting in tremendous bias rather than what the ecosystem actually thinks.

Startup density per 100,000 residents contextualizes ecosystem maturity relative to peers. This gives us more meaningful comparison.

Founder in-migration versus out-migration might be the clearest directional signal. Are ambitious people moving in to build? Are they leaving once they are capable? Greater than that question alone, we know that immigration (yes into the country but we also know that from within a country to your city), is a catalyst of entrepreneurship.

Why These Startup Ecosystem Metrics Work

In metrics (or KPIs – key performance indicators), we need some norms that are consistent. I like pushing for what’s known as SMART metrics (Specific, Measurable, Achievable, Relevant, and Time-bound) but we don’t need as much structure since it’s more important that you simply start measuring outcomes. What we find in these are three consistencies:

1. They measure value creation, not programming volume – revenue, follow-on capital, contracts, and survival represent wealth generation.
2. They are longitudinal – they force multi-year accountability rather than annual press cycles.
3. They align incentives across actors – Accelerators, investors, city officials, and chambers succeed together only when founders succeed.

If you run an accelerator and cannot report survival, revenue growth, follow-on capital, and founder retention, you are not managing an economic development instrument, you are managing an event calendar, and your operational costs are quite possibly actually a net drain on the ecosystem with founders and investors really only funding your revenue stream.

If you run a city’s innovation office and do not publish annual ecosystem outcomes, you are not stewarding capital, you’re marketing.

Founders tend to be rational.
Venture capital is rational capital.
Both move environments to compound advantage.

Are we measuring movement or are we measuring wealth creation? Prove it.

And then publish the answer.

One more thing, because this always gets distorted: none of this means “only count funded companies,” and it absolutely does not mean chase unicorns. Venture capital is a signal, not the goal. A healthy startup ecosystem is one in which founders systematically move from idea to revenue, from revenue to growth, from growth to durable companies, whether or not they ever raise a $100M round. Outcome metrics are about whether your environment increases the probability that ventures work out; they tell you if local programming actually improves survival, accelerates traction, deepens customer adoption, and builds repeat founders who stay. If your founders are consistently building viable, growing companies (funded or not) your ecosystem is functioning AND funding is one of those signals. If they aren’t, no number of pitch competitions or Tech Week hashtags will compensate.

The post Startup Cities Need to Measure and Expect Outcomes, Not Activity. Here’s How. appeared first on Startup Economist.

Perfection is the fastest way to look inexperienced.

Not because ambition is bad and not because polish doesn’t matter but because the very definition of a startup makes perfection impossible.

A startup is not a smaller version of a big company, it is a temporary organization searching for a scalable, repeatable business model. That language comes from Steve Blank and is echoed by Eric Ries in The Lean Startup. If you’re searching, you do not have it all figured out. If you claim you do, you either misunderstand the word “searching” or you’re selling theater.

And investors, partners, and experienced operators can smell theater.

Imposter Syndrome in Founders Isn’t a Flaw; It’s Evidence You’re Stretching.

Psychologists Pauline Clance and Suzanne Imes first described “imposter phenomenon” in 1978, noting that high-achieving individuals often attribute success to luck and fear being exposed as frauds (notably, studied in women). Subsequent research shows imposter feelings are common among high performers, especially in uncertain environments.

Startups are uncertainty engines. If you don’t occasionally feel underqualified, you’re probably not attempting anything difficult.  And notably, this is the critical distinction between a startup and a new business for precisely the reason that this distinction matters: a new business can write and follow a business plan, there is certainty; the point of a “startup” so-named is that it is not that, it can’t just write out the plan of similar businesses and execute that, it’s uncertain.

The mistake founders make is overcorrecting. Instead of acknowledging uncertainty, they mask it with overconfidence. The pitch becomes a performance of inevitability:

“We just need capital.”

“We’ve solved it.”

“Everything is ready to scale.”

“What we’re doing is unique, we don’t have competition.”

No, it isn’t.

If everything were figured out, it wouldn’t be venture-scale risk. It would be a bank loan.

Overconfidence doesn’t signal strength. It signals blindness to gaps. And nothing unnerves experienced capital more than a founder who can’t see their own blind spots.

We need your gaps.

Life Isn’t a Fairy Tale; Neither Is a Startup

I recently saw a thoughtful breakdown about declining birth rates and permanent personal relationships. The observation was simple: modern expectations are absurd. We now expect a partner to be financially secure, emotionally fluent, physically fit, mentally resilient, constantly communicative, adventurous, available, stable, and ambitious, all at once.

That’s not a person, that’s a Pixar character.

Global fertility decline is well documented. Sociologists increasingly attribute part of the delay or avoidance of family formation to economic precarity and rising expectations for partnership stability. When expectations approach fantasy, real humans can’t compete.

Founders do the same thing to themselves. Even if you don’t think you do, most of you are. Founders think a startup must show flawless product, perfect traction, elite team, airtight unit economics, massive TAM, defensible moat, and a fully built roadmap before they deserve belief.  After all, that’s what your “date” (the investor on the other side of the table) is *saying* they need it.

But is that really what they need or is that just what they’re talking about with you because something is off?  Perfection isn’t entrepreneurship, it’s mythology.

No investor is looking for a fairy tale; they’re looking for capability in the presence of imperfection.

Take a look at that Painting

Venus is the Renaissance ideal of perfection: divine symmetry, idealized beauty, immaculate form. The painting embodies the era’s obsession with proportion and divine harmony.

And yet, look closely at her. Her neck is elongated unnaturally, her shoulders don’t align correctly, and her left arm attaches at an impossible angle. Her proportions violate human physiology.

Art historians have pointed this out repeatedly; Botticelli was not incompetent. He distorted deliberately. He exposed reality; the ideal had to break perfection to be ideal.

That’s the metaphor: perfection requires distortion.

Pitching Isn’t Performance, It’s Gap Discovery.

Good pitch work is diagnostic work and I need you all to stop thinking that we’re working on a pitch so you can get funding.  That’s not the point!

In environments like Founder Institute, founders pitch weekly; not because repetition makes you charismatic, because repetition reveals weakness.  And we’re not actively seeking weakness, that misses the point – when you pitch every week while simultaneously building the company, gaps surface:

• Your customer isn’t as defined as you thought
• Your channel isn’t repeatable.
• Your differentiation is thinner than you hoped.
• Your financial model assumes behavior you haven’t validated
• Your team lacks a critical capability.

That is not failure, that is progress.  The number of times I’ve held office hours with founders who push back on my feedback because it’s not what we think, not what we want, or wherein you try to convince me I’m wrong or that it’s not a problem is ASTOUNDING – you’re completely missing the point.  I don’t care if I’m wrong and you’re right, it’s your startup; I’m giving you feedback about gaps and weaknesses I see and hear.

The mistake is pretending the gap doesn’t exist and plowing forward to the next slide because when you skip the gap, your audience actually hears: “We can’t actually do this.”

When you acknowledge the gap, your audience hears: “We know what must be solved, and here’s how we’re solving it.”

That difference determines whether you look naive or investable.

The 10 Slides and the Gaps They Expose

Guy Kawasaki popularized the 10-slide pitch deck framework: Problem, Solution, Business Model, Underlying Magic, Marketing & Sales, Competition, Team, Traction, Projections, Ask.

Most founders treat these as content requirements.  Trust me, when you pitch from a template (or worse, an AI generated slide deck), we know.  What you have here is actually stress tests, a teaching tool: a diagnostic of your startup in working through how to communicate what you’re doing.

Problem
You must articulate pain clearly and specifically; if you can’t, the gap is customer intimacy. Maybe you haven’t done enough discovery (odds are you haven’t); that’s fixable but ignoring it is not acceptable.

Solution
Is it a feature set or a transformation? If it sounds incremental, the gap is differentiation. Saying “we’ll iterate later” doesn’t reassure anyone and saying, “we don’t have any competition” is either ignorance or a lie.

Business Model
If revenue logic feels hand-wavy, the gap is economic understanding. Venture investors don’t fund hope, they fund scalable mechanics.

Underlying Magic
If your defensibility is “we’ll move fast,” the gap is strategic depth; speed without moat becomes exhaustion.  Start to note here, gaps can emerge BETWEEN slides (or points in your pitch).  If your solution doesn’t have a competitive advantage, then whatever you say here is probably wrong.

Marketing & Sales
If you say “we’ll hire sales,” you’ve revealed the gap: you don’t yet have a repeatable channel. Capital cannot buy product-market fit, it accelerates what already works.

Competition
If you dismiss incumbents as “legacy,” the gap is market realism. Arrogance reads as inexperience.

Team
This is where most founders posture OR hide their shortcomings – both are wrong. They inflate advisory boards and overstate experience.  They merely show their photos and say they are the CEO who formerly worked for Google. The real gap question is capability alignment: What critical function is weak? Product? Distribution? Regulatory? If you surface that gap honestly and explain how you’re closing it, trust increases.  Again, note the slide-to-slide gaps!  If you’re saying that you’re going to scale quickly, but your marketing & sales slide is elementary, and no one on your team can do it, you’re fooling yourself and we see it.

Traction
If metrics are vague, the gap is discipline. Measure what matters or admit you’re still discovering what matters.

Projections
If the numbers assume smooth adoption curves without constraints, the gap is operational experience.  If anywhere, this is where you actually show gaps because that smooth curve is unrealistic.

Ask
If the raise size feels culturally inherited rather than economically justified, the gap is capital strategy. Investors notice when your projections don’t require your ask.

Every slide is a mirror and gaps are normal; pretending they don’t exist is disqualifying. By the way too, I just explained here one of the easy ways we use this 10 slide template as a diagnostic, we go through it backwards – try it.

The Story Flow: Why, Who, When, Where, What, How

I prefer a different narrative order.

Start with Why. Not inspiration! Economic inevitability: What change in the world makes this necessary?

Then Who. Front-load capability. Not ego. Capability. If your team lacks something essential, state it and explain how you’re addressing it. When you clarify team strengths and weaknesses early, everything else gains context.

Then When. Timing frames urgency. Why now? Regulatory shift? Technological inflection? Cultural behavior change? If timing is fuzzy, the opportunity feels optional.

Then Where. Market context. Geography, sector, adjacency. Where does this wedge in?

Then What. Now the solution makes sense because we understand the environment and capability.

Finally, how. Execution mechanics. Distribution, economics, partnerships, capital structure.

When founders reverse this and start with product features (as almost all of you do), they force the audience to infer competence and timing on their own. That’s unnecessary cognitive load and it amplifies the perception of gaps.

Be explicit. Be structured. Be aware of your weaknesses before your audience discovers them for you.

Founders, Embrace Imperfect and Investable

No serious investor expects perfection – they might say they do; I’m being harshly critical and direct about *them* in saying, they’re not serious, they’re a problem in the startup ecosystem because a founder and their startup can not be perfect, which means an investor expecting it is exposing their ignorance.  Great investors expect pattern recognition, honesty, and the ability to close gaps.

Startups are asymmetric bets. Partners, employees, and capital join you because they see where they fit in the story. If your pitch implies you don’t need them (because everything is already solved) you’ve eliminated their role.

You are not selling inevitability, you’re selling capability under uncertainty.

A founder who says, “Here’s where we’re strong. Here’s where we’re not. Here’s how we’re addressing it,” signals maturity.

A founder who says, “We’ve solved everything, just wire the funds,” signals fantasy.

Stop trying to be perfect; be clear, be self-aware, and be strategically imperfect.

If you look at your current deck right now, can you identify three real gaps you’re actively closing? Or are you hiding them in adjectives and optimistic graphs? 

That answer determines whether you’re building a company or pitching a fairy tale.

The post Founders, Stop Trying to Be Perfect appeared first on Startup Economist.

Articles and perspectives considering the end of STEM education, given the rise of AI, have been filling my inbox lately. And in fairness and to be clear, STEM professionals are pointing, “of course not, Math will always be a critical skill, and Science is clearly more than an LLM doing research,” no indeed, STEM isn’t dead. But the demise of likely hundreds of thousands of engineering jobs raises a question fun to consider, and it’s clear many are doing so; what is future ready skills curriculum?

Ossiana Tepfenhart wrote in Medium, a year ago, that Gen Z is turning away from STEM. The LA Times, with UC San Diego’s workforce researcher and education Professor, John Skrentney, wrote a year before that, why pushing STEM is turning out to be a terrible investment. Brick Labs’ John Neretlis, “STEM is Dead.”

We can argue about if it’s true but that’s not why I’m here. Reading a lot about education, EdTech, and curriculum this weekend, I couldn’t help but keep thinking that while it isn’t dead, it’s important to still ask “what’s next?” Or perhaps, what is increasingly important in this emerging future??

AI does not replace technology.
AI replaces pattern recognition and execution.

The future belongs to people who understand people.

STEM teaches you how systems function. ECPM teaches you how humans behave inside those systems. And markets are human systems.

Economists such as David Autor at MIT have demonstrated that automation displaces routine, rule-based tasks while increasing the value of non-routine analytical and interpersonal work. The data shows polarization: middle-skill routine jobs decline; roles requiring judgment, coordination, persuasion, and problem framing increase in relative value.

Notice what that isn’t: it isn’t coding.

It’s decision-making, interpretation, coordination, and influence.

So, drawing from my online marketing past where a CPM is a measure of value (in online advertising), I got giddy at the implication of realizing that there is an acronym for a future in education that orients people better to creating value: ECPM.

Economics: Allocation of Scarce Resources

AI can model markets, it does not allocate capital or talent, and it isn’t going to deal with these looming questions of needing UBI (Universal Basic Income) or a mythical Post-Scarcity Society.

Capital allocation remains a human governance problem. Even in algorithmic trading environments, humans define risk tolerance, regulatory boundaries, and strategic objectives; we might be able to automate away hedge funds or day trading but actual capital allocation in society requires far more than math.

The OECD has repeatedly emphasized that entrepreneurship and productivity growth depend on efficient resource reallocation toward high-growth firms. Understanding incentives, marginal tradeoffs, opportunity cost, crowding out effects, and capital formation is what determines long-term prosperity.

If you don’t understand economics, AI becomes a productivity amplifier for someone else’s strategy.

You become the labor input.

Communications: Coordination at Scale

Psychologist Daniel Goleman (look at that, can you guess what the P is going to be?) has published research on leadership effectiveness consistently linking communication clarity to performance outcomes.

I want to highlight communication clarity there because most of my work with startups and governments is oriented to clearer communication setting proper expectations. I’m astounded by how many founders push back on pitch (communication) feedback when we talk about investor expectations; I’m not trying to get you funding, I’m trying to help you fix that what you’re saying doesn’t add up!

Language organizes coordination.
Markets are coordination machines.

AI generates text; it does not bear reputational consequences.

The workforce advantage in an AI world will go to those who can synthesize complexity, persuade stakeholders, frame decisions, negotiate tradeoffs, and align distributed actors.

Communication is not presentation skill. It is institutional architecture.

Psychology: Understanding Incentives and Cognitive Bias

AI models process information; they do not experience motivation. Markets are not equations; they are networks of human bias.

Daniel Kahneman’s work in Thinking, Fast and Slow and decades of behavioral research demonstrate that humans systematically deviate from rational models. Framing effects, loss aversion, anchoring, and status quo bias, these distort decisions every day.

AI can identify patterns in that data.
It cannot live inside the bias.

The person who understands cognitive load, fear responses, emotional triggers, and decision fatigue will design products, policies, and businesses that AI executes or engineers build.

Psychology is not soft science, it’s leverage.

Marketing: Value Perception, Not Product Engineering

If you think technology wins markets, you have not read history.

The QWERTY keyboard survived because of adoption lock-in, not engineering superiority. VHS beat Betamax for distribution reasons. Apple captures profit margins because of brand positioning, not semiconductor design.

Marketing is the applied science of value perception.

This time, I read The Effects of a Market Orientation of Business Profitability, in the Journal of Marketing , thanks to UC Berkeley’s John C. Narver and Colorado State University’s Stanley F. Slater. Repeatedly shown, well beyond that work, is that that customer orientation and market intelligence correlate strongly with firm performance. Simply put, is one of my frequent rants: marketing is not advertising and if you think it is, you’re hopefully appreciating by poor marketing is the second leading cause of startup failure.

Companies that understand customer behavior outperform those that focus purely on product excellence.

AI will optimize messaging and segment audiences.
It cannot decide what humans should care about.

That is a psychological and economic judgment.

More than in startups, in startup ecosystems (which I study and explain extensively) regions that emphasize invention over meaningful narrative capably distributed repeatedly underperform.

Technology without market alignment is academic theater.

Hopefully Clear, ECPM Wasn’t Just About STEM, it Makes Us Consider, “Yeah, but AI?”

Large language models and generative AI systems excel at synthesis and execution of structured data. They predict next tokens.

• They do not originate goals.
• They do not carry moral accountability.
• They do not own risk.

Humans who understand economics, communications, psychology, and marketing already determine:

• What problems matter
• What tradeoffs are acceptable
• What narratives drive adoption
• What incentives shape behavior

STEM builds the machine.

ECPM decides why it exists.

The labor market data already reflect this. LinkedIn’s 2025 Global Skills Report shows rising demand for skills like strategic thinking, communication, and relationship management. Wait, let me actually parse this a bit – they have, Conflict Mitigation (psychology and communication), Adaptability (marketing), Process Optimization (economics and marketing), Public Speaking (hopefully I don’t need to point this one out), Solution Based Selling (are you following me yet? marketing and psychology), Customer Engagement & Support (marketing, psychology, and communication), Budget & Resource Management (economics and marketing), Go To Market Strategy (I’m not even), Growth Strategy (ffs, it’s like they wrote my article), and Risk Assessment (marketing and economics). McKinsey’s 2023 report on generative AI concludes that roles requiring social and emotional skills are less automatable.

Routine cognitive execution is compressing in value.
Judgment, coordination, persuasion, and capital allocation are not.

“Engineering is Dead? b.s.” I’m not saying that or you’re not paying attention

Engineers who understand ECPM will lead.
Engineers who do not will be managed.

Founders who study market psychology build scalable companies.
Founders who worship product complexity build demos.

Policy professionals who understand incentives design durable ecosystems.
Those who chase innovation theater subsidize activity without value.

If you want to remain distinct from AI, become the person who decides what is done with STEM, how it is governed, and what humans are incentivized to do around it all, that’s ECPM.

Economics, Communication, Psychology, and Marketing
Not as electives: as core curriculum.

STEM remains essential but STEM alone produces implementers (and again, not paying attention if that makes you angry as a STEM professional, I didn’t say STEM produces implementers, I said STEM alone). ECPM produces strategists.

The future of the workforce is not anti-technology; it is pro-human behavior. Are you training students to build tools or to allocate power?

AI will handle the former while the latter remains human.

For now, for a few years, advantages will go to those who can code fastest as we transition into AI. In time, as it always ultimately has, it will go to those who understand why anyone cares.

ECPM: Economics, Communications, Psychology, Marketing.

Here’s why THAT order: Future Ready Skills Curriculum

Economics comes first because everything begins with allocation: scarcity, incentives, and tradeoffs; if you don’t understand marginal cost, opportunity cost, capital formation, or incentive distortion, you’re just rearranging deck chairs. Economics is the structural layer.

Communications comes next because organizations fail not because they lack ideas but because they lack coordinated execution. Research on team performance consistently shows communication clarity predicts outcomes.

Psychology is still before even marketing (gasp! Yes, I said it) because incentives don’t operate on rational robots and while communication without psychology is in-and-of-itself a valuable still, adding psychology is everything. Keep in mind, incentives and decisions operate in biased humans. Behavioral economics exists precisely because psychology alters economic outcomes. Kahneman didn’t win a Nobel Prize for vibes, he won it because psychology changes markets. Speaking of which…

Marketing comes last because it’s applied behavioral economics at scale. Marketing is where economics and psychology meet persuasion in the real world. Narver & Slater’s market orientation research: firms that orient around customers outperform product-centric firms.

ECPM also has a strategic logic:

Structure > Alignment > Behavior > Adoption.

That’s the stack to teach. That’s what everyone should learn.

The post Forget STEM, The Future Ready Skills Curriculum is ECPM appeared first on Startup Economist.

Synonymous with space, Texas is far more than Houston being informed of a problem, and after an incredible tour of Firefly’s rocket facilities in Briggs, Texas, with Space Force Association, I needed to dig in.

Texas got into aerospace the way Texas gets into anything: by building a messy, expensive, politically complicated machine that becomes unavoidable.

If you want a simple story, go watch Apollo 13 and call it a day. The real story is that Texas has been stacking aerospace capability for generations, across Houston’s human spaceflight brain trust, North Texas’ industrial-scale defense and aviation manufacturing, the Gulf Coast’s petrochemical-grade heavy engineering, Austin’s hardware-plus-software startup metabolism, and West Texas’ wide-open test ranges where you can light rockets without immediately annoying millions of neighbors. That geographic diversity is the structural reason Texas keeps winning aerospace and space activity even when the headlines bounce between “Space City” and “Starbase.”

Yes, I’m going to use the phrase “Texas Aerospace Space,” because the sector is now one fused ecosystem: airlines, MRO (maintenance/repair/overhaul), avionics, rotorcraft, drones, eVTOL, satellites, lunar missions, propulsion testing, spaceports, workforce pipelines, defense procurement, and venture financing. Trying to separate “space” from “aerospace” in Texas is like separating barbecue from brisket; technically possible but meaningfully lying.

Space City Launches a State-sized Flight Stack

Houston became “Space City” because NASA put the nation’s human spaceflight nerve center there.

NASA’s Johnson Space Center (originally the Manned Spacecraft Center) opened in the 1960s, and it’s been designing, developing, and testing spacecraft, training crews, and running Mission Control ever since. NASA’s history page defines the role: JSC has overseen NASA’s human spaceflight missions at the Mission Control Center.

That matters culturally (Houston’s identity) and economically (a durable cluster of contractors, engineers, and adjacent industries). But if you stop at NASA, you miss the shift: Texas went from being a government space state to being a commercial space state, without losing the government base. That’s the barbecue sauce. Where Florida has rockets, California has talent, Colorado has space business, and Alabama has NASA heritage, Texas has all of those ingredients in one state, spread across multiple metros, plus a regulatory posture that tends to say “build” more often than “submit a 43-page environmental narrative before you’re allowed to buy a wrench.”

The commercial shift shows up as physical infrastructure, policy, and new institutional players.

Houston Spaceport at Ellington, for example, is a federally licensed commercial spaceport on 400 acres at Ellington Airport, built as a hub for aerospace and aviation companies and for R&D and fabrication. Space “ecosystems” collapse when they can’t test, integrate, assemble, and iterate locally – that’s your summary; your, “Why Texas.” A lot like health innovation, you don’t build this stuff a coworking space.

And then there’s South Texas: SpaceX’s Boca Chica / Starbase complex turned a once-quiet tip of the state into a manufacturing-and-launch reality show, except the props are stainless steel rockets and the audience is the global aerospace supply chain. The cultural point isn’t whether you love Elon Musk. The economic point is that a rapid-iteration launch-and-manufacturing site creates gravitational pull for suppliers, machinists, welders, avionics talent, software, and mission operations. Even the debates around Starbase’s growth underline that this is a real industrial footprint with real benefits (and consequences).

So: Houston gave Texas the institutional brain. South Texas gave it a commercial launch factory. North Texas gave it manufacturing scale. Austin adds startup tempo. West Texas gaves it test space.

That’s a state-sized flight stack.

The Origin Story: Aerospace Before Space

Texas aerospace didn’t begin with rockets. It began with aviation (military, commercial, and industrial) because Texas sits at the intersection of geography (big skies, big distances), defense (bases and procurement), and manufacturing logistics.

North Texas is the simplest example, where Fort Worth is one of the country’s most consequential defense aerospace manufacturing nodes, anchored by Lockheed Martin Aeronautics and its fighter production footprint. Lockheed Martin itself highlights the North Texas manufacturing line producing the F-35.

That legacy does two underappreciated things for the space economy.

First, it normalizes complex manufacturing at scale; space hardware isn’t just innovation, it’s process control, QA, supplier qualification, and people who don’t panic when a tolerance issue ruins the week.

Second, it builds the middle of the labor market: technicians, machinists, inspectors, electricians, program managers; exactly the jobs space startups need but most innovation ecosystems forget exist because they’re too busy building panels about AI in the metaverse taking our jobs.

SWIFT (Space Workforce Incubator for Texas) is explicitly trying to solve that workforce reality with a statewide pipeline across educational institutions and industry, aimed at space talent development. And the reason SWIFT is necessary is also the reason Texas has an advantage: the space economy is not mainly PhDs. It’s a lot of skilled technical work; SWIFT’s own analysis emphasizes the need for welders, machinists, and certifications, not just rocket scientists.

Similar, or really, the same, industrial competencies power both.

The Modern Engine: NASA + commercial space + defense + advanced air

Texas now has multiple, overlapping “centers of gravity,” each pulling a different part of the aerospace-space stack into the state.

Houston remains a human-spaceflight and mission-operations epicenter through NASA JSC but Houston is also now a commercial space HQ town.

Axiom Space, founded in Houston, is building commercial space infrastructure and planning a commercial space station, while also running human spaceflight services. Axiom’s own announcement of its Houston HQ and mission makes the ambition explicit.

Intuitive Machines (Houston) is a different kind of proof: a commercial lunar program with missions under NASA’s Commercial Lunar Payload Services (CLPS) framework. NASA’s release on Firefly’s Blue Ghost landing underscores how NASA is using commercial partners to deliver payloads and science; and Intuitive Machines’ mission pages and NASA releases show the cadence of lunar activity and the seriousness of the payload work.

Austin and the Austin metro area are building a parallel story: space hardware and propulsion capability on one side (Firefly Aerospace in Cedar Park is the obvious anchor), and advanced air mobility on the other (eVTOL, drones, autonomy).

Firefly’s Blue Ghost program is not a startup pitch deck, it’s a lunar lander that successfully delivered NASA science and ran surface operations: real mission execution, not cosplay.

And Austin’s “air” side matters because the aerospace future is not only orbit; it’s also low-altitude mobility, logistics, autonomy, and distributed electric propulsion. LIFT Aircraft’s HEXA and the broader eVTOL movement sit right in that seam between aviation and “space-grade” systems engineering.

Even Uber’s activity is a signal of the platform economy colliding with aviation (you did know Uber is working on drone transportation here, yes?). Uber’s partnership with Flytrex is explicit about integrating drone delivery into Uber Eats pilot markets.

Meanwhile, West Texas is and will always be a place where you can test loud things while they pump oil. Blue Origin’s test facility near Van Horn has been part of its engine testing narrative for years, including public statements about operations at that site.

Of course, South Texas is the manufacturing-and-launch end of the spectrum with SpaceX’s Starship testing and launch posture.

The point is not that any one company makes Texas space, it’s that Texas has the full ladder (space elevator would have been a cooler metaphor but it doesn’t work as well as ladder): workforce ? manufacturing ? test ? launch ? mission operations ? commercialization pathways ? defense adjacency ? capital.

Most regions have one or two of those. Texas has most of them, and increasingly all of them.

The Institutional Layer: state policy, funding, and “grown-up” coordination

Texas is not NASA heritage, it built the policy direction and funding instruments.

The Texas Space Commission and its Space Exploration & Aeronautics Research Fund (SEARF) are the result of the Texas Legislature establishing the fund in 2023 and appropriating $150 million for grants across multiple priority areas. The Commission also publishes award information and specific grant releases (including awards to aerospace companies), which is how you know the state isn’t just a press conference machine in this sector.

The Commission frames SEARF as providing grants to entities “involved in space exploration, research or aeronautics” (Shoot… aeronautics… Okay, so this is The Texas Aerospace Aeronautics Space). Aerospace clusters don’t grow sustainably on one-time competitions, logo-stuffed summits, or “innovation districts” that are really just rezoned real estate. Aerospace grows when there is stable, multi-year infrastructure and workforce investment, aligned with the actual needs of manufacturers and mission operators.

SWIFT is the workforce pipeline player, building partnerships across Texas educational institutions to train space talent.

The Space Force Association’s Texas Chapter is part of the national-security connective tissue, explicitly focused on connecting military, industry, and academia across Texas.

And Houston Spaceport is itself an institution: it’s a city-operated, federally licensed facility designed as a hub for commercial aerospace and aviation R&D and fabrication.

Those three alone form a triangle that most places would kill for: workforce + definitive association + physical spaceport infrastructure. Add NASA JSC and you’ve got a fourth vertex: human spaceflight expertise.

If Texas screws this up, it won’t be because it lacked assets, it will be because it failed to operate the machine with excellence.

Talent Pipeline: the part everyone pretends just spits out from STEM

Texas has major research universities with deep aerospace and space engagement, but the more important trend is that institutions are being pulled into a more operational, workforce-and-commercialization posture.

UT Austin’s Center for Space Research, for example, has been directly tied into SEARF-related funding pathways (including education and outreach efforts).  Rice University’s Space Institute is building partnerships and even accelerator-style programming tied to Houston and the Houston Spaceport, explicitly connecting global aerospace partnerships and commercialization pathways.

University space programs often die in the gap between research and industry adoption but here the move ties university efforts into statewide grants and into physical hubs, avoiding the classic problem: brilliant labs producing papers while industry imports talent from somewhere else.

Venture Capital and Startup Development in Texas space

Space startups are not like SaaS startups, and pretending they are is how you get ecosystems full of pitch nights and zero flight hardware.

Capital in space behaves differently because timelines are longer, capex is real, the customer set is concentrated (government + primes + a few large commercial buyers), and technical risk is non-trivial. That means the space funding stack in Texas tends to look like a mix of specialist funds, defense-adjacent investors, and a growing set of generalist firms that have decided aerospace is now venture-backable again.

SpaceFund (Houston) is one of the clearest Texas-based specialist examples, explicitly positioning itself as an early-stage venture fund dedicated to space startups.

On the startup development side, the most meaningful Texas space accelerators are the ones that connect founders to facilities, manufacturing partners, and procurement pathways; not just mentors who give advice from a podcast microphone. Rice Space Institute’s programming and Houston Spaceport’s positioning are signals of that kind of infrastructure-first approach.  Let me frank for a moment though, this is where Texas has a gap to close; which is really a tremendous opportunity we should fix.

As for major events relevant to the space economy, the biggest ones Texas founders and ecosystem builders should obsess over are the events that reliably attract government buyers, primes, and technical partners. Most of those are national (SpaceCom is in Orlando), but Texas also has its own spaceport and industry programming such as the Texas Space Summit in San Antonio or Texas Space Commission events, and increasingly a statewide grant-and-workforce narrative that attracts convenings.

Texas has specialist capital (like SpaceFund), state capital (SEARF grants), federal mission pathways (NASA CLPS and others), and multiple physical hubs (Houston Spaceport, Starbase region, West Texas testing). Those four together are why space founders scale here.

For Now, It’s The Aerospace Employers That Make the Startup Layer Possible

Startups don’t float above reality, they feed on supply chains, labor pools, and anchor customers such as Boeing, which has a substantial footprint in San Antonio through Port San Antonio’s aerospace cluster and maintenance/modification operations.

That’s why North Texas’ defense manufacturing footprint matters. This is why the West Texas engine-test story matters.

And that’s why the advanced air layer matters too: LIFT Aircraft and Uber’s drone-delivery integration are not spaceflight, but they are part of the same aerospace future: autonomy, flight safety, certification, operations, and new mobility business models.

Texas is one of the few places where a founder can plausibly build across those layers without leaving the state.

What Texas is Really Building

Texas is building an aerospace economy that looks less like a single cluster and more like an integrated production system. Think of it as a portfolio:

• Houston is mission operations, human spaceflight, training, and an expanding commercial space HQ base.
• Austin is the hardware-plus-software startup engine, with lunar missions (Firefly) and advanced air mobility experimentation (LIFT).
• DFW is manufacturing scale, defense aerospace supply chain density, and a pipeline of industrial talent that space companies actually need.
• South Texas is manufacturing + launch iteration at a pace that changes what “cycle time” means in rocketry.
• West Texas is test space for engines, vehicles, and high-risk experimentation where geography is an asset.

Then the state overlays funding and coordination through the Texas Space Commission and SEARF.

Texas assembled the full production system.  So, is it working as best as it possibly can.

Capacity Building in the Texas Aerospace Space

I’ve written frequently in my ecosystem development work that capacity building is not a calendar of events; it’s the deliberate construction of conditions that make venture outcomes repeatable (see my broader framing on ecosystem capacity building and why most regions mistake activity for progress). With that lens, here’s how Texas stacks up in aerospace and space, where it’s strong, and where it might stop congratulating itself to get sharper.

1) Overcoming silos through shared infrastructure and community. Texas does well when the “shared infrastructure” is physical: Houston Spaceport exists; Starbase exists; university labs exist; defense manufacturing exists. Where Texas still struggles is the social layer: founders in Austin, mission operators in Houston, defense suppliers in DFW, and test operators in West Texas can still operate like separate countries. The fix is not another summit. The fix is shared programs with shared KPIs: supplier matchmaking tied to actual procurement, workforce credentials recognized statewide, and a consistent cross-city calendar of technical demo days that are operational, not performative.

2) The missing middle: widening the gap between early startup and established company. Texas is good at early-stage formation (Austin’s startup machine) and it’s obviously good at large industrial anchors (DFW defense aerospace, Houston energy-grade engineering). The missing middle is the scale-up layer for hard tech: the expensive transition from prototype to certified production, from one mission to repeatable missions, from clever engineering to manufacturable reliability. SEARF helps here because it’s explicitly funding aerospace and space projects, not just ideation theater. But Texas needs more “industrial scale-up operators” who can sit inside startups and drag them through qualification, certification, and supply chain hell without romanticizing it.

3) Secure long-term funding and incentives for the actors building ecosystems. Texas is finally doing what most states refuse to do: putting real money behind the sector through an explicit commission and fund. The vulnerability is continuity. Aerospace timelines don’t care about election cycles. Texas should lock multi-year operating support not only for companies, but for the unsexy actors: workforce intermediaries like SWIFT, facility operators, and the program teams who recruit founders and mentors. If that funding becomes episodic, the pipeline breaks.

4) Measuring outcomes, not activity, and promoting success so progress is visible and repeatable. Texas has plenty of headline moments (lunar landings, rocket tests), but ecosystems improve when you measure the boring stuff: supplier contracts won, cycle-time reductions, certification milestones, job placement rates into aerospace roles, follow-on capital attracted, and repeat founders staying in-state. NASA’s CLPS outcomes are measurable; so are Firefly’s lunar mission deliverables. Texas should publish a quarterly, statewide aerospace-space scorecard that ties SEARF awards to downstream milestones, not just press releases.

5) The culture and behaviors that make collaboration natural, not forced. Texas has a builder culture, and the space sector rewards builders. But collaboration in aerospace is not “networking.” It’s trust, quality standards, and reliable execution. The Space Force Association’s Texas chapter exists specifically to connect military, industry, and academia (good!). The improvement Texas needs is to operationalize that into procurement pathways for startups and into mentor networks where mentors are selected for relevance and execution history, not for LinkedIn follower counts.

6) Including the full spectrum of talent, not just the visible and well-connected. This is where SWIFT is pointing directly at the right problem: space jobs include welders, machinists, and technicians, and many roles do not require advanced degrees. Texas is strong here because community colleges and workforce programs can scale quickly if the incentives are aligned. The gap is prestige bias: too many “space initiatives” talk like every kid needs to be an astronaut. No, the state needs thousands of “space cowboys” who can build hardware reliably.

7) Architecting environments that enable peak performance. The physical environment matters more in aerospace than in software. Texas is doing the right thing by investing in facilities (spaceport infrastructure, test sites, rocket labs). The improvement is to design program environments with operational excellence: clean governance, clear safety culture, predictable access to equipment, and program managers who know how to run cohorts like mission operations—tight feedback loops, clear deliverables, no nonsense.

8) Aligning government, academia, and the private sector around shared outcomes. Texas is closer than most states because it has a formal commission and fund, and because universities are participating in funded workforce and education initiatives. The gap is alignment around what counts as success. If academia wants publications, government wants job counts, and industry wants qualified technicians next quarter, you get confusion. The fix is explicit shared outcomes: placements, certifications, supplier readiness, and mission milestones.

9) Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness. Texas is already doing this through density: you can prototype in Austin, test in West Texas, integrate through Houston Spaceport, and sell into defense-adjacent networks in DFW. The improvement is to formalize “fast paths” for startups: pre-negotiated test access, shared compliance resources, and procurement coaching that actually understands federal contracting and aerospace certification.

10) Adapting global best practices, not copying them, for local realities—especially excellence in program operation, mentor recruiting, and promotion of success stories. Texas does not need to cosplay Silicon Valley. Aerospace founders don’t need more demo days; they need operator mentors, manufacturing partners, and customer-introduction pathways that end in contracts. SpaceCom-style programming is useful as a marketplace, but Texas should be running its own operator-grade convenings tied to in-state assets. The biggest improvement Texas can make here is ruthless program quality: fewer programs, better run; fewer generic mentor rosters, more domain-expert mentors; fewer “startup weekends,” more mission-readiness sprints.

If you want a practical reference point for how I think about this beyond aerospace, my broader playbook on capacity building is here, and it maps directly onto what aerospace ecosystems need: stable funding for ecosystem actors, operational excellence, and outcome measurement that isn’t a participation trophy.

Texas is Ahead, and Not Finished

Texas has the ingredients that most regions spend decades trying to buy: mission heritage (NASA JSC), commercial lunar execution (Firefly and Intuitive Machines), launch-scale iteration (SpaceX), test geography (West Texas), industrial manufacturing density (DFW), and now state-level funding structure (Texas Space Commission + SEARF).

The remaining work is less glamorous, which is exactly why it’s decisive: running programs with excellence, building a statewide workforce pipeline that respects skilled trades as much as engineering, and tightening the connective tissue between metros so suppliers, talent, and founders aren’t trapped in city silos.

Texas doesn’t need another slogan. It needs to keep building the machine and make it easier for the next wave of founders and technicians to plug into it without already knowing the right people.

If you’re building in Texas aerospace or space, are you spending more time chasing attention, or more time shortening cycle time?  Want to argue about all of this (politely, or not)? Share where you think Texas is strongest (Houston, Austin/Cedar Park, DFW, South Texas, or West Texas) and where you think the biggest execution gap actually is.  Heck, take me on from your part of the world and share with me how and what you’re doing there in the clouds and vacuum beyond the atmosphere is better suited to innovation.

Before you go, this March, SXSW attendees are invited learn more.

In Austin this March 14 -15 and presented by CesiumAstro, Space House will be an immersive sanctuary for visionaries, pioneers and storytellers. Located in the heart of downtown Austin, Space House is open to festival badge holders and will take place from 10 a.m. to 10 p.m. each day. – REGISTER HERE

I’m also officially involved with SXSW as a mentor so if you want to come talk formally (or informally), message me here and we’ll make it happen.

The post The Texas Aerospace Space appeared first on Startup Economist.

Miami, known for its beaches and nightlife, is far more than the art deco and the party destination rightfully earned wherein you’ll find something that feels like a real startup ecosystem: vibrant, international, and increasingly respected on global rankings. This is the story of how Miami and Florida evolved from a tourism-centric economy into a dynamic platform for invention, investment, and entrepreneurship, and what it still must do to mature into a world-class innovation hub.

I recently spoke with Innovation Maestro, James Barrood, and Miami’s Melissa Medina, CEO of eMerge Americas, prompting in my policy and economic development work with cities, the following deeper dive on Miami startups, with Founder Institute‘s local leaders Ryan Martin and Grace Spindel. Tune in here:

It’s tempting to start with hype, “Miami is the next Silicon Valley,” and for a stint, Miami leaned too far into being a cryptocurrency hub as it sought some attention from the buzz that surrounds innovation. Both are lazy and if you’ve read enough of my work, you know it’s also ignorant and misleading.  So here we’re going to dig into why with the real narrative which is far more interesting and more useful for founders, investors, and policymakers: Miami is a crossroads city. That positioning (cultural, economic, and geopolitical) shapes both its strengths and its limitations as a startup ecosystem.

Miami’s DNA: Gateway, Maverick, Culture Creator

Miami has always been a narrative of connection and risk-taking. From early 20th-century land booms to its role as the economic bridge between North and South America, Miami has been a city built on the idea that borders are not the end of opportunity. That ethos, an openness to other cultures and markets, underpins why venture dollars now look at Miami differently. In the 2025 Global Startup Ecosystem Report, Miami ranked No. 22 globally and No. 10 among U.S. metros, reflecting not just raw growth but international reach and funding traction.

A couple patterns there deserve attention. First, unlike older, insular ecosystems, Miami’s appeal is intrinsically global. This isn’t accidental: its connections to Latin America and Europe make it attractive for founders looking beyond the U.S. market. Second, Miami’s rise isn’t solely about the usual suspects like fintech or web3; sectors like healthtech are gaining real traction, with startups like OneImaging (which raised $38 million) leveraging AI to solve practical problems in medical workflows.

There’s also a geopolitical dimension often overlooked: Miami isn’t just building consumer apps. It’s positioning itself as part of Florida’s national security tech ecosystem; combining defense, AI, autonomy, and logistics technologies. The state’s military infrastructure, aerospace activity, and research institutions feed into this “dual-use” startup layer where government, enterprise, and academic research converge.

That’s layered onto the basic economic incentives: Florida has no state personal income tax, no local corporate income tax, and policies that make it easier to capture capital and talent relocating from higher-cost markets.

From Gatorade to Advanced Genome Research: Florida’s Innovation Legacy

Florida’s contribution to invention is real, deep, and often misunderstood. Yes, Gatorade, invented at the University of Florida in 1965 to help athletes replace electrolytes, became a global sports drink phenomenon. But that’s just a start to align your focus around potential here in a way that I often encourage: alignment with unique strengths (or weaknesses) of a region of the world. Florida was home to early breakthroughs in mechanical refrigeration and air conditioning, technologies that made modern life (and modern industry) possible. Sunscreen was popularized here, concentrated orange juice was commercialized, and even major cultural industries like NASCAR have roots in Florida ingenuity.

Today, that legacy continues in places like the Cade, named after the Gatorade inventor, which is purpose-built to inspire current and future inventors. In 2020 alone, Florida produced more than 5,500 patents; a testament to a persistent innovation engine tied to universities, federal labs, and private R&D (one which I’d like to see and help evolve).

Even in more esoteric spaces, inventors from Florida find ways to add value: from consumer products to applied tech celebrated in the Florida Inventors Hall of Fame.

Every ecosystem needs its first believers, and in Florida, those weren’t VCs in hoodies – they were engineers & builders who chose Miami over Silicon Valley, and proved that you could build world-class products under palm trees.” – Ryan Martin; Managing Partner of Five Spheres Capital and Founder Institute Director

How the Economy Actually Works for Startups

Economically, Florida doesn’t have the entrenched corporate hierarchies of older tech hubs. That’s a double-edged sword. On one hand, new firms don’t have to battle decades of turf battles or cultural inertia. On the other, there isn’t the same density of seasoned entrepreneurial talent or legacy industry to absorb and scale early-stage innovation. The state’s growth, reflected in rising startup applications, shows demand for entrepreneurship is high.

Government plays a mixed role. Organizations like Space Florida have acted as de facto economic developers for specific sectors such as aerospace and manufacturing by consolidating authorities and financing mechanisms to accelerate investment. Local governments, from Miami-Dade to Tampa, have leaned into innovation strategy as a core economic development tool, not just an afterthought to tourism or real estate; this is, though, why we’re going to dig into the strengths and gaps in the region’s economy for entrepreneurs.

Notably, Florida’s policy environment is more laissez-faire than strategic. It’s designed to attract businesses through tax policy and regulatory simplicity, not to coordinate innovation around shared outcomes. You feel this in ecosystem gaps: funding spigots turn on for attractive seed and growth stages, or to chase an innovation bubble (as was evident with crypto) and so there’s less focus on pre-seed support or systematic capital bridge mechanisms.

Florida Companies and Founder Stories that Lay a Foundation

Florida’s startup landscape may not yet churn unicorns at Silicon Valley pace, but it is producing meaningful exits. In Tampa Bay, ConnectWise, technology management firm, sold for $1.5 billion and catalyzed a cybersecurity ecosystem cluster. Its founder, Arnie Bellini, reinvested returns into workforce development and AI/cyber education initiatives.

In Miami, founders like Matthew Vega-Sanz, co-founder of insurance infrastructure platform Lula, which raised tens of millions from premier Silicon Valley funds from which he moved on to launch Gail, show that Florida can breed and export globally competitive founders.

Miami has also become a magnet for international startups. Lluís Faus, co-founder of Barcelona-founded legaltech vLex, has Miami as his home base, enabling global scale for vLex, which landed a landmark $1 billion acquisition by Clio, underscoring Miami’s growing role as a hub for globally significant exits.” – Founder Institute Director, Grace Spindel

Added Ryan, “When Chewy‘s founders built a pet supply empire from Miami before their $3.35 billion acquisition by PetSmart, they created a blueprint: Florida could produce not just exits, but unicorns.”

Venture capital is real too. Florida Funders, a hybrid VC and crowd-funding platform, has catalyzed early-stage deals and syndicates statewide, partnering with angel networks to scale capital access. And in 2025, Florida startups raised more than $2.8 billion across hundreds of deals, with Miami anchored as the dominant regional center.

Startup Development Organizations and Capital Sources

Florida’s network of startup development organizations is expanding. In Miami, eMerge Americas functions not just as a conference but as a connective tissue between founders, investors, and global partners. It’s increasingly a place where defense, AI, and deep tech conversations intersect, showing that ecosystem identity is developing more than social media hype.

Other accelerators and coworking hubs (often organically grown, which should change) provide community and mentorship; but that means a critical shortage of world-class operator-mentors with multiple successful exits, and that gap limits founder learning loops.

Two critical co-working hubs anchor Miami’s founder ecosystem – not as desk providers, but as platform builders with real programming, capital access, and pathways to scale. Mana Tech operates programs like scale2miami, designed to support MVP-stage startups expanding into the U.S., while The LAB runs a very selective Miami Founder Residency program with focal.vc, serving as a launchpad for technical AI founders. “These builders have access to mentorship from focal vc and Miami-based unicorn founders,” noted Grace Spindel.

On capital, the state leans on a combination of angel networks, hybrid funds, and regional VC outfits. While big national funds will write Florida checks, a disproportionately high share of early capital still comes from local angel groups and syndicates. That’s healthy, but without larger funds anchoring later rounds, many ventures struggle to scale without leaving the region.

What I’ve highlighted, I hope, paints a picture of clear capability, some success supporting opportunity, and yet some challenges that I mentioned we’d cover in exploring gaps (and strengths).  Let’s get to that.

Florida’s Hard Conversations: Ten Capacity Building Imperatives

The internal plumbing of ecosystem success starts with the fact that Miami’s ecosystem is undeniably dynamic, but “dynamic” isn’t the same as “mature.” Changing this is about infrastructure, incentives, and outcomes, and to do that, we look to 10 considerations of entrepreneurial capacity building:

1. Overcoming Siloes: Miami’s community feels vibrant, but founders still report fragmentation between sectors: health, aerospace, and defense operate in their bubbles where there could be overlapping alignment. Shared infrastructure and communication platforms are essential, not just meetups.
2. The Missing Middle: Seed capital exists and late-stage interest is rising, but the gap between early product-market validation and meaningful scale remains wide. That’s where Florida needs intentional impact: funds designed for that middle stretch.
3. Long-Term Funding and Incentives: Yearly boosts in VC raises are good news, but entrepreneurial strategy requires predictable support over decades, not boom-and-bust, and not leaning in on hype cycles. Florida’s incentive ecosystem should align with long-term capital commitments.
4. Measuring Outcomes, Not Activity: Ecosystems often count events, accelerators, and pitch competitions, but not exits, jobs created, or follow-on funding. Leaders need to shift toward metrics that matter.
5. Culture and Collaboration: Miami’s cultural diversity is one of its strengths, but collaboration doesn’t happen automatically. Incentives need to reward shared problem-solving, not just individual wins.
6. Inclusive Talent: Miami attracts high-profile founders and remote tech workers, but full inclusion (across socio-economic, cultural, and educational backgrounds) remains uneven. This isn’t an ethical goal; diverse talent equals stronger innovation.  Particularly evident in how we’re seeing academic work increasingly dependent on creative and entrepreneurial people.
7. Environment for Peak Performance: Hot climates and traffic congestion matter. Founders need real 24/7 environments such as labs, venture studios, prototyping spaces, incubators, and reliable infrastructure, not just coworking spaces (nor coworking spaces masquerading as startup development organizations).
8. Aligning Government, Academia, and Industry: The more effective ecosystems (think Boston or Silicon Valley) have alignment across sectors.  Speaking from my experience in Texas, this is something that lacking can seriously handicap an economy while frustratingly is also easily overcome (we’re working on it!).  Florida is more like Texas, with pockets of collaboration, but alignment lacks strategic cohesion with measurable targets.
9. Reducing Risk Through Local Competitiveness: Startups succeed where markets are accessible. Florida needs to improve procurement pathways for local startups into government and enterprise clients.
10. Adapting Global Best Practices: Copy-pasting Silicon Valley doesn’t work. But treating proven frameworks as inspiration (not blueprints) will help build a unique Florida model.  Starting with Founder Institute’s ecosystem canvas, for example, is an easy framework to apply.

Miami Excels and Can Improve

Miami’s biggest success is its ability to attract capital and attention. Investors increasingly write checks here because the city’s global story resonates: international reach, zero state income tax, and cultural magnetism. But excitement alone doesn’t build sustainable growth. To operationalize excellence, programs need rigorous recruitment of mentors who’ve built and exited companies, not just hosted events. They must spotlight success stories in ways that make real, repeatable recipes visible, not just social media fodder.

What you might appreciate is that Miami has the ventilator but it’s still building the heart. When founders can regularly find capital that stays in Florida for multiple rounds; when serial founders mentor the next wave; when government, research institutions, and funders align behind specific measurable goals, that’s when “ecosystem” turns into a lasting innovation engine.

Miami is not a newcomer to invention and risk-taking. Its culture has always been about connection and reinvention. But a culture of excellence, where the next billion-dollar company comes from and stays in Miami, requires the kind of gritty, strategic investment most ecosystems take decades to build.

Founder Institute, launching soon with early enrollment here, ending March 1st, for programming live in April, addresses many of these gaps head on, bringing those experienced mentors, opening collaboration and competition, and putting in place the frameworks, methodologies, and systems wherein startups thrive.

A challenge for founders: what’s your part in shaping that future? Entrepreneurs don’t just benefit from ecosystems, they build them. Miami’s next decade depends on founders who think that way.

The post Florida, Miami Startups, the Startup Ecosystem: Innovation, Invention, and Building Sustainable Entrepreneurial Capacity appeared first on Startup Economist.

In my last piece, The Startup of You, I wrote about how the real venture we’re building isn’t the company, it’s ourselves.

As our long weekend comes to an end, my parents boarded a flight home after visiting; and as my daughter steps into new projects and fresh chapter of her own, my mind turned to something related but deeper:

Second chances.

Not in the sentimental sense.
Not in the “rewrite the past” sense.

But in the disciplined, earned, second time-around sense.

In venture capital, we see a lot of obsessions over firsts.

First movers.
First checks.
First rounds.
First traction.

But the people who’ve actually built something durable know a quiet truth:

The second time is where the magic lives.

The first time is chemistry.
The second time is clarity.

The first version of a company is adrenaline and instinct. You’re building from urgency; you’re reacting, you’re proving something, and you’re fighting for oxygen.

It’s raw. It is electric and it can be unforgettable.

But it’s rarely stable.

The second version is different.

The second version knows what broke the first one. It knows which partnerships felt aligned and which were forced. It knows which hires were ego and which were energy. It knows the difference between momentum and noise.

Second-time founders don’t move faster.

They move intentionally.

They build with restraint.
They hire with intention.
They protect culture more than optics.

And most importantly, they understand something that first-timers can’t:

Sustainable things are built from calm, not chaos.

There’s a myth in startups that lightning can’t strike twice; that once the moment passes, it’s gone. That the early, wild days are the only real days.

It’s wrong.

Lightning doesn’t disappear.

It just becomes infrastructure.

The second time isn’t about recreating the high of the first, it’s building something that can carry that energy without collapsing under it.

We talk a lot about pivots in venture. We talk about product-market fit. We talk a lot about timing.

But sometimes what actually changes between version one and version two isn’t the market.

It’s the founder. The you and the me.

You’ve seen more.
You’ve endured more.
You’re less reactive.
You don’t need applause to know something matters.

And that shift makes everything possible.

When people ask me what separates companies that endure from those that burn brightly but fade, it’s rarely capital, never distribution, and really isn’t even talent.

It’s maturity.

Not age.

Maturity.

The willingness to rebuild without bitterness.
To try again without pretending nothing hurt.
To stay open without being reckless.

The best companies I know weren’t accidents.

They were evolutions built by people who had already learned what didn’t work and decided not to become cynical about it.

That’s a rare trait.

And it’s the one that compounds.

The first time is momentum.

The second time is mastery.

And mastery is where meaning gets created.

The post The Second Time Around appeared first on Startup Economist.

There are moments in life when everything you thought was solid shifts.

A job changes.
A parent gets sick.
A child grows up faster than you expected.
A diagnosis lands hard.
A technology appears that compresses decades of mastery into seconds.

You sit there and realize the ground was never the ground; it was this hacked together scaffolding.

And underneath it all, there has always been something else.

You.

I’ve spent most of my adult life around startups. Founders searching for product-market fit. Investors searching for asymmetric returns. Cities searching for relevance. Ventures searching for growth.

I’ve built programs, launched initiatives, helped founders raise money, watched some soar and too many dissolve.

But the longer I’ve lived, the more I’ve realized that the most important startup in the room was never the company.

It was the person holding it together.

Because companies pivot.

Markets change.

Capital moves.

But a human being carries their history, their losses, their love, their resilience into every room they enter.

That is the real enterprise.

You Are Not Your Job

We attach identity to roles because it feels stable.

“I’m a founder.”
“I’m an executive.”
“I’m an operator.”

“I’m an entrepreneur.”

The title becomes the logo on our chest or the startup name on the sweatshirt.

But titles are contracts; they are temporary allocations of responsibility inside someone else’s structure. They are funding mechanisms.

You are the venture.

A startup is, as Steve Blank defined it, a temporary organization searching for a scalable and repeatable business model. If that’s true, then a human life is also a search.

A search for meaning.
A search for contribution.
A search for where we are most alive.

Your job funds the search. It is not the search.

I didn’t always understand that. For years I believed competence was the goal: Learn more, do more, and be useful. Accumulate experience the way a company accumulates intellectual property. I treated my career like a growth chart.

And then life interrupts.

Loss rearranges priorities.
Illness changes timelines.
Children mature and remind you that time is a hell of a lot shorter than it seems.

You look around and realize the thing you thought was durable was just infrastructure.

The only enduring asset is your ability to adapt, to care, to create, to think, to love well.

That is the enterprise.

Product-Market Fit Is Personal

In startups, we talk about product-market fit as if it’s mythological -> When customers pull the product out of your hands. When growth becomes organic. When something clicks.

In life, the parallel question is the same.

Where do I feel pulled?

Where do my skills, my temperament, my experiences, and even my scars align with something the world genuinely needs?

Not what pays the most.
Not what impresses the most.
Not what feels safest.

What fits.

There were seasons of my life that looked successful from the outside and felt misaligned on the inside despite high activity and high output; something still felt hollow underneath.

Startups pivot when the market tells them they’re wrong. Humans often ignore that signal for years.

We tell ourselves that revenue equals validation.

It doesn’t.

Money is feedback, it is not fulfillment.

When something truly fits, the energy changes and you are no longer performing competence. You are inhabiting it. You are not forcing distribution; you are building resonance.

That is personal product-market fit.

Growth Isn’t a Promotion

Paul Graham wrote that startup equals growth.

Not fundraising and not branding: Growth.

In a human life, growth is daily more than a promotion and deeper than a salary increase. It is the expansion of capacity, the widening of empathy, the strengthening of judgment, and the ability to remain steady in uncertainty.

Some of my most meaningful growth did not happen in seasons of applause but in seasons where plans dissolved.

There is something clarifying about watching a carefully constructed future unravel. Something refining about realizing that a skill you spent decades mastering can be automated in minutes.

You are forced to confront what remains uniquely yours.

And what remains is rarely technical.

It is discernment.
It is relational steadiness.
It is pattern recognition across systems and people.
It is the courage to stay when things are hard.
It is the humility to repair when you’re wrong.

That is growth.

Not flashy.

But durable.

Your Burn Rate Is Emotional

In venture, burn rate is how quickly you consume capital before reaching sustainability.

In life, burn rate is more intimate in the erosion of energy when you are building something that isn’t aligned with who you are becoming.

You can look productive and be erratically depleting.

You can look successful and feel disconnected.

Eventually, the math surfaces.

You feel it in your body.
In your patience.
In your relationships.

Startups that ignore burn rate collapse suddenly. People who ignore emotional burn rate unravel.

If you are tired in a way that sleep does not fix, that is a signal. If you feel accomplished but not alive, that is data.

And data is not judgment; it is information.

You can respond to it.

Work Funds the Mission

Companies and our work are how the startup of us is funded.

Your employer is revenue, your clients are revenue, and your business is revenue.

They matter. They enable stability. They allow experimentation. They create opportunity.

But they are not the venture.

If the job disappeared tomorrow, would the startup of you continue? Would your values persist? Would your relationships endure? Would your curiosity survive?

If the answer is yes, you are building correctly.

If the answer is no, then work replaced your mission instead of funding it.

There is nothing wrong with structure; entrepreneurship is not morally superior to employment. The structure is neutral. Scaffolding.

What matters is whether you are expanding as a human being inside it.

Psychologists Edward Deci and Richard Ryan’s Self-Determination Theory shows that autonomy, competence, and relatedness drive sustained motivation. We cannot sustainably build in environments that deny those needs.

You can grind for a season.

You cannot build a life that way.

The Startup is You

If your life were a startup pitch, what would be the thesis?

What problem are you uniquely wired to address?
What unfair advantages do your experiences give you?
Who are your true co-founders?
What kind of life compounds love instead of just achievement?

There is no steady state in startups; you are either compounding or decaying.

The same is true for a human being.

The hopeful part, the part we rarely say out loud, is that you can pivot.

At 25.
At 45.
At 65.

You can decide that the job was infrastructure, not identity.
That failure was data, not definition.
That heartbreak was pruning, not destruction.
And that loss clarified what matters most.

You are not late.

You are still building.

And if the structure around you shifted tomorrow, would you still recognize the person you are becoming?

The startup of you has been operating beneath every venture, title, and transaction.

Today ask not whether it exists, ask if you are living your startup with intention.

The post The Startup of You appeared first on Startup Economist.

I’ve found that one of the strengths and distinctions of New York City, from which we might all learn for our own local economy, is that it doesn’t have an ecosystem the way people say it at conferences, like it’s a single organism. A couple weeks ago, we explored here that New York is what I called in the prior piece “a rotating set of sector-specific machines that manufacture startups the way the Garment District used to manufacture clothing.”  That framing explains why NYC keeps producing venture-scale companies in specific categories (fintech, insurtech, regtech, adtech, martech, legal ops) even when the broader market mood swings between euphoria and hibernation.

Promised then was a deeper look at the startup ecosystem in New York so let’s get into it.  Before jumping in, if you appreciate this kind of analysis and work on your ecosystem, make sure you’re connected with Founder Institute here, and reach out by subscribing to my Startup Economist research here.

This is a follow-up to that “Sector Machines” argument (read it first, here, if you haven’t). The punchline is simple: invention and innovation create the spark and draw attention; specialization multiplies attention by attracting the exact experience, networks, and buyers who turn a spark into a compounding flywheel. New York is not the best place in the world to invent in a vacuum; it is one of the best places in the world to commercialize under pressure: under population density, under institutional risk, under regulatory scrutiny, and under “show me the audit trail.”

We’re going to use the “10 Considerations of Startup Economic Development” to audit NYC, because if you’re going to talk about ecosystems we should be using some model for analysis.

New York’s culture was built for transaction, risk, and reinvention

New York’s startup advantage wasn’t born in coworking spaces. It came out of centuries of being a trust-and-logistics metropolis: shipping and insurance, finance and credit, media and advertising, real estate and law; industries where strangers transact at scale, where mistakes are expensive, and where the winners are the people who can reduce friction without increasing risk.

That’s why New York’s macroeconomic size is not just intriguing. NYCEDC describes the metro economy as about $2 trillion, roughly 9% of U.S. GDP.  Big economies can absolutely produce bureaucracy; New York does that too, the difference is that New York’s bureaucracy sits adjacent to unusually dense clusters of buyers with budgets, compliance requirements, and internal ops teams. That adjacency is the soil where enterprise workflow startups grow. When your customer is a department, the product is never “an app.” The product is a measurable reduction in cycle time, leakage, or exposure.

New York also has a long cultural habit of pulling talent in, smashing backgrounds together, and then charging them rent until they do something useful. Immigration isn’t a vibe nor controversy; it’s an engine. This is a city where ambitious people arrive broke, then learn to talk their way into rooms they don’t deserve, until they do. It’s a training ground for sales, grit, marketing, and coalition-building, which is most of entrepreneurship once you stop romanticizing it.

New York’s inventions are largely “urban operating system” upgrades

The myth of innovation is the lone genius in a barn.  Rather, that’s not fair, that’s a very accurate history of Silicon Valley. New York’s history is closer to: someone got tired of the world being inefficient and decided to fix the bottleneck that was blocking scale.

Start with vertical transportation. Elisha Otis publicly demonstrated the safety elevator concept in New York (the famous Crystal Palace demonstration “safe vertical space” believable), and that shift made skyscrapers commercially viable instead of just architectural bravado.  You can’t have modern Manhattan (finance, law, media, dense headquarters) without monetizing height.

Then air conditioning: Willis Carrier’s “first modern” system traces directly to a Brooklyn printing problem (humidity wrecking print quality) so the invention wasn’t “comfort,” it was industrial reliability in a dense city. Carrier’s own materials still tie the origin to a Brooklyn printing plant and that humidity-control requirement.  Solve a practical constraint, then scale the solution into infrastructure.

Then credit rails in, perhaps, the origin of FinTech. Diners Club’s story is literally a New York dinner problem: forgotten wallet embarrassment turned into generalized consumer charge-card infrastructure. “Trust at scale” is one of New York’s recurring inventions, and fintech is basically the modern continuation of that.

Then communications. Edwin Howard Armstrong’s work is deeply tied to Columbia and New York’s engineering culture; Columbia itself frames his contributions across regenerative circuits, superheterodyne, and FM.  Again: dense cities demand systems that work reliably, loudly, and repeatably.

Notice the pattern: New York repeatedly produces inventions and companies that make dense economic life possible – transportation, climate control, credit, communications – and modern “New York categories” are software versions of the same thing: reduce friction, increase visibility, create auditability, and keep the machine running.

The economy: huge, yes but more important, it’s buyer-dense and risk-priced

A $2T metro economy is impressive, but it doesn’t automatically manufacture startups, it manufactures meetings. New York’s difference is the composition of its demand: finance and insurance (risk pricing), media and advertising (attention markets), real estate (capital stacking), law and compliance (rules and enforcement). Those sectors create a permanent appetite for software that makes decisions explainable and operations measurable.

Government matters here, but not the way people play politics. Government doesn’t “create wealth,” it decides whether entrepreneurs can, and New York is a great case study in both directions (enabling and constraining). Policy’s core role is to defend rights and establish rules that allow markets to allocate capital toward value.

In New York, you can see the enabling side in intentional “applied sciences” and commercialization initiatives. Cornell Tech came out of the Bloomberg-era Applied Sciences push (Cornell and Technion won the bid to build a major applied-science campus on Roosevelt Island).  That’s government behaving like a competent allocator of conditions: land, capital, convening power, and a mandate to build an institution that produces talent and commercialization pathways.

At the state level, START-UP NY is another example of government trying to pull levers around university adjacency, offering tax benefits for approved businesses located on or near participating campuses. Whether such programs are perfectly executed is a separate debate; the point is that New York (state and city) has repeatedly tried to connect academia, incentives, and economic outcomes, instead of just cutting ribbons for another “innovation center.”

NYCEDC’s more direct interventions are also instructive: LifeSci NYC is framed as a $1B initiative intended to grow life sciences R&D and jobs. That’s New York acknowledging a truth most cities avoid: you don’t get a category by wishing; you get a category by building the institutions, capital pathways, and real estate that make it feasible.

By the way, readers in policy, economic development, or in office, we’re here to advise you on this. Connect with our work for governments here.

Why NYC is already a fintech and insurtech hub, and why legaltech is “up for grabs”

When you want proof that New York is structurally advantaged in fintech, start with the state’s own framing: Empire State Development explicitly positions New York as a fintech powerhouse and reports billions in VC activity and a large base of fintech startups.  Appreciate if you’re elsewhere, this framing is one of the most important things you must do to help your entrepreneurs – you’re not a tech hub, you’re not a startup hotspot, you are something specific that matters.

Then look at the infrastructure that exists when buyers are nearby. The FinTech Innovation Lab (run by Accenture and the Partnership Fund for New York City) is clear about the model: it pairs selected startups with senior-level executives at major financial institutions and VCs, and it publishes program outcomes like proofs of concept and capital raised.  That’s customer development institutionalized; most ecosystems say they want “more pilots.” New York operationalizes pilots as a repeatable machine.

Insurtech is the same logic with some paranoia; insurance is finance’s more anxious sibling: underwriting, claims, fraud, catastrophe modeling, compliance (paperwork and probabilistic risk sitting on legacy systems). That’s the kind of environment where software and now AI thrive, and the Lab itself explicitly runs insurtech alongside fintech in New York.  The key advantage isn’t “talent” in the abstract; it’s that you can hire people who’ve actually done the job inside carriers, brokers, MGAs, and compliance functions. Sector experience turns “we automate insurance” into “we cut FNOL triage time and leakage” – only one of those sentences gets procurement to move (take note founders).

Legaltech is where this gets fun, because it’s not “behind,” it’s cautious by design. The legaltech wave that matters now isn’t marketplaces or templates; it’s operational infrastructure for in-house teams and AI-native compliance workflows.  That’s why Checkbox’s framing is so on: the company positions itself as an “AI Legal Front Door,” capturing requests where business users already work and converting messy intake into structured, measurable workflow.  Legaltech is “up for grabs” because there still isn’t a universally adopted operating system for legal work. Finance has ERPs, CRMs, and well-worn implementation playbooks. Legal departments often have a Frankenstein stack: email, intake forms, CLM, e-billing, knowledge bases, outside counsel portals, and whatever got purchased after the last conference. The winners will be the platforms that turn legal work into auditable operations.

If you’re hunting for incubators and accelerators in New York, you quickly notice the same sector-machine reality: they’re clustered around buyer bases, universities, and industry-specific pathways.

NYU Tandon Future Labs are a great example because they’re explicit about being a public-private partnership focused on incubation and economic impact.  That matters because it’s not just “space,” it’s a commercialization mechanism connected to the city’s priorities.

Techstars NYC is one of the accelerator models plugged into the city’s category mix; Techstars is transparent about its standard accelerator structure and investment terms, and it continues to recruit cohorts that reflect NYC’s strengths (AI infrastructure, fintech, government tech, compliance, and more).

ERA (Entrepreneurs Roundtable Accelerator) is another anchor: an accelerator plus seed capital plus a network, and it publishes its own scale claims (hundreds of startups, billions raised).

Then you have “buyer-integrated” programs like the FinTech Innovation Lab, which is basically the opposite of demo day theater because it’s structured access to senior decision-makers and proofs-of-concept pathways because the institutions themselves are involved.

Founder Institute’s impact in New York, with Kenneth Parker, Lara Hejtmanek, and Reid Hamilton, is likely the best place for everyone to get involved if only because the mentor network in New York is immense.  Programs are starting again soon so check it out as a founder, mentor, or potential partner.

On the funding side, New York has the full ladder, from angels to mega-funds. The most important point isn’t that there are many firms; it’s that New York’s investing base includes people who understand procurement cycles, regulation, and enterprise ops.  Long ago as I moved to Texas, I gave a talk about how Silicon Valley investors seek scale, Texas’ seek revenue analogous to putting a hole in the ground and drawing oil, and New York’s are understandably drawn from their finance roots.

Angels: New York Angels is one of the most established organized groups; it frames itself as a long-running angel organization and points to early investments in notable companies.

Venture: the city has iconic firms and a deep bench across stages: Union Square Ventures, Insight Partners, Thrive Capital, Greycroft, FirstMark, Primary, Lerer Hippeau, IA Ventures, RRE, and more. Different lists exist and vary in quality, but even mainstream ecosystem roundups emphasize NYC’s density of VC shops.

And then there’s the “institutional adjacency” capital that makes New York different: corporate venture arms, private equity, hedge-fund talent migrating into venture, and sector specialists who treat regulated enterprise as a home turf rather than a scary place full of sales cycles.

This is also where the “Sector Machine” framing should shake economic developers awake: the most valuable capital isn’t money. It’s expert capital – operators, compliance leaders, risk managers, procurement veterans – because they are the ones who turn an innovation into something an institution can actually buy.

Ten considerations of startup economic development in New York, scored like an adult

Now let’s run the 10 Considerations and be honest about what New York does well and where it’s still stepping on rakes.  This is work I do for cities throughout the world, here in a brief assessment, so if you’re interested in exploring your own strengths and weaknesses, so you can address the gaps and reinforce the distinctions, let me know.

1) Overcoming silos through shared infrastructure and community. New York is simultaneously excellent and terrible here, which is very on-brand. Inside sectors, collaboration is natural because proximity to buyers and peers forces it: fintech people run into fintech people; legal ops people find each other because the city is dense and the career pathways overlap. Cross-sector, New York fractures into tribes. NYC’s advantage is that sector machines are strong enough that founders can still progress without a unified “community.” The improvement opportunity is citywide shared infrastructure: interoperable calendars, shared mentorship CRM, cross-sector founder services that don’t require joining the “right” clique. NYCEDC’s Venture Access NYC explicitly exists to build a more inclusive pipeline and address inequities; great signal, but the broader “shared rails” problem remains.   Frankly, easily addressed, I’d put this infrastructure under the ecosystem and onboard entrepreneurs with assessments while connecting mentors throughout programs.

2) The missing middle. New York can start companies and it can scale companies, but it still has a widening gap between “seed-stage darlings” and “established institution.” Part of that is structural: enterprise sales cycles are naturally slow, and regulated verticals hinder premature scaling. The missing middle shows up when founders can raise a seed on narrative, then discover that procurement doesn’t care about narrative. New York’s fix is not more pitch events; it’s more structured commercialization pathways like the FinTech Innovation Lab model: proofs of concept, buyer access, and measurable outcomes.  This might be one place in particular where startups should lean in more on public affairs and policy professionals so as to work the system.

3) Long-term funding and incentives for the ecosystem builders. New York is good at funding big initiatives (Cornell Tech; LifeSci NYC) because it can marshal public and philanthropic capital, but it also churns programs when political priorities change. The city’s strength is that major institutions are permanent, and they can underwrite long-term efforts. Cornell Tech’s origin story shows deliberate public-private planning, and LifeSci NYC shows scale.  The improvement is consistency at the “middle” layer: sustained funding for the operators running programs that move founders from prototype to repeatable revenue.  This is something EVERYWHERE needs to explore doing because it’s the under-appreciated community builders doing the heavy lift of turning institutional startup programs into part of your culture.

4) Measuring outcomes, not activity; promoting success so progress is visible and repeatable. New York has pockets of strong measurement because regulated industries demand measurement.  The gap is ecosystem reporting: too much is still framed as “jobs created” (good) and “events held” (noise) when it should also include more pilots executed, procurement cycles shortened, follow-on revenue, retention of scale-stage firms, and category leadership. NYCEDC’s economy reports are helpful at the macro level, but founders need micro-level signals.

5) Culture and behaviors that make collaboration natural, not forced. New York’s culture makes certain types of collaboration effortless: dealmaking, sales, partnerships, and talent poaching (yes, that’s collaboration in New York’s dialect, it’s not a bad thing; it grows talent and transfers experience to where best allocated). The improvement seems to be making collaboration less dependent on social status and more dependent on shared outcomes: buyer-driven cohorts, operator-led working groups, and compliance playbook exchanges.

6) Including the full spectrum of talent. New York has enormous talent diversity; it also has some gatekeeping. Venture Access NYC exists precisely because inequities persist in who gets funded and who gets connected. The improvement moving forward from panels about diversity to building more on-ramps where under-networked founders can get buyer conversations, not just “mentorship.” The city can do this better than almost anywhere because the buyers are local.

7) Architecting environments that enable peak performance. New York’s environment is simultaneously a performance enhancer and a tax. The density creates serendipity and urgency; the cost and stress create burnout and short-term thinking. The best “peak performance” environments in NYC are not generic coworking spaces; they’re sector-specific hubs where founders can move fast because the right expertise is physically and socially nearby.

8) Aligning government, academia, and private sector around shared outcomes. New York has some of the strongest examples in the country and since I’ve covered this a bit already, let’s just jump into being better: too many cities (including New York, sometimes) try to be “everything tech.” The winning approach is to pick a few compounding categories and align research, talent, procurement, and capital around them.  New York City does this, as we’ve explored; double down.

9) Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness. This is where New York is elite; the city’s startups tend to reduce risk and compress cycle time inside institutions, because the institutions are right there.

10) Global best practices adapted, not copied. New York’s best practice is not “be New York.” It’s: build sector machines by concentrating buyers, talent, regulation fluency, and capital into tight loops. That’s what other regions can adapt without pretending they’re Manhattan.

Where New York still needs to improve (yes, even New York)

New York’s biggest weakness is the same thing that makes it powerful: it’s so dense and so successful in certain categories that it can tolerate fragmentation and still win. That’s a dangerous complacency because it means too many founders fall through cracks that shouldn’t in a city with this much capital and expertise.

The second weakness is affordability and operational drag. When the cost of “existing while building” is extreme, founders bias toward faster narratives and earlier fundraising rather than slower, more durable customer development. That’s not a morality issue; it’s a survival response.  Interestingly, it actually works both ways since more expensive cities tend to orient founders to the high bar of accomplishment, the need for resources, and the demands of focus on acquiring both.  The fix isn’t rent control for startups, it’s more buyer-integrated pilots, more sector accelerators with real procurement pathways, and more shared infrastructure that reduces the time wasted on networking games.

In both cases, expertise exists, so I’d advise getting in touch with Ken, Lara, and Reid, or with government-oriented startup development organizations such as what we’re doing in Founder Institute.

Invention gets attention; specialization compounds it

New York’s story isn’t “a lot of startups.” It’s that the city repeatedly upgrades the operating system of dense economic life, and then it builds sector machines that turn those upgrades into companies.   Appreciate in an assessment of your city, that Silicon Valley will always be the casino for technological upside; New York will always be the risk desk with an aggressive bonus structure.  Neither replicable, nor should you be trying to copy either… In a world where AI is turning workflows into software faster than org charts can update, the cities that win won’t be the ones with the loudest brand, they’ll be the ones with the tightest loops between innovation, buyers, and specialization – figure that out.

The post New York’s Sector Machines, Explained: The Real Drivers of Startup Economic Power appeared first on Startup Economist.

Most pitch decks don’t fail because the startup is doomed (though I’ve explained how we know that’s the case just from how you pitch, here). They fail because the founder is thinking in PowerPoint instead of economics, incentives, and narrative logic. Every founder asks for the template to follow, as though there is some magic ideal that investors are seeking; that’s the wrong approach however, starting with a template is the ideal way to force your thinking to be concise and clear, critical because what you’re doing is telling a compelling story that appeals to everyone (yes, everyone; you’re taught to pitch to investors, and there is a reason for that which I’ve also explored, but ideal is appealing to everyone). There isn’t a better startup pitch, but there is a methodology to a better startup pitch. To get there, I push founders toward Guy Kawasaki’s 10-slide pitch deck; not as a pitching format, but as a diagnostic tool. Used properly, it’s less a presentation and more an MRI for your business thinking.

The Kawasaki deck is often misunderstood as “the right way” to pitch. It’s not. It’s too rigid, too generic, and frankly too optimistic to be a great investor deck on its own. What it is, however, is an exceptionally good forcing function. Ten slides, minimal text, one idea per slide. That constraint does something most founders desperately need: it strips away narrative camouflage – You can’t hide behind paragraphs; You can’t bury uncertainty under screenshots; You can’t confuse activity with value; You’re forced into first-principles thinking and actual storytelling instead of informational dumping.

Kawasaki even establishes this noting right up front something most founders fail to embrace, “The purpose of a pitch is to stimulate interest, not to cover every aspect of your startup and bludgeon your audience into submission. Your objective is to generate enough interest to get a second meeting.”

With this firmly in mind, hopefully you can appreciate that a perfect pitch does NOT get you funding and isn’t even for investors, it’s to get your audience to the point that they’re willing to invest more (time). In a world where 90% of startups fail, the trick to that isn’t being perfect, it’s catching where your story fails so that you avoid a “no” simply because of a gap.

When I use this with founders, I have them fill out the slides in the prescribed order first. Problem, solution, value proposition, underlying magic, business model, go-to-market, competition, team, projections, ask. That forward motion mimics how founders naturally think: idea first, money later. But that’s not where the real value is. The real value comes when I tell them to start over at the end and work backwards, interrogating whether each earlier slide actually earns the right for the next one to exist.

The Fastest Way to a Better Startup Pitch Is Running Your Deck Backwards

Slide 10, start with your ask, where most decks confess their sins. The ask, when seeking funding, is often a number that feels emotionally correct rather than economically inevitable. If you’re raising $3M, the immediate backward question is whether the financial projections actually require that amount or whether it’s just a culturally inherited seed-round number. If your projections show modest revenue growth, slow hiring, and conservative spend, the ask is lying. Investors notice. Most VCs and Angels won’t say it out loud (usually because they know it’s wrong but don’t know why), the mismatch registers as either inexperience or opportunism.

Before we explore how this makes sense as your test, let me point out that most of you are not and should not be pitching for funding. Maybe you’re seeking partners, co-founders, or customers. The logic is the same: that ask might feel correct, but what matters is whether or not what precedes it justifies the risk that party would take by getting involved.

Next in our test is working backward, bringing us to slide 9.

Slide 9, financial projections, which fall apart if it doesn’t justify the ask. Projections fail when they are arithmetic instead of causal. Most of what you do is arithmetic – you filled out the business model or financial projection template and reported it here. Revenue curves that go up and to the right without any explanation of what actually drives customer acquisition, pricing power, or retention are decorative, not predictive. If the projections don’t clearly explain how capital converts into growth, the ask above them is exposed as narrative fiction.

Slide 8, the team, often tries to compensate for weak projections with résumés. This is where founders say “former Google” as if that explains execution risk. Going backward, the question is whether this specific team is plausibly capable of delivering the financial outcomes claimed. Usually (in my experience) that’s not the case, I find myself mentoring founders thinking, “that’s great but YOU can’t do that.” If the projections assume enterprise sales cycles and regulatory navigation, but the team has never sold into enterprises or navigated regulation, the slide isn’t supportive, it’s contradictory.

Slide 7, competition, which is where your attempt at honesty and your confidence in your ability actually dies. This backward logic matters here. If your go-to-market assumes rapid adoption, low friction, and cheap acquisition, but your competitive slide pretends there are no alternatives, the story breaks. Markets with no competition are usually markets with no urgency. A weak competitive analysis undermines confidence in the revenue assumptions that follow it. Hopefully you’re seeing how that’s obvious in your own deck… “we plan to scale quickly through CPC ads and our newsletter.” Great, except there is a competitor that crushes you at that AND worse, you don’t even have the person on the team who knows how.

Slide 6, go-to-market strategy, is one of the most common failure points when examined backward. Hell, it’s the most common point of failure in general. Founders describe channels instead of mechanisms. “We’ll use partnerships” or “we’ll do content marketing” are not strategies; they’re tactics without proof. If the business model depends on scale efficiencies, but the go-to-market relies on founder-led hustle that doesn’t scale, the deck is internally inconsistent.

Slide 5, the business model, often looks clean until you compare it to the value proposition above it, so this is where pricing fantasies show up. If your value proposition claims mission-critical impact, but your business model prices like a nice-to-have SaaS tool, something is wrong. Conversely, if pricing assumes high willingness to pay but the value proposition only saves mild inconvenience, the economics don’t clear.

Slide 4, underlying magic (which, by the way, is competitive advantage or your moat in more common parlance), is where technical founders overestimate differentiation. Backward analysis exposes whether the “secret sauce” actually supports the value proposition or is just interesting (or egotistical) engineering. If the value proposition promises defensibility, but the underlying magic is easily replicable, investors will mentally compress your margin assumptions to zero. Not just compress your assumptions, it drops to zero and you’re done.

Slide 3, the value proposition, fails when it doesn’t logically resolve the problem it claims to address. Working backward, if the solution is narrow but the value proposition is broad, you’re inflating impact. If the value proposition is vague, everything downstream becomes speculative. Investors don’t fund vagueness; they discount it. Can you see how backwards works magic now? Here, you’re making a promise… and we can now see… based on your ask, based on the team and competition, and based on the business model and underlying magic, can they even deliver this value proposition?? No? You’re done. Notice how working forward, your value proposition is developed because of what you want it to be and what you hope to communicate, but you’re not creating any value if you can’t.

Slide 2, the solution, is often mistaken for the product demo. Backward scrutiny asks whether the solution actually delivers the value promised or merely pushed toward it while you have to be able to deliver more than a product. Features are not outcomes. If your value proposition is about cost reduction, but the solution requires significant integration effort, the contradiction is obvious.

Slide 1, the problem/opportunity, is where everything either holds together or collapses completely. More meaningfully, because I find Lean Startup screws most of you up, Kawasaki points us to think in terms of “opportunity” as much as problem. Too many founders are fixed on problem thanks to things like the Problem Solution Statement, disregarding almost entirely that all that actually matters is that there is an opportunity here. In many ways, the problem itself is safely presumed (though in fairness, most of you get that wrong too). When examined backward, the problem must be severe enough to justify the solution, valuable enough to support the business model, urgent enough to enable the go-to-market, and costly enough to rationalize the ask. Most problems fail this test. They’re interesting, not expensive or annoying, not existential.

Pitch Better

Why the Kawasaki deck works is not as a pitch, but a stress test. It exposes narrative gaps, economic inconsistencies, and wishful thinking with brutal efficiency. It breaks founders out of the 20-slide, paragraph-heavy habit that signals confusion more than sophistication. And it gives you an early warning system: long before the market rejects your startup, your own deck will tell you whether it deserves to.

The trick though isn’t even working through his 10 slides (which I demand you do), it’s that forcing function then making it easy to work backwards. You can work backwards with any pitch deck, and believe me, I have, with founders who feel they need 20 slides (I won’t if you send me 30).

If you can’t make the story work backward, help (be that funding, co-founders, partners, or advisors) won’t save you; it will only make the failure more expensive. Try whether or not your pitch survives its own logic when you stop moving in only one direction. In my experience, it won’t.

The post The Better Startup Pitch Test: Why Most Decks Fail Before Investors Ever Say No appeared first on Startup Economist.

I realized this week, that this is a discussion point I have with almost every founder, and yet I’ve never bothered to write it up. Every founder. Particularly in our work in Founder Institute, when teaching or mentoring dozens of founders in the same room, the question is always posed, “why are we working on pitching to investors, if we don’t want VC?”

Many startup founders love to say they “don’t want VC.” Sometimes they’re right; more often, they’re confusing not wanting dilution with not needing discipline. Those are not the same thing, and pretending they are is one of the most reliable ways to build a company that survives just long enough to disappoint everyone involved.

We teach startups to pitch to investors because convincing a venture capitalist to allocate millions of dollars is categorically harder than selling a product to an early customer. That’s not an insult to customers; it’s an observation about risk, incentives, and asymmetry.

Many of you have heard that you need to know your audience so that you might speak to them and their needs, but what I’ve learned over the years and thousands of startups, is that better, is appreciating in startup pitch not your target audience or objective, but rather, pitching what you’re doing in such a way that it is appealing to everyone. Investors are the peak challenge to win over so we orient your thinking (and pitch) to appealing to them because if they’d be on board, everyone else is relatively easy

A customer is buying relief from a specific pain today. A venture capitalist is underwriting years of uncertainty, competitive response, capital structure, execution risk, and the probability-weighted outcome of a meaningful exit. If you can’t articulate why your company deserves that kind of commitment, you almost certainly don’t understand your own business as well as you think you do. And hold in your mind as you read on, I’m not suggesting that you need or should want venture capital; frame that meeting their needs orients your brain, priorities, work, and talking points, to what conveys a valuable opportunity.

Early customers are forgiving. Investors are not. A customer might buy because the product scratches an itch, the founder seems competent, or procurement needed to spend a budget before year-end. Investors assume customers are easy. In fact, if a founder can’t sell to customers, investors usually stop listening immediately. Selling is table stakes. What investors are evaluating is whether sales can compound into a durable company.

Besides, in overwhelmingly most startup pitches, we tend to hear founders selling more than pitching – you want to show the product, explain the value to customers, and wrap up with an ask that almost sounds like you really just want people to *buy* what you’re doing. That, in and of itself, is a SALES pitch, not a startup pitch; while you are still holding in your mind that a startup pitch is not because you NEED (or want) funding, it’s to pitch the startup, not the product.

That distinction matters because early revenue actually does not equal value creation; this is where a lot of startup mythology falls apart. Easily understandable because only 1% of you (+/-) will even ever get funding, you’re bombarded with advice to focus on the customer – and so you do orient your thinking that way. But you can sell something useful and without the bigger picture, be building a company that will never scale, never defend itself, and never justify further support (or funding). A handful of customers can validate that a solution works; they do not validate that a business works. Growth, resilience, and survivability are different problems entirely.

When an investor listens to a pitch, they are not buying the product. They are buying a theory of the future. That theory has to account for capital efficiency, competitive advantage, and the mechanics of scaling. It has to explain why this company, in this market, with this team, can grow faster than alternatives and defend its position long enough to produce an outcome that matters. That outcome is usually an acquisition or IPO large enough to return the fund, not just cover payroll and make the founders feel clever.

Startup pitching (a good startup pitch) forces clarity. Investors expect things like financial responsibility not as a moral virtue, but as a survival trait. They expect founders to understand unit economics because capital misallocation kills companies faster than competition. They expect a capable team because lacking that, you will fail. They expect a defensible advantage because markets copy everything that works. They expect partnerships because scale rarely happens in isolation. And they expect a plausible path to exit because liquidity is the entire point of the exercise.

None of that is required to close your first few customers. In fact, customers often buy precisely because they don’t care about those things yet (they care that the solution works today). But customers are also not stupid. At some point, they’ll stop betting on companies that look like they might disappear. Enterprises, in particular, avoid dependency on fragile companies. A startup that cannot articulate longevity will eventually feel that hesitation in slower sales cycles, smaller contracts, or outright rejection.

The overlap between customers and investors: neither wants to rely on a company that is clearly going to fail. Customers may not ask for a cap table or an exit strategy, but they absolutely care about continuity, support, and roadmap credibility. Those are downstream effects of the same fundamentals investors interrogate upfront.

Why Pitch for Investors

Teaching founders to pitch to investors is not about pushing them toward venture capital. It’s about forcing them to confront whether they are building something that can survive success. The investor pitch is a stress test; it asks questions customers won’t, at least not until it’s too late to fix the answers.

You can see this dynamic play out in real funding events. When companies raise significant rounds, the story is never “we sold a useful product.” It’s about category definition, institutional adoption, and scale economics. In the recent Series A raised by Checkbox, for example, the narrative I interpreted centered on becoming a foundational layer for legal operations, integrating across enterprise systems, and turning institutional knowledge into scalable workflows. That framing is not a sales pitch; it’s not customer focused; it’s an articulation of why the company can grow into something durable and defensible.

That same clarity benefits founders who never take VC. A bootstrapped company that understands its economics, its moat, team that is really required, TAM/SAM/SOM, and its growth constraints will make better decisions about pricing, hiring, partnerships, and product scope. It will know when not to grow and it will know when to say no. Ironically, the companies most confident in rejecting venture capital are often the ones that could raise it, precisely because they’ve done this work.

So, we teach startups to pitch investors because the exercise exposes weakness early, when it’s still cheap to fix. It replaces vague optimism with explicit tradeoffs. It’s like a new business writing a business plan in that the exercise of doing it is almost more important than the plan itself. It forces founders to stop confusing traction with inevitability, and it makes painfully clear whether the company is being built to last, or merely to sell something for a while.

If pitching an investor feels harder than selling your product, that’s not a problem. That’s the point. The true questions to work out as a startup are whether your current decisions would still make sense if someone put a few million dollars on the table and asked you to make sure they get a substantial return on that investment. If the answer is no, what are you actually building? How long do you expect anyone else to trust it?

The post Why We Teach Startups to Pitch to Investors Even If They Don’t Want Venture Capital appeared first on Startup Economist.

Don McLean’s American Pie is usually shared as an elegy for rock ’n’ roll and American innocence. It’s a song with tremendous meaning to me, sung as a group while my high school class graduated, I went to study the lyrics and history in college, teaching myself how to build and website (then with notepad, html, and ftp) so I could publish my assessment of the lyrics where others might enjoy. In the 30 years since that analysis of American Pie (here if you’re curious) was published, I’ve heard from thousands of fans, academics, and even a few documentaries, citing what became my first webpage on the internet.

It just so happens that today, February 3rd, is not only 30 years since I published, it has been 67 years since The Day the Music Died; on February 3, 1959, American rock and roll musicians Buddy Holly, Ritchie Valens, and “The Big Bopper” J. P. Richardson were all killed in a plane crash near Clear Lake, Iowa, coined when singer-songwriter McLean referred to it as such in his song.

Today the Music Died

Music defines my life in many ways, but my work online has evolved from curiosities about lyrics and music history, to instead shape startup ecosystems, guide founders, and serve venture capital. With that in mind, if you’ll roll with me, I thought explore the lyrics from a different point of view and consider if we can shape them from what they actually mean, to instead be meaningful to founders.

Listen instead to a long, bruising post-mortem of a startup, and it works. The song becomes a founder’s retrospective on the day the startup died, told years later by someone who’s lived long enough to understand why it was inevitable. Something from which we can learn.

The genius of the song is that McLean never narrates the “death” directly. He circles it, mythologizes it, disguises it in symbols and scenes. That’s exactly how founders talk about failure too. Nobody says, “we misunderstood distribution and burned runway.” They say, “Things just changed,” or “The market moved,” or “It stopped feeling like fun.” The day the music died is the day belief collapsed; when momentum, morale, and meaning broke before the cap table.

McLean opens with childhood, learning to sing, faith in music, belief that something pure could last forever; he’s describing the pre-startup phase – naïve optimism in the first idea that feels obvious and righteous. The early conviction that if you just work hard and stay true, the world will reward you. Every founder starts there. You don’t quit a safe job because you ran the numbers; you quit because you felt something.

News arrives and “February made him shiver,” the first real signal shock. For us in this different context, perhaps a competitor launches, a platform changes its rules, or a key partner or cofounder pulls out. It’s not fatal but it is cold. You realize the game is bigger than your product. Founders still think grit alone will save them.

As the song moves into scenes of celebration: the levee, dancing, and singing; you’re in the early traction phase with demo days, some social media traction, and early users telling you they love it. Advisors are nodding enthusiastically while everyone is drinking the same optimism (repeating the same refrains). But the levee is dry and that’s a tell too many of you ignore: there’s no underlying flow – no real distribution engine and no repeatable growth. Just vibes.

“The jester” and the shifting cast of characters mark what you might think of as a professionalization phase: consultants, investors, accelerators, service providers swoop in to help given the hype. Often, the founder stops being the storyteller and starts reacting to other people’s narratives. Strategy decks replace execution and the vision gets abstracted into playbooks as the team grows with managers who need to know how to manage people. The company sounds more impressive but feels less alive.

By the time the song reaches the chaos of missed signals, crossed wires, and battles between factions, it’s late-stage dysfunction. This is when startups confuse motion with progress: meetings multiply, metrics contradict each other because no one really even knows what KPI means, and culture fractures. Everyone senses the music is off, but nobody wants to stop the show.

And then the refrain lands again as it does throughout, “the day the music died” but this time, here, it means something. Not bankruptcy nor shutdown, that comes later, this is the day the founders stop believing the story they’re telling. This is the day hiring gets harder because the spark is gone. The startup is still operating but it’s already dead. What makes Don McLean brutal here is his refusal to assign clean villains. Just like in startups, nobody killed the company alone as incentives drifted, signals were misread, and power consolidated in the wrong hands. Creativity was crowded out by safety. Leadership lost among advisors, consultants, agencies, and investor priorities. Execution died to risk aversion. All that made it special was slowly optimized away.

The final verses (quiet, reflective, unresolved) are what founders sound like years later after the “failure was the best thing that happened to me” speeches.

There’s wisdom, sure; but also grief. Because something real did die, and pretending otherwise is cope.

Let’s see what we can learn: American Pie Lyrics

A long, long time ago…

I can still remember how That music used to make me smile. And I knew if I had my chance, That I could make those people dance, and maybe they’d be happy for a while

“American Pie” becomes the founder looking back at the early years of “startup America” when the playbook was simpler, the community was smaller, and the feedback loop between creator and customer was perhaps more honest. In startup terms, this is the era before growth hacks, before “blitzscaling” became a religion, and before everyone learned to talk like a pitch deck.

This is founder origin story. The “music” is the first version of the product that works, not in a theoretical TAM way, but in the “holy hell, people actually like this” way. Making people dance is product delight while the “happy for a while” is the honesty every founder eventually learns: early traction isn’t permanence; it’s a temporary window where novelty + novelty distribution + novelty demand align. The smile is the dopamine of being understood by strangers.

But February made me shiver,

Buddy Holly, Ritchie Valens, and “The Big Bopper” J. P. Richardson, died on February 3, 1959 but in our variation, this is the moment the market turns cold in that platform change or a competitor finding funding. Perhaps it’s a regulatory shift, increasingly common and part of the work I do to prevent such things happening. Maybe a key channel dries up. Typically, this isn’t really a lesson learned because we teach founders to pivot; no, this is physical as founders shiver and feel it in their gut.

With every paper I’d deliver,

This is the unglamorous part most of you only appreciate later despite it being one I rant about alongside many; the hustle phase where you’re doing work that doesn’t scale, such as selling manually, handling support yourself, and shipping at midnight. Worse, while some, along with me, are pushing you all to do marketing instead, bad advice is telling you to do things that don’t scale (largely only because people don’t know how to do marketing, so they tell you instead to sell). “Every paper” is every cold email, every demo, and every awkward first sale merely keeping the lights on while you pretend you’re getting validation.

Bad news on the doorstep… I couldn’t take one more step. I can’t remember if I cried When I read about his widowed bride

Bad news hits founders like grief because it is grief: you’re mourning the future you had already started living in your head. The “widowed bride” is a harsh startup metaphor: the company wasn’t just a project; it was a relationship. Something you committed to publicly. Something you planned your life around. When the bad news arrives, your identity gets widowed before your cap table does.

But something touched me deep inside, the day the music died.

Here’s the core translation: the startup dies when the founder feels, unmistakably, that the thing no longer has a pulse. In venture land, people try to turn this into spreadsheets with CAC/LTV, runway, and burn rates. Sure, those matter, but we also write about Grit, Passion, and Tenacity, because every “dead company walking” has a moment where the founder knows, privately: distribution isn’t working, retention is lying, the team is pretending, the story feels fake coming out of their own mouth. It isn’t working.

So…

(Refrain) Bye bye Miss American Pie,

“Miss American Pie” is the beautiful, naive version of the company; the one you pitched when you still believed the market would reward effort and charm. It’s also the myth of inevitability (we’re building the future, therefore we must win). Bye bye is goodbye to innocence.

I drove my Chevy to the levee but the levee was dry, Them good ol’ boys were drinkin’ whiskey and rye Singing “This’ll be the day that I die, This’ll be the day that I die.”

This is founders joking about failure long before they believe it. Every startup has this gallows humor phase: “If this doesn’t work, I’m going back to consulting.” The irony is that when founders joke about dying, it’s usually because something already feels off: the levee is dry. The channel they assumed would carry them isn’t carrying anything. So, they drink (metaphorically or literally) and keep repeating the story because silence would force acknowledgement.

Weaving together narratives for a moment, I want to touch on the interesting correlation with the fact that we tend to appreciate that the ideal startup founding team is 3, not two and certainly not a sole founder. In Buddy Holly, Ritchie Valens, and The Big Bopper, we have our CEO, CMO, and CTO, the 3 ideal to the founding team, singing, “This’ll be the day that I die.”

(Verse 2) Did you write the book of love, and do you have faith in God above, If the Bible tells you so?

This entire verse is about belief systems and what founders trust when things stop being simple.

When a startup is young, belief is emotional: people love it, it feels right, this should work. As pressure increases, founders start reaching for substitutes for real market truth.

“Did you write the book of love”
This is the founder asking whether the original story was ever real. Did we actually understand customers, or did we just romanticize them? Was the insight authentic, or a projection?

“Do you have faith in God above, if the Bible tells you so?”
This is authority-based belief. In startup language: investors, accelerators, famous founders, playbooks, dogma. Is it true because someone important said it?

Now do you believe in rock ‘n roll? Can music save your mortal soul? And can you teach me how to dance real slow?

Rock ’n’ roll here is the thing itself: the product, the craft, and the act of building. The question is tough – Do you still believe in what you’re making, or only in the narrative around it? Founders often hope the product will redeem everything: the sacrifice, the debt, the stress, and the relationships strained. This line asks whether the company can actually justify the cost of founding it.

“Can you teach me how to dance real slow?”
This is about execution discipline. Not hype. Not speed. Can you operate with patience, restraint, and rhythm, or do you only know how to sprint?

Well, I know that you’re in love with him ‘Cause I saw you dancing in the gym

This is the founder watching customers fall in love with something else. The “gym” is the open market where other students are watching. This is where denial starts to crack.

You both kicked off your shoes

Early adopters committing. They’re not just flirting, they’ve invested time, data, and habit. Switching costs are forming, just not in your favor.

Man, I dig those rhythm ‘n’ blues

This line is about roots. In startup terms, it’s the realization that what works is often older, simpler, less flashy than your innovation. The market rewards fundamentals, not novelty.

Before the popularity of rock and roll, music, like much elsewhere in the U. S., was highly segregated. The popular music of black performers for largely black audiences was called, first “race music,” later softened to rhythm and blues. In the early 50s, as they were exposed to it through radio personalities such as Allan Freed, white teenagers began listening too. Starting around 1954, a number of songs from the rhythm and blues charts began appearing on the overall popular charts as well, but usually in cover versions by established white artists, (e.g.”Shake Rattle and Roll,” Joe Turner, covered by Bill Haley; “Sh-Boom, “the Chords, covered by the Crew-Cuts; “Sincerely,” the Moonglows, covered by the McGuire Sisters; Tweedle Dee, LaVerne Baker, covered by Georgia Gibbs).

I was a lonely teenage broncin’ buck with a pink carnation and a pickup truck

This is the founder archetype: confident, undercapitalized, overcommitted, powered by identity and charm. The pickup truck is independence, and the carnation is performative confidence. You look like you belong (even if you’re improvising everything).

But I knew that I was out of luck The day the music died I started singing…

Here’s the first explicit founder self-awareness moment. Luck didn’t really run out though, fit did. The realization that no amount of hustle fixes a solution that no longer resonates.

Refrain

(Verse 3) Now for ten years we’ve been on our own and moss grows fat on a rolling stone

This is what happens after the golden age of the startup; the ecosystem professionalizes, money pools, and bureaucracy creeps in. Founders stop moving, stop experimenting, stop risking. The “rolling stone” settling is what happens when success calcifies into comfort.

Bob Dylan wrote “Like a Rolling Stone” in 1965, his first major hit. How about these lyrics relevant in a startup failing, “You used to laugh about, everybody that was hangin’ out, now you don’t talk so loud, now you don’t seem so proud, about having to be scrounging your next meal“?

McLean could have also been The Rolling Stones as many musicians were angry at the Stones for selling out when they became citizens of another country merely to save taxes. In our case, maybe disappointment in selling out to investors, an early exit, or a bad deal out of desperation?

But that’s not how it used to be when the jester sang for the King and Queen

In the song, the jester is Bob Dylan, as will become clear later. The king some think is Elvis Presley, which would be rather obvious, while the queen of the time might have been Connie Francis or Little Richard. What we lack here is why the jester sang to them. Instead, historically and interestingly, it works as the Kennedys (the King and Queen of “Camelot”), who were present at a Washington DC civil rights rally featuring Martin Luther King where there is a recording of Dylan (the jester) performing… which hints that the jester could instead be Lee Harvey Oswald who sang (shouted) before he was shot for the murder of the King (JFK).

Apologies though that I went off track (or rather, on track) in my passion for the song and history. In our case here, let’s say the jester is the founder: irreverent, honest, and dangerous, while the king and queen are capital and culture. Early on, founders challenge that power while singing to it for support. Later, failing, founders perform for it.

In a coat he borrowed from James Dean

In the movie “Rebel Without a Cause,” James Dean has a red windbreaker .that holds symbolic meaning throughout the film In one particularly intense scene, Dean lends his coat to a guy who is shot and killed; Dean’s father arrives, sees the coat on the dead man, thinks it’s Dean, and loses it. On the cover of “The Freewheelin’ Bob Dylan,” Dylan is wearing just such a red windbreaker, posed in a street scene similar to movie starring James Dean.

For our purposes, our founders (the jester) lend the coat of experience to team members who have moved on and who themselves try to start something. Given similarities drawn from experience, as those startups die, friends and family too anguish.

In a voice that came from you and me

Startups speak from lived pain and direct experience but a voice that matters also listens to and uses the voice the market: you and me. While dying, the founder sings with a voice that has more appeal now drawn from their audience.

Oh, and while the King was looking down the jester stole his thorny crown

This is the moment when a founder stops being an outsider and becomes the establishment they once mocked.

The king is the incumbent logic: old capital, old industries, old rules. Our jester, the founder, irreverent, underestimated, and allowed to speak uncomfortable truths precisely because they have no power, now has what appears to be success – they “steal the crown.”

In startups, this is the moment when the founder wins legitimacy: big funding round, press validation, or marquee customers; they are no longer protected by scrappiness, they are now accountable to the system they probably once criticized.

The crown is thorny because scale introduces incentives that punish honesty. The founder can no longer say what they really think and the product doesn’t really do what they really wanted to do; governance replaces instinct and optimization replaces creation.

This is not victory; it’s transformation and often the beginning of the end.

The courtroom was adjourned; no verdict was returned.

This is the most damning lyric in the entire song for entrepreneurship because in startup terms it’s failure without truth. No verdict means no clear reason given, no post-mortem. no accountability, and the assertions that the company didn’t “fail,” it “pivoted,” “merged,” “soft-landed,” or “returned capital.”

The courtroom exists (boards, investors, customers, the local community, and media) but it never really renders judgment so much as the rumor mill floats opinions. Founders never learn, other founders never really learn, investors never admit the mistakes, and patterns repeat.

(This is how bad ideas get recycled with new logos and new pitch decks)

And while Lennon read a book on Marx,

This is the moment when the company’s internal conversation shifts from customers and craft to ideology and power. “Marx” here is shorthand for systems thinking about control (who owns what, who decides, who gets paid, who is exploited, who is allowed to win). This is when the team starts sounding like they’re doing sociology instead of shipping. Sometimes that’s necessary (labor, fairness, governance) but most of the time it’s a tell that the company has drifted from direct value creation into narrative warfare.

Notably, we’ve added Lennon to our cast of characters so at the risk of this getting too confusing, let me continue to steer you to the notion that we’re still talking about the founding team, but instead of using the ideal of three, we’re talking about The Beatles, with Lennon the 4th addition to our three…

The quartet practiced in the park

See it? What quartet speaks volumes in music but The Beatles?? Here, the founding team is rehearsing the act of being a company. “Practiced” is the key word as they’re getting good at demos, pitches, brand voice, and culture rituals, particularly at this stage trying to evolve into a company (and often before actually being any good at consistently producing value). And what do we have here? Lennon, one of our founders, starting to deviate from the rest.

“In the park” is public space: incubators, meetups, demo days, social media. You’re building in front of spectators.

And we sang dirges in the dark

A dirge is mourning music. Why are we singing dirges in the dark? The product stops being joyful and becomes a coping mechanism. The work turns into elegy: long internal threads, solemn all-hands, “we’ll get through this” speeches, post-mortems that aren’t honest. “In the dark” is the lack of clarity as well as hiding the struggle from customers. Your dashboards don’t explain what’s happening, you aren’t being honest about the difficulties, Lennon is off considering a different model, and your customers aren’t telling you the truth.

The day the music died. We were singing…

Refrain again “Bye bye…”

Let’s revisit it this time because now is the explicit marker: the day the startup loses its living relationship with the market. We’re not shutdown yet, we’re not insolvent. This is the day feedback loops break, the vision is gone, the alignment stops, and execution has been replaced with managers.

“Chevy to the levee” is now taking your reliable old tools (your hustle, your network, and your competence) back to the place you expect the flow to be only to find it is indeed dry. Our “Good ol’ boys…” are here the inner circle (founders, early believers, early investors) self-medicating with certainty, often doubling down instead of seriously changing, haunting us again with “This’ll be the day…” as a gallows prophecy: the company repeating its own funeral line to avoid admitting reality out loud.

(Verse 4) Helter Skelter in a summer swelter

Chaos. The company loses a single strategy and starts chasing five. Worse, overheated market conditions: too much money, too much hype, too many competitors, and too much noise. Everyone’s sweating; nobody’s thinking.

The birds flew off with the fallout shelter

Your key channel or partner leaves and the protective story goes with them. The “fallout shelter” is whatever you were hiding inside: brand halo, platform dependency, a distribution deal, or an investor’s reputation. When it goes, you’re exposed to reality.

Eight miles high and falling fast

This is the company floating above the market: talking future, talking platform, talking grand vision, talking TAM (which is a truly irrelevant metric unfortunately hyped in pitch deck workshops), while users are trying to solve basic problems. Gravity is retention, churn, CAC, activation, and referral; it always wins. Falling? It’s going to hit hard and hurt.

It landed foul on the grass

Your pivot misses the field. Perhaps a new launch you hoped would save things. This is, “we built the wrong thing for the wrong buyer,” why and how? Because you took that “do things that don’t scale advice” and talked to a handful of customers while dropping cold emails while ignoring marketing – The grass is where customers live, on the field; if you don’t design for the field, you don’t have a business.

The players tried for a forward pass

The team tries to force progress: new features, new positioning, new pricing, and new sales hires (after all, sales and customers solve every problem, don’t they??) You try anything that looks like moving forward.

With the jester on the sidelines in a cast

Wow. If you’re a failed founder, you felt this line. The founder at this point in a startup is increasingly sidelined: burned out, pushed aside, constrained by board pressure, or psychologically checked out. The founder can’t “play” anymore; they can still talk, still pitch, and still attend meetings, but they can’t create the music.

Now the half-time air was sweet perfume

Okay, take a breath here because that last Board meeting made you feel good that we’re going to get this back on track. It’s half-time and we’re getting back in the game. And why not? This is the intoxicating distraction layer: awards, conferences, press, and social buzz. Perfume covers the smell of decay.

While sergeants played a marching tune

The institutionalization that crept in, the professionalization of process, reporting, and compliance, in the form of OKRs, forecasts, and board decks, the company becomes a marching band. Playing a rigid tempo with no improvisation, you know where this is going…

We all got up to dance oh, but we never got the chance

The team is ready to do the fun part: ship, win, delight customers, and feel alive again! The machine won’t let them; the company is too heavy, every move requires permission, coordination, and risk management. The music can’t breathe and the jester is in cast.

‘Cause the players tried to take the field, the marching band refused to yield.

The creators and marketers try to get us back on the field but the system refuses to stop controlling. This is the heart of later-stage startup death: control beats creativity.

Do you recall what was revealed, the day the music died?

This is the moment of revelation founders remember forever: the day you realize you never had product-market fit, or you lost it, or your channel is gone, or your economics are terminal.

We started singing

Refrain

(Verse 5) And there we were all in one place

If you know the song well, you know this is where the melody changes tempo and gets upbeat. We’re in the startup hub downtown, going to the same conferences, supporting one another with encouragement that feels good while it masks groupthink. You maybe add a go at an accelerator, all of which are merely preaching Lean Startup, so there you go; everyone is solving the same problems with the same tools, but at least we feel optimistic again.

A generation lost in space

I seriously laughed this one being so fitting. What the hell are you all doing trying to plugged into the local “community” through some physical space for startups!? These are founders detached from real buyers and startups with no meaningful tie to their sector or potential partners, because you’re sitting there in a startup space wasting your time thinking that the celebrated space will save you.

With no time left to start again

Runway is gone, but more importantly: psychological runway. The founder can’t restart because they’re depleted or trapped by identity and sunk cost.

So come on Jack be nimble Jack be quick

The culture screams speed: Move fast! Iterate, ship… “Nimble” becomes morality.

Can you believe how fitting this is for a song that was written in 1971??

Jack Flash sat on a candlestick

Jack of course, being a nickname of the founders, “Come on dude,” with Flash added because you’re quick now – instead of correct. Velocity becomes the substitute for insight.

Candlesticks are market charts: spikes, hype cycles, short-lived momentum. “Sat on” implies riding the spike: building a company on a temporary candle instead of a durable base.

‘Cause fire is the devil’s only friend

Why? Because fire is burn and burn is thrilling until it isn’t. Burn attracts attention, but it also consumes the only thing you truly have: time.

And as I watched him on the stage, my hands were clenched in fists of rage; No angel born in hell, could break that Satan’s spell

The founder watching the company turn into theater: keynotes, brand performance, story performance: less substance. This is the founders are angry now realizing they helped create a machine that rewards only rewards performative behavior over truth.

“No angel” come on, you have to have be loving this as much as I do! Angel Investors, even those born of the startup environment itself, can get people off the gravy train of revenue (the fire of Satan’s spell) meaningful now, here in the staging of the startup, because it’s wrong.

And as the flames climbed high into the night, to light the sacrificial rite

Burn intensifies. Stakes rise. Pressure rises. The company is spectacularly on fire. Particularly at night, in the dark with no real visibility; you’re burning now, blindly. What do you do? What did you do? Layoffs.

Someone gets sacrificed: employees, early customers, founder health, relationships, ethics, product quality. Startups often pretend this is “necessary.”

I saw Satan laughing with delight

The market doesn’t care; hype doesn’t care. The ecosystem doesn’t care. If you can’t make people dance, the world moves on.

The day the music died He was singing…

Refrain

(Verse 6) I met a girl who sang the blues

Tune in the music again, our tone shifts in the melody here, it slows… it’s almost melancholy. You meet the customer’s real emotional state: skepticism, fatigue, and distrust. They’ve been burned by tools like yours before. You talk to some of your customers and they’re genuinely sad.

And I asked her for some happy news, but she just smiled and turned away

Founders fishing for good signals: “Any excitement?” “Any chance you’d share this?” “Can we count you for referrals?”

The coldest market response isn’t hate, it’s indifference.

I went down to the sacred store where I’d heard the music years before

You return to where the magic used to happen: your old channel, your old community, or your old distribution source. Nostalgia sinks in as you remember when shipping felt like flying and users felt like friends.

But the man there said the music wouldn’t play

That channel is gone. That era is gone. That advantage is gone. Past traction doesn’t replay on demand.

And in the streets the children screamed

The broader world is in chaos: layoffs, political turmoil, platform shifts, economic cycles. Your company is not insulated and what we’re reminded of here are the start of the lessons – the tense changes to PAST tense. The music wouldn’t play again, but in the streets remember, the children screamed. YOU ignored that.

The lovers cried and the poets dreamed

Your customers AND the market (not just customers!!) tried to tell you but you didn’t listen to the crying. People who loved the mission kept trying to keep you on it. Storytellers, influencers, and journalists, dreamed of the future you promised but you didn’t stick to it. Besides, dreams don’t fix distribution; it is understandable that you were torn.

But not a word was spoken, the church bells all were broken

But, back to the PRESENT, silence from the market, silence from the press, silence from users, the scariest signal. Want a religious parallel if only because it’s evident here? Those three founders: CEO, CMO, and CTO… Holly, Valens, and The Big Bopper…. are in the Christian religion very relevant in 1970s America, are the Holy Trinity… the Church bells have stopped ringing for them.

And the three men I admire most The Father, Son, and Holy Ghost

This could obviously be those 3 founders, leaving and moving on (as the next line brings about). But we could also see here pillars of your identity as a founder: your mentors, your heroes, your original inspirations, or, in a company sense, the three core legs: solution, market, and resources.

In a mythic trinity, this could be soft of a holy trinity founders worship without admitting it: truth, trust, and traction.

The lesson here? Lose one and the other two collapse. CEO, CMO, and CTO. Solution, Marketing, and Resources. Truth, Trust, and Traction. Too many founders don’t even lose one, they ignore it. That is why you fail.

They caught the last train for the coast

This is actually not leaving in failure because again, the coincidences are uncanny with the coast being the California coast – Silicon Valley? A last chance to pivot, to recover, or to re-found. The last train is your final window of optionality. Typically in a demise of a startup? An acquihire. Maybe a move to somewhere else.

The thing is that the coast is where things “end” in American mythology.

The day the music died

And they were singing…

Refrain (2x)

Even at the end, the system keeps singing the old chorus. Founders keep pitching. Investors keep tweeting. Ecosystems keep hosting events. But this song is over.

By the last chorus, the refrain isn’t denial anymore. It’s memorial. It’s the founder admitting: we kept repeating the old lines because we couldn’t face the moment the music stopped.

What American Pie Really Teaches Founders

Read this way, American Pie stops being a nostalgic riddle about music history and becomes an eerily precise anatomy of how startups too frequently die.

The song never treats death as a single event and in a startup it isn’t. There is no moment where everything collapses at once. American Pie documents drift: belief replaced by ritual, craft replaced by performance, feedback replaced by ideology, and rhythm replaced by control. The “day the music died” is not the day the company shuts down or exits; it is the day it loses its living conversation with the market. Everything after that is administration.

What made McLean’s lyrics mean so much to me is that they capture culture, history, and psychology in a narrative of downfall better than any post-mortem email to stakeholders. The early verses are full of innocence, joy, and communal creation: the founder phase, when people dance because the product speaks to something real. As the song progresses, success hardens into hierarchy, experimentation gives way to marching orders, and institutions form that cannot yield even when the builders are ready to play again. By the time capital, process, and reputation dominate, the music has already stopped.

But what it reveals is that you didn’t actually listen. You went in on the groupthink space. You disregarded the third part of the trinity. You took the thorny crown of celebrity and turned away from your mission.

The lesson is not sentimental, and it is not kind: startups do not die from lack of effort, talent, or capital. They die when they stop making people dance; when they stop listening to the rhythm that makes people dance and instead replace it with structure, certainty, and story – which no one wants.

If there is one thing I hope you enjoyed and learn to hold on to with me, it’s listen to the music: retain your music. The moment you can no longer hear it, the end has already happened, we merely have another refrain to play before it’s over.

The post American Pie and the Moment Every Founder Loses the Music appeared first on Startup Economist.

With such a substantial and dense population, it’s difficult to say that New York City has a startup ecosystem as though a monolithic slice of the economy and yet, it’s precisely because of New York’s urban density that it’s a leading example of an advanced startup community.  New York is a rotating set of sector-specific machines that manufacture startups the way the Garment District used to manufacture clothing: it concentrates buyers, trains relevant talent, organizes pertinent regulation, promotes itself for what it is, and aligns money into a square mile or so until the outcome becomes inevitable.

The easiest way to see that this is how New York really works is to stop staring at “NYC raises a lot of venture capital” (true, but boring) and look at what just got funded and why. Checkbox’s $23M Series A was announced out of New York this week, led by Touring Capital, with participation from Peak XV Partners (formerly Sequoia Capital India), Conductive Ventures, Tidal Ventures, Five V Capital, and angels including Jerry Ting.  That is not a random pile of logos, that’s a signal that investors are leaning harder into legal operations as an enterprise workflow category, and that they believe the “front door” problem (intake, triage, measurement, automation) is now big enough (and AI-ready enough) to be a venture-scale wedge.

I write and talk a lot about how cities need to think beyond their borders while specializing after understanding regional strengths and weaknesses.  Many try to be like Silicon Valley while neglecting that it’s a region, not a city, making it all but impossible for a city to replicate what happens thanks to 4 (cities), while revealing that it’s the culture and experiences there that many certain kinds of startups, with fundable outcomes, work well.   It can be hard to grasp that reality without spending time there, so let’s instead look at this other extreme of a city so populated that while you can’t replicate that either, it shows the importance of specialization and focus in civic and economic development.

Checkbox literally frames itself as the “AI Legal Front Door,” capturing requests where business users already work (email, Slack, Teams, Salesforce, intranet), turning the messy human ask into structured work.  That’s New York energy in a sentence: convert chaos into an instrument panel, then sell the dashboard to institutions.

In Checkbox as news pertinent to us all, the story isn’t “LegalTech raised money,” the story is ‘sector specialization is what turns innovation into compounding attention.” Innovation and invention create the sparks. Specialization is how a city turns the spark into a steady burn that attracts the exact people who matter: operators, risk managers, compliance veterans, buyers with budget, and investors who already know how procurement works in that vertical.

Why here was always set up to win for New York startups (whether anyone called them that or not)

New York’s startup scene didn’t start with coworking. It started with the fact that New York is a logistics-and-trust city. For centuries it has been the place where strangers transact at scale: ships, commodities, insurance, credit, media, fashion, real estate, and law. The city’s comparative advantage has never been invention in a vacuum. It’s commercialization under the pressure of exposure (population), immigration, and demand.

You can see it in the big picture; NYCEDC describes the New York metro economy as the largest in the nation, generating about $2 trillion in GDP (roughly 9% of U.S. GDP).  Big economies don’t automatically create startups; they create bureaucracy. But New York’s specific mix (finance, insurance, and media) creates something different (something every city should invest in creating): a permanent demand for tools that reduce risk, compress cycle time, and make decisions auditable.

That’s why New York keeps producing high-frequency categories like fintech, insurtech, regtech, adtech, martech, and now legal ops automation. In New York, the customer isn’t “a customer.” The customer is “a department,” and departments buy outcomes (reduced fraud, faster underwriting, fewer outside counsel bills, better compliance). Checkbox’s pitch is basically stop losing work in Slack threads and email chains; route it, measure it, automate it. New York is one of the few cities where that sentence is both a product spec and a moral philosophy – hence my framing this as an extreme example from which to learn about developing your ecosystem distinct from Silicon Valley: you can’t achieve being either, but you can learn from and replicate parts of what each do well.

If you want the simple way to think of that: Silicon Valley is a casino for technological upside while New York is a risk desk with a very aggressive bonus structure. Both can mint giants, different kinds of giants, as long as you know the “rules” of what’s being done.

Innovation and invention: New York’s long habit of making the future practical

New York has a long history of inventions that are less romantic genius in a barn and more someone got tired of the world being inefficient.

Take the elevator. The safe elevator (the thing that made skyscrapers commercially viable instead of just architectural bravado) is tied to Elisha Otis, who developed the safety mechanism in Yonkers and demonstrated it publicly in New York; it’s impossible to overstate how much that changed urban economics.  New York didn’t just build up, it monetized vertical space.

Take air conditioning. Willis Carrier designed the first modern air-conditioning system in 1902, tied directly to a New York printing problem (humidity messing with paper and color registration).  Not an invention to make summers tolerable, it unlocked modern office density and, later, entire regional economic shifts, because the Media Department needed a solution to runny ink.

Take generalized consumer credit cards. In what you probably perceive to be a finance sector play, Diners Club’s origin story is New York where charging meals across multiple merchants required scaling trust into infrastructure.

Edwin Armstrong’s work is deeply tied to Columbia and New York’s early electronics culture, and FM’s development is part of the city’s broader history of communications infrastructure given the demands of tremendous population underserved by AM.

This is the narrative of an entrepreneurial city.  New York repeatedly invents or scales the tools that make dense economic life possible: vertical transportation, climate control, credit rails, communications. And dense economic life is exactly what modern startup categories like FinTech, Insurtech, and LegalTech serve.

Hopefully Evident: New York is a fintech hub

Empire State Development points out that New York is ranked #2 in fintech investment, citing more than $4.6B in VC across 377 deals in 2023, and saying New York is home to 1,500+ active fintech startups (with 115 unicorns). Even if you want to argue about rankings (people love arguing about rankings so please, join the fray and debate), the underlying reality that the city is stacked with financial institutions, market infrastructure players, and buyers who can deploy fintech inside real operations.

The thing to appreciate for founders and the development of your ecosystem is that Fintech in New York isn’t a theme, it’s the implication of the adjacency. You have the exchanges, the banks, the asset managers, the payments networks, the compliance apparatus, the auditors, and the armies of analysts who know exactly where money leaks out of a system. That means founders don’t have to guess what matters, they can walk into the problem.  When mentoring throughout the world, finding sufficient customers to talk to so as to validate an idea, remains one of founders greatest hurdles; hopefully you can see why I want your city to A) focus on what it does well and B) promotes itself for what it is, founders fail to a great extent because of both sides of this coin – a coin cities can fund.

You see this in the way New York fintech companies scale: expense management, fraud, compliance, payments orchestration, lending infrastructure, wealth tech, risk analytics. Ramp (a New York-based fintech) has a $500M late-stage round valuing it at $22.5B and explicitly ties growth to product expansion including autonomous AI agents for finance workflow. That’s not a cool app, that’s software serving the finance department from the inside from explicitly where it makes sense that would be the case.

Crucially, New York has sector accelerators that exist because the buyers are there. The FinTech Innovation Lab (run by the Partnership Fund for New York City and Accenture) is explicit about its model: put startups in a 12-week sprint with access to senior leadership at dozens of financial institutions; it tracks alumni scale (hundreds of alumni, hundreds of proofs of concept, billions raised) and runs both fintech and insurtech tracks.  That’s customer development as a sport; exactly what we should expect of Accelerators and precisely why Founder Institute has been on the ground here for years, getting founders to the stage appropriate to scale.

Evan Wong, Co-founder & CEO of Checkbox, put it in a way founders share after they’ve survived the first few years, “I had the most incredible learning experience. I would definitely not be the founder I am today without the Founder Institute being my backbone.”

New York is also an insurtech hub (because insurance is finance’s more paranoid sibling)

Insurance is one of those sectors everyone uses and almost no one understands, which is why it keeps producing venture-scale opportunities: underwriting, claims, fraud, distribution, reinsurance, compliance, catastrophe modeling, cyber, and now AI-driven pricing and risk selection.

The city’s advantage here is also structural; New York has major insurance carriers, brokers, and professional services density, plus the regulatory environment that forces discipline. The FinTech Innovation Lab runs that insurtech track in New York in parallel with fintech. So zoom out for a moment and download this paper from Milken Institute because it’s study like this, into trends, that everyone should be doing to work out how to advance your own ecosystem, lean into New York, or to figure out where to launch or invest in a venture of your own.

Whether the market is hot or cold in a given year, underlying drivers persist.  In this case, just as is the case with finance here, insurance is paperwork + probabilistic risk + legacy systems = three things software (and now AI) loves to attack and which will always be opportunity here.

New York’s secret weapon in insurtech is the same as in fintech: you can hire someone who has actually done the job inside a carrier, broker, MGA, or compliance function.  It’s frequently pointed out that the average age of a successful founder is 44 because of inside experience and connections; well, you can put those in place with cofounders or an experienced team, what you can’t do is pretend and make it up as you go. Sector experience is the difference between “we automate insurance” and “we reduce cycle time for FNOL claims triage and cut leakage by X%;” One is a pitch and the other is revenue.

Legaltech is up for grabs and New York is one of the few places that can actually win it

First, a reality for legaltech founders: law is not “behind,” law is cautious by design. The solutions are in risk allocation with consequences.  I was in Croatia not long ago and one of the more intriguing startups was working on LegalTech for Europe; to which I impressed, “how do you scale to the other countries while handling the never ending changes in local law?”

The legaltech wave that matters now isn’t a marketplace for lawyers or another contract template, it’s operational infrastructure for in-house teams, and increasingly, AI-native compliance and regulatory workflow.  Not easy, which is why Checkbox is a bellweather both a case study and opportunity.

This Series A announcement from Checkbox is basically a manifesto about legal teams drowning in ad hoc intake channels and lacking visibility; the product is positioned as orchestration plus automation plus measurement; exactly the kind of work New York institutions will pay for, because legal spend is enormous, scrutiny is constant, and outside counsel bills are the tax you pay for having no internal system.  

Another recent signal is even more New York-coded: Legal AI startup Norm Ai secured a $50M investment from Blackstone and announced the creation of an independent law firm, Norm Law LLP, headquartered in New York, explicitly aimed at “AI-native” legal services for financial services clients.  Read that again: an AI company plus a major financial institution investor plus a New York-based law firm wrapper. That’s a bet that the boundary between software and legal service delivery is getting redrawn, and it’s getting redrawn where finance and regulation collide hardest.

Meanwhile, the biggest legal AI platforms are racing to integrate authoritative legal content, not just generate plausible text. For example, LexisNexis partnered with Harvey (AI in contract analysis, due diligence, compliance), letting Harvey users access LexisNexis content directly inside the workflow, an explicit move to solve the “your AI can’t cite the law reliably” problem.  Granted, not based in New York, but we won’t hold that against them.

That being the case is kind of why legaltech is “up for grabs.” There is no universally adopted operating system for legal work the way finance has ERPs and CRMs. Legal departments are a Frankenstein stack of email, intake forms, CLMs, e-billing, knowledge bases, outside counsel portals, and whatever someone bought after a conference three years ago.   In the incredible accomplishment of companies like Harvey and Checkbox, we see the culture, economy, and experience of Silicon Valley (Harvey) while also witnessing the impact of New York (Checkbox); both more than capable in their own right but for very different reasons as hubs of innovation and the future of our economy.

New York is one of the few places with enough density of (1) legal buyers, (2) regulated industry clients, (3) legal ops talent, (4) enterprise budgets, and (5) investors who understand compliance cycles to turn that wedge into specific categories and they provide us all with some of the best examples of why your city should be doing the same.

The post New York Isn’t a Startup Ecosystem, It’s a Set of Sector Machines appeared first on Startup Economist.

From the freezing tundra of Austin, Texas, this weekend I was asked, “Is it true that the U.S. became a leading industrial power through entrepreneurship, innovation, and mass production, creating immense wealth?” and it struck me that this city being quiet on a Monday when the northern part of the United States is at work, is a perfect reflection of if, how, policy and entrepreneurship work in concert to create opportunity.

We’re going to talk about America here so for my readers elsewhere, put yourself in the shoes of policymakers in your part of the world, and consider the role local and national government plays in helping or hindering the work that you’re doing to make the world a better place.

America didn’t become an industrial superpower because a Senate subcommittee “managed innovation,” it happened because a ridiculous number of people with sleepless night habits kept figuring out how to make things cheaper, faster, and more reliable… and then scaled those improvements through mass production and national markets. The United States is a great petri dish in the creation or limitation of wealth through which, for most of its history, created unparalleled wealth throughout the world. The U.S. didn’t “discover” prosperity; it manufactured it.

And yes: entrepreneurship, innovation, and mass production are the core reasons the U.S. became a leading industrial power and then a leading global economic power.

The cleanest way to see it is to track what changed over time: not that Americans were uniquely virtuous, but that the U.S. built a system where (1) people could take risks and keep the upside, (2) ideas could be turned into repeatable processes, and (3) large markets could be reached cheaply enough that scale mattered. When those three show up together, “immense wealth” develops naturally.

Entrepreneurship + innovation + mass production: the American flywheel

Long before “startup culture” became a buzzword even I use too much, Americans were doing the same basic thing: spotting unmet demand, applying a new method or technology, and then scaling distribution. The “American System of Manufactures,” interchangeable parts plus specialized machinery plus organized assembly, is one of the earliest forms of modern scale economics. Michael Goodfriend’s work with Carnegie Mellon, put together with University of South Carolina’s John McDermott, describes it as using interchangeable parts to reduce reliance on craft fitting, paired with the invention and diffusion of specialized machines.

That’s the bridge from “invent something” to “produce a lot of it without losing your mind (or your margins).” Interchangeability isn’t sexy, but it’s basically the reason you can buy an affordable anything.

When I look at the modern economy and see something like WordPress being used for most of the websites on the internet, or even ChatGPT interchanging all that’s available there, we see how humanity’s history with machines and scalability, applies even today.

Early versions of that system emerged in U.S. military armories and industrial manufacturing experiments, the benefits of which spilled out into public life as we uncovered the process of scale creating an increase of supply driving affordability: a breakthrough in process and standardization, followed by a flood of entrepreneurs who build businesses around it.

Then the U.S. did the very American thing: it scales that flywheel across a continent.

How? Think of transportation and logistics as silent partners and you’ll appreciate why the internet was coined the Information Superhighway. When moving goods costs too much, local artisans win. When moving goods gets cheap, scalable producers win. The Erie Canal is an early “oh wow” moment which slashed transport costs and time, effectively enlarging markets and enabling specialization and consumer trade. Railroads follow, then highways, ports, and air freight; the U.S. industrial story is also a logistics story uncovered in how Detroit and Chicago became the major cities that dominated the early 20th century economy.

Converting hand labor into seemingly limitless supply, mass production is where the wealth literally makes noise. Henry Ford is the cliché example because his impact was so evident: the assembly line and standardized parts turned automobiles from luxury items into mass consumer goods, which then created entire supply chains, cities, and labor markets around that scale.

And when the U.S. needed to prove it could out-produce enemies, World War II wasn’t so much the catalyst of American production, as it’s known, it was more like the venture capital investment in what already existed in nascent (“startup”) form. Faster than AI took all our jobs, U.S. aircraft production became the largest sector of the wartime economy (h/t Christopher Tassava), spilling out into public life in the form of the American airline industry and demise of the country being connected by rail (a sore spot for us still).

Hundreds of thousands of aircraft produced not because the Wright Brothers flew but demand, policy, and will, created the circumstances that organize capital, labor, and process at scale. That is how wealth is created: productivity – more output per unit of input.

Government doesn’t create wealth, but it can absolutely make it possible

A little aggravation of mine is hearing the trumpet from the White House celebrating how many jobs the President’s economic policy created. To be blunt and a little harsh, the two dumbest takes in American politics are (a) “government has no role” and (b) “government creates the wealth.’

Those assertions do a discredit to entrepreneurs while misleading people in ways that enable governments to get involved in the wrong ways, hindering value. Entrepreneurs convert uncertainty into products and services people pay for. Innovation creates new value by improving capabilities or reducing costs. Marketing and distribution decide whether the value becomes a business or stays a lab demo. Government doesn’t do that loop well because it can’t reliably price risk, it doesn’t face competitive discipline, and it rarely gets punished for wasting capital.

But government does matter, because markets require rules, enforcement, and shared infrastructure. Economists have been direct about this for decades, hoping the right role and responsibility sinks in. Douglass North’s work on institutions argues in Journal of Economic Perspectives, that institutions shape incentives and thereby the direction of economic change. North followed that research with what is called the “credible commitment,” a warning label: for investment and growth, the state has to credibly commit not to expropriate returns after the fact

“Institutions are the humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange,” North in the simply named paper, ‘Institutions.’ “Institutions provide the incentive structure of an economy; as that structure evolves, it shapes the direction of economic change towards growth, stagnation, or decline.”

I’ve bolded stagnation and decline in quoting him because we’re all too easy to overlook the fact that the institution of government causes stagnation and decline just as much as it can foster the creation of wealth. Institutions have been devised by human beings to create order and reduce uncertainty in exchange, and they can just as easily enable restrictions, costs, or monopoly controls, that make things worse.

Still yes, government can help, when it does three things well.

1) Defending rights: property, contracts, speech, and the freedom to trade

If you want a society where people invest, invent, and build, you need them to believe the upside won’t be stolen by a monarch, a mob, or a bureaucrat with a pen and a crusade.

By the way, it’s no surprise to me that this is why Intellectual Property incumbents got a little pissed off at me when I said they’re taxing innovation

The Boston Tea Party era is often reduced to a children’s book about taxes, but it’s also about the legitimacy of extraction and monopoly privileges; every summary of the Tea Act consequences emphasizes the monopoly power and taxation legitimacy as triggers of revolution. The point isn’t “taxes bad;” the point is that arbitrary extraction and monopoly favoritism poison investment incentives.

We can (and should) look further back in American history. Most Pilgrims certainly weren’t libertarian saints; yet the early American experiment is saturated with fights over conscience, belief, and autonomy. Study of those who emigrated to the New World largely reflect religious nonconformity and persecution as key drivers of migration decisions (interesting, that the same thing could be said of a lot of migration today). The long arc of those foundational values eventually shows up legal commitments to speech and belief in the United States, two core issues which you might not fully appreciate the implication of in entrepreneurship… Speech is how markets coordinate whereas when you clamp down on expression, you don’t just hurt culture; you cripple discovery, persuasion, and trade.

Then, in the 20th century, “defending rights” grew to include those protections beyond U.S. borders with defense of trade routes and the ability to move goods globally. The Council on Foreign Relations’ Sea Power: The U.S. Navy and Foreign Policy is explicit about the U.S. Navy’s dominance being a guarantor of global trade. We can argue about the politics of it, but economically it’s straightforward: secure sea lanes reduce the risk premium on trade, lower risk premiums increase investment and commerce. Such protections are the foundation of global capitalism.

Here is where I hope, you can again see the implications to the Information Superhighway and how that forum of speech and medium of trade is subject to the exact same considerations, well beyond the interchangeability of WordPress. The U.S. became rich in part because it kept widening the “market for ideas,” not shrinking it. If we treat modern communication networks like controlled utilities where permission is required to speak, ship, or build, we’re not “saving democracy,” we’re kneecapping entrepreneurship while pretending it’s a moral victory. Rather, that’s not quite right, it isn’t pretending a moral victory, it’s propaganda that it needs to be controlled instead of protected, to “keep us safe.”

2) Investing tax dollars in infrastructure: the boring stuff that makes scale possible

Infrastructure is the underrated enabler of mass production. You can’t do national markets without roads, ports, rail, power, and communications. Entrepreneurs can build factories; they can’t sensibly build the interstate system.

The Erie Canal example is the principle: reduce transport friction and markets expand. The interstate highway system is the 20th-century version: restructure logistics, commuting, distribution, and regional specialization. The Federal Reserve Bank of Richmond published that the relationship of that with growth. Academic work keeps finding the same general direction: infrastructure investment can raise productivity and income growth under certain conditions, even as the details vary by place and design.

Electrification is another clear example which we should weave in here as we lead back to the internet and AI. Rural electrification changed productivity and enabled new economic activity in areas the private sector under-served because the payback period was too long or too uncertain. Without electrification, rural productivity lagged, widening the gap with urban standards of living; we can replace “electrification” with the modern era’s internet access or high-speed bandwidth.

The internet is not a folk tale where either “government built it” or “government did nothing.” The historically accurate version is that early networking and backbone efforts were government-funded (DARPA/ARPANET; NSFNET), for a time protected from infringement like our trade routes, enabling entrepreneurs and innovation to turn capability into the modern economy.

Government funds or coordinates certain kinds of infrastructure because the payoff is diffuse and long-term; entrepreneurs then build competitive products and markets on top of it.

Consistent with my point is history: the enabling layer matters but that’s not the same thing as creating wealth. Governments mistakenly try to fund startups when what we need from policymakers is focus on neutral infrastructure that founders can’t (and shouldn’t) allocate resources to fund.

3) Preventing corruption: not just crime but also market power, capture, and rigged access to knowledge

Corruption is broader than bribes handed out on park bench along the National Mall. We need to talk about monopoly power used to block entrants, regulatory capture used to cartelize a sector, and political self-dealing that turns public office into a trading desk.

A competitive market is an anti-corruption tool. When markets stay contestable, the next entrepreneur will challenge incumbents; when they don’t, you get rent extraction (wealth transfer dressed up as efficiency).

This is where antitrust shows up as pro-market, not anti-business. The Standard Oil case of 1911 is a defining example of government acting (however imperfectly) to stop monopoly behavior that restrained trade where The Supreme Court’s opinion framed the conduct as an “unreasonable and undue restraint of trade,” and the remedy dissolved the trust. Whether you like the “rule of reason” doctrine or not, the intent was to preserve competitive conditions rather than let private power become a parallel government.

One can argue we’re slipping a bit on this front because the same logic applies to internet platform monopolies and permissioned digital markets (Think, net neutrality or the causes of torrenting). If a handful of gatekeepers can decide who gets distribution, we don’t have a free market, we have an approval process. In many respects, Google, and increasingly AI, sort of decide what we know so appreciate the risks of controlling that, limiting it, or allowing politicians to be influenced by it.

The U.S. Constitution explicitly empowers Congress to secure exclusive rights for inventors “for limited Times” to promote progress while economists studying innovation history note that early U.S. patent institutions likely encouraged development by lowering the costs of adopting and copying foreign inventions (“IP maximalism” is not the same thing as “innovation” which requires mainstream adoption). Now, who makes the rules?

Thus, my anti-corruption / pro-competition posture on IP is not “abolish patents” and certainly isn’t “lock everything down,” it’s: keep IP rights limited, enforceable, and not easily weaponized by incumbents to block entrants. That includes cleaning up patent trolling, abusive injunction strategies, and regulatory games where compliance becomes a moat. When knowledge is in the market, which includes other countries making it available, it should become free use because to do otherwise enables foreign competition while handicapping domestic innovation.

If you really want to take preventing corruption seriously, we can’t ignore political self-dealing. Insider trading by public officials is a trust-destroying tax on the entire economy because it signals that rules are for civilians, not insiders. Even when it’s not prosecuted, the perception alone raises the “why bother?” factor for entrepreneurs who don’t have access.

Marketing is the wealth multiplier everyone pretends is beneath them

Most American industrial greatness wasn’t invention, it was commercialization. The U.S. repeatedly turned technical capability into scalable markets by pairing production with distribution, branding, and sales. You can invent interchangeable parts, but if you can’t sell the product at scale, you’ve created a neat museum exhibit, not wealth. A thought which again makes me reflect on University Tech Transfer offices (most of which are struggling with commercialization).

Marketing is not “ads.” Marketing is the discipline of understanding demand, positioning value, and building channels. It’s how innovation becomes adoption. That’s why American firms, across eras, created immense wealth even when other countries had comparable science: they were often better at commercialization (which is MARKETING, not licensing IP): turning new capability into solutions people would actually buy, and then building a system to keep selling it.

This is also why it’s a category error to claim government creates wealth. Government can create conditions, it can sometimes fund enabling infrastructure, but it does not do the iterative loop of customer discovery, pricing, persuasion, distribution, and competitive adaptation that turns novelty into market value, entrepreneurs do.

So yes, it’s true, and it’s also a warning label for 2026

The U.S. became a leading industrial power through entrepreneurship, innovation, and mass production.

Immense wealth followed because productivity rose and markets expanded. Government helped most when it defended rights, invested in infrastructure, and prevented corruption (especially monopoly and capture) without pretending it was the producer.

The modern risk is that we forget which parts are the canals and who makes the ships. If we throttle speech and digital exchange, treat AI as permissioned knowledge, let incumbents cartelize distribution, or allow political self-dealing to become normal, we don’t get “safety,” we get stagnation.

If you want a pointed way to test whether a policy is pro-wealth or just pro-control, ask yourself one thing: does it make it easier for a new entrant to compete or does it make permission mandatory or participation expensive?

Quite simply, it’s freezing in Austin, Texas right now, uncharacteristically, and we don’t have the same infrastructure in place to get everyone working. Economic policy takes entrepreneurship one way or the other.

The post Government Doesn’t Create Wealth, It Decides Whether Entrepreneurs Can appeared first on Startup Economist.

A startup pitch is not a sales pitch; no one in the room is buying, we are not your customer and we’re not even deciding whether your idea “will work.” What we’re doing is much simpler and harsher: we’re deciding whether what you’re doing creates enough perceived value to justify our time, reputation, and risk tolerance.

A startup pitch is not “for investors,” so for pitches sake, stop thinking that! It’s not for customers either! It’s for everyone.

• It’s what potential partners hear when deciding whether to align with you
• It’s what future employees and co-founders hear when deciding whether you’re worth betting their careers on
• It’s what mentors hear when deciding whether to invest their limited attention
• It is for investors and customers too, but you’re failing for reasons few explain or even understand

It’s for people like me when you’re asking for introductions. What I’d like to do here is explain why, out of the dozens of pitches I hear every day, you don’t get those introductions. Every time you pitch, the name, network, and credibility of everyone in the audience, is on the line when they help you.

While most are trying to advice you how to make your pitch better, let me explain how it sucks so you stop doing these things.

Seriously. Out of a hundred pitches I receive (emails, DMs, decks, live presentations) maybe two trigger the thought: okay, I’d risk my reputation by introducing this one. Not because they were polished and not because they had traction but because what they said and how they said it signaled that the opportunity exceeded the risk – simple startup pitch mistakes.

While advisors preach MVP testing, validation, customer discovery, and relentless execution, founders are drowning in advice about which framework to follow and which newsletter to read. Meanwhile, the real failure mode is painfully basic: what you say (and write) about what you’re doing fails; before the product fails, before the market rejects you, and before capital even listens.

The first mistake is thinking you’re pitching to investors or customers, you’re not, you’re pitching to everyone. At least some startup development organizations understand this; at Founder Institute, founders pitch every week, not to raise money, but to fix what’s wrong. That repetition isn’t about learning how to “sell investors better,” it’s about fixing how you think, speak, and write. And in such environments, we can spot future failure instantly in cohorts where founders say, “I don’t understand why we’re pitching every week;” a sentence that alone reveals misaligned priorities. Weekly pitching forces clarity about what matters, what’s being validated, and whether the work is actually worth anyone else’s time. Pitch work isn’t presentation polish; it’s cognitive repair.

What most advisors lack (and won’t tell is you) is that most of them have little to no training in communication. That isn’t a negative criticism of advisors it’s just a fact of people in general, but it’s a skill insufficiently understood none-the-less. Communication errors aren’t cosmetic, they’re structural. Founders make predictable rhetorical and logical mistakes that instantly signal poor judgment, weak thinking, or unmanaged risk. If you’re in a startup or a startup development organization, you should be actively seeking people with backgrounds in public speaking, writing, debate, or rhetoric – not social media influencers nor “pitch coaches” who optimize slides, but communicators who know how to identify and correct these errors.

Why Startup Pitches Fail: The Mistakes We Spot Immediately

Catch-22 Statements

A Catch-22 is a self-defeating argument where the condition required to succeed is impossible to meet because of the rules you’ve imposed. Joseph Heller popularized the term and you might be familiar with the book (or Hulu series).

In startups, this is evident in the notion that “We can’t get customers until we raise money, but we can’t raise money until we get customers.” What the listener hears is not empathy; it’s paralysis. You’re announcing that progress is impossible without external rescue.

The fix is reframing agency. Replace impossibility with what’s known as constraint navigation. “We’ve identified a constrained point of entry that allows us to validate demand without capital,” and do it. People won’t help you if you can’t work your way out of two conflicting statements that create a stalemate; startups are about breaking stalemates.

Selling Instead of Pitching

I touched on this as I waxed on too poetically before getting to this list, so let me be clear why selling kills your pitch: selling is persuasive while pitching is explanatory. When founders conflate the two, they oversell before they’ve established credibility.

One of my Pitch Deck peeves is that the standard template, and too many advisors, tell you to introduce the team near the end of the presentation. See the flaw in that? “Oversell before they’ve established credibility,” means I have no reason to believe you, invest time in listening, or care, because I have no idea if you and your team are even capable and credible. This isn’t directly selling instead of pitching, but it’s related; you are not persuading me of anything! I am paying attention to uncover the opportunity and value in helping you in some way – that’s a pitch – and you have to explain it.

You see sales when a pitch is packed with hype language such as how great this article is: “revolutionary,” “game-changing,” “guaranteed ROI,” before anyone understands the problem. Over-selling signals insecurity and often suggests the founder doesn’t understand the audience’s role.

The fix is simple and uncomfortable: stop convincing, start clarifying. A good pitch teaches. If someone understands the value and risk clearly, persuasion takes care of itself.

Ad Hominem Attacks

An ad hominem shifts focus from the argument to the person. In startups, it often appears as dismissing competitors or critics as “stupid,” “legacy,” or “out of touch.”

Kiss of death? Actually, saying you don’t really have any competitors. Life-threatening collision? Comparing yourself to competitors in a way that frames you as simply better (see the previous mistake to learn more)

When founders attack people instead of addressing alternatives, it signals fragility. Worse, it implies you don’t understand why others have chosen different approaches.

Now imagine, or even perhaps consider if you have done this; I’ve been in pitches where the founders will even criticize the audience for not understanding, not being their target, or not caring. What are you doing!?

The fix is respect through analysis which means explaining why existing approaches fail structurally or economically without attacking the actors behind them. Certainly, never criticize your audience – you don’t know their experience or skills and more often than not, someone willing to speak up with criticism is because they know better. Serious audiences respect rigor, not contempt.

Red Herrings

A red herring distracts from the core issue by introducing irrelevant information. In pitches, this often shows up as impressive but unrelated metrics (social followers, press mentions, vague partnerships) that don’t address the fundamental question of value creation. For example, traction doesn’t mean you have 10 customers, it’s evident in a recurring pattern and the delta’s (changes) that show an improving venture.

The fix is ruthless relevance. Every claim should directly reduce uncertainty about value, feasibility, or risk. If it doesn’t, cut it.

Another pet peeve that I have is one that frustrates most Product or Engineer oriented founders – no, I don’t want to see a demo of your solution, if it doesn’t do what you claim, that’s evident in what you are telling me because a functional solution alone is not a valuable company. The red herring is the distraction from your growth metrics or competitive advantage, “here, let me show you the demo.”

Ignorance of Competition

Nothing kills credibility faster than “we have no competitors.” That statement doesn’t signal uniqueness; it signals ignorance.

Competition isn’t just companies, it’s substitutes, behaviors, inertia, and status quo. Pretending otherwise tells us you haven’t done the work.

The fix is intellectual honesty. Map the alternatives (not things doing what you’re doing! Alternatives!) clearly and explain why your approach changes the trade-offs; differentiation is comparative, not declarative.

Straw Man Arguments

A straw man misrepresents an opposing position to make it easier to knock down. This probably the mistake most in need of examples. Consider it making a caricature of existing solutions instead of engaging with their real strengths.

Let me give you a few here, because this one shows up all the time while also closely relating to other mistakes:

• “Existing solutions are spreadsheets and email, which are obviously broken.” That’s a straw man. No serious buyer is choosing spreadsheets because they think spreadsheets are great software. They’re choosing them because they’re flexible, cheap, familiar, and good enough. By pretending incumbents are stupid tools used by clueless people, the founder avoids explaining why those real advantages are outweighed. The fix would be acknowledging why spreadsheets persist and explaining precisely which costs or risks finally exceed their benefits.
• “Legacy vendors are slow, bloated, and don’t care about customers.” That’s not an argument; it’s a cartoon villain. Large vendors survive because they handle compliance, scale, procurement, and political risk better than startups. When founders reduce them to lazy monopolists, they’re dodging the harder question of how they’ll replace institutional trust. A serious pitch explains where incumbents are constrained structurally, not morally.
• “Everyone else is still using outdated technology, but we’re using AI.” That implies competitors are ignorant or incompetent. In reality, most companies are very aware of new technology and have chosen not to adopt it because of cost, risk, data readiness, or marginal benefit. The straw man is pretending ignorance when the real issue is trade-offs. Fixing it means articulating why the timing, economics, or constraints have changed now.
• One from today, a founder pitched, “Most startups in accelerators are spending $100-$300/mo just on cold outreach tools (Lavender, Lemlist, etc.), which is insane for a pre-seed or seed-stage team.” Um… no, they’re absolutely not. Notice the criticism of Lavender and Lemlist, which is also ignorance of competitors and ad hominem attack, even wrapped a bit in selling rather than pitching because they’re trying to persuade the audience that they’re better.

You ever hear (or God forbid, say), “We’re not raising capital because investors just don’t get it”? Okay, you’re done.

The fix is always the same and always uncomfortable: present the strongest version of the alternative and then explain why your approach still wins despite that strength. When a founder does that well, it’s immediately obvious; when they don’t, we know (instantly) they’re going to fail.

False Dilemma (False Dichotomy)

False dilemmas frame the world as having only two options: “either you do X or you fail.” Startups that rely on this sound naive because reality is multi-dimensional.

The fix is nuance by acknowledging multiple paths and explaining why yours is advantageous under specific conditions. Sophisticated audiences think in spectra, not binaries.

Seeing a pattern yet? You should… this is frequently related to straw man arguments.

Want some common pitch advice that more frequently screws you up? This is also usually evident in that advice that you start your pitch with a question. If the mind of your audience might think, “no, I don’t have that problem,” or “no, actually, I don’t agree,” then you’ve failed at the start; you set up this binary decision that isn’t realistic and lost your audience because of it.

Slippery Slope Claims

Slippery slope arguments assume that one action will inevitably lead to extreme outcomes. “If we don’t do this now, the market will be gone forever.” This is a fear-based tactic, not analysis.

Not to be judgmental but hey, that’s why we’re here; almost all social impact, energy, or climate-oriented founders do this because their passion and bias supersede judgement.

I got it, the world is going to end if we don’t invest in your lawn water reduction app. I’m good, thanks.

Show mechanisms, not inevitabilities. If a risk exists, articulate its probability and impact instead of dramatizing it.

Appeal to Authority

Name-dropping logos, advisors, or “top-tier interest” without substance is an appeal to authority. Logic should get you to appreciate the fallacy particularly when authority is irrelevant or unverifiable.

Explain why someone’s involvement matters operationally or strategically; otherwise, it’s noise.

I have this happen quite a bit so here’s a good example: I’m frequently asked to be an advisor to a startup. Most completely irrelevant to my work or experience… “okay… why me?” The founder is trying to establish their credibility with authority. I’m going to say no, because it makes you look bad.

Circular Reasoning (Begging the Question)

Circular reasoning occurs when the conclusion is assumed in the premise. “We’re the best because no one else does this as well as we do.” That tells us nothing.

Back to pattern matching from this list: ignorance of competitors, false dilemma, selling, and a bit of ad hominem.

Use external validation not internal logic – Show how inputs lead to outcomes without restating the claim. When pressed why, if your answer is “Because customers keep choosing us,” that’s internal logic. Instead, we need causality such as, “Shortening onboarding from six weeks to nine days cut implementation costs by 38%, which is why procurement approved us despite a higher price.”

Notice, explaining not persuading (not selling).

Hasty Generalization

Founders often extrapolate broad conclusions from tiny samples: “Our first three customers loved it, so the market is huge.”

Most evident is in your TAM/SAM/SOM slide where I’ve pointed out before that saying your Total Addressable Market is billions is rather irrelevant (globally, everything is) and your SOM (obtainable market) needs to be what you can get right now (meaning it’s probably really small). Don’t lead us to generalizations because we neither care nor are they believable.

The fix is proportionality in that you match the strength of your claim to the size and representativeness of your evidence. Simply be clear what’s real and possible.

Post Hoc Ergo Propter Hoc

Let’s end with some Latin none of us will ever remember! You’ll know what this is when I say it because in English, it’s a frequent concern. This fallacy assumes that because one event followed another, it was caused by it. “We launched feature X and revenue went up, so feature X caused growth.”

Correlation is not causation.

Here’s one, that can help us all; not really a startup mistake but an example I write about frequently: Entrepreneurship isn’t just owning a business; the high correlation between business ownership and entrepreneurial behavior has led people to mistakenly treat them as the same thing. Likewise, the starting of a business (sequence) doesn’t make someone an entrepreneur. Similarly, a startup might be a small business, but a new small business isn’t a startup; the correlation of the two being small and new does not cause them to be the same.

Serious leaders do not confuse sequence or similarity with cause.

Startup Pitch Mistakes Kill You from the Start

Founders cannot afford these mistakes. Call it pitching, explaining, writing, or thinking—labels don’t matter. When you commit these errors in how you talk about what you’re doing, you lose before you begin. Not because the idea is bad, but because you’ve signaled that the risk outweighs the value.

If you’re wondering why doors aren’t opening, why introductions don’t happen, or why advisors disengage, look at your language. The market listens long before it buys.

The post The Startup Pitch Mistakes That Tell Us You’ll Fail Before You Start appeared first on Startup Economist.

A practical startup economic policy framework for governments that want venture-scale companies

Governments around the world love the word entrepreneurship. They put it in press releases, name departments after it, fund “innovation hubs,” and cut ribbons in front of coworking spaces that end up being networking clubs for service providers seeking customers. What almost none of them do (at least not formally, structurally, or coherently) is distinguish startups from new businesses. Fewer than roughly 10–15 countries worldwide do this in law, policy, or administrative design. That’s under ten percent of governments operating as if the two are economically different things. They are! Radically.

This isn’t a semantic quibble (though I know some of you will argue with me about it). It’s a policy failure with measurable consequences.

The Organisation for Economic Co-operation and Development has been explicit for more than a decade that high-growth, innovation-driven firms behave differently from small and medium enterprises and require different policy instruments, capital structures, and timelines. The World Bank draws a clear line between subsistence or lifestyle entrepreneurship and innovation-led firm formation tied to productivity growth.  Yet most governments still govern as if opening a dry cleaner or building a software development company are the equivalent of a new AI driven AdTech venture or being the first to market with gluten-free pie crust finding its way to grocery stores.

They aren’t even cousins, they’re different species.

What most states and countries do have are entrepreneurship programs, usually actually designed around job creation, self-employment, and local services. Those programs blend startups into the same category as sole proprietorships and franchises because it’s administratively easy and politically safe. The result is that startup founders are taught how to write business plans, manage cash flow, and apply for grants that were never designed for companies expected to fail fast, scale aggressively, or exit through acquisition.

I hosted today, a wonderful discussion of this with Gil Gonzales who has been tackling this in Arizona, California, and Ohio.  We’ll have the debrief of that event available soon; until then, since this topic caught your attention, register here to join me on February 3rd when I’ll be joined by Alberto Martellini and Richard Mort as we share with you how a cross-border startup program in your city opens the doors to collaboration and capital in ways that soft-landing programs fall short.

Most countries also have innovation programs, which sound promising until you look closely at the reality that innovation policy typically focuses on research outputs, patents, or technology demonstrations. Innovation is part of startups, but innovation alone does not create companies. A patent without a market is a résumé line, not an enterprise. Mariana Mazzucato, Professor in the Economics of Innovation and Public Value UCL (University College London), has written extensively about the limits of innovation policy that stops short of firm creation and market formation – such as in her work with Henry Lishi Li, Research Fellow in Health Innovation and Policy Engagement, UCL Institute of Innovation and Public Purpose, “The Entrepreneurial State and public options: Socialising risks and rewards.”

Then there’s commercialization and tech transfer, especially in university settings. Governments invest heavily here and then act surprised when the results disappoint. Technology transfer offices optimize for licensing revenue and risk avoidance, not for building venture-backed firms. According to AUTM’s U.S. Licensing Activity Survey, universities disclose tens of thousands of inventions annually, but only about 3–5% result in the formation of a startup, and AUTM does not track whether those startups survive, scale, or attract venture capital (meaning the share that become viable, venture-scale companies is necessarily much smaller (if private sector patterns are consistent that 90% of those will fail).  Commercialization is a transaction. Startups are an organizational, behavioral, and market-driven process. Confusing the two guarantees mediocrity in both.

Governments also invest billions in R&D, often pointing to this as proof of startup support. But R&D is just one input. Startups are not R&D projects; or rather, they actually are, but not in the sense meant herein, they are experiments in market creation under extreme uncertainty. Paul Graham has been explicit that startups are “companies designed to grow fast,” not labs with payroll.

Finally, there’s a question to appreciate in finance. Almost every government regulates venture capital. Some allocate capital into funds. Very few treat venture capital as a distinct economic function; the mechanism by which high-risk, non-bankable firms are created and disciplined by markets. Public capital is often deployed as grants because grants are politically palatable. Venture capital is not a grant system; it is a governance system for uncertainty. The National Venture Capital Association has been clear that venture-backed firms account for a disproportionate share of innovation, IPOs, and productivity growth in the U.S.

And did you know? Only around 50–75 universities, almost all elite or research institutions, even teach Venture Capital. Community Colleges round to zero. This means the investor class funding startups likely isn’t even exposed to how startups work unless they’ve been in one; if we’re lucky, drawing from finance degrees which are designed around traditional economics and business models.

Most governments regulate that system without understanding it.

The consequence of all this blending is predictable. Startup founders find themselves in programs optimized for stability instead of the methodology, systems, and culture of what makes startups, distinctly, work -> Universities measure patents instead of companies; public capital substitutes for private discipline; policymakers declare success because activity happened, not because firms scaled… And then everyone wonders why ecosystems stagnate.

Countries that do distinguish startups from new businesses (Israel, Estonia, France, Finland, Singapore, South Korea, the UK, Germany, Chile, Canada, Australia, Japan) govern differently. France’s La French Tech explicitly separated startups from SMEs across labor law, taxation, and capital access.  Israel’s entire innovation policy framework was designed more with venture formation in mind, not small-business support. The outcomes are obvious.

If governments actually want startups (not press releases about them) some policy shifts are unavoidable

A few thoughts…

First, economics and marketing must be core curriculum everywhere, not electives and not optional. Marketing is not promotion; it is value is discovered and created. Peter Drucker was unambiguous: “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Startups fail because they misunderstand incentives, demand, and behavior, not because they can’t code. Teaching STEM without economics is how you get elegant solutions to nonexistent problems.

Second, startup-specific committees should exist in every legislative body and major department. Not “small business.” Not “innovation.” Startups. Policy design requires fluency. You wouldn’t ask an agriculture committee to regulate aerospace; treating startups as generic businesses is the same category error.

Third, governments should fund startup infrastructure (physical and platform). Free or heavily subsidized spaces for coworking, events, and founder collisions outperform almost every curriculum-driven intervention. Density matters. MIT’s research on innovation districts shows proximity and interaction (not subsidies) drive entrepreneurial output.  Spaces should be neutral, open, and boring in governance.  Along with that, the platform on which to run startup development programs, the CRM of investors, and the community networking software – who is going to pay for that when startups can’t (and founders shouldn’t)?  Or rather, why make everyone reinvent the wheel when the wheels are in motion and available??

Fourth, grant programs, such as the United States’ SBIR and STTR, must be explicitly startup-oriented, not research-oriented. Not in NAME, in practice, which is to say, clear carve out of what is available, how, and why, for startups rather than everything else bundled together.  In the U.S., these programs are still evaluated as science projects despite repeated evidence that commercialization outcomes improve when startups (not institutions) are the unit of analysis.  If a grant isn’t structured to lead toward a venture-scale company, it shouldn’t be counted as startup policy.

Fifth, healthcare (especially mental health coverage) must be accessible to startup founders independent of employment status (hint, they’re not employees when a temporary venture is neither funded nor making money). The data on founder stress, depression, and anxiety is no longer anecdotal. Michael Freeman’s widely cited study found founders are significantly more likely to experience mental health challenges than the general population. Treating that as a personal failing instead of a systemic risk is negligent.

Three more changes come immediately to mind…

Governments need procurement pathways designed for startups, with faster timelines and smaller contracts. The United States Department of War has shown this is possible through programs like AFWERX and Defense Innovation Unit (DIU), which explicitly target startups rather than incumbents.

They need immigration policies that treat founders as economic infrastructure, not labor market anomalies. Canada’s Startup Visa and Estonia’s Startup Visa exist because those governments understand that founders import future firms, not just talent.  What caused Silicon Valley to boom?  Migration into Northern California just as would happen to Austin, TX a couple decades later.  Immigration brings culture, different opinions, other experiences, and networks, into the ecosystem.

And they need data systems that track startups separately from small businesses, measuring formation, failure, follow-on capital, and exits. You cannot manage what you refuse to define. Kauffman Foundation research has repeatedly shown that high-growth firms drive net job creation, yet most state dashboards still lump them into SMB metrics.

None of this is radical. What’s radical is continuing to pretend that startups are just enthusiastic small businesses with hoodies.

If you’re a policymaker, economic developer, or university administrator reading this and feeling defensive, that reaction is the point. Ask yourself a simple question: where, exactly, in your statutes, budgets, or org charts does “startup” appear as a distinct category?  Not a buzzword meaning new businesses but rather a distinction of your plans and policies different from new business creation.  If the answer is nowhere, you’re not supporting startups, you’re crowding them out with good intentions.

And if you’re a founder operating inside that system, the better question is which of these absences is slowing you down right now (and why you’re expected to absorb that cost while governments celebrate “entrepreneurship,” and the jobs created that are a result of your hand).

The post Only 10% of State and National Governments Distinguish Startups from New Businesses appeared first on Startup Economist.

We trained a generation to build tools, not understand consequences. Technology keeps revealing just how dangerous that gap has become.

American courts have been undergoing an experiment by way of a study that might (should) heavily influence everyone in appreciating how important it is that decision makers are well informed. Finally seeing more light with the publication of the research in The Quarterly Journal of Economics, through the Manne Economics Institute for Federal Judges, judges were trained not just in law, but in law and economics.

Empirically measurable, statistically significant shifts in legal outcomes, behavior, and ideology; judges exposed to these workshops sentenced more harshly, leaned more favorably toward markets over regulation, and adopted language that mirrored classical economic reasoning.

Not because of lobbying. Not because of political pressure, social pressure, nor even institutional change; Because of a short course in thinking like an economist.

Now, before I go on, I want to head-off the political extremist views that I know will come at me, since they just did when I waded into the California tech tax; yes, the Antonin Scalia Law School at George Mason University, affiliated with the Manne Law & Economics Center, is conservative. If you’re itching to come at me that this is just wrong, simply because of the source, you’re missing the forest for the trees, and frankly I’m not here for it. Months ago, the other side (which I’ll go with calling it since I’m not here to pick either side), went hard at this study for being right wing or some ideology to take over the justice system. We are NOT here for that and what I hope you’re capable of is the critical thinking that I am advocating is needed in society, by seeing how easily education influences very consequential leadership and decision making.

What happens when we don’t give entrepreneurs, voters, or founders the same grounding?

Illiterate entrepreneurs and illiterate voters are realizing a problem

We accept, almost without debate, that uninformed voters are a threat to democracy. We acknowledge but poorly support that the same logic applies to startup ecosystems. Bad policy is visible and slow; bad companies are opaque and fast. But they both stem from the same source: people making consequential decisions without any understanding of systems, incentives, or economics.

Voters follow narratives because policy is abstract while founders follow playbooks because markets are opaque. Both default to intuition, social proof, and bias because no one taught them the rules underneath the game.

So what we get is a generation of builders with no comprehension of supply and demand, incentive distortion, pricing theory, or opportunity cost. Founders can ship software, raise capital, and make viral TikToks but most can’t explain what value is or how markets discover it. What’s lacking is the primary reason startups fail.

And now we’ve dropped artificial intelligence into this intellectual vacuum.

On a Titanic in Icy Waters

We are flooding every domain (product design, investing, journalism, governance) with tools that can mimic intelligence. That doesn’t mean the people using them understand anything. They’ve just been handed a calculator and told it’s a brain. Before thinking this is a critical concern I’m raising about AI, appreciate that this is merely an observation of what’s been happening for decades – Google accomplished the very same, teaching people to “Google it.”

Our nature to be easily influenced by Facebook or TikTok is nothing more than the natural outcome of a skill taught in standardized education: What you need to know is what you are told is correct.

Decades of education oriented to preparing people to be IN the workforce, or choose a specific profession (architect, doctor, construction, lawyer, or judge) have resulted in a society happy consume what we’re told, as fact. Allow me to get political for a second (though I said I didn’t want to)? Because Obama said so… because Trump said so… is the same red flag about our future that we should appreciate in falling victim to the first result on Google, the hallucination of ChatGPT, the biased post on Facebook, or the judge who says they’re right… or the criticism of the Manne Program and results, because of a conservative source.

I read the results of Ideas Have Consequences: The Impact of Law and Economics on American Justice with a critical eye and what I took from it is the mere fact that when exposed to economics, judges make different rulings. Which means, my left OR right leaning friends, we have judges sitting on the bench making clearly personal opinion conclusions, that shape lives and society, when what is considered among the most fundamental of rational thinking, changes those conclusions… only to be attacked by a political bias. Forget the outcome or the biases, can you see the red flag??

When founders disregard marketing, regulators treat tech as ideology, and voters chase meme coins because a politician said to, it’s not disruption, it’s waste and harm driven by ignorance. What we’re watching isn’t innovation, it’s a consequence of a society where everyone learned how to use tools and no one learned how to think about them.

The AI “skills gap” everyone is talking about? It’s not Python. It’s Econ 101.

Marketing and economics are studies of understanding behavior which, when oblivious of, humans are easily influenced by propaganda, agenda, and misinformation.

AI, at scale, will create content, code, and campaigns. But only people trained in economics, communication, and strategy will be able to direct that toward opportunity instead of noise since any work that we’re doing to create opportunity requires critical thinking and understanding markets – something we can’t rely on artificial intelligence trained on existing knowledge to do.

Why we need to teach economics, not engineering

If a six-day workshop changed the American judicial system, then the refusal to teach foundational economics to our entrepreneurs is malpractice.

Let me make sure we’re on the same page: economics is not finance, it’s not investing, it’s not business, and it’s not about money. In the same breath that I rant that marketing isn’t about customers, advertising, or promotion, I realized that the reason so few founders embody the most fundamental of understandings that drive startup success, is the same issue facing uninformed voters, easily reframed judges, and people being taken advantage of by a Facebook post. Economics and Marketing are about behavior under scarcity, tradeoffs, systems, second-order effects, and incentives.

The fact that founders still ask whether revenue is the same as profit is not their fault, it’s ours.

We taught them to pitch. We didn’t teach them to think.
We teach people to know what they’re told, to believe what they read, and to trust what they hear.

As the barrier to building drops to near zero, but the barrier to understanding why to build has not changed. We’re not create more entrepreneurs; we’re creating more waste, unless we reorient education along the same lines that voters need for good governance.

We need founders who can think about economics the way marketers think about psychology: as the bedrock of how things actually work. Not how we hope they’ll work.

We need voters who can think about economics the way marketers think about psychology: as the bedrock of how things actually work. Not how we hope they’ll work.

Founders Trained Like Judges?

That misses the point entirely. The study that kicked this off proves the concern we should have. Train people in an economic worldview, and their decision-making changes. Permanently. Across domains.

The judges in the Manne program rewired how they assessed evidence, harm, responsibility, and consequences. You don’t need to agree with the outcomes to grasp the significance of the mechanism.

So, why are we teaching founders to code and pitch instead of reason and explain?

Entrepreneurship is not product design; it’s economic development and it’s labor allocation, it’s capital deployment and social influence. And in every domain, people are being outmatched by tools, manipulated by algorithms, and gamed by people who know how psychology and incentives work.

The future will be run by people who can wield AI as a tool of influence far more than intelligence. That means understanding how people think, what they respond to, and where systems break. It means teaching marketing, communication, behavioral econ, and strategic reasoning as core curriculum.

You want job creation? Teach opportunity cost.
You want startup success? Teach market dynamics.
You want AI alignment? Teach ethics, power, and incentives.
You want empowered people? Teach the implication of ignorance of this.

Teach People How to Think with Behavioral Sciences over STEM

The startup world doesn’t need more hackathons. It needs founders who understand why their idea shouldn’t exist. It needs people trained in criticism, risk modeling, and persuasion. People who know what happens when the wrong thing scales, because they’ve seen it in law, in markets, and in governance.

What The Quarterly Journal of Economics study reveals is that worldviews beat tools by exposing the reality that people sitting in judgement change that judgement when exposed to how things work rather than ideals. Institutions bend to the frameworks their leaders are taught to use. If we want innovation to serve society, we need to train founders the way we should’ve trained voters: not in what to think, but in how to recognize when someone else is lying.

If we don’t? The people shaping markets, deploying models, and writing laws will still be doing so based on vibes and influence, not value or consequence.

Admit it, we’re all sort of feeling like we’re on a ship destined to sink… whether in your anger about the current administration, AI eliminating all our jobs, feeling like university is a waste, knowing that healthcare is bankrupting us, or pissed off that you can’t afford a home, this an era of uncertain concern. The Titanic sank because of ignorance, overconfidence, and foregoing agency to just do what the captain says. If you want to argue with me because of a political extreme, take it elsewhere, I’m here so ships don’t sink.

The post What Sinks Startups AND Democracies: The One Thing Founders and Voters Are Starting to See Might Save Us appeared first on Startup Economist.

The research isn’t vague anymore. Decades of behavioral economics, psychology, and entrepreneurship studies have piled up enough evidence to stop pretending success is random. Whether someone builds alone or inside a founding team, outcomes track to a small set of repeatable human behaviors. Put the right skills and habits inside a young organization and it compounds. Miss them, and no amount of hustle theater, demo day pitches, or motivational posters saves you.

That matters because we finally know how to serve entrepreneurs better. I’ve written extensively about what separates founders who build durable companies from those who burn time and capital, pulling from personality research, venture outcomes, and ecosystem data. Academic work, including research coming out of Oxford University and aligned institutions, keeps reinforcing the same point: certain traits correlate strongly with entrepreneurial success, while others do not. Risk tolerance, openness, internal locus of control, and conscientious execution show up again and again in the data. Society is slowly learning that helping entrepreneurs doesn’t mean telling everyone they’re equally suited to founding a company. This means encouraging people to try, teaching them the methodology, and then helping those without certain traits partner with or co-found alongside people who have them.

Personality, risk appetite, and cultural wiring are stubborn. We can’t reprogram them with a workshop. That tension weighs on startup communities: be welcoming and inclusive without lying to people about odds (for example, the conventional wisdom that 90% of startups fail is misleading – we know that the average age of success is 44 which means, like it or not, if you’re 20 or 60, your odds of success are much lower than that of a 40 year old starting a company). The good news is that habits are different. Habits are trainable. They don’t overwrite who you are, but they do determine how you behave when it matters. The founders who win develop the same six habits, consciously or not, and then repeat them until they look like instinct.

Before I go on, some credit where due, Hector Quintanilla identified these Habits of Highly Successful Entrepreneurs almost a decade ago and here, we’re going to explore them further (Hector, there is a book here)

1. The Habit of Curiosity

Entrepreneurship begins with irritation; most see this the wrong way, orienting people to opportunity, self-employment, or starting a business, encouraging effort in possibility when what’s required is determination. Curiosity is the refusal to accept that the way something works is the way it must work. Every strong founder I’ve met has a low-grade obsession with questions that most people don’t bother asking. How could this be faster? Why is it so expensive? Who actually makes the money here? Why does everyone tolerate this friction?

Curiosity isn’t abstract, it’s practical nosiness. It’s standing in line and reverse-engineering margins. It’s using a product and mentally redesigning it while everyone else scrolls. Think of curiosity like a muscle that tightens every time you encounter inefficiency; over time, it becomes automatic.

You develop it deliberately by slowing down your consumption. When you buy something, ask how it’s made and shipped. When you subscribe to software, sketch the sales funnel in your head. When you see a company raise money, ask what problem investors believe is being solved. Keep a running document of questions that annoy you. I write, less so to share or teach and more so because I’m curious how you all will react. Most startups begin as a single unanswered “why is it like this?”

2. The Habit of Analysis

Curiosity without analysis is just opinion. Entrepreneurship demands the discipline to turn questions into numbers, tradeoffs, and constraints. Analysis is where fantasy gets murdered early, which is a mercy, not a flaw (when people criticize your startup meaningfully, it’s a kindness from an analyst who knows).

Serious founders model reality before it models them. They ask what manufacturing actually costs, not what they hope it costs. They pressure-test pricing against payroll, taxes, and customer acquisition, not vibes. They care about market size because small markets cap outcomes no matter how clever the product.

This habit is developed by learning to enjoy spreadsheets and analytics the way artists enjoy canvases. You don’t need an MBA, but you do need fluency in unit economics. Start by breaking every idea into inputs and outputs. Revenue drivers, cost drivers, time drivers. Force yourself to quantify assumptions, even badly. Precision improves with repetition. Avoiding analysis doesn’t make risk disappear; it just blinds you to it.

3. The Habit of Executing

Ideas don’t fail; people fail to act on them. Execution is the least romantic habit and the most decisive. The difference between a dream and a company is a calendar filled with risky actions taken.

Execution looks boring up close. It’s deciding what happens today and doing it even when motivation evaporates. It’s shipping something imperfect instead of polishing a concept forever. It’s understanding that activity is not progress and busyness is not effectiveness.

You build this habit by shrinking the gap between decision and action. Write down the next physical step required to move forward, not the ten after that. Make commitments public so accountability isn’t optional. Track your time honestly. If fear, comfort, or distraction keeps showing up, name it because it’s not teaching you to play it safe, it’s getting in your way. Execution improves when excuses are treated as data, not character flaws.

4. The Habit of Having Big Dreams

Entrepreneurship without a real dream collapses under pressure. The dream isn’t about money. Money is a scoreboard, not the game. If wealth is the only motivator, a high-paying job beats startup stress every time.

Big dreams function like gravity that pulls you out of bed when conditions are bad and validation is absent. They answer why this pain is worth enduring. Strong founders can articulate their purpose clearly, even if the language evolves over time. This is often evident in a founder when they’re fixated on a problem, not their solution.

You develop this habit by interrogating your motivations ruthlessly. Ask why this problem matters to you specifically. Ask what kind of world exists if you succeed. Write it down and revisit it when things stall. Dreams don’t have to be grandiose, but they must be personal. Borrowed ambition dissolves quickly.

5. The Habit of Thinking Like a Marketer

Entrepreneurship is selling, whether you like that word or not (frankly, as my peers know, I don’t like it). But be clear that as a startup (and so many of you still ignorantly argue with me about this -> a startup, not a new business), selling is not about customers! You sell ideas to co-founders, belief to employees, confidence to investors, opportunities to partners, and solutions to potential customers. Marketing isn’t promotion. It’s understanding how people decide and designing around that reality.

The best founders obsess over their market which is far more than who buys. They learn what triggers action, what creates trust, and what removes hesitation. They understand that features don’t sell; outcomes do. They know distribution is often more defensible than technology. Society, in 2026, is finally waking up to the immeasurable value of storytelling and you lack this habit, you’re severely disadvantaged.

This habit is developed by studying human behavior, not slogans. Read classic marketing research. Watch how people actually buy, not how they claim they buy. Practice writing simple explanations of what you do that a stranger understands in one sentence. If you can’t sell the idea, the product won’t rescue you.

6. The Habit of Being a Rebel

Entrepreneurship is leadership without permission. Following the crowd is safer, but it never produces asymmetric outcomes. This reiterates that distinction I demand with veracity of a startup from a new business – you’re not a business owner, you’re a rebel. Every successful startup founder carries a quiet rebellion against “the way it’s always been done.”

Being a rebel doesn’t mean being reckless. It means developing convictions and acting on them even when consensus disagrees. Markets reward those who see differently and act earlier, not those who wait for validation.

You develop this habit by resisting reflexive agreement, question defaults. Build a point of view and stress-test it against evidence, not approval. Surround yourself with people who challenge you instead of comforting you. Leadership emerges when you’re willing to be temporarily wrong in public in pursuit of being eventually right (hell, subscribe to or follow me, you’ll see I’m wrong all the time! Or at least, willing to stir controversy to change norms).

None of these habits require permission, pedigree, or a specific personality profile, they require practice. Startup ecosystems that understand this stop pretending success is mystical and start building environments where these behaviors are taught, reinforced, and modeled. The real question isn’t whether you’re cut out for entrepreneurship in some abstract sense. It’s which of these habits you’re strengthening right now, and which ones you’re quietly avoiding.

The post 6 Habits of Highly Successful Entrepreneurs appeared first on Startup Economist.

California is flirting with a policy idea so aggressively stupid it reads like parody, except it isn’t. It’s drafted law; it’s real. And even if it never passes, the damage is already done.

The proposed “Billionaire Wealth Tax” ballot measure is not merely a tax and it’s far more than California’s tech tax; it is an explicit declaration that the state no longer understands property rights, incentive structures, or how modern innovation emerges. Hopefully, there mere proposal of it signals to every founder, investor, and operator that California views their ownership, control, and upside not as earned value, but as a public resource to be harvested when politically convenient.

As Mike Solana, CMO of Founders Fund, shared in Pirate Wires, a post-it note to every economic development office in America:

“The architects of California’s ‘Billionaire Wealth Tax’ ballot proposition quietly amended language in their proposal which, if successful, would permanently end the concept of founder-controlled startups in the state — a technology industry kill switch.”

This is not hyperbole; the amendment targets concentrated ownership itself – not consumption. not income, and not even capital gains at the moment of liquidity; it targets retained ownership, the very mechanism that allows founders to take long-term risk, resist short-term extraction, and build category-defining companies instead of financialized husks.

You don’t get Google, DoorDash, Stripe, Airbnb, or SpaceX by forcing founders to sell control early to satisfy tax liabilities on unrealized wealth. You get mediocrity. You get consultants. You get rent-seekers. You get Delaware C-corps with Cayman Island wrappers and operational headquarters anywhere but California.

The most important point gets lost in the ongoing debate of the merit or stage seemingly set to enable Gavin Newsome to swoop in as a savior as he readies a White House run: whether the tax passes is almost irrelevant. Drafting it at all tells founders everything they need to know about the governing philosophy of the state.

The trillion-dollar exit nobody wants to talk about

The predictable response is denial, “They won’t really leave,” “They need California,” or “This is just about billionaires.”

That fantasy collapses under data.

Etienne de la Boetie has documented that the total wealth that has already left California now exceeds $1 trillion. That’s migration data, tax filings, and asset relocation aggregated over the last several years.

This didn’t start with the so-called billionaire tax. It started with hostility to ownership, casual contempt for capital formation, and a belief that innovation is a static resource rather than a fragile, compounding process. The tax proposal simply confirms the trend and accelerates it.

California legislators appear genuinely surprised that people respond to incentives. This is remarkable given that incentive response is the core operating principle of venture-backed innovation. Founders don’t take asymmetric risk for applause. They do it because ownership of upside compensates for the overwhelming probability of failure.

That is why the tax doesn’t “just hit the rich.” It annihilates the risk premium that justifies entrepreneurship in the first place. If the state claims your upside while leaving you fully exposed to downside, the rational response is exit – Not protest. Not negotiation. Exit.

Chamath Palihapitiya caught my attention:

“You all use Uber, DoorDash and every other tech innovation made here but now you want the creators of these services to go bankrupt doing it??

That math doesn’t math.

Everyone that is potentially touched by this will now leave and all that will result is a massive hole in California’s finances that you will be forced to fill.

Come Election Day, if this proposition lands on the ballot and succeeds as written, founders throughout the industry who haven’t already left California will not only be forced to sell control of their companies, many could go bankrupt. (Yes, literally).”

That last parenthetical matters because this isn’t figurative bankruptcy and it should reveal ignorance in office that concerns everyone. If you’re asset-rich, cash-poor, and forced to pay annual wealth taxes on illiquid equity, insolvency becomes a math problem, not a moral one. Hell, it is a moral one, because people are proposing doing these things and Americans keep electing them.

California has even been here before! It ignored the warning.

California has been broadcasting this attitude for decades.

Back in 2009, long before Uber, long before the modern tech backlash, Travis Kalanick wrote:

“CA has some of the highest tax rates in the country. With those high tax rates you’d think there would be fairly high quality services provided by the state. Unfortunately, those huge taxes provide services that have the lowest levels of quality in the country.”

That post aged like wine because high taxes were defensible when paired with some competent governance, improving infrastructure, and the predictability tech brought to California. What founders face now is high extraction paired with regulatory chaos, ideological hostility, and performative politics.

At some point, founders stop asking how much they owe and start asking why they’re still there.

When innovators refuse to govern, fools do it for them

This brings us to the most uncomfortable part of the conversation I want to have; the most important.

John Loeber makes the case plainly in his plea for Silicon Valley to enter politics, “Silicon Valley figures have historically avoided politics… They have instead stuck to donating and delegated the thick-skinned job to representatives like Ro Khanna, who have unfortunately shown that they cannot be trusted to represent these constituents… we cannot pay someone else to do the job, but we must do it ourselves.”

He goes further, and this is the line every founder should sit with:

“It is an unthinkable sin that the work of the greatest innovators and savviest capital allocators of our time is given as tribute, placed on the high altar of government, only to be frittered away on waste and fraud.”

This is not a partisan argument; it’s a governance argument. When the people who actually understand systems, incentives, scale, and tradeoffs refuse to engage in power, power gets exercised by people who see the economy as a spreadsheet to be raided for votes (or wealth).

I’ve been making the same plea from a startup economics perspective for years. Startups are not getting crushed by competitors. They’re getting crushed by politics, regulation, and policy written by people who have never built anything fragile. Entrepreneurs need to treat government engagement as a core function, not a charitable afterthought, to ensure that ignorance in policy won’t result in preventing the very solution you’re trying to bring to market. It’s also why I’ve warned repeatedly that intellectual property under government or university (publicly funded) control needs to be reframed as public goods to be used rather than private property to be controlled. Governments are often upside-down in understanding this sector of the economy and that bass-ackwards approach to the slice of humanity that creates jobs and wealth, actively destroys both.

The California wealth tax proposal isn’t an anomaly; it’s the logical outcome of a system where innovators abdicated governance and hoped donations would substitute for representation.

Exit, Stage Texas: Structurally Better Positioned to Lead

Please tell me you’re not buying the narrative that people are moving into Texas because it’s more affordable. If we’re being honest about it, Texas still struggles with a lack of experienced startup mentors, a venture capital gap, and difficulty hiring people who exhibit the personality and cultural tendencies of entrepreneurs; these are real problems some of us are working to overcome. Still, let’s shift from California’s latest glaring violation and reflect on Texas’s opportunity.

A state such as Texas offers legal clarity, respect for ownership, and a political culture that (for now, granted) still understands that wealth creation precedes wealth redistribution. That matters more than any incentive package.

Texas already dominates on population growth, employment growth, business formation, and net domestic migration. According to U.S. Census Bureau and IRS migration data, Texas has been the largest net gainer of both people and adjusted gross income for multiple consecutive years.

Founders are voting with feet and balance sheets.

More importantly, Texas has begun aligning government, universities, investors, and founders around a shared understanding: innovation is a strategic asset, not a taxable windfall. When those actors coordinate, the state compounds advantages instead of eroding them.

This is precisely what Loeber is arguing for California to rediscover, and what Texas is already positioned to execute. Texas entrepreneurs: enter politics! A tech economy governed by people who respect property rights, understand incentives, and view founders as partners (the catalyst of jobs and wealth), rather than targets will win by default.

Texas doesn’t need to “steal” Silicon Valley and as I and many others have repeatedly reinforced, you don’t want to replicate Silicon Valley either! Hell, California is pushing it out… if you don’t buy into the concern about tax policy, at least take note of the fact that what they’re doing isn’t working as it did when unique circumstances created a temporary monopoly on the internet.

California is Choosing

Chamath bears repeating, “This proposed ‘Billionaire Tax’ will blow a massive hole in the California deficit and ruin the tech economy in California. The middle class will then be forced to pay for it if this passes because all the rich people are leaving! It’s mathematical at this point. Newsom needs to find a way to balance the budget and shelve this wealth tax from ever making it to the ballot.”

Mathematics doesn’t negotiate and capital doesn’t protest, it relocates.

The real question isn’t whether the state even stops this California tech tax. It’s whether founders elsewhere will recognize the warning early enough to avoid being next.

Do you want to build it under a government that sees ownership as a liability? California just answered it in draft legislation. The rest of the country should be paying attention.

The post The California Tech Tax Is a Kill Switch. Texas Keeps Innovation Compounding. appeared first on Startup Economist.

“Can a model perform well technically but fail to create business value, and why?” What a wonderful question; I was asked recently that perspective on tech in a way that made me see a primary challenge in startups, in a different light. Read the question again and appreciate that even the asking of it reveals that we still have a serious gap in education, our economy, and advice about business. In my head, I reframed the question along the lines of what we often hear about startups, “Can an MVP for my startup technically solve the problem but still fail to create business value?”

Hopefully, you know and understand that that answer to that question isn’t just, “yes, of course,” but rather you understand why the question persisting is frustrating to people like me. The question shouldn’t even exist… solving a problem is not a business and creating value isn’t a result of a technical invention, a built solution, or your IP.

Dear founders, most of you fail because your determination to build something and expectation that you’ll be rewarded for that is horrifically wrong.

Michael Jackson wasn’t Technically Proficient; Why do Founders Still Believe that’s the most Important Skill?

Subscribers and followers, you are familiar with the fact that I have an unusual penchant among startup advisors in that I love using movies, music, and pop culture, as familiar experiences through which to better understand entrepreneurship. Let’s talk about the King of Pop.

Michael Jackson couldn’t read music; that is to say, not with the expertise you might expect given his success. He couldn’t notate a score, and he could barely play instruments. And yet he didn’t just write songs; he composed them, arranged them, produced them, and built a global empire on top of them. One of the most prolific artists and entrepreneurs of the 20th century had none of the technical skills that startup culture obsessively overvalues.

The Cult of the Technologist

Startups continue to operate under the delusion that building the product is what matters most.

Accelerators screen for technical founders. VCs ask, “Who’s writing the code?” Hackathons, pitch decks, and MVPs are all optimized for the person who can show something functional. That engineering-first mentality is so entrenched it now passes for common sense. And yet, most of the biggest failures in tech come not from poor engineering, but from an utter lack of creative authorship.

When Michael Jackson walked into the studio, he didn’t show up with a notepad, a keyboard, or a demo. He came in with a finished product in his head. According to sound engineer Rob Hoffman, Jackson would compose full string arrangements in his mind, complete with breaks and fills, then sing them part-by-part to session musicians. “Here’s the first chord. First note, second note, third note…” He once beatboxed a full rhythm section in court while being sued for plagiarism. No manuscript. No software. Just the fully-formed product, built from taste, clarity, and obsession.

I’ll just sing the bass part into a tape recorder… in court during the Dangerous-era trial in which he just beat-boxed his method, taking the bass lick and putting the chords of the melody over the bass lick to inspire the melody.

On Billie Jean, Jackson layered four different bass parts to give the song its stalking groove. He noted, you’re hearing four basses on there, doing four different personalities, giving it character. That wasn’t experimentation and it wasn’t engineering, it was composition.

Founders, You Aren’t Composing

Most startup pitches today resemble the opposite of Jackson’s approach. Founders rattle off features, stick to the pick deck template they’ve been told to mirror, show mockups and beg to demo the tech as though the solution capable proves something. But ask them to articulate what the product feels like (what the tension is, where the release comes, what emotion the user experiences) and they can’t do it. They didn’t compose anything: they built, shipped, and hope.

Jackson controlled the details not by brute force, but because he heard what mattered before it existed. He was the product – which notice, is NOT the solution nor even the end-all-be-all that so many founders hope is the case when preaching that it’s all about the product: he was marketing, brand, storytelling, and influence, in a product that then fulfilled the solution people wanted. Everyone else in the studio was executing his vision, translating his arrangement from voice to tape. That’s what a visionary founder does and they aren’t fixated on the product itself nor how it’s technically produced but that it delivers what the market values. Think Steve Jobs designing the iPhone around feel before it existed, or Walt Disney describing Disneyland frame-by-frame before ground broke.

The startup world confuses this with mission; vision means a napkin sketch or a pitch because it isn’t what we hope to accomplish or solve but the direction we need to go. Jackson had it all in his head. He could rebuild it from scratch with nothing but a voice recorder.

Can a Model Be Right Technically and Still Fail?

Absolutely. And it happens all the time.

A model, even a startup, can function exactly as designed: It can be profitable, have users, and generate revenue, and it can still collapse. Why? Because business value isn’t created by technical success, it’s created in the market.

Peter Drucker put it bluntly in the 1970s: “Only two things create value in business: marketing and innovation. And marketing is the distinguishing of the two.” That observation of the economy is now ignored by advisors, and investors dangling checks, who, frankly, have no idea what it even means.

Most people think “marketing” means promotion, advertising, growth hacking, and demand gen. They’re wrong. Marketing is the entire commercial discipline of discovering, positioning, communicating, pricing, delivering, and defending value in a competitive market. It’s not the glossy topcoat; it’s the core business function. And if you can’t do that, your innovation is irrelevant.

A technically successful model that fails to differentiate, fails to understand competition, or misreads the customer will still go under. The failure might not be immediate – you might have early adopters, customers, and press coverage (traction by most accounts), but six months later, someone else eats your lunch. You thought you created value, but you didn’t; you captured temporary attention before getting out-marketed.

Drucker’s point was structural: Innovation alone doesn’t create value. Marketing makes innovation valuable. A startup that doesn’t understand that will eventually mistake working software for a working business.

Michael Jackson didn’t just compose, he barely could! He marketed and he distinguished. He didn’t need to be technical because he understood the emotional architecture of attention. He understood competition and he created culture, not just content.

It’s Not About Being Technical, it’s About Mattering

The problem I hope to illuminate is NOT that technical founders are bad; obviously that’s not the case and none of the technical ventures would work without the code or semiconductors, it’s that the industry treats technical execution as the determining factor of success. The tech is not the moat… No one has a proprietary app, every API is available, features are duplicated in days.

What can’t be copied is the insight and taste that creates something people actually feel.

Founders obsessed with technical ability are like aspiring musicians who spend years learning scales but never write a song – the song is the thing! The impact, the emotion, and the resonance, that’s what makes a product stick, not whether it’s built on Firebase or Ruby or with AI.

The best startups emerge thanks to the people with an unavoidable point of view. The kind of person who would beatbox four basslines into a microcassette recorder and fire a band member for changing one note. Michael Jackson didn’t need to code to build a billion-dollar business, he just knew what it needed to be and how to make people love it.

The post Michael Jackson and the Startup Delusion: Why Tech Isn’t What Creates Value appeared first on Startup Economist.

A couple of weeks ago I published Universities Aren’t Commercializing Innovation, They’re Taxing It with a challenge I knew would find support from most but anger from a few. Founders forwarded it privately. Economic developers chimed in with encouragement. Researchers beyond the 25 universities that benefit from commercialization sent me flowers. Intellectual property stifles innovation. And, almost without exception, the only people who disagreed were the ones whose salaries, offices, or prestige depend on the current IP and licensing regime staying exactly as it is.

I knew the pushback would come. What surprised no one was who it came from.

That matters because it proves the thesis. When a system is defended almost exclusively by those who benefit from it, you’re not looking at a debate about effectiveness. You’re looking at a fight over rents.

The original article argued something uncomfortable largely evident in startup communities: university tech transfer and IP commercialization, as practiced today, are actually not engines of entrepreneurship. They’re toll booths. They don’t accelerate startups; they slow them down. They don’t broaden access to innovation; they restrict it. They don’t reward discovery; they monetize permission. That is not capitalism. That’s feudalism with better branding.

With a chuckle at the very typical-of-credentialed assertion that I was just wrong, I decided to dig deeper because the real issue isn’t universities. It’s that our entire posture toward technology, IP, and access quietly flipped sometime around the mid-2000s and we’re still pretending nothing fundamental changed.

If radio was invented today, it would be controlled by four companies and locked behind a paywall

Before we decided that owning ideas was more important than spreading them, most foundational technologies were deliberately left open, accessible, and un-ownable in practice. Not because people were altruists, but because society understood something we’ve apparently forgotten: utilitarian technologies create substantially more value when everyone can use them.

The printing press wasn’t licensed per pamphlet. Broadcast radio wasn’t restricted to approved content partners. Early television could be recorded, shared, re-watched, and rebroadcast without lawyers hovering over the living room. Telephony was fought over precisely because access mattered more than who owned the copper. The breakup of AT&T and the Bell System wasn’t anti-business; it was pro-market. Everyone understood that universal, insanely cheap access to communication was the feature, not the bug.

At the same time, we have plenty of historical examples of what happens when control wins – and we shouldn’t like the results…

Hemp paper was sidelined not because it didn’t work, but because it threatened lumber interests and newspaper supply chains. Corn didn’t become the backbone of American food because it was nutritionally brilliant; it became ubiquitous because subsidies made it politically and economically unbeatable. The automotive industry combined with the might of the airlines all but prohibited the once transformative impact of rail in the U.S. from result in any form of meaningful public transit. VHS didn’t “win” because it was the best format; it won because control, distribution, and licensing crushed competitors into submission.

No innovation victories; these were power victories.

Yet even then, society generally resisted locking down core technologies. Utilities were regulated precisely to prevent capture. Access came first. Competition followed. Innovation flourished on top of that foundation.

Then, right around 2001, we collectively lost the plot.

The U.S. government went after Microsoft over operating systems. The browser wars between Netscape and Internet Explorer weren’t really about browsers, they were about who controlled the doorway to the internet. At the time, it felt like preventing singular control; in retrospect, it was a signal flare.

What followed was not restraint, but escalation.

Innovation is Faster When No One is Allowed to Own It

Television, once freely broadcast, recordable, and shareable, became fragmented into licensed streaming fiefdoms. You don’t own what you “buy,” you rent access until the terms change. DRM turned music, games, and media into perpetual permission slips. Torrenting surfaced, and resurfaces, not because people suddenly became immoral, it’s the price of control is unreasonable to the market – causing innovators and entrepreneurs to break it.

We’re still fighting about Net Neutrality because the internet was never formally treated as a utility, even though it behaves like one. Control crept in everywhere, and the justification was always the same: protection, monetization, privacy, safety, sustainability. Pick your grounds for dictating how things work.

Now we’re watching the same fight replay in real time with AI.

AI is not a product category. It’s an interface layer for knowledge itself. It is to cognition what the internet was to information. And yet, instead of defaulting to openness, we’re racing to decide who gets to own it, license it, throttle it, or sue over it. The question isn’t whether AI should be accessible, it already is. The question is whether we will legally enable a handful of actors to decide who’s allowed to use intelligence at scale. More, how we’re allowed to use it.

If that sounds abstract, look at healthcare.

The cost of many life-saving drugs has nothing to do with manufacturing difficulty. It has everything to do with exclusivity. Single-provider licensing, regulatory capture, and insurance acting as de facto price-setters have created a system where access is rationed not by need, but by permission. Knowledge exists. Capability exists. Production exists. Access does not.

This is the same moral failure as university tech transfer, just wearing a lab coat instead of a blazer.

Treating research as licensable property rather than societal infrastructure is not neutral. It is not pragmatic. It is not even particularly profitable at scale. It is a tax on founders who could build more, on markets that could compete, on communities that could benefit, and on economies that desperately need velocity instead of gatekeepers.

Commercializing research as a control mechanism is no different than monopolizing a utility or regulating innovation into paralysis. It locks up what should be abundant. It rewards permission instead of progress. And it ensures that the next generation of breakthroughs arrives later, costs more, and serves fewer people than it should.

The defenders of this system will insist it’s necessary, for quality, for incentives, or for sustainability. They said the same thing about phone lines, broadcast towers, operating systems, and file sharing. They were wrong then, and they’re wrong now.

A good question isn’t whether universities or governments can own innovation, it’s whether they should, and what kind of economy we have since they do.

The post The IP Trap: How Licensing Knowledge Became a Tax on Progress appeared first on Startup Economist.

Okay, up front? Most startup advice is recycled nonsense, passed around by people who’ve never actually watched hundreds of companies quietly die. Startup failure isn’t mysterious, it’s patterned. Predictable. Boring, even. The frustration is that founders keep making the same mistakes while congratulating themselves for “learning fast.”

If you’ve been around accelerators, demo days, angel groups, or Slack channels long enough, you start seeing the same corpses in different clothing; different logos, same obituary. What follows aren’t “mistakes.” They’re death patterns. If you see one, you should already be nervous. If you see two, you should stop. If you see three, congratulations, you’re rehearsing a postmortem that we’ve already heard.

So, some patterns, and it struck me that one of these directly contradicts some of the most popular startup pitching advice ever given…

1. The Solution Looking for a Problem

This one never goes out of style. “I built this really cool AI thing… now I just need to figure out who wants it.” That sentence alone should disqualify you from raising money (who am I kidding, it does disqualify you).

The tell is always the same. You describe the technology before the problem. You light up talking about architecture, models, features, integrations. When someone asks who it’s for, you squint a little and say, “Well, potentially anyone who…” No. Stop. Nobody asked for this.

Research backs this up in painfully obvious ways. CB Insights’ long-running postmortem analysis of failed startups consistently shows “no market need” as the number one reason startups die (aside from a bad team), cited in roughly 35–42% of failures depending on the year. That’s not bad execution. That’s building something no one wanted in the first place.

This pattern thrives because builders confuse capability with demand. Engineers, especially, mistake “can be built” for “should exist.” Markets don’t reward cleverness, they reward relief from pain.

2. The “It’s Like X But for Y” Pitch (Yes, This Is the One That’s Wrong)

This is the sacred cow I’m happy to tip over. You’ve been told by investors, mentors, decks, and Medium posts that the fastest way to explain your startup is to say, “It’s like Uber for dogs,” or “Shopify for healthcare,” or “Slack for construction.” Cute. Familiar. Completely misleading.

When you pitch this way, you’re telling everyone you don’t understand your own business yet.

Analogies compress thinking, they don’t clarify it. When you anchor your identity to another company, you inherit their assumptions, their market context, and their constraints (most of which don’t apply to you). Worse, you train investors to evaluate you as a derivative instead of a solution.

This problem has gotten dramatically worse in the age of AI. “It’s like [X] but with AI!” isn’t a pitch; it’s a confession that your product can be recreated in ten minutes by anyone with access to ChatGPT. If your differentiation disappears when OpenAI ships a new feature, you don’t have a moat, you have a timer.

Harvard Business School research on competitive advantage makes this painfully clear: durable companies are built around unique value creation, not borrowed framing. Substitutability is death.

If your idea only makes sense in comparison to someone else’s success, you’re behind.

3. The Zombie Market

Some markets look alive: they have blogs, conferences, trade associations, and white papers. “Thought leaders.” What they don’t have is a grave marker acknowledging the dozens of startups that already tried (and failed) to make more work.

Zombie markets consume founders. They shuffle forward, moaning about “timing” and “education,” while quietly killing every new entrant. Everyone’s tried. Everyone’s failed. And somehow you think you’re the exception.

Literally, every single Event / Ticket / Things to Do startup I’ve heard about since 2004 is, I know, doomed, because they aren’t even doing what was already successful then… they’re trying to solve a problem in a completely DEAD way.

This is not about competition making it impossible; healthy markets support multiple winners. Zombie markets don’t support any. When you Google your idea and find twenty dead startups with eerily similar positioning, that’s not validation, it’s a warning label.

Economists call this path dependence and market saturation, but founders experience it as slow, confusing resistance. Entrepreneurial recycling happens in healthy ecosystems and how the absence of recycling solutions into new innovations signals structural problems in a market:

If no one survives long enough to become an acquirer, customer, or platform, ask yourself why before you become entry number twenty-one.

4. The One-Time Use Tool

This one hides behind “MVP thinking.” You find a real problem, but it happens once a year; or once per job change; or once per crisis. You build a beautiful product. People say, “That’s useful.” And then they never open it again.

Usage frequency isn’t a metric you want to discover later. It defines your destiny now. Recurring revenue requires recurring pain. If the problem disappears after it’s solved, so does your business.

Low-frequency usage correlates directly with churn, low lifetime value, and failed expansion. Let’s be frank, this is precisely why we have a bit of a challenge in healthcare pushing for preventative care to be prolifically available – it’s not that healthcare community doesn’t want to but there isn’t much money in eliminating problems. Products with infrequent core actions struggle to maintain revenue retention above 100%, which is table stakes.

If your best case is, “They’ll use it again next year,” you don’t have a startup, you have a feature.

5. Customers Said It’s Good

Okay, my article headline lied, I have two bit of conventional wisdom that are b.s. Customers aren’t lying to you, it might be good, but that is NOT market validation and that feedback alone is misleading and irrelevant to your success (because come on, if you don’t know it’s good and you need customers to tell you, you probably aren’t right for that startup, are you??)

Customers don’t want to hurt you. They don’t want to look stupid. They don’t want conflict. So, they nod. They encourage. Heck, they want the solution. They say things like, “I’d totally use that,” which is not the same as actually pulling out a credit card.

Real validation comes from strangers who owe you nothing and still choose to pay. This isn’t opinion; it’s behavioral economics: stated preference is unreliable. Revealed preference (what people actually do) is all that matters. Nobel laureate Daniel Kahneman spent his career explaining why humans are terrible at predicting their own behavior, especially in hypothetical scenarios (worth some reading).

If the only people excited about your idea already like you, you don’t have market validation. You have emotional support.

How Startups Avoid Failure in These Traps

The fix isn’t complicated: You have to talk to strangers, not friends (and not just customers). It’s funny the number of times I say this and have some supposed startup advisor tell me I’m wrong. 200 random people is worth FAR more than a dozen potential customers; you’re a startup, not a business that can just close customers. More, you have to look for “hair on fire” problems; situations where people are already hacking together ugly solutions because the pain won’t wait. You have to actively search for failed startups in your space and learn why they died instead of assuming you’re smarter (you’re not). And you have to ask the one question founders dodge because it’s brutal and clarifying: would I pay for this if someone else built it?

Notice what’s missing here: pitching tricks, clever decks, demo day theatrics. None of that matters if you’re standing on one of these fault lines.

Startup failure isn’t random. It’s patterned. Once you see the patterns, you can’t unsee them. The question is whether you’re willing to admit which one you might be standing in right now and whether you’re brave enough to change before momentum turns into rigor mortis.

If you’ve spent enough time around founders, investors, or ecosystems, you’ve seen these deaths play out in different disguises. The interesting work isn’t pretending they don’t exist, it’s recognizing them early, saying it out loud, and helping founders not repeat what everyone else already proved doesn’t work.

The post 5 Predictors of Startup Failure; One of Which Proves Conventional Wisdom Wrong appeared first on Startup Economist.

Everywhere I go lately experiences at some point, the same conversation. Different city, different state, different accents and startup hype, but the same whisper once the doors close and University administration is out of the room. 

I was just in Phoenix, sitting with startup operators and ecosystem builders, and within minutes we were right back where I’ve been in Austin, Chicago, Tulsa, Boise, Kansas, and half a dozen university-oriented ecosystems that all swear they’re “different.” IP. Commercialization. University tech transfer. Broken. Everyone knows it. No one seems willing to say why out loud, much less change the model that keeps failing.

Oh, don’t misunderstand me when I say “broken” if you’re in a University with a major program; you are among the 25 universities or so, in the world, that make a fortune licensing IP from research usually funded by taxpayer dollars; I’m sure you’re thrilled and celebrate the year end with a banquet featuring the Mayor where you cheer how much more funding you’ve pulled in to further research.  Meanwhile, most colleges struggle with entrepreneurship and let’s be honest, the majority of your celebrated research sits on shelves because you like to think innovation is doing the research that someone else will pay to make valuable. Broken.

The polite version, which I’m certainly not prone to repeat, is that “commercialization is hard,” or to celebrate the wins while ignoring the waste.  The honest version is that the university tech transfer model was built for a world that no longer exists, one which assumes invention is rare, local, slow, and valuable on its own. None of those things are true anymore.

The Bayh–Dole Act of 1980 is usually credited with “unlocking” U.S. university commercialization by allowing universities to retain ownership of federally funded research. And to be fair for the time, it worked.  The Association of University Technology Managers’ (which for some reason, is adamant that they are only called AUTM now and you’re not to repeat that original name… which was very clear and descriptive) data shows that university licensing income is highly concentrated: fewer than 25 universities account for the majority of licensing revenue in the U.S., and even among them, a handful of blockbuster patents drive the numbers.  Most universities lose money running their tech transfer offices.

The model assumes that IP precedes value creation. That research gets done, a patent is filed, a license is negotiated, and then a company emerges – and I assure you, right now, researchers reading this are thinking, “well, yeah, obviously.”  Decades of study in entrepreneurship now tell us that this is backward. Steve Blank’s work on customer development showed long ago that technology without a market is trivia, not a business. The Kauffman Foundation has repeatedly documented that high-growth firms are not born from invention alone, but from execution, timing, and market pull.

“There are a number of universities, two of which do $1B+ in research, plus entities like the Flinn Foundation and Arizona Commerce Authority, that do an excellent job of going from research idea through tech transfer to company creation,” shared Brian Ellerman who I spoke with in Arizona. “The problem is that so little is focused on market building and value creation for those companies to get them to venture scale and exit. That’s not remotely in the skillset of universities or most non-profits. I’ve been encouraging AzBIO to take that lead but it takes dedicated resources,” he added, Ellerman, long-time angel who has custom-built focused accelerator for scale-ready companies, is the Executive Director of XLR8 at Phoenix Bioscience Core. “This is about purpose-built programs (like XLR8) that train founder/CEOs on raising capital, help them fill out their C-suite with experience, and build pipelines to industry partners who go from customer to investor to acquirer.”

Globalization accelerated the need for correcting the model forced in the 80s. Knowledge diffuses almost instantly now. Research papers are published online. Open-source frameworks replicate “defensible” technology in months. AI is reading that, iterating it, and advancing the research, whether lawyers like it or not. Manufacturing, software development, and even biotech experimentation are no longer geographically constrained. The OECD has been blunt about this: IP ownership is becoming less correlated with where value is ultimately created.  Yet our universities still behave like medieval guilds guarding trade secrets behind toll booths.   Perhaps worse, have you noticed that University campuses are expanding from one location to many; moving colleges to specific locations isolated from the rest?  The self-congratulatory celebration is that this is concentrating the work of those students and professionals but as it pertains to fostering innovation and entrepreneurship, we know with certainty that silos isolated from the creatives and engineers, are precisely what stifle entrepreneurship (and putting a startup program in place doesn’t change the fact that it’s the mixing of the research, investors, and a sector, with entrepreneurial people that drives innovation: not invention licensed by people who think and expect the same outcomes).

And then there’s the pace problem. Innovation cycles are accelerating while university licensing cycles still move at the speed of committees, attorneys, and risk aversion. Multiple studies have shown that delays in licensing materially reduce startup survival odds because founders lose momentum, capital, and early market windows; we see this painfully in National Security and Defense potential where founders won’t even bother working with Military programs or the Government because the 9 month cycle of approval is a lifetime in startups. In plain English: by the time the paperwork is done, the opportunity has moved on.

What’s finally dawning on everyone is that IP is a supporting asset, not the asset. The real value is the company: the brand, the distribution, the customer relationships, the cash flow. Harvard Business School research shows that complementary assets like marketing and sales capabilities explain more variance in firm success than patent portfolios in most sectors.

So, if the old commercialization model is dead, what replaces it?

There are a few paths that survive contact with reality. The first is radical simplification through public funding. If research is publicly funded for public benefit, then stop pretending universities should behave like venture capitalists. Publish the research. Make the IP open or royalty-free. Fund downstream commercialization through grants, SBIR-style programs, and founder-led companies that compete on execution rather than access. This is closer to how DARPA has been operating as it evolves, and there’s a reason DARPA-backed innovations (from the internet to GPS) created trillions in downstream value without the government trying to extract licensing fees.

The second path seems more uncomfortable for universities but it’s the ethical direction if genuinely supporting entrepreneurs: give founders more equity and fewer shackles. That means default founder ownership of IP, minimal or no upfront licensing fees, and university participation capped at small, non-blocking equity positions. MIT moved in this direction years ago by prioritizing startup formation over licensing revenue, and it shows. MIT’s economic impact studies consistently find that companies founded by MIT alumni (not patents licensed) are the real engine of value creation (I’m reminded of the old Silicon Valley perspective on why Stanford has the impact it has).

A third model, often misunderstood, is sponsored spinout studios. Here, universities stop pretending they can evaluate markets and instead partner with experienced operators (venture studios, entrepreneur-in-residence programs, or external builders) who co-create companies around research insights. The IP is shared, diluted, or even deferred until traction exists. Imperial College London and ETH Zurich have both moved toward this hybrid model, prioritizing repeatable company creation over patent toll collection. The key insight: professors are inventors, not founders; universities are knowledge factories, not startups.

We might explore time-bound IP reversion. If a university licenses IP to a startup and that IP is not commercialized within a defined window (say 24 or 36 months) rights automatically revert to the founders or enter a shared commons. This directly addresses the “IP hostage” problem where promising technologies die in filing cabinets. Legal scholars have argued this could dramatically increase experimentation without reducing long-term university upside as it treats commercialization as a dynamic process, not a one-shot transaction.

Then there’s the uncomfortable but increasingly necessary model of non-exclusive-first licensing. The default assumption that exclusivity is required for commercialization is empirically false. Non-exclusive licenses lower risk, increase experimentation, and allow multiple teams to pursue different market applications simultaneously. NIH has pushed this model for certain biomedical technologies with demonstrably better diffusion outcomes. Universities resist this because it caps upside… again, a tell.

Finally, there’s the model no one in government wants to say out loud: decoupling universities from commercialization entirely. Let universities do what they’re good at: research, education, talent formation. Let commercialization happen downstream through independent capital, founders, Startup Development Organizations, and market-driven mechanisms. The economic literature supports this separation of functions; regions with strong startup outcomes often rely more on alumni entrepreneurship and industry spillovers than formal tech transfer. Stanford didn’t win because of its licensing office; it won because its graduates ignored it.

Tech Transfer Is a Rent-Seeking Industry Masquerading as Innovation

Both paths acknowledge the same truth: you cannot tax something into existence. You cannot committee your way to entrepreneurship. And you certainly cannot host enough demo days to compensate for a broken incentive structure.

Which brings me back to Phoenix. What I heard there was earnest, well-intentioned people saying “tech transfer must change” but I’m hearing that everywhere which means it isn’t being done. Perhaps because most places still confuse innovation with entrepreneurship, business with startups, and that demo days and meetups signal a thriving community of creators; we know we must move past more events, more innovation districts. and more centralized hubs designed to look collaborative while concentrating resources, decision-making, and ownership there. It’s theater. Activity without outcomes. Signals without substance.

The irony is that the very nature of modern research and IP makes geographic centralization less defensible than ever. Talent is distributed. Knowledge is distributed. Capital is increasingly distributed. Clinging to physical epicenters as gatekeepers doesn’t create innovation; it filters it, and not in a good way. Brookings has warned explicitly that innovation districts often exacerbate inequality and underperform unless paired with systemic reforms in capital access and commercialization pathways.

As Phoenix works to lead in BioScience, just as Bentonville could lead in Supply Chain, Tulsa might lead Rural Tech, and Chicago could be Industrial Innovation, the opportunity isn’t to do what we have been doing any more than it is to out-event Austin or out-brand Silicon Valley. It’s to break the model first. Strip friction out of university IP. Stop handicapping founders before they even begin. Measure outcomes instead of attendance. And accept the uncomfortable but liberating reality that innovation no longer lives in one place. The next model has to enable everyone, everywhere or it will fail the same way the current one leaves important research sitting on shelves.

The post Universities Aren’t Commercializing Innovation, They’re Taxing It appeared first on Startup Economist.

Riyadh didn’t become a startup ecosystem overnight. It’s rooted in a long history of adaptation and reinvention; a story about shifting from desert trade routes and tribal politics to oil wealth and now trying to crack the code on innovation-led diversification. To understand why Saudi Arabia, and Riyadh startups in particular, is increasingly attractive to founders, investors, and global innovators, we have to start with that arc.

Long before Vision 2030 existed, the country’s plan for an ambitious nation, a thriving economy, and a vibrant society, what we now call Saudi Arabia was a set of tribal regions connected by pilgrimage routes and seasonal markets like Souk Okaz, historically, one of the largest annual fairs in that drew traders and poets from across Arabia. Marketplaces weren’t just commerce; they were early forms of knowledge exchange and creative problem-solving

When the modern state was unified in 1932 under King Abdulaziz (at the end of a century of conflict and reconsolidation) the country’s future was monetized on a single resource: oil. The discovery of commercial oil at Dammam No.7 in the Eastern Province in 1938 ushered in an era where raw capital trumped innovation culture. For decades, economic returns were mostly about extraction and export, not idea creation.

Fast-forward to the 21st century and that old model starts to look like a trap: economies rooted in a single commodity rarely develop the resilience or creative risk-taking culture that vibrant ecosystems need. Much like my experience in Texas, the culture that emerges from the wealth of natural resources tends to mature into a creative class of artists, innovators, and entrepreneurs. Saudi Arabia’s leadership recognized that, and Vision 2030 is the Kingdom’s playbook for rewriting its future. It’s an ambitious economic diversification strategy built around three pillars.

More than three pillars in Vision 2030, three challenges, identified by the Saudi government, drove appreciation of it being time for economic and regulatory change:

1. Lack of good deal flow – Investors struggling to find good startups to invest in at pre-seed, seed, series A.
2. Cost of building is high – Due to oil and government industries, we have a risk aversion driven by the comfort of great jobs.
3. PR without real results – Much of what I refer to as startup theater in this, events to make announcements, announcements to promote events.

Part of that transformation has been cultural, not just structural. Saudi society has been opening up to modern creative industries while still preserving tradition. The rapid expansion of arts, music, and cultural sectors is not superficial feel-good policy, it’s part of a broader attempt to shift social norms toward creativity and experimentation. It feels familiar.

Saudi Arabia Isn’t Starting from Zero with Innovation; It’s Reclaiming a Deeper Intellectual Tradition

If you step back into early Islamic history, the Arabian Peninsula wasn’t devoid of innovation. It was part of a broader intellectual ecosystem that produced monumental advances in algebra, optics, and astronomy. Scholars transmitted Arabic numerals and algebra to medieval Europe, deeply influencing the Renaissance.

Modern Saudi Arabia doesn’t directly inherit those medieval scientific institutions, but there’s symbolic value in reclaiming that history. It signals that the Kingdom’s leaders view innovation not as a Western import, but as compatible with local identity. That’s why statements about turning Riyadh into a global hub for AI and innovation resonate with deeper cultural lineage rather than being superficial slogans. It’s a reframing.

Riyadh’s Startup DNA: Infrastructure, Capital, and Policy All Moving Together

Riyadh isn’t just emerging, it’s exploding. According to the 2025 Global Startup Ecosystem Report, Riyadh jumped 60 places to rank 23rd globally as a startup ecosystem, now third in the Middle East and North Africa for startup funding. Over $2.6 billion in venture capital has flowed into Saudi startups since 2018, with Riyadh serving as the primary node of this growth.

You need capital, regulation, and market demand moving in the same direction for startup ecosystems to take off, and that rarely happens. Saudi Arabia has done that. VC activity has ballooned; Saudi Arabia captured nearly half of all Middle East and North Africa (MENA) venture capital funding in 2023, up from less than 15% five years earlier.

Part of this shift comes from systematic ecosystem building, not just capital infusions, but structures that actually support risk-taking. The Saudi Venture Capital Investment Company functions as a fund-of-funds, seeding VC and PE funds and backing hundreds of startups alongside private investors. Jada, another Public Investment Fund of Saudi Arabia (PIF) entity, manages around $1 billion in VC/PE capital, and Saudi Fintech initiatives are designing regulatory sandboxes and frameworks to catalyze innovation.

As you well know, capital alone doesn’t make an ecosystem, in fact it follows. Saudi Arabia has also built physical and institutional infrastructure like Digital City in Riyadh; a tech park that hosts multinational tech operations alongside local innovators and connects talent with resources.

Native Innovation: Companies That Show What’s Possible

The narrative that Saudi Arabia is merely a capital engines market is collapsing under real examples of Saudi-led innovation. Humain, established in 2025 by the Public Investment Fund with ambitious AI infrastructure goals, is a Saudi-born AI company partnering with Nvidia and others to build a major data center and AI stack.

Startups like Reachware, a Riyadh-based automation and systems integration company, have raised seed rounds and secured market traction in automation and cloud services.

Saudi-based VC players like Nama Ventures are backing early-stage startups across fintech, proptech, and tech sectors, and these aren’t vanity plays; they are real, revenue-oriented portfolios investing across MENA.

Add in the emerging SME brands going national, from bakeries scaling across regions to digital-native businesses benefiting from improved logistics and digital infrastructure, and you see an ecosystem spreading beyond Riyadh. That’s real organic growth, not just headline chasing.

Economics, the Saudi Government, and the Macro Narrative

Saudi Arabia’s narrative right now is: diversify or stagnate. Oil still dominates GDP, but Vision 2030 explicitly ties entrepreneurship to economic sustainability, job creation, and global competitiveness.

At the macro level, the government plays a dual role: regulator and seed investor. It’s not just about laws on paper; foreign entrepreneurs can now own 100% of their companies and there’s a concerted effort to simplify licensing and reduce bureaucracy.

That’s a major departure from decades when local sponsorship laws and opaque regulatory models were barriers to entry. That reform alone changes risk profiles and attracts international founders, as well as capital. And Saudi Arabia isn’t shy about using its sovereign wealth footprint to catalyze ecosystems: the Public Investment Fund alone manages hundreds of billions with a strategic objective to invest domestically and globally.

Saudi Startup Development Organizations and Funding Sources

Tour the Saudi ecosystem – Here are the actors actually shaping it:

• Saudi Venture Capital Investment Company SVC): Government-linked fund-of-funds seeding VCs and co-investing in startups and funds.
• Jada: PIF’s VC/PE arm with ~$1B under management to boost the ecosystem.
• Fintech Saudi: Regulatory and ecosystem builder for financial innovation.
• Angel networks and accelerators: Often co-backed by SVC and private partners (e.g., Sanabil 500).
• Digital City and specialized tech hubs: Physical infrastructure that attracts multinational and local innovators.
• Private VCs like Nama Ventures: Providing genuine early-stage capital across sectors. International partners and global funds: Including Google backing STV’s AI investment efforts, and AWS’s AI zones under construction.

This blend of sovereign funds, domestic VC, angel capital, and global partnerships is unusual for a place that historically had almost no VC infrastructure just a decade ago.

Ten Strategic Ecosystem Building Considerations; What Riyadh Gets Right and Where It Still Struggles

1. Overcoming Silos and Shared Infrastructure. Riyadh has made big investments in shared tech parks and events, but the community still feels curated by large institutions. Organic grassroots tech communities are growing, but they’re younger and less networked than in Silicon Valley or Berlin.
2. The Missing Middle. Saudi Arabia has strong seed and late-stage interest, but mid-stage Series A/B funding is still thin, meaning many companies stall between proof of concept and scaling.
3. Long-Term Funding and Incentives. PIF and government vehicles provide patient capital, but private LP confidence is still developing; more pension funds and corporate LPs need to buy into early-stage risk.
4. Outcome Measurement Versus Activity. Riyadh loves numbers: events, registrations, funds announced, but measuring economic impact (jobs created, revenue generated, global reach) still needs better public data.
5. Culture and Natural Collaboration. Saudi culture values hospitality and relationship building, but the innovation community is still learning how to collaborate across sectors without top-down mandates.
6. Including the Full Talent Spectrum. Vision 2030’s social reforms have expanded opportunity, but real inclusion will require persistent structural change (which, gratefully, is in progress).
7. Architecting High-Performance Environments. Investment in coworking spaces and innovation districts is strong, but integration with research universities and deep tech labs is still emerging. This is, frankly, something everyone needs to do because university commercialization is not moving forward from traditional business models that have left research languishing.
8. Aligning Government, Academia, and Private Sector. Vision 2030’s frameworks exist, but institutional silos remain; aligning incentives across these sectors is an ongoing challenge which means it’s also an opportunity.
9. Accelerating Innovation and Reducing Risk. Programs, like regulatory sandboxes are promising, but the real test is whether founders can fail fast and iterate; cultural tolerance for failure is still maturing.
10. Adapting Global Best Practices to Local Realities. Saudi Arabia has been smart importing frameworks (e.g., sandbox regulation, VC fund models) but sincerely adapting them to local norms rather than copying them is an active process, not yet a solved one.

Riyadh Startups’ Strengths and Gaps

Riyadh’s strength is that capital, policy, and ambition are moving in the same direction. That alignment is rare and historically why ecosystems in Africa, Latin America, and Asia often stagnate. Riyadh looks like a mature ecosystem on day one because it has sovereign wealth backing and top-down coordination. But that’s also its Achilles’ heel: ecosystems that feel built from the top can struggle to create bottom-up cultural norms of risk taking and iterative learning that make true startup cultures resilient.

Riyadh is proving it can attract founders and capital. What it now needs is to let the ecosystem breathe, let founders fail without stigma, let mid-tier capital form without state guarantees, and let universities spin out startups without bureaucratic friction.

Saudi Arabia is no longer a dark horse. It’s a contender. But it’s still learning how to run the race, not just fund it. The next decade will tell if Riyadh can sustain innovation in a way that isn’t dependent on sovereign backstops but driven by market-led, risk-tolerant entrepreneurial energy.

If you’ve been watching Riyadh from the outside, the provocative question now is: does Vision 2030 end up creating an ecosystem people live in, or just an ecosystem they invest in? That’s the test every founder and investor should be watching.

The post Why Riyadh and Saudi Arabia Are Rapidly Becoming a Global Startup Powerhouse appeared first on Startup Economist.

There’s a nasty little lie that keeps getting passed around the economy like a like a VC quote on LinkedIn: that every new business built on a new technology is a “startup.”

It’s how we got here, misunderstanding the difference between a startup and a business. The bloated graveyard of Web3 ventures, now being backfilled with AI “startups,” isn’t a cautionary tale about blockchain or metaverse, it’s a meaningfully clear signal we can’t keep ignoring or apologizing for disregarding, that most of what founders built weren’t startups at all; they were businesses in costume, trying to pass for startups because startups are sexy (supposedly). Sexy raises money. Sexy gets you tweets. Sexy gets you keynote stages and free t-shirts at the local Accelerator.

But sexy doesn’t scale. Sexy doesn’t survive when the hype dies.

The same thing happened with Web 2.0. It’s happening right now with AI. Founders jump on the innovation trend du jour and build products on top of it, mistaking the presence of a new technology for the presence of a new venture model.

Just because you’re using blockchain, AI, or quantum fairy dust doesn’t mean you’re running a startup.

Startups are not just new businesses. Startups are new business models.

They’re not “another version” of an existing idea with tech sprinkled on top. A startup creates an entirely new kind of economic behavior, often enabled by innovation but not reducible to it. It changes how markets operate, how customers behave, or how industries are structured. It breaks something, reconfigures it, and creates disproportionate value by doing so.

A fundable startup delivers 15x+ returns because it has to; otherwise, it can’t offset the 90% failure rate of the rest of the VC portfolio. In contrast, a business has a far more survivable model (about 54% fail), but it will never return what VCs need to justify the risk. VC isn’t being mean. It’s math.

And yet… the entire Web3 boom (and bust) was full of businesses dressed as startups begging for VC dollars. A therapy app using AI isn’t a startup; it’s a therapy app. A VR-enabled property showcase? That’s a design agency with a headset. A decentralized social network? Just another social network.

These aren’t bad ideas. In fact, many can succeed beautifully, generate wealth, and even exit. But none are changing the fundamentals of the business they’re in. They are businesses, and when they try to play the startup game, they not only mislead themselves, they poison the well for everyone else.

So, where’s the real failure? It’s not founders being ambitious. It’s mentors, investors, and the peanut gallery giving one-size-fits-all startup advice to people who are, in fact, building businesses. Advice like “focus on revenue” is classic. It’s what a VC tells a founder who shouldn’t be in a VC conversation at all. It’s not bad advice; it’s just not startup advice.

This perpetuates a myth: that startups should focus on revenue too. No, they shouldn’t, not in the early stages. Startups are in a race to discover scale, not to prove profitability. Revenue is a lagging indicator of value capture; scale is the leading edge of innovation (adoption of invention).

Founders keep getting told they’re doing the right things (revenue, retention, burn rate) but those things matter differently depending on whether you’re building a business or a startup. And that’s the line we’ve all stopped being able to see clearly.

So, how do you actually discern good advice from garbage? Here’s a litmus test:

1. When someone gives you advice, ask them: “Thank you. Why?”
2. If that checks out, press further: “Great. How do we do that?”
3. Then, push again: “Wonderful. So we’ll do that. Here’s what we need from you.”

If your advisor can’t explain, assist, or participate, discount the advice. Not because it’s wrong, but because it might be. An investor says “focus on customers”? “Why?” “Great, how?” “Wonderful, give us half the funding we’re seeking and we’ll do that.” If they really knew how to help, wouldn’t they be offering intros, resources, or at least clarity?

Let’s look at two examples to make this real:

You want to open a crypto-themed restaurant that rewards loyal diners with blockchain tokens. That’s a business. Could be fun, could work (ha, maybe). But don’t call it a startup. You might get good advice, but the guy who mentors disruptive SaaS founders isn’t your guy because you are starting a restaurant and if that fails, you fail. Don’t mistake startup tips for gospel.

Now, imagine you’re building an AI fintech platform that integrates with credit cards and bank APIs to manage debt negotiation and repayment in real-time. That’s a startup. If your advisor gets it, they’ll offer something tangible: education, funding leads, a great connection, or maybe even a pilot partner (IF they know their advice is meaningfully valid).

In either case, the ability to distinguish a business from a startup (and qualify the advice you’re getting based on that) can save you years of wasted time, embarrassment, and missed opportunity. And frankly, it could save our entire ecosystem from continuing to burn cycles propping up zombie companies who were never supposed to be advised like startups in the first place.

If at any point in that advice validation discourse, the mentor or investor can’t explain or won’t help, discount their advice.

That doesn’t mean it’s wrong (it might be right), it means you have to discount it.

Why? How do I know you should discount it??

Well, work backwards. If I was giving you advice I *know” will work out for you… wouldn’t I help you in some way? Funding, resources, intros, or direct help?

If I know that my help is worthwhile, wouldn’t I be able to explain you how to do it? I’m not just regurgitating common advice; I know how to do it.

In either case, you have to understand how to discount or even dismiss what you hear by discerning the difference between business and startup.

I’d push through #3 in our fintech scenario because I work with startups. I wouldn’t always push through #3 with advice, I certainly don’t know everything. But I would with some of my advice because I know startups. And where I wouldn’t get to advice validation point #3, I’d be able to tell you how to do what I’m advising (or I wouldn’t advise it!) In turn, you’d know what to discard that I advise when I won’t go through the steps of validating my advice.

I would not survive validation of advice in our restaurant scenario because I don’t know how to make such businesses successful; and such things should be successful – we know how to make restaurants successful (I don’t but our economy does). Thus, you’d know to take my advice with a huge grain of salt while instead listening to the business advisors who work with restaurants.

What we should have learned from the implosions of early Web3

That overhyping a technology doesn’t build a startup.

That chasing capital without understanding venture economics is a fool’s errand.

That conflating innovation with invention or business is why so many smart founders wind up angry, broke, and bitter at an industry they never really understood.

If you’re going to play the founder game (whether you’re launching a new business or building a startup) you need to learn the rules. If what you’re building is a business, own that. Be proud of it. Just don’t cosplay your way into venture capital; it’s a model that isn’t designed for you. Because Web3 didn’t fail. We did, by refusing to admit that slapping a new technology on an old business model doesn’t magically make it a startup. It just makes it a business with new tech. And that’s okay, until you pretend otherwise.

The post The Great Startup Delusion: What Web3 Failures Teach About Confusing Business with Innovation appeared first on Startup Economist.

This is a city that burned to the ground and responded by inventing the skyscraper. It turned its geography into the nation’s freight yard, its politics into a machine, and its universities into research engines. It engineered futures markets, modern cellular telephony, and now wants to industrialize quantum computing.

If you’re trying to understand how investment in invention translates into entrepreneurship and attention, Chicago startups are a case study in what happens when a region treats innovation as infrastructure, not theater.

The Chicago setting: risk, resilience, and a culture built for commerce

Chicago’s story starts with geography and risk.

The city grew up where railroads, canals, and the Great Lakes converged; perfectly placed between East and West, North and South. By the late 19th century, it had become “the great internal gateway” of the U.S., a logistics and industrial choke point where grain, livestock, lumber, and manufactured goods all passed through and were priced.

Then it burned down.

The Great Chicago Fire of 1871 wiped out roughly a third of the city and displaced 100,000 people. Rather than rebuild what it had, Chicago re-invented how a city could be built; experimenting with fireproof materials, steel-frame construction, and new building codes that paved the way for the world’s first true skyscrapers.

That combination (catastrophic risk, followed by aggressive reinvention) is still baked into the culture. You see it in:

• Its history as the nation’s meatpacking plant and distribution hub.
  
• The rise of the Chicago Board of Trade and CME Group, where futures and options markets turned commodities risk into tradable, hedgeable contracts.
  
• A political and labor history that forces constant negotiation between capital, workers, and government—messy, but deeply pragmatic.

Today, the Chicago metro economy is one of the most diversified in the United States. No single industry accounts for more than 13% of total employment, according to World Business Chicago and the Bureau of Labor Statistics. That matters for startups because it means:

• Tons of legacy industries to disrupt (logistics, manufacturing, food, finance, insurance).
  
• A big, stable regional market not dependent on one boom-and-bust sector.
  
• And a deep bench of corporate buyers, partners, and acquirers.

This is not a “one-story” economy like a tourism town or a single-industry boom region. It’s a dense, layered operating system.

Inventions from Chicago: a narrative of creativity and applied ingenuity

Chicago is not just a place where things get traded. It’s where a lot of modern life was invented.

• The skyscraper. Chicago architects and engineers (including William Le Baron Jenney and later firms like Burnham & Root) pioneered steel-frame construction and elevator integration, enabling the world’s first skyscrapers in the 1880s and 1890s.
• The Ferris wheel. George Ferris’s giant rotating wheel debuted at the 1893 World’s Columbian Exposition in Chicago as an audacious response to the Eiffel Tower; a literal engineering flex to prove American industrial prowess.
• Mail-order retail and catalog commerce. Chicago was home base for Sears, Roebuck and Montgomery Ward, which reshaped consumer markets through catalogs, logistics, and national distribution. That’s the spiritual ancestor of e-commerce and DTC retail.
• The vacuum cleaner, the zipper, and the grain silo. Illinois and Chicago-area innovators contributed key industrial and everyday inventions, from early vacuum cleaning technologies to the modern zipper and agricultural storage systems that changed global commodities logistics.
• The cell phone. Engineer Martin Cooper, working for Motorola, made the world’s first handheld cellular phone call in 1973. Motorola’s work in and around Chicago was foundational to modern mobile communications.  Ben Lalez shares that Paul and Joseph Galvin founded the Galvin Manufacturing Corporation in Chicago in 1928. Within a couple of years, they developed the first mass-produced car radio. The name “Motorola” came from combining the words “motor” and “ola” (from Victrola, those old record players).
• Blood banking and medical advances. Chicago institutions helped pioneer blood bank practices and other medical innovations that underlie modern healthcare systems.

When you trace that arc, from skyscrapers and Ferris wheels to cell phones and futures contracts, you get a recurring pattern: Chicago doesn’t fetishize invention for its own sake. It commercializes.

New building methods become real estate markets. New communication technologies become telecom giants. New financial instruments become global exchanges. That’s the through-line: innovation as something you industrialize and scale, not just celebrate in a museum.

Now, layer on the current wave. Chicago’s next bet is that it can do the same thing with quantum.

• Illinois has four of the top 10 federally funded quantum centers and has attracted startups like Infleqtion and PsiQuantum.
• Governor JB Pritzker’s latest budget proposes allocating roughly $500 million toward quantum technologies, explicitly to make Illinois a global hub for quantum, semiconductors, and AI.
• The Illinois Quantum and Microelectronics Park (IQMP) on Chicago’s South Side is a planned 128-acre campus (part of a 440-acre Quantum Shore district) whose stated goal includes creating the world’s first commercial million-qubit quantum computer.
• PsiQuantum has already broken ground at IQMP after a $1 billion Series E round. The company and the state expect that facility to anchor “a massive quantum ecosystem” and potentially house the first fault-tolerant million-qubit quantum computer in the U.S.

Chicago’s pattern holds: take a frontier technology, build an industrial-scale platform around it, and dare the rest of the world to keep up.

The macro economy of Chicago: diversified, corporate-dense, and structurally important

Macro-economically, Chicago is not a scrappy up-and-coming tech town; it’s already a pillar of the U.S. economy.

The region consistently ranks among the top U.S. metros by GDP and is one of the few global cities whose economy spans manufacturing, finance, logistics, healthcare, professional services, and information technology in roughly balanced proportions. World Business Chicago points out that no single sector dominates; manufacturing, finance and insurance, professional services, healthcare, trade, and transportation all carry substantial but not overwhelming shares of employment and output.

On top of that, Chicago sits near the top nationally for Fortune 500 headquarters. ConnectCRE notes that the Chicago area ranks third in the U.S., with around 15 Fortune 500 companies headquartered in the city or metro.  These include:

• United Airlines
• Walgreens
• Exelon
• Abbott and AbbVie (nearby)
• Archer Daniels Midland (ADM)
• Mondelez International
• CME Group

For startups, this matters more than the ego of “we have X unicorns.” Corporate density and sector diversity define the local demand side: enterprise customers, pilots, partnerships, acqui-hires, and exits – even relevant jobs to fall back to when the startup doesn’t work out.

Illinois’ Department of Commerce and Economic Opportunity (DCEO) leans into this. Its “Why Illinois” positioning explicitly emphasizes the state’s central location, logistics advantages, diverse economy, and strong talent pipeline.

In other words, Chicago isn’t a monoculture startup hub in the mold of early-stage Silicon Valley. It’s a diversified, corporate-heavy, globally integrated economy that treats entrepreneurship as an overlay on top of industry, logistics, and finance.

That’s both its advantage and its constraint.

Government as co-architect of the innovation system

Unlike states that treat entrepreneurship as an afterthought, Illinois is explicitly constructing an innovation policy stack.

At the state level, the Office of Entrepreneurship, Innovation & Technology (EIT) within DCEO is set up “to help Illinois’ entrepreneurs, innovators, and small businesses grow by providing funding, expertise, and statewide support networks at every stage of development.”

A few elements of that stack directly matter for startups in Chicago:

• The Illinois Innovation Venture Fund (INVENT) makes direct equity investments in Illinois-based startups to attract private capital and strengthen the venture ecosystem.
• The Angel Investment Credit Program offers state income tax credits of up to 35% for investments in qualified Illinois startups—effectively de-risking early capital for angels.
• SBIR/STTR matching grants, innovation vouchers, and wet-lab capital programs provide non-dilutive funding and shared infrastructure for tech commercialization.
• The Tech Incubator Enhancement Grant Program (TIEG) has deployed millions to strengthen incubators and accelerators statewide, catalyzing more robust Startup Development Organizations (SDOs).

Overlay that with a focus such as their quantum push:

• The Quantum Enterprise Zone program designates quantum campuses and offers tax benefits to resident companies.
• Pritzker’s budget proposal for $500M in quantum infrastructure and incentives is intended to make Illinois “a leading hub for quantum development,” anchored by the Chicago Quantum Exchange and IQMP.
• The state and DARPA signed a memorandum to create a Quantum Proving Ground at Illinois’ quantum campus, linking federal R&D and state infrastructure in a single platform.

At the regional level, World Business Chicago (WBC) serves as the city’s public-private economic development arm. Their 2023 Business Bulletin notes that Chicagoland companies raised approximately $4.73 billion in growth capital in 2023 and highlights that the region ranks among the top U.S. locations for women-founded startups.

This combination, state capital programs, tax incentives, and a public-private business development engine,is unusually sophisticated by U.S. standards. It positions government as an investor, convenor, and infrastructure provider, not just a regulator (which in and of itself is a problem).

The risk, of course, is that policy becomes the story instead of the platform. Chicago’s challenge is whether that stack accelerates founder-led entrepreneurship, or just adds a glossy quantum brochure on top of an already complicated system.

Startup Development Organizations: Chicago’s operating system for founders

If you look past the press releases, what actually touches founders are the Startup Development Organizations: incubators, accelerators, university centers, innovation hubs, and community groups.

Chicago arguably has one of the most dense SDO stacks in the country, especially when you include sector-specific and demographics-focused programs. The Chicago Entrepreneurial Resources guide compiled by GET Cities and the Tech Equity Working Group (TEWG) is 58 pages long and still describes itself as non-exhaustive.

A non-trivial subset of the SDO landscape:

• 1871: The flagship digital-tech incubator, with programs for early-stage startups, corporate innovation, and underrepresented founders. The GET Cities guide highlights 1871’s membership, pitch competitions, and events like BLKtech, LTNtech, and WMNtech focused on Black, Latinx, and women founders.
• MATTER: A global healthcare startup incubator and “community nexus and corporate innovation accelerator” mobilizing entrepreneurs, clinicians, and industry partners to improve health and care.
• mHUB: The nation’s largest independent HardTech and manufacturing innovation center, running accelerators in climate & energy, medtech, and sustainable manufacturing, plus the mPOWER and Landis fellowship programs targeting women and founders of color in physical product innovation.
• Chicago:Blend: A nonprofit focused on DEI in VC and startups, with data, resources, and a Venture Fellows program connecting underrepresented aspiring investors with entrepreneurs.
• P33 / TechChicago: A nonprofit co-founded by Penny Pritzker with the mission to “transform Chicago (and all of Illinois) into a global tech and innovation hub that creates opportunities and economic growth for all.”  They lead TechChicago Week, talent programs, and ecosystem marketing.
• World Business Chicago – ChicagoNEXT: WBC’s innovation arm, supporting the tech economy, sector councils, and events like the Chicago Venture Summit.
• GET Cities and TEWG: Focused on building city-wide infrastructure that addresses gender and racial inequities for tech founders, including access to early capital, mentorship, and networks.
• Portal Innovations: A life sciences and deep-tech venture platform combining lab space, funding, and expertise. Portal recently closed a $100 million life sciences fund tied to its Chicago hub and expansion markets.
• TechNexus Venture Collaborative: A long-standing corporate innovation hub that co-builds startups with large enterprises, especially in media, sports, and industrial tech.
• Bunker Labs: A national network with a strong Chicago presence, supporting veteran and military-spouse entrepreneurs.
  

Then there are the universities:

• University of Chicago’s Polsky Center and Polsky Exchange, the Booth New Venture Challenge, and the Chicago Quantum Exchange (CQE), which UChicago leads as “a catalyst for advancing quantum information science” in the region.
• Northwestern University’s The Garage, which supports student and alumni founders across sectors.
• University of Illinois’ Discovery Partners Institute (DPI) in Chicago, focused on tech talent pipelines and innovation. DPI is being strategically re-aligned to link with IQMP, positioning Chicago as a global center for tech innovation and new-economy jobs.
• Illinois Tech’s Kaplan Institute, which combines engineering talent with startup programs.

And wrapped around all of that: a broad network of SBDCs, sector labs, neighborhood innovation centers, and community organizations cataloged by the GET Cities resource guide.

You can reasonably argue Chicago has solved for “having enough organizations.” The question is whether they function as an operating system or a bunch of overlapping apps.

Capital: from angels to venture and strategic money

The capital side is similarly thick but unevenly distributed.

On the institutional side, Waveup’s 2025 overview notes that “more than $6B in VC funds poured [into Chicago] in 2023 alone” and points to large rounds like Invenergy ($1B+), Fly.io ($95M total), and NanoGraf ($65M+ Series B).

That capital is spread across a mix of classic venture, growth equity, and sector funds, including:

• New Stack Ventures
• ARCH Venture Partners
• Origin Ventures
• Lightbank
• OCA Ventures
• Hyde Park Venture Partners
• Chicago Ventures
• Jump Capital
• Sandbox Industries
• Adams Street Partners
• First Analysis

Many of these funds straddle Chicago and national markets, often investing well beyond the city. ARCH, for example, is a global deep-tech and life-sciences investor; Adams Street is a global PE/VC platform.

On the early-stage and angel side, there’s a history of organized angel networks:

• HPA (formerly Hyde Park Angels), one of the Midwest’s more active angel groups.
• Heartland Angels and other regional groups focusing on seed-stage deals.

The state’s Angel Investment Credit Program sweetens the pot for these investors with tax credits for investments in qualified Illinois startups.

Corporate and strategic capital also loom large. Chicago’s Fortune 500 base turns into:

• Strategic investors (CVC arms and corporate venture initiatives).
• Pilot and procurement relationships (especially in logistics, insurance, and industrials).
• Exit routes that don’t always show up as flashy unicorn valuations but matter for founder liquidity and career recycling.

On the macro numbers, World Business Chicago’s 2023 Business Bulletin pegs Chicagoland’s growth capital at $4.73B for 2023 and notes that the region is among the top U.S. hubs for women-founded startups raising venture capital.

At the same time, Crain’s and other local analyses have pointed out that venture activity has cooled from the 2021 peak, and that Chicago still trails coastal hubs on per-capita early-stage funding, especially for underrepresented founders.

So the capital story is classic Chicago: substantial in absolute terms, diversified, somewhat conservative compared to the coasts, and still leaving a “missing middle” where founders struggle to move from local seed to scale-stage growth.

Sectors: where Chicago actually competes

If you zoom out to sector specialization, Chicago’s startup activity is not random. It grows on top of its industrial roots.

Key areas where innovation and entrepreneurship align with the city’s economic base:

• Fintech and trading tech, built on top of CME, CBOE, and a legacy of quantitative finance and derivatives.
• Logistics, supply chain, and mobility, leveraging Chicago’s position as a rail, air, and trucking hub.
• Food and ag-adjacent innovation, connected to regional agricultural production and global food majors like ADM and Mondelez.
• Healthcare and life sciences, with Northwestern, UChicago Medicine, Rush, MATTER, and Portal Innovations as anchors.
• HardTech, manufacturing, and climate/energy via mHUB and the broader industrial base.
• Quantum, AI, and deep tech through the Chicago Quantum Exchange, IQMP, and ARCH/Portal-style investors. Build this more with the Quantum corridor of the U.S. and it’s pivotal.

Chicago’s unicorn and breakout story reflects that:

• Groupon and Grubhub as earlier-wave consumer/internet successes.
• Braintree/Venmo in fintech.
• Tempus in precision medicine and health-data AI.
• project44 in logistics tech.
• Relativity in insurance and insure-tech.

In other words, this isn’t a city trying to copy “Bay Area SaaS” as a fashion trend. It’s building where it has comparative (and in some cases absolute) advantage.

“Chicago has everything it needs to lead diverse industries, world-class talent, and a history of practical innovation; but it hasn’t yet activated these strengths as a cohesive system. Its global appeal is natural, though under-leveraged, and international founders should see it as a premier landing zone for HardTech, healthcare, logistics, and manufacturing innovation. The city’s next leap won’t come from rebranding, but from structuring collaboration across universities, corporations, government, and investors. Once Chicago embraces this operating model, it will stop being compared to other hubs and start defining a category of its own.” – John Zozzaro, Founder/CEO Innovative EcoSystems

Capacity building: 10 considerations for Chicago’s startup future

Let’s use capacity building as a diagnostic.

1. Overcoming silos: shared infrastructure and community

Chicago’s biggest strength and biggest handicap is the same: there is a lot of everything.

Dozens of SDOs, multiple universities, competing civic coalitions, and overlapping city/state programs create a thick mesh of support, but also fragmentation. The GET Cities TEWG report was explicit that one of its goals was to design “city-wide solutions and collective infrastructure” precisely because founders, especially women and people of color, were bouncing between uncoordinated resources.

The state’s TIEG grants and World Business Chicago’s ecosystem councils are attempts to treat incubators and hubs as shared infrastructure rather than isolated brands.

What Chicago does well:

• It has built specialized physical infrastructure (wet labs, hardtech prototyping, quantum facilities) that most cities can’t even dream of.

Where it needs work:

• Founders still experience the system as a maze. The next frontier is interoperability: common data, shared intake, and outcomes-driven routing rather than “whose membership do you have.”

2. The missing middle: the gap between early startup and established company

This is the structural issue in Chicago.

At the seed stage, local angels, HPA, early-stage VCs (New Stack, Chicago Ventures, Hyde Park Venture Partners, etc.), and university competitions (Booth NVC, Polsky, The Garage) give credible first money and validation.

At the scale stage, big corporates and growth equity funds exist in abundance.

In between (Series A to C, especially for companies without obvious local corporate buyers) founders often end up raising from the coasts or relocating. WBC’s own numbers show solid total capital volume but not a proportionate number of home-grown “breakouts” relative to the city’s population and GDP.

The state’s INVENT fund is designed to pull more early growth capital into Illinois startups; the question is whether it can materially close the gap or just top off existing deals.

3. Long-term funding and incentives for the ecosystem’s builders

One thing Illinois is getting right, especially compared with cities that rely entirely on philanthropy and sporadic corporate sponsorship, is treating SDOs as critical infrastructure.

• TIEG grants explicitly fund incubator enhancement.
• Illinois’ Wet Lab Capital Program has already deployed millions to expand biotech lab capacity.
• Quantum Enterprise Zones and IQMP are multi-decade plays, not one-off ribbon cuttings.

Chicago’s risk, though, is political half-life. Quantum looks brilliant now because you have alignment: Pritzker as a quantum-obsessed governor, Penny Pritzker via P33, strong university leadership, and DARPA partnership.

The real test of capacity building is whether these funding and incentive structures survive leadership changes and cycles. Chicago’s ecosystem builders will need more endowments, revenue-generating models, and multi-year commitments that aren’t just “this governor’s pet project.”

4. Measuring outcomes, not activity

Chicago may be the best city in the world at events (and I’m saying that coming from Austin, Texas, which is flooded with them)

TechChicago Week, Chicago Venture Summit, numerous pitch competitions, and a constant calendar of demo days can easily create the illusion of progress.

But real capacity building demands ruthless outcome measurement:

• Net new high-growth firms created.
• Quality of jobs and wages, not just headcount.
• Follow-on capital raised.
• Repeat founders and return-founder rate.
• Founder demographics and mobility (who is actually being served).

GET Cities’ TEWG report is a step in the right direction, using data to expose inequities in access to early capital.

Where Chicago needs to push further is agreeing on a shared dashboard of ecosystem outcomes and tying public funding, incubator grants, and PR to that, not to vanity metrics like event attendance or social media impressions.

5. Culture and behaviors: collaboration should be natural, not forced

Historically, Chicago has had a reputation for “Midwestern humility” and heads-down execution. That’s a double-edged sword.

On one side, you don’t get the performative startup theater that plagues some other regions. On the other, founders often under-pitch, under-network, and assume that if they build something solid, attention will follow. It doesn’t.

Organizations like Chicago:Blend, GET Cities, and P33 are trying to change the culture by making collaboration and visibility part of the default behavior; tracking diversity data, curating introductions, and incentivizing cross-org work.

Still, you hear a consistent founder refrain: “It’s hard to know who’s doing what, and the big players often stay in their own lane.”

If Chicago wants to unlock its full capacity, it needs to normalize:

• Introductions across competitive lines.
• Shared programming rather than overlapping cohorts.
• A culture where established founders and VCs consider ecosystem service part of the job, not charity.

6. Including the full spectrum of talent

The good news: Chicago is one of the most racially and economically diverse big cities in America, with enormous pools of underutilized talent.

The bad news: like most ecosystems, the visible startup layer is historically typical (demographically) and more Northwestern/Booth-centric than the city itself.

This is precisely why GET Cities, TEWG, 1871’s BLKtech/LTNtech/WMNtech programs, mHUB’s Catalyze initiative, the Landis Fellowships, and Chicago:Blend’s data work exist: to close the gap between who lives in Chicago and who actually gets access to capital and networks.

Capacity building here means treating inclusion as infrastructure:

• Broadband, transit, and childcare that make participation feasible.
• Neighborhood-based innovation hubs tied into the downtown/core ecosystem.
• Stronger bridges from community colleges, bootcamps, and nontraditional talent pipelines into founding and startup roles.

If Chicago gets this right, its diversity becomes a massive strategic advantage over more homogeneous hubs.

7. Architecting environments for peak performance

Chicago’s HardTech and life-sciences infrastructure is too quietly world-class: mHUB for hardware and manufacturing, MATTER and Portal for healthcare and biotech, plus expanding wet-lab capacity funded by the state.

Add IQMP and the quantum campus and you get something rare: founders can literally go from lab to prototype to scale in the same metro, with appropriate facilities at each step.

The weak spot isn’t physical infrastructure, it’s cognitive and emotional infrastructure:

• Systems that help founders navigate burnout, risk, and the long arc from invention to market.
• Management and commercialization training baked into technical programs.
• Board, advisor, and executive-in-residence talent tuned to startup scale, not just corporate governance.

This is where Chicago’s universities and SDOs can lean far harder into founder psychology, entrepreneurial leadership, and scale-up management as distinct disciplines, not afterthought workshops.

8. Aligning government, academia, and the private sector around shared outcomes

If you want a case study in alignment, look at quantum here.

• The state (Pritzker administration) is putting in $500M+ and designing QEZ incentives.
• Universities (UChicago, UIUC, Northwestern) are leading scientific and engineering efforts through the Chicago Quantum Exchange and related centers.
• The private sector is represented by PsiQuantum, Infleqtion, IBM, Nvidia’s venture arm, and others investing and locating at IQMP.

The Chicago Sun-Times summarized it bluntly: Pritzker and local leaders “have a plan to build a quantum manufacturing campus at the former U.S. Steel South Works site,” with the governor calling for $500M in public and private funding to make Illinois a quantum leader.

That’s alignment.

The question is: can Chicago replicate that level of coordination in less sexy but equally important domains like early-stage capital access, neighborhood entrepreneurship, or talent retraining?

Alignment is not everyone agreeing on talking points. It’s:

• Shared metrics.
• Shared infrastructure.
• Clear division of labor between the state, city, universities, corporates, and SDOs.

Quantum shows Chicago can do it. The rest of the ecosystem now needs the same treatment.

9. Ecosystems that accelerate innovation and reduce risk through local competitiveness

Chicago’s diversified economy and corporate density give it a massive ability to de-risk startups if it uses those assets well.

An ecosystem reduces risk when:

• Founders can pilot with local corporates and iterate quickly.
• There’s enough sector expertise to kill bad ideas early and amplify good ones.
• The labor market is deep enough that founders and early employees aren’t betting their entire lives on a single binary outcome.

Chicago is set up for this in logistics, insurance, manufacturing, food, and increasingly healthcare and quantum. WBC underscores that Chicago’s tech sector is one of the nation’s fastest-growing, powered by corporate-startup collaboration and a robust talent pool.

Where the city hasn’t fully cashed in is brand and velocity. Compared to coastal hubs, diligence cycles can be slower, risk appetites more conservative, and narrative-building less aggressive. That’s fixable, and it’s where capital and ecosystem leaders need to act less like a Midwestern chamber of commerce and more like an unapologetic global sales machine.

10. Adapting global best practices to local realities

Finally: Chicago’s great temptation is to copy other ecosystems’ surface features.

• “We need our own South by Southwest.”
• “We should have a ‘Silicon Prairie’ brand.”
• “Let’s import a coastal accelerator playbook.”

The better path is borrowing global models (research hubs, public-private campuses, federal tech-hub designations), then adapt them ruthlessly to Chicago’s assets: Great Lakes logistics, national-lab proximity, existing manufacturing base, and a diverse urban population.

That same logic should apply to:

• How SDOs structure equity and revenue (don’t just copy Y Combinator terms into a deep-tech region with very different time horizons).
• How venture funds structure follow-on and reserves for capital-intensive companies.
• How talent programs are built (not just importing Bay Area “founder fellowships” into a city where many talented people have families, multiple jobs, or community obligations).

Chicago will win not by being the next startup hub but by being the first city that industrializes deep-tech, HardTech, and applied innovation across a truly diversified, real-economy base.

So, what does Chicago actually do well and where does it need to improve?

What Chicago does exceptionally well:

• It treats innovation as infrastructure. From skyscrapers to futures markets to quantum campuses, Chicago builds physical and institutional systems around technology, not just programs.
  
• It leverages a diversified economy and corporate density to ground startups in real demand.
  
• It has one of the most mature SDO stacks in the country, spanning sector-specific hubs (MATTER, mHUB), generalist incubators (1871), quantum consortia (CQE), and DEI-focused organizations (GET Cities, Chicago:Blend).
  
• It is making a serious, globally visible bet on quantum and deep tech, backed by real money, federal alignment, and world-class institutions.
  
• It has built credible early-stage and growth-stage capital infrastructure, with more than $6B in VC deployed in 2023 and a roster of serious local funds.

Where Chicago still needs to push harder:

• Defragmenting the ecosystem. The sheer number of organizations is a strength only if they function as a coherent operating system; something easily fixed with something like Founder Institute’s platform in place. Right now, too many founders still feel like they’re doing their own routing.
  
• Closing the missing middle. The region must deliberately build structures (funds, guarantees, co-investment vehicles) that bridge local seed success to serious scale without requiring founders to relocate or fully re-anchor on the coasts.
  
• Hard-wiring outcome measurement. Public money and ecosystem prestige should be tied to actual startup formation, quality jobs, and successful exits, not event calendars. TEWG’s equity-focused data work is the template; it needs to become the norm.
  
• Mainstreaming access. Programs for women and underrepresented founders exist and many are excellent. But until the composition of funded founders and fund managers looks materially more like Chicago’s population, inclusion remains a partially-solved problem, not a capacity asset.
  
• Turning quantum-style alignment into a habit. The quantum push is a proof of concept for deep alignment between state, city, universities, corporates, and capital. The real challenge is to apply that same discipline to “boring” but crucial areas like workforce transformation, neighborhood entrepreneurship, and SME digitalization.

If you zoom out, Chicago is not an underdog hoping to be “discovered” by venture capital. It’s a heavyweight industrial and intellectual hub deciding what it wants to be in the next century.

The question is not whether Chicago can build successful startups, —it already has. The question is whether it can fully align its history of industrial experimentation, its present push into quantum and deep tech, and its sprawling ecosystem of SDOs and capital so that entrepreneurship becomes the natural consequence of living and working there.

If it does, Chicago won’t be competing to be “the next Silicon Valley.” It will be something more interesting: the first region to prove that you can retrofit a mature, diversified economy into an operating system where invention, investment, and entrepreneurship compound by design.

–

The post Chicago Startups Industrialized Innovation appeared first on Startup Economist.

Despite countless articles and every startup program explaining how to validate a startup idea, one of the (surprisingly) still frequently most asked questions is how to validate a startup. Reading the tea leaves, that tells me not that people actually don’t know (conventional wisdom is “talk to customers”) but rather, that that advice is less than ideal. And if I’m to hazard a guess, less than ideal is accurate because well, I agree; I’m well known for pointing out that a startup with customers is easily misled and hardly competitive or capable of scale, but more to the point, perhaps you don’t know how to get at a sufficient number of customers… saying “talk to customers” is great if you have the depth of a community or audience that makes that possible. Startup idea validation doesn’t seem easy (but it is).

Let me give you 5 things to consider better:

1. Do you know what you’re doing?

The most successful founders are roughly 44 years old and the reason for that is that experience trumps everything.

When I hear people asking about idea validation, I think of the thousands of ideas I hear every year and it occurs to me in 99% of cases, common sense can tell us if an idea is valid or not.

• A CRM that favors social media profiles and engagement over email addresses and sales lead engagement? Good idea. Common sense.
• A blockchain based AI platform for promoting events via mobile? Come on. Just saying that makes it obviously not.

Don’t know what you’re doing to know that it’s probably a good idea? Then it’s probably not a good idea simply because you aren’t experienced and oriented to doing it (which happens to be a primary cause of startup failure). Which is to say of an idea, you should know… you should be moving forward already to validating what’s uncertain and proving that you can accomplish it.

2. Have you done the marketing?

Overwhelmingly most founders don’t, and troublingly, too many mentors and investors who don’t have a clue what marketing means, perpetuate this horrific notion that marketing means promoting something you have.

Marketing is the work of the market to determine what you should do. So, in this context, have you:

1. Studied competitors?
2. Set up a SWOT analysis
3. Done the market research about trends
4. Evaluated where to build and how?
5. Determined the channels through which to find customers, pricing, and points of conversion?

Most founders don’t do any of that and frankly, disregarding it is why 90% of startups fail (a ridiculously bad rate of performance we should all be ashamed of, driven entirely by founders pushing to do something that clearly isn’t going to work).

3. Have you talked to PEOPLE (not customers)?

Talking to customers requires that they are unbiased. They’re not.

If you present a solution to a problem, they’ll tell you it’s a good idea. But will they switch? Will they pay?

More, founders are horrifically bad when it comes to overcoming their own bias and perceptions. How do you overcome that? How do you overcome your own bias and perception when customers agree that it’s a problem and opportunity? You talk to 12-year-olds. You talk to 70-year-olds. You talk to hundreds of random people, and you learn from them what NOT to do – because people aren’t dumb.

Think people are dumb? See #1. Are you REALLY? Or can you rather reasonably work out if an idea is worthwhile?

People aren’t dumb. Ask if it’s a good idea, ask what’s wrong with it, ask why it won’t work, and I guarantee you, 200 conversations with a diverse set of people are more valuable than 10 customers who did little more than reassure you that your idea is a good one.

Now, if you properly built an MVP, having already spoken to lots of people, and have that MVP live to PROVE that customers will convert, then start talking to customers. But I doubt you’ve done that, most of you don’t build an actual MVP, you built the solution you want.

Besides, as a startup, if you have customers but didn’t work out if and how to fund operations, scale, and compete, your customers are worthless when you go out of business. You don’t need customer proof unless you have an obviously bad idea, and you should have worked that out before building anything.

4. Use the Bell Mason Diagnostic

This is a sophisticated one, so bear with me and I’ll give you an easy option next.

Go through this list and evaluate YOUR competence on a scale of 0 to 5 where 0 is incompetent and 5 is best in the world (odds are you’re not 5 on anything):

1. Technology (Feasibility)

• Technology): The foundational tech innovation and whether it is viable.
• Product: The step beyond raw tech—how it transforms into a usable product.
• Manufacturing: The ability to produce at scale efficiently.

2. Product (Usability)

• Business Plan: The strategy behind turning the product into a viable business.
• Marketing: Defining how to bring the product to the right audience.
• Sales: Demonstrating real user interest and conversion strategies.

3. Market (Scalability)

• CEO: The leadership’s ability to drive market adoption and strategy.
• Team: The operational force behind scaling the company.
• Board: Governance and strategic oversight for sustainable market growth.

4. Organization (Sustainability)

• Cash: Financial resources to sustain and grow operations.
• Financeability: Investor confidence and ability to raise further funding.
• Control: Systems and governance to ensure operational efficiency and regulatory compliance.

We map this on a spider graph; you can check it out here: Your Startup Pitch is Bad; Let me Explain How I Know. The more 4s and 5s, the larger the graph shows your potential (good idea). If you have a small shape plotted on the graph, bad idea.

5. AI it (but not on your own)

This is something AI is actually very useful for. Let me give you two paths.

The smartest would be just using FounderGPT, here

Already trained to operate based on researched startup methodology, they have there an Idea Assessment Coach and an Idea Discovery Guide freely available, meaning you can prompt it things based on all the stuff that you need to know as a founder (but likely don’t). Don’t reinvent the wheel here, just ask the AI made for it. By the way, they also have a Competitor Analysis & Market Research Assistant which tackles consideration #2 a bit more for you.

Not sold on free and already trained for it? Build your own.

Set up your own Board of Advisors as a Project in ChatGPT (project means you’ve added instructions to direct how it operates and then the chats are self-contained within that project). So, you’re project is your Board.

With the right “Board Members” programmed into your AI (a marketer experienced in your sector, a sales person who would know your customers, an investor who knows the innovations, etc.), you have an AI designed to ask any question and get more meaningful advice than you’d get asking Grok (or even an actual Advisor) directly. Here’s how

Any one of these is better than what 99% of founders do. The smart play is doing all 5.

The post Better Startup Idea Validation appeared first on Startup Economist.

If you still think of New Mexico as a quiet desert between Texas and Arizona, you’re about 80 years behind. This is the state that built the atomic age, test-flew the rockets that defined the Cold War, turned a supposed UFO crash into a tourism engine, and is increasingly the heart of quantum computing.

New Mexico is not “trying to be a startup ecosystem.” It has been an R&D engine for generations. What I want to look at is how well it’s doing finishing the job; turning invention into scalable, visible, compounding entrepreneurship.

As I tend to dig into when exploring a region economically for entrepreneurs, I’ll get into the impact of the history there, the inventions, the money, and the startup development organizations, but this time I want to talk about capacity building because what we have in New Mexico is a region of the world with cities distinct in their own right but an identity uniform in implication; New Mexico startups continue leading in frontier tech begging a question of if that eye to the future becomes a flywheel that accelerates more startups or another set of innovation districts that look great in a brochure while quietly disappointing founders. I’m not suggesting New Mexico is disappointing!  We’re here to explore it because you all know what I’m talking about, many regions of the world fall short; I think there is something special happening here from which we might learn.

A Culture Built on Risk, Secrecy, and Strange Ideas

New Mexico’s innovation story didn’t start with startups. It started with weapons, rockets, and an uncomfortable willingness to be the proving ground for things that might blow up.

Los Alamos National Laboratory was founded as Project Y in 1943, the top-secret site designing nuclear weapons for the Manhattan Project.  Its scientists assembled the “Trinity gadget” (the world’s first tested atomic device) at a ranch site in the New Mexico desert.

Sandia National Laboratories spun out of that work, beginning as “Z Division” and becoming Sandia Laboratory in 1948; by 1949, it was a major nuclear weapons engineering lab, today a $5.1B operation headquartered at Kirtland Air Force Base in Albuquerque. Since 1949, Sandia scientists and engineers have been doing “breakthrough research in weaponization” (the polite way of saying they build the most sophisticated physical systems on earth.

White Sands Missile Range, established during World War II as a bombing and gunnery range, became a rocket sandbox after the war. From 1946 onward, the U.S. assembled and test-fired 67 captured German V-2 rockets there, and between 1945 and 1954 missile launches went from 14 per year to 656.  In 1946, White Sands launched the first American-adapted V-2 high-altitude missile that could be controlled in flight.

So, if we’re asking whether New Mexico’s culture is comfortable with risk and experimentation, we can stop pretending that’s an open question.

That context matters when you look at the cities:

• Los Alamos is effectively a lab town; a place where “almost 80 years of science and innovation to protect the nation” has attracted high-end physicists, engineers, and now quantum scientists.
  
• Albuquerque sits at the intersection of Sandia, Kirtland AFB, the Air Force Research Lab, and now a growing space and data-science sector. StartupBlink notes ABQ’s ecosystem grew 6.2% in 2025, with nearly 100 startups and over $86M in funding.
  
• Santa Fe leaned hard into the creative economy. Meow Wolf (the immersive art company) has raised roughly $169M over 8 rounds and is now a globally known experience brand, with the New Mexico Economic Development Department itself listed among investors.
  
• Las Cruces anchors New Mexico State University and Arrowhead Center, and connects to White Sands and Spaceport America, mixing agriculture, space, and border trade.
  
• Rio Rancho is literally wired into the global semiconductor supply chain. Intel has invested more than $17B in its New Mexico operations since 1980, with a $3.5B expansion making Rio Rancho its “domestic hub for advanced semiconductor manufacturing,” projected to create 700 new jobs and a $1.2B annual economic impact.

• Roswell is the weird one; a critical feature of a creative and innovative ecosystem. The 1947 “Roswell incident” may have been a crashed military balloon, but the narrative I’m sticking with is that there are little green men squirreled away here thanks to a crash that created the UFO industry; the city’s UFO Festival alone generates over $2M in local spending.

Add Spaceport America, the commercial spaceport used by Virgin Galactic and others, plus NewSpace New Mexico’s co-innovation hub around Kirtland, funded with $11M in federal dollars to “facilitate growth in the emerging space industry” around Albuquerque.

This is not a culture afraid of frontier tech. It’s a culture that normalized it decades ago… but seemingly stopped at the government contract.

Making it a case study in how to start and where to go from there: converting that legacy into a startup economy rather than just a contractor economy; exactly the distinction I’ve hammered on in pieces like “From Texas to Tulsa: How Innovation Shifts to Opportunity.”

A Long Narrative of Invention From Nukes to Quantum Dots

If you draw a straight line from Trinity to quantum computing, New Mexico is what’s under the pencil.

Historically, Los Alamos and Sandia have produced a pipeline of technologies that later become platforms in industry: nuclear engineering methods, materials science, high-performance computing, sensors, and control systems. Los Alamos National Labs explicitly frames its history as “almost 80 years of science and innovation to protect the nation.”

White Sands and the V-2 program provided the early rocketry and telemetry experience that fed the U.S. space program.

Fast-forward to the last decade and you see a pattern: lab-grade invention, spun out into high-growth companies:

• Descartes Labs, founded in 2014 by researchers from Los Alamos National Laboratory, built a “data refinery” turning petabyte-scale satellite imagery into usable analytics. TechCrunch described it as “focused on taking satellite imagery, turning it into something coherent and analyzing it for useful data” after it spun out and raised early capital.
  
• UbiQD, based in Los Alamos, is a quantum-dot materials company powering greenhouse film and solar applications. Its UbiGro films “use red-shifting quantum dots to optimize sunlight” for crops. A USDA-funded UC Davis study recently showed UbiQD’s quantum-dot glass boosted lettuce yields by nearly 40%.  Not a Pinterest mood board, actual peer-reviewed AgTech.
  
• RS21 in Albuquerque is a data-science company using AI, data engineering, and UX to help organizations make better decisions in health, infrastructure, and security (an Inc. 500 “fastest-growing” company).
  
• Build With Robots (now Breezy Med) builds disinfecting and automation robots from Albuquerque, selling turn-key systems that “eliminate over 99.9% of pathogens” in public spaces.
  
• Meow Wolf in Santa Fe took immersive art and story-driven environments, wrapped them in venture and community capital, and built a creative-industries growth engine that has raised at least $169M.

When people are unfamiliar with New Mexico and innovation, they’re just confessing they don’t read beyond Bay Area headlines.

What’s more interesting is that many of these companies look like exactly the kind of “startup studio” infrastructure I’ve argued cities should invest in instead of vanity coworking. Instead of investing in startup ecosystems (places that actually blend infrastructure and innovation) most cities are building overpriced coworking spaces and pretending that counts as ‘innovation.’  New Mexico, by accident, has more of the former than the latter. The question is whether capital and policy have caught up.

The Macro Picture: Oil, Government, Labs… and now Quantum

Macroeconomically, New Mexico is small but leveraged.

Real GDP in 2024 was about $112.8B, growing roughly 2.2% after inflation, with real GDP per capita just under $53K (among the lower tier of U.S. states). Government is the single largest contributor to GDP at about $25.3B.

On the private side, oil and gas quietly bankroll the whole game. New Mexico doubled its oil production from 900K barrels/day in 2019 to 2M by 2024, becoming the second-largest oil producer after Texas and generating $11.3B for state and local governments.  Natural gas output also hit record highs, accounting for 8% of U.S. production.

That money is paying for early childhood education and tuition-free college, but it’s also what lets the state create a sovereign wealth-fund-backed venture strategy.

Add the national labs (Los Alamos, Sandia, and the growing nuclear-modernization program) and you have a state whose budget is heavily tied to federal spending and extractive industries. Los Alamos alone is central to a $1.7T modernization push and has added about 2,700 employees in recent years.

This is precisely why the quantum push matters: it’s not a PR flourish, it’s diversification away from a two-legged stool of nukes and oil.

The New Mexico Economic Development Department’s Technology and Innovation Office (TIO) now explicitly supports startups in advanced computing, advanced energy, aerospace, and bioscience, “driving commercialization of innovation” and sector-specific assistance. That office is backing:

• State SBIR/STTR matching grants of up to $100K for local tech companies in sectors like space and climate tech.
• New $5M tech grant rounds for science and technology startups.

New Mexico Startup Development Organizations and the Impactful Infrastructure

This is where things get interesting for founders and investors, because New Mexico quietly has a dense web of Startup Development Organizations (SDOs). It’s not literally every single one but this is the spine.

If you want a map, UNM’s “New Mexico Startup Ecosystem Toolbox” is a decent starting point; it catalogs incubators, accelerators, funds, and support programs statewide. Pull that next to the Founder Institute “Startup Ecosystem Canvas” framework and you can see where New Mexico is strong and where it’s thin.

Some of the core SDOs:

Albuquerque / Central New Mexico

• UNM Rainforest Innovations & InnovateABQ: the tech-transfer and innovation district around UNM; they run SBIR support, licensing, and startup programming tied into the statewide SBIR matching grants.
• CNM Ingenuity & ABQid: Central New Mexico Community College’s engine for applied entrepreneurship. ABQid, once a standalone accelerator, is now under CNM Ingenuity and focuses on early-stage founders with intensive accelerators and investor networks.
• WESST: a statewide small-business and startup support organization with a major hub in Albuquerque, offering training, incubator space, and microloans, notably for women and minority entrepreneurs.
• FatPipe ABQ, The BioScience Center, and similar hubs provide sector-focused coworking and incubation; the Toolbox and local ecosystem maps list them among key innovation centers.
• NewSpace New Mexico: a 501(c)(3) running the Unite & Ignite Space co-innovation hub, providing workspaces, rapid prototyping, and stakeholder coordination across the space industry.

Santa Fe

• Santa Fe Business Incubator (SFBI) is one of the more mature incubators in the state, which has “helped launch and grow over 100 businesses” and continues to diversify the local economy.
• Creative Startups: the “world’s leading accelerator for creative companies,” headquartered in New Mexico but running programs globally, and for over a decade providing creative-industry founders with capital-raising and business-building support.
• Santa Fe’s own business resource map highlights a dense network of mentorship, financing, and incubator programs feeding into these anchors.

Las Cruces / Southern New Mexico

• Arrowhead Center (NMSU): the university’s entrepreneurship engine, “working with students, startups, and communities to create meaningful economic opportunities” statewide.
• Arrowhead SPACE Incubator: supporting startups at the intersection of space, agriculture, and energy.
• Arrowhead RenewTech Accelerator: a clean-energy and water-tech incubator launched with federal EPIC funding, explicitly designed to “support an innovation-centric ecosystem” in New Mexico.

Statewide / Sector-specific

• NewSpace New Mexico (already mentioned) for space.
• NMexus: a new global accelerator in Albuquerque, announced by the Governor at SelectUSA, designed to attract foreign startups. The program aims to support up to 40 companies annually, create 1,500 jobs, and generate roughly $400M in economic impact over five years, and already hosts companies from India and Oman.

On top of that, you’ve got:

• Tribal and Native-focused entrepreneurship programs often run in partnership with Creative Startups and regional partners.
• A variety of local incubators and accelerators cataloged in the Toolbox, from bioscience to rural innovation.

This is not a state lacking in “places to go” as a founder. The opportunity, as usual, is coordination, capital, and narrative; exactly the issues I wrote about in Why Startups and Cities Fail Without a Clear Narrative, “Most cities trying to be ‘the next Austin’ or ‘Silicon Valley’ don’t have a capital problem, they have a belief problem.”

New Mexico’s story is better than its reputation. That’s actually a solvable problem which is why we’re going to turn from my usual economic development assessment of a city to instead explore capacity building here.

New Mexico’s Capital Stack: angels, funds, and sovereign wealth

Now, the money (which is where most regional ecosystem conversations devolve into fantasy).

At the early stage, New Mexico Angels remains the flagship organized angel group; together with vehicles like New Mexico Start-Up Factory and local syndicates, it provides the first checks into lab spin-outs and local founders.

On the institutional side, you have:

• Sun Mountain Capital: a Santa Fe-based firm managing regional private equity and venture funds, often in partnership with the New Mexico State Investment Council (SIC).
• Tramway Venture Partners: an Albuquerque life-science and health-tech VC fund focused on early-stage companies, frequently tied to UNM and lab innovations.
• Cottonwood Technology Fund: historically investing in high-tech startups in the Southwest and Europe, often pulling from lab-related IP in New Mexico.
• Roadrunner Venture Studios: now explicitly part of the quantum strategy, funded to connect scientists with entrepreneurs and turn quantum R&D into companies.

The real accelerant, though, is the state’s sovereign wealth approach.

New Mexico’s new $315M quantum initiative will allocate $185M from the state’s sovereign wealth fund for venture capital firms investing in local quantum businesses, with $60M each from DARPA and the state for Quantum Frontier Project development and commercialization, plus another $25M for Roadrunner’s venture-studio work.

That is not a grant program; that is the state pre-committing to fund the funds that back the companies. It’s the opposite of the “we built a shiny incubator, where are the startups?” model that even Los Alamos Makers has rightly criticized in quoting Allan Wille warning that incubators often focus on real estate and lack focus or experience – the human capital that actually builds companies.

New Mexico’s quantum play is closer to what we have well established as better: invest in studios, infrastructure, and methodology, not furniture.

Why Quantum, and Why Now?

Let’s look at the two key quantum announcements together: the state’s $315M commitment and the DARPA partnership.

Reuters summarized the state’s move succinctly: New Mexico will invest $315M to position itself as a leader in quantum computing, focusing on fabrication facilities, a quantum network based in Albuquerque, and VC support for quantum companies. Governor Michelle Lujan Grisham explicitly tied it to the state’s structural advantages, “a skilled scientific workforce, low-cost land and energy, and the presence of two U.S. National Labs and an Air Force Research Lab.”

On the federal side, DARPA’s Quantum Benchmarking Initiative (QBI) is about figuring out whether quantum computers can reach “utility-scale operation” (where the computational value exceeds cost) by 2033.  As part of QBI, DARPA and the state are creating the Quantum Frontier Project, with matching contributions up to $60M each over four years.

DARPA’s Joe Altepeter explained, “World-class national laboratories in New Mexico, such as Sandia and Los Alamos, are already a part of QBI’s independent verification and validation team.”

And Governor Grisham didn’t mince words about stakes:

“Quantum computing may prove to be the most consequential technology of this century — for national security, for breakthrough innovations, and perhaps most importantly, for avoiding strategic surprise.”

This is exactly the kind of future-oriented bet regions should make instead of chasing generic “tech hub” labels. We’re not entering some magical DIY epoch; the reality is that capital still concentrates where the math makes sense: scalable innovation, defensible advantages, and talent density.

New Mexico checks those boxes for quantum:

• National-lab IP and verification capabilities (Sandia, LANL)
• AFRL and defense demand sitting in Albuquerque
• Cheap land and energy relative to coastal peers
• University coordination through efforts like the Quantum New Mexico Institute at UNM and state-level Quantum Moonshot efforts

If Texas has been the poster child for shifting attention from California with its semiconductor incentives, energy grid (such as it is), and startup enthusiasm, New Mexico’s quantum move is the next iteration: go narrower, deeper, and more aligned with your existing R&D base (ironically, something I’ve pushed Texas to do for these very reasons)

Innovation migrates from the coasts to the center, and into communities that rewrite the rules; New Mexico is leaning into being the test range for the next computing paradigm.

So how good is the New Mexico startup ecosystem really?

If you zoom in on Albuquerque, external observers are catching on. A 2025 analysis by EWOR notes that while there’s a growing startup ecosystem, founders still wrestle with regulation and access to funding, but the local focus is often on “building the ecosystem rather than highlighting intense competitive barriers.” StartupBlink’s index has Albuquerque ranked around #215 globally, with just under 100 identifiable startups and ~$86.8M in funding. 

This access to funding challenge is something repeated by every EDO (economic development office) in the world and you’re all going at it the wrong way so let’s fix that.

Meanwhile, Intel is pouring billions into Rio Rancho, NewSpace New Mexico is scaling space innovation, and companies like UbiQD, Meow Wolf, RS21, and Build With Robots are concrete proof that deep-tech and creative-tech firms can scale from the state.

What New Mexico is missing is the kind of integrated capacity…

Ten considerations for capacity (where New Mexico is strong, and where it’s not)

1. Overcoming silos: shared infrastructure and community

On paper, New Mexico is unusually rich in shared infrastructure: InnovateABQ, Arrowhead Center, NewSpace New Mexico, SFBI, the state’s SBIR programs, and a Technology and Innovation Office that explicitly serves startups.

The problem is that labs, universities, defense, and private startups often still operate as parallel universes. Lab employees live in one world, Santa Fe creatives in another, Las Cruces ag-tech founders in a third.

New Mexico does better than most on physical infrastructure. It’s still weak on relational infrastructure (the connective tissue of mentors, repeat founders, and capital that easily crosses sectors) the thing I push in “Marketing and Storytelling Manifest a Startup City”

Good: lots of hubs, lot of R&D infrastructure.
Needs work: cross-pollination and a shared, loud, believable story.

2. The missing middle: the gap between early startup and established company

New Mexico does okay on idea-stage: SBIR assistance, pre-accelerators like Creative Startups LABS, Arrowhead Sprints, CNM/ABQid cohorts.

Where it suffers is exactly where most ecosystems suffer: the $1–10M scale-up zone. That’s the space between “we have a cool prototype” and “we can raise a serious Series B from coastal funds without moving.”

Sun Mountain, Cottonwood, Tramway, and a handful of national funds help bridge that but the number of post-revenue, scaling New Mexico startups is still modest.

Good: clear seed and grant programs, early-stage SDO support.
Needs work: more aggressive growth capital, revenue-driven scale programs, and corporate customers willing to take the first risk.

3. Securing long-term funding and incentives for ecosystem actors

Here, New Mexico is quietly excellent. LEDA expansion, Intel’s use of it, and the sovereign-wealth-fund-backed quantum initiative are long-horizon plays. Intel’s own report notes over $17.6B invested in New Mexico operations since 1980 and ~$1.2B annual economic impact.

The Technology and Innovation Office is not a one-off grant program; it’s a standing unit in the Economic Development Department with a clear mandate.

Good: structural funding mechanisms, not just ARPA-era sugar highs.
Needs work: ensuring SDOs aren’t fighting for the same grant scraps and locking in multi-year commitments for incubators and studios that actually work.

4. Measuring outcomes, not activity (and telling the story)

Here New Mexico behaves like most places and I’m not surprised, the digital age has left marketers behind, and storytelling is slowly emerging again as though it’s something we invented in 2020. With a bias toward listing programs and ribbon cuttings instead of tracking: survival rates, scale-up numbers, export revenues, and follow-on capital, organizations take the shortcut out by making announcements that things are going well.

The Santa Fe Business Incubator does a relatively good job reporting that it has helped launch over 100 companies that continue to diversify the economy. NewSpace New Mexico, Arrowhead, and TIO have some outcome-oriented language (jobs, capital raised, energy impact).

But the statewide narrative still sounds like a brochure, not a dashboard. That’s exactly what I mean when I say “Narrative isn’t fluff. It’s infrastructure.”

Good: pockets of metrics and case studies.
Needs work: a unified, public, relentless scoreboard of startup outcomes and exits.

5. Culture and behavior: collaboration as default, not forced

You do see genuine collaboration: DARPA and the state jointly funding QBI’s Quantum Frontier Project; Intel and state/local governments aligning around a hub strategy; NewSpace New Mexico co-creating with AFRL; UNM and the state co-funding SBIR matches.

But labs still dominate. The New Yorker’s coverage of Los Alamos’ nuclear boom points out the real challenge: the region’s dependence on lab jobs can crowd out other forms of risk-taking and economic diversification.

Good: strong lab–state collaboration and a long history of multi-institution work.
Needs work: more founder-centric norms, more repeat-founder leadership, and less default to “get a lab job and call it a day.”

6. Including the full spectrum of talent and not just the usual suspects

On inclusion, New Mexico has some real advantages and some glaring gaps.

Creative Startups has run programs globally and works with creative entrepreneurs often excluded from traditional tech circles. WESST and various Native-focused programs explicitly support underrepresented founders.

Yet the gravitational center of the ecosystem still sits around PhDs at lab towns and engineers at Intel. That’s great for quantum and semiconductors; it’s less great if you want service, consumer, or community-scale entrepreneurship to thrive.

Good: some of the best creative and Native-focused accelerators anywhere.
Needs work: making sure the quantum and deep-tech boom doesn’t become another closed guild.

7. Architecting environments where people perform at their highest potential

New Mexico actually has an advantage most “innovation districts” don’t: the lifestyle is legitimately attractive – outdoors, culture, affordability relative to coasts, and a creative identity that’s not just a marketing slogan.

What’s missing is that innovation is not a real estate play, and an innovation district is likely disappointing entrepreneurs.

Albuquerque and Santa Fe have not gone nearly as far down the “glass box with free Wi-Fi” rabbit hole as some other cities, which is good. But there’s room to be much more intentional about environments that blend lab-grade work, creative energy, and founder-centric services.

Good: authentic quality of life, meaningful physical assets (labs, spaceport, Intel).
Needs work: fewer generic “hubs,” more integrated, studio-style environments tied to outcomes.

8. Aligning government, academia, and private sector around outcomes

The quantum initiative is a textbook case of alignment done right: state government, DARPA, labs, and venture studios all focused on a 2033 target for utility-scale quantum computing.

New Mexico’s creation of the Technology and Innovation Office inside EDD is another signal; it’s not a side project, it’s in the economic engine.

Compare that to states where economic development, universities, and VCs barely speak, and you can see why DARPA chose to partner here after similar QBI agreements with Illinois and Maryland.

Good: above-average alignment on targeted sectors like quantum, space, semiconductors.
Needs work: pushing that same alignment into broader startup sectors (not just the sexy frontier tech).

9. Ecosystems accelerating innovation and reducing risk by unlocking local competitiveness

This is where New Mexico can genuinely lead.

The combination of:

• National labs validating claims (critical for quantum, climate, and security tech).
• A space innovation hub co-located with Air Force research.
• An ag-tech cluster emerging around quantum-dot greenhouse tech like UbiGro.
• Intel’s advanced packaging and manufacturing presence in Rio Rancho.

…means New Mexico can become the place where high-risk technologies get de-risked faster and cheaper than in coastal cities obsessed with valuations.

Good: extraordinary ability to prototype, test, and validate frontier tech.
Needs work: making sure that when the risk is reduced, the company stays in New Mexico instead of relocating to California at Series B.

10. Adapting global best practices to local realities (not copy-pasting Silicon Valley)

In “To Grow Your Local Startup Community, First Map It Out,” Founder Institute argues that most ecosystems misdiagnose their problem as “a lack of capital” instead of fragmentation; the remedy is to map your ecosystem and intentionally fill the gaps.

New Mexico is doing that; with the Toolbox, with targeted sector plays, with TIO’s sector focus, and with international programs like NMexus bringing in Indian and Omani companies to use New Mexico as a North American landing pad.

This is not Austin, not Boulder, not the Bay. It’s a nuclear-and-oil state with world-class labs, a creative capital city, a spaceport, and a sovereign wealth fund willing to gamble on quantum.

Good: genuine adaptation – quantum, space, creative-tech, and manufacturing, not “let’s build our own SOMA.”
Needs work: more explicit articulation of New Mexico’s model – the “why here, why now” story for founders and funds globally.

What Might New Mexico Do Now?

If you step back, New Mexico is ahead of most U.S. states on the things that actually matter for frontier innovation:

• Deep, long-standing R&D capacity (LANL, Sandia, AFRL, White Sands).
• Real industrial anchors (Intel, Meow Wolf, space companies, deep-tech spin-outs).
• A state government willing to put sovereign-wealth money into venture scale quantum bets and tech grants.
• A growing web of SDOs: Arrowhead, Rainforest, CNM/ABQid, SFBI, Creative Startups, WESST, NewSpace, NMexus.

Where it’s behind is exactly where most ecosystems are behind, but with higher stakes:

• Scaling companies from $1–10M to $100M+ without losing them to the coasts.
  Building a capital class that actually understands venture, instead of treating everything like a grant or a real-estate play – the issue I call out directly in “Startup Ecosystems Fail Because of Investors.”
• Owning the narrative, instead of letting the national press reduce the state to “labs, nukes, and UFOs.”

Given this specific history, talent, and capital structure, which of these ten levers are you willing to pull this quarter in a way that founders will feel six months from now?

Is it rewriting how your angels do deals? Is it building a quantum-native startup studio aligned with QBI and Roadrunner? Is it a serious, public outcome dashboard? Might it be alignment of a narrative more accessible to entrepreneurs?  Is it step easier than most places think such as finally stitching labs, creatives, and space into one ecosystem instead of three silos?

Because New Mexico has already done the hardest part: the risk. It built the infrastructure. It bet on the future with quantum.

The next phase is less glamorous and more uncomfortable: changing local behavior, capital norms, and expectations so that this doesn’t become yet another story of a place that invented the future… and exported all the value.

Wrestling with that tension – between invention and entrepreneurship, between labs and founders – is what many of us love to do so it’s the conversation worth continuing because we now know how to ensure a place like New Mexico isn’t just frontier tech, it’s frontier startups.

The post New Mexico Didn’t ‘Find’ Startups, It Built the Future: From Nukes and UFOs to Quantum Capital appeared first on Startup Economist.

Cities everywhere are doing a lot for entrepreneurs, often sincerely and impressively, and what I’m finding in city after city is that the greatest opportunity is not in another startup program or even fostering a new investor but building capacity. They are supporting some founders, but not more founders. They are helping some investors, but not bringing new capital into the market. They are delivering programs, but not producing system-wide throughput.

Talk to economic-development teams in New Mexico, Alberta, Queensland, Lisbon, or Tulsa and the pattern sounds uncannily familiar. They’ve launched accelerators, pitch competitions, public–private task forces, grant programs, and “innovation districts.” Yet their deal-flow density stays relatively flat, their mentor pools age out, and their best startups outgrow the region long before the region grows into what they need.

The problem is not that cities aren’t doing enough. The problem is that cities aren’t expanding their capacity to serve more of the entrepreneurs, mentors, and investors that a competitive economy now requires. As Brookings has pointed out in their analysis of innovation clusters, ecosystem performance is a function of network depth, institutional coordination, and resource density. Resource density is the giveaway. Most cities don’t lack activity; they lack density, coordination, and the infrastructure that makes tens of thousands of entrepreneurial decisions possible each year.

The OECD, likewise, concluded that capacity building must focus on enhancing entrepreneurial support systems, strengthening intermediary organizations, and improving human capital pipelines, particularly in regions seeking to diversify their economies.

And that’s the paradox. Cities are building things that look like startup ecosystems, while the underlying throughput resembles a two-lane frontage road at rush hour. Most communities still collapse at the knot of the bow tie; the point where early-stage aspiration is supposed to transition into real growth. Most cities simply don’t have the lanes, the exits, the signage, or the on-ramps necessary to move hundreds of founders through to market traction, capital formation, and scale.

Capacity building is the hard, unglamorous engineering work of widening the freeway.

Let’s talk about the ten dimensions of entrepreneurial capacity that economic-development leaders must confront.

1. Overcoming Silos: shared infrastructure, shared memory, shared momentum

Ecosystems stall because information moves slowly, repetitively, or not at all. Universities run their programs. Chambers run theirs. Accelerators build cohorts in a bubble. Government agencies maintain parallel databases. Everyone “supports entrepreneurship,” yet founders navigate a maze where every door leads to a different map.

Silos destroy throughput.

MIT’s Regional Entrepreneurship Acceleration Program found that ecosystems with strong collective governance and shared infrastructure outperform those where actors remain isolated. Shared infrastructure means, for example, a common CRM for founders (why not?), collective storytelling, unified mentorship standards, and consistent deal-flow pipelines.

What to do: create a single interface for entrepreneurs; treat every organization as a node in one network rather than one more isolated program. Better? Obligate that startup development organizations in your ecosystem are promoting one another, freely sharing all mentors and investors, and referring founders to the resources more ideal than perhaps their own (or shut them down because they’re contributing to the silos that limit entrepreneurs)

2. The Missing Middle: the widening gap between nascent startups and established companies

Economic development traditionally focuses on small business support and corporate attraction. But between those poles sits the high-growth, pre-scale firms that need mentorship, capital, and technical support long before they qualify for incentives or bank financing.

High-growth new firms are responsible for a disproportionate share of net new jobs. Yet these companies often die in the gap between ideation programs and investor readiness. That gap is exacerbated by what are likely other middle gaps also a challenge in your ecosystem such as capable marketers, mid-career jobs, and Series A funding, just to name a few of the commonly cited gap issues in cities throughout the world, “we have stuff on this side and for that side but nothing can cross the chasm.”

What to do: build mid-stage supports such as B2B customer access, fractional executives, applied R&D partnerships, and capital-readiness preparation.

3. Funding the Actors: not venture capital for startups, but stable, multi-year support for ecosystem builders

Every ecosystem quietly relies on a handful of people: connectors, mentors, operator-founders, nonprofit teams, program managers, analysts, community architects, marketers, and scouts. Most are underfunded. Many burn out. Some quit in exhaustion because no one supports them.

The National League of Cities concluded that sustainable entrepreneurial ecosystems depend on sustained investment in intermediary organizations and local leaders.

Cities pour millions into corporate recruitment incentives while asking ecosystem builders to charge $25 tickets to a startup event just to keep the lights on because the local law firm won’t sponsor any more than a few thousand dollars.

What to do: provide multi-year operational funding, not short-cycle grants; treat ecosystem builders as infrastructure, not event planners.

4. Measuring Outcomes, Not Activity

Events are not outcomes. Demo days, pitch competitions, and hackathon participation are signals of interest, not economic performance.

Capacity building requires metrics tied to throughput, such as:

• funding per capita
• new angel investors activated per year
• number of scalable startups reaching $1M+, $5M+, and $10M+ revenue
• local corporate procurement awarded to local startups
• exits and liquidity events

Ecosystems obsessed with activity create vanity metrics that move no capital, change no culture, and mislead policymakers. What matters is whether you can repeat success.

What to do: adopt metrics tied to growth, traction, and capital formation, then promote those stories relentlessly to create gravitational pull.

5. A Culture Where Collaboration Is Normal, Not Negotiated

Collaboration often dies in the same place innovation does: at the boundary between organizations competing for relevance, credit, or funding.

Stanford’s research on ecosystem performance shows that trust and informal collaboration networks are strong predictors of early-stage innovation output. Yet many cities treat collaboration as a memo instead of a habit.

What to do: build rituals that force cross-pollination such as shared mentor pools, cross-organization cohorts, integrated communications channels, and standing ecosystem roundtables. I’m revisiting consideration #1 a bit to reiterate that it’s on you to require this of startup development organizations (and don’t take their word for it that they are, ask the people you’re supporting in #3 because they’ll tell you about the bad actors)

6. Include the Invisible Talent Not Just the Visible Founders

Most ecosystems empower the people already on stage: serial founders, credentialed executives, alumni of recognizable companies. But the OECD warns that untapped entrepreneurial potential disproportionately exists among people outside established networks.

I see this all the time where over a decade, the same handful of people repeatedly win your annual awards, are featured in local press, and give the speeches and panel talks. You’re not recognizing the leaders, you’re ignoring the majority that matter.

What to do: broaden discovery. Never limit the stage to members or paying partners. Build outreach teams. Use founder-assessment tools rather than resume filters. Ensure “openness to outsiders” (the trait the best ecosystems have in common).

7. Architect Environments Where People Perform at Their Highest Potential

Entrepreneurship is not merely a function of talent; it is a function of conditions. Workspace design, mentorship availability, early customers, access to prototyping resources, and even psychological safety determine whether a founder moves fast or stalls.

Environmental context determines the likelihood that entrepreneurial intention becomes entrepreneurial action.

What to do: build spaces, norms, and tools that remove friction from every step, from IP support to B2B sales to freely available physical space to mental-health support for founders.

8. Align Government, Academia, and the Private Sector (the knot in the bow tie)

Government moves slowly, academia moves cautiously, and the private sector moves according to incentives. Alignment requires shared outcomes, shared data, and shared language.

This is precisely where most ecosystems break, as I explored in a bow tie analogy. Cities invest in “on-ramps” (programs, workshops, accelerators) but fail to tighten the knot where founders transition into revenue, customers, and capital. Universities produce research without commercialization pathways. Governments offer incentives but not deal flow. Investors wait until traction exists, long after the region has lost half its would-be founders.

What to do: implement a single strategic operating framework such as what we have in Founder Institute for cities, define shared KPIs across all partners, and appoint ecosystem stewards with authority to coordinate across institutions.

9. Accelerate Innovation by Unlocking Local Competitiveness

Regions rarely understand their own comparative advantage. They chase whatever trend is hot so as to appear innovative (crypto conferences, AI hubs, Web3 zones, biotech corridors) rather than building around the strengths their talent, industries, and institutions already offer.

Pace-based innovation succeeds when it aligns with regional industrial capabilities and existing knowledge domains.

If you’re saying, “tech sector,” you’re doing it wrong because tech isn’t a distinction.

What to do: map local industry clusters, commit to two or three defensible strengths, and build founder services tailored to them. Focused ecosystems outperform generic ones.

10. Adapt Global Best Practices (don’t copy them!)

Cities love to import templates: “Let’s be the next Austin.” “Let’s go with that partner because they’re dominant in Silicon Valley.” “We need an accelerator like Boulder.”

But ecosystems are not software; they are organisms. Best practices must be adapted to local cultures, industries, risk profiles, and political realities.

Founder Institute, MIT REAP, Startup Genome, and countless global partners consistently emphasize this: the regions that rise are not the ones that copy, but the ones that translate.

What to do: study global models, borrow only the principles, and rebuild the implementation from the ground up for your city’s realities.

The Freeway Analogy to Share with Your Economic Development Team

Most ecosystems have the same problem as most metro freeways.
Insufficient on-ramps.
A couple of exits but rarely in the ideal places.
Lack of transit alternatives while everyone is clearly angry at the congestion.
And signs that confuse newcomers while locals pretend it all makes sense.

Capacity building is freeway engineering: widening lanes, adding ramps, improving exits, synchronizing signals, and making sure the entire network handles volume, not just special-occasion traffic.

Until a city treats its startup ecosystem as infrastructure, not programming, it will always end up with congestion, frustration, and a whole lot of talent taking the first exit out of town.

If your region is running out of lanes, consider this an opportunity to rethink the infrastructure before the next wave of entrepreneurs decides to merge somewhere else.

The post Why Startup Ecosystems Fail at Scale: The Economic Development Playbook for Capacity Building appeared first on Startup Economist.

Every few years, someone declares a new epoch in entrepreneurship. We’ve had the “Era of Lean,” the “Rise of the Micro-VC,” the “Democratization of Innovation,” and (God help us) the phase where every city believed a coworking space with a yellow logo and a couple late career bankers counted as a “startup ecosystem.”

With AI and criticism of VC throughout the past few years, I cringe at hearing that now is the era of bootstrap not because most founders weren’t bootstrapping but because saying it now is a use a data misrepresenting reality.

The Era of the Bootstrapped Startup

Welcome to it everyone! Now, your bootstrapping is admirable (as though it wasn’t before). Now, people can really do it themselves (as though they weren’t able before). Don’t look behind the curtain at the fact that the overwhelming majority of all startups have always had to bootstrap, because now it’s an era!

No, it isn’t the era of the bootstrapped startup. And pretending otherwise is how regions misallocate money, how founders misunderstand capital markets, and how bad advice metastasizes into bad policy.

What we’re really experiencing is far less poetic. It’s arithmetic.
And a long-overdue correction to 14 years of terrible incentives.

If you want the TL;DR in one line:
It’s not the era of bootstrapping, it’s the era of more startups and finally better advice.

Let’s walk through the actual cycles because if we don’t ground this in data, history will repeat itself like a The Matrix.

How We Got Here: Two Cycles and a Lot of Disillusioned Founders

Around 2010–2012, cities across the U.S. (and abroad) were in full “Let’s Become Silicon Valley Too” mode. The Kauffman Foundation reported record entrepreneurship rates while the Brookings Institution published reams of research urging regional innovation policy such as, “Rise of Innovation Districts.”

Those weren’t inherently bad.
The problem was how local actors interpreted them.

We entered two seven-year cycles that shaped founder psychology in ways we still haven’t fully unwound. By the way, in startups, it’s helpful to think in terms of 7-year cycles (when they start and end isn’t as important as philosophically appreciating that it takes startups 7-10 years for startups to exit, build enduring companies, or establish new innovation; hence, 15 years = roughly 2 cycles of lessons).

Cycle 1: The Accelerator Gold Rush (2010–2017)

Everyone built an accelerator. Some good. Many dreadful. Most modeled themselves after Techstars or Y Combinator but replaced actual investor networks with “mentors” who were, at best, middle-manager consultants. At worst, people who genuinely believed owning a coworking space made them a venture capitalist.

Founders were told:

• Quit your job
• Pay a membership fee
• Give up 1 percent
• And we’ll “connect you to investors”

It was the Oprah meme brought to life:
“You get funding, and you get funding…”
Except the trunk was empty.

Regions mistook startup participation for startup capacity; exactly why I dug into how ecosystem builders create meaningful startup communities.

Cycle 2: “VC is Broken” (2017–2024)

When accelerators didn’t deliver introductions to VCs (because they couldn’t) founders naturally got pissed.
Meanwhile, new funds were popping up labeling themselves “pre-seed VCs,” which is the linguistic equivalent of “jumbo shrimp.” Pre-seed wasn’t a stage; it was marketing to inexperienced founders.

By 2020, the trope had hardened:
“VC is broken.”

But NVCA data never supported that narrative. Early-stage venture remained a power-law game, with a small number of startups receiving most of the capital.

VC wasn’t broken. How do we know? We asked… VC wasn’t willing to take the risks on your ecosystem because what had preceded had peed in the pool
The expectation that it was available to everyone was broken.

The Startup Math That People Keep Misreading

If you want to understand why everyone thinks we’re in a “bootstrap era,” ignore Twitter analysts and dumb down the math to a simple scenario:

2005:

• 100 founders
• 10 got angel
• 1 got venture
• 89 bootstrapped or died

2015:

Because accelerators pumped more people into trying entrepreneurship:

• 200 founders (not 100 more; what we mean is that 10 years later, twice as many were trying)
• 20 got angel
• 2 got venture
• 178 bootstrapped or died

2025:

More people than ever are attempting a startup (reports now show the highest new-business formation rates in 40 years).

• 300 founders (highest rate per capita yet)
• 30 get angel
• 3 get venture
• 267 bootstrapped or died

Bootstrapping didn’t rise as a strategy.
It was exposed through a denominator problem.

You have more voices. More frustrated founders. More failed accelerator alumni. More people discovering that “pre-seed VC” doesn’t exist outside coastal metros and that capital markets don’t abide by motivational-speaker fantasies.

Of course it feels like a bootstrapping era.
That’s because there are more people not getting funded, not because bootstrapping suddenly became vogue.

So, Are Founders Suddenly Bootstrapping? No.

Bad actors got weeded out.

The accelerators that charged rent instead of adding value? Dying.

The “mentors” who gave advice based on a single exit in 1998? Retired again.

The local angels who thought convertible notes were witchcraft? Fading.

And thanks to more credible research, venture-backing now meets reality:

• Most people don’t get funded.
• Most shouldn’t pursue venture.
• Most should bootstrap.

Not because we’re in a new era.
Because we’re finally telling the truth.

Entrepreneurship is not supposed to begin with fundraising; it’s supposed to begin with value creation, and everyone bootstraps their way there. Instead of chasing VC or complaining it’s broken, all because some local advisor told you they’d introduce investors, founders are doing what they’ve been doing since Oog sold a rock to Ugg, doing it themselves.

Myths Are Dangerous for Cities and Ecosystem Builders

If economic-development leaders believe we’re in an “Era of Bootstrapping,” they’ll misinterpret what’s actually happening.

We don’t have:

• more bootstrappers by preference
  We have:
• more founders discovering that they were misled

And if cities think this is the “bootstrap era,” they’ll create yet another cycle of misguided programming (celebrating romantic founder martyrdom instead of building the actual infrastructure required for capital readiness).

Bootstrapping is not the new frontier.
It’s the baseline. It always was.

VC is not broken.
Expectations were.

And accelerators didn’t democratize entrepreneurship.
They democratized attempts at entrepreneurship.

The Era We’re In: The Age of Competent Advice

After 14 years of noise, hype, inflated expectations, bad mentors, and worse incentives, the market is finally catching up to what Silicon Valley has known since the 1970s:

• Venture financing is for a tiny percentage of companies
• Angels fill the narrow gap just before revenue
• Everyone else builds their business the normal way:
  by making money having built from scratch

Bootstrapping isn’t new. What’s new is clarity. Entrepreneurship, successful entrepreneurship, depends on being clear about these distinctions so that founders who can’t or shouldn’t raise capital, get the advice and direction they need while investors are meaningfully aligned with fundable opportunities and outcomes.

If founders today finally know they won’t get funded…
If accelerators can’t sell false hope anymore…
If cities are waking up to the importance of real entrepreneurial capacity…

What would our ecosystems look like if the last 15 years hadn’t taught people the wrong lesson about how startups get built?

We know the answers and we know how, it starts with being honest about your ecosystem so that you can work with people, programs, and policies best suited to what needs to be done there.

The post There Is No “Era of the Bootstrapped Startup,” There’s Math, Memory Loss, and Better Advice appeared first on Startup Economist.

A nation whose cultural DNA has been entrepreneurial for over seven hundred years, Thailand startups didn’t just suddenly wake up and decide to build a startup ecosystem because it saw Singapore building skyscrapers to the heavens; traders, artisans, inventors, and diplomats, long before “ecosystem” was a word policymakers could spell, have held Thailand as a nexus for ages. From the Ayutthaya Kingdom’s international port in the 14th century to today’s Bangkok fintech scene, Thailand has thrived at the intersection of creativity and commerce. It is a country whose temples might look ancient, but whose people have always been busy inventing the next big thing, centuries before venture capital made it fashionable.

For someone like me, obsessed with how culture and capital collide to create innovation, Thailand is irresistible. While I tell everyone it’s near the top of my places I’d like to visit, it’s as much for research and to experience the economy and culture, as it is the tourism. It’s a living laboratory of what happens when ancient social systems meet modern entrepreneurial experimentation. This isn’t a place trying to “be the next Silicon Valley,” it’s a place that never stopped being entrepreneurial. The vibrancy of Bangkok alone feels like an economy in constant motion: the street vendors are running micro-logistics operations, the artists are building micro-brands, and the universities are spinning out global talent. What’s magnetic about exploring Thailand isn’t just the potential for venture collaboration or policy reform, it’s seeing, firsthand, a country on the cusp of re-architecting its economy from the ground up. For someone working at the intersection of venture capital, public policy, and startup development, Thailand isn’t just an emerging market, it’s the case study in how cultural infrastructure is economic infrastructure: a truth I’ve been hammering at for years.

The Culture of Thai Innovation

Thailand’s innovation stems not from industrial imitation, but from cultural curiosity. Historically, the country’s geography, wedged between China, India, and the sea routes to Europe, turned it into a hub for trade and technology. As early as the Sukhothai period, Thai artisans engineered intricate water systems for rice farming that would make modern hydrologists blush. By the 19th century, under King Mongkut, Thailand became the first Southeast Asian nation to adopt Western scientific education, telegraph systems, and astronomical observatories. This wasn’t mimicry; it was adaptation – entrepreneurship in its purest form: spotting opportunity and seizing it fast.

This spirit remains deeply embedded in the Thai psyche. Whether it’s street vendors who dynamically price mango sticky rice better than Silicon Valley AI, or designers turning upcycled tuk-tuk parts into home décor brands, Thais have been quietly demonstrating the principles of agile iteration for centuries.

Thailand’s record of innovation is often overlooked. Consider, Thailand has long experimented with rice-husk biomass as a renewable fuel; a published 2004 study assessed a 10 MW pilot plant using rice husk feedstock and found most environmental impact potentials were lower than for fossil-fuel plants. Or the creation of Red Bull, the world’s most famous energy drink, co-developed by Thai businessman Chaleo Yoovidhya, whose formula became the backbone of a multi-billion-dollar global brand; now among the most meaningful examples of why “startup” doesn’t mean code and semiconductor but does mean innovation. Bangkok’s Siriraj Hospital performed early dialysis treatments and expanded nephrology rapidly, with the invention of the artificial kidney (dialysis machine).

Thailand’s knack for practical invention (products that solve real problems) explains why the nation is now climbing global innovation indices. In 2024, the Global Innovation Index ranked Thailand 43rd worldwide, ahead of many economies with far larger R&D budgets, driven by strong gains in knowledge diffusion and human capital investment.

The Modern Economy and Macroeconomic Momentum

Thailand’s macroeconomic architecture is uniquely favorable to startups. With a GDP nearing $550 billion USD, it is Southeast Asia’s second-largest economy after Indonesia. The nation boasts a 3.2% growth forecast for 2025, anchored by manufacturing, tourism, and digital services.

The government’s Thailand 4.0 strategy (a 20-year national innovation plan) is the economic scaffolding beneath this transformation. Its goal: shift the country from a “production-based” to a “knowledge-based” economy, emphasizing smart electronics, biotech, fintech, AI, and automation. As part of this, the Board of Investment (BOI) now offers corporate tax exemptions up to 13 years for startups in targeted sectors, and Digital Economy Promotion Agency (depa) grants support ranging from cloud credits to market access for AI and blockchain firms.

The impact has been transformative: the startup ecosystem valuation reached $4.9 billion USD in 2024, with Bangkok, Chiang Mai, and Phuket emerging as key innovation zones.

Thailand’s Startup Development Organizations

If startup ecosystems are the modern temples of innovation, Thailand’s are multiplying fast. Here’s the map:

• depa (Digital Economy Promotion Agency) – The engine behind Thailand’s digital transformation. Its “Smart City” initiatives in Phuket, Khon Kaen, and Chiang Mai are essentially live labs for mobility, health tech, and AI ventures.
• NSTDA (National Science and Technology Development Agency) – The apex public R&D institution, partnering with private accelerators to commercialize research.
• NIA (National Innovation Agency) – The “innovation ministry” of sorts, managing over 1,000 startup grants annually. Its “Startup Thailand” platform connects founders with investors and policymakers.
• True Digital Park – The country’s largest innovation campus, in Bangkok’s Sukhumvit district, hosting hundreds of startups and corporates, including Huawei, Google, and AWS.
• SCG Open Innovation Center – Backed by Siam Cement Group, supporting sustainability and industrial tech startups.
• AIS The StartUp – A corporate accelerator from Thailand’s largest telecom provider, focused on IoT and mobile solutions.
• RISE Accelerator – A private accelerator known for corporate innovation programs and founder training.
• TechSauce – Both a media company and a convener, it hosts one of Asia’s top annual startup summits.
• Bangkok Venture Club and Angel Investor Network Thailand – The most active early-stage angel groups, bridging domestic investors with Southeast Asian syndicates.

And notably, launching in November, the development of entrepreneurs and idea stage startups through a collaboration with Founder Institute.  A unique opportunity for Bangkok-based founders to join a global accelerator program, tailored for early-stage and MVP-level startups, the program combines core startup fundamentals with expert coaching to prepare Thai founders for success in the U.S. market

Thailand’s Venture Funding Landscape

Thailand’s capital markets are evolving fast. The Stock Exchange of Thailand (SET) now operates LiVE Exchange, a specialized board for SMEs and startups that allows fundraising without full IPO compliance (effectively a sandbox for private equity transparency).

Major VC funds include:

• 500 TukTuks (now 500 Southeast Asia) – The Thai arm of 500 Global, investing in over 100 Thai startups since 2015.
• Beacon Venture Capital – Backed by Kasikornbank, one of Thailand’s most active fintech investors.
• Krungsri Finnovate – The innovation arm of Bank of Ayudhya, funding fintech and regtech ventures.
• InVent – From Intouch Holdings, focusing on enterprise SaaS and AI.
• SeaX Ventures – With a global portfolio, invests in deep tech and healthcare startups linked to Thai founders.
• SCB 10X – Siam Commercial Bank’s corporate VC, managing over $800M across global funds.

Add to this an emerging angel network driven by successful Thai founders from Flash Express (logistics unicorn), Bitkub (crypto exchange), and Ascend Money (fintech unicorn under CP Group).

Evaluating Thailand in Startup Economic Development

Drawing from The 6 Considerations of Startup Economic Development, Thailand’s progress can be evaluated:

1. A Culture of Competition, Potential, and Creativity
   Thailand thrives here. Its entrepreneurial spirit is embedded in everyday life; from family-run street stalls to the rapid scaling of startups like Flash Express and Bitkub. Creativity is part of its national identity, expressed in design, cuisine, and digital art. The challenge is competition: Thai founders often avoid confrontation or bold dissent in professional hierarchies, a cultural trait that can temper the assertiveness needed to disrupt. Still, this is a nation that has turned improvisation into an art form (creativity is Thailand’s native advantage).
2. Reasonable Wealth Available
   Capital exists, but it’s centralized. Bangkok holds the lion’s share of investment and liquidity, though secondary cities like Chiang Mai and Phuket are gaining traction. Corporate VCs (SCB 10X, Krungsri Finnovate, and Beacon Venture) are the most active, while the government’s BOI incentives and the LiVE Exchange platform broaden access. What’s missing is a thick layer of angel investors and early-stage venture funds that take the first risks, particularly outside the capital.
3. Innovative Employers
   The country’s legacy conglomerates (CP Group, PTT, SCG) are not just old money; they’re turning into innovation engines in a way other countries should study. Each runs open innovation programs and venture arms, helping bridge academia and startups. Employers are increasingly tech-forward, but Thailand still needs more mid-sized firms operating at the frontier of digital transformation, where talent learns the operational skills that later fuel new startups.
4. Little to No Government Interference
   Thailand’s government plays an active, but not always light-handed, role. The Digital Economy Promotion Agency (depa) and National Innovation Agency (NIA) are progressive by Southeast Asian standards, offering grants, cloud credits, and startup-friendly tax breaks. Yet bureaucratic drag and corruption concerns persist, particularly around licensing and intellectual property. The trend, however, is improving: the state is shifting from controller to catalyst.
5. Access to Startup-Experienced People
   This is Thailand’s current inflection point. Until recently, most founders were first-timers, but the past five years have produced repeat entrepreneurs and operators who’ve exited or scaled regionally. Programs like True Digital Park’s “Startup Sandbox” and Founder Institute’s Thailand chapters are now formalizing that mentorship pipeline, turning experience into accessible capital for new founders.
6. Credible and Distinct Promotion of the Region
   Thailand markets itself as the “Land of Smiles,” but its new narrative is the “Land of Startups.” Initiatives like Startup Thailand and TechSauce Global Summit have put Bangkok on the map, while Chiang Mai’s creative community offers a counterbalance: digital nomads, sustainability ventures, and cultural tech. What’s needed now is global clarity: a unified, data-backed brand of Thai innovation that competes with Singapore’s efficiency and Vietnam’s velocity.

Recent Developments and Global Integration

In 2025, Thailand made global headlines when new digital asset regulations affected Bitkub’s operations, its crypto unicorn, signaling a pragmatic stance on blockchain policy. Meanwhile, Flash Express expanded across ASEAN, demonstrating that Thai startups can scale beyond local borders. The government also approved Thailand Digital Valley Phase II, an innovation district in Chonburi modeled after Singapore’s One-North, expected to host 200 tech companies by 2027.

Thailand’s partnership through Chulalongkorn University, in CU Innovation Hub, with Founder Institute, marks a decisive step in building structured startup infrastructure. It’s past time that we start asking if we could be doing things more effectively and meaningfully for founders. Entrepreneurs aren’t just taking risks, they’re creating culture.  The Founder Institute programs will deliver that missing infrastructure: structured founder development, mentor networks, and global investor connectivity. The goal is simple but powerful: help Thailand’s entrepreneurs not only start, but scale, sustainably.

Thailand’s startup story isn’t a Silicon Valley imitation; it’s a rediscovery of its own DNA. The same spirit that built temples without nails, invented the energy drink that fuels global capitalism, and turned local artisans into global brands, is now being harnessed in code and capital. The challenge now isn’t whether Thailand can innovate, it’s whether the world will pay attention to notice that it already has.

The coming decade will prove decisive. With institutional support, global integration through programs like the Founder Institute, and a new generation of investors unafraid of risk, Thailand could soon be known not just as the “Land of Smiles,” but as Southeast Asia’s land of startups.

The post Thailand: The Startup Ecosystem Rising from Centuries of Ingenuity appeared first on Startup Economist.

There’s a thought Jeff Buckley once shared, half-interview, half-confession: “Grace is what matters in anything. It keeps you from pulling the trigger too soon. It keeps you from destroying things too foolishly; it sort of keeps you alive and keeps you open for more understanding.”  You could hang that on the wall of every entrepreneurs’ office and still not appreciate the truth of it.

Buckley wasn’t preaching spirituality. In the same breath, he’d shrug, “I’m not a god or a saint or a genius, I’m just a musician,” grounding his idealism in mortal craft. That humility, the artist refusing the myth, is what most founders forget when they start believing their own pitch decks.

Because for all our talk of innovation and disruption, most entrepreneurs misplace grace. They understand speed, iteration, capital, even charisma, but grace is too often lost in our pursuit of success by the book. That’s why most innovation sounds like noise: all pitch, no resonance.

The artist who recorded Grace was, by every measure, an entrepreneur. He wasn’t born into privilege or industry access. He built his audience from a handful of patrons in a coffeehouse so small that a sneeze could interrupt a song. His “startup” wasn’t a company; it was the art of learning in public; his guitar, his voice, and the terrifying honesty of doing it in front of real people who didn’t owe him applause.

Buckley’s path, in short, is the playbook of creation itself. Not the sanitized, PowerPoint version of creativity that universities and pitch deck templates like to canonize, but the kind of creation that leaves skin on the floor.

I’m writing this because someone whose work is as kind and passionate as I try to be, suggested exploring in startups an artist rather than the film or music analogies I tend to draw.  When Eric Alper coincidentally shared that question, I knew the song that immediately spoke to me; fitting, because “Hallelujah” once wrecked me, in a room full of people who didn’t expect a song to do what data rarely does: break defenses, align values, and move people to act.  Product Market Fit for the human condition; let’s take a look at how an artist changes lives and inspires entrepreneurs.

The Workshop Before the Record Deal

Before the studio, there was Sin-é, a café on New York’s East 4th Street. Jeff played there constantly: covers, originals, sometimes both in the same breath. “You can’t create without the crowd,” he said in a 1994 interview. “You learn to surrender to it, or it kills you.”

Sin-é was the founder’s prototype lab. A minimal viable product, live and unfiltered. He tested his material against real customers, the kind who paid for coffee, not tickets. Every song was a sprint. Every set, a demo day.

He’d slip from Edith Piaf to Van Morrison, from “Strange Fruit” to his own “Mojo Pin.” That wasn’t genre confusion, it was iteration. The data of emotion. While founders measure click-through rates; artists teach us that you should be measuring the intake of breath before a room goes silent as you begin.

And unlike most startup programs, Buckley didn’t pivot because a mentor told him to. He pivoted because the feedback loop of humanity guided.

“I would rather play two notes in front of real people than a thousand behind a wall,” he told an interviewer. That wall, between performer and listener, creator, and customer, is exactly what separates invention from noise. Buckley never let the wall form.

The Product Was the Performance

When Grace arrived in 1994, it didn’t sound like anything else on the market. Columbia Records wanted another pop record. Buckley delivered something unclassifiable: ethereal, furious, devotional.

The title track, “Grace,” isn’t a song about salvation, it’s about surrender to what you can’t control. “There’s the moon asking to stay,” he sings, “Long enough for the clouds to fly me away.” That’s not melancholy; that’s acceptance, the kind that fuels every founder who knows that what they’re building might just outlive them.

He understood what startups call opportunity cost. Buckley left Grace untouched after release. He didn’t chase radio edits, didn’t remix it to fit the market. He let it stand as it was, imperfect, alive. And what did the market do? 

It ignored him.

His mother later said he came home bewildered but unbroken, “He believed in Grace the way a scientist believes in a theorem because he’d proven it night after night.”

Rolling Stone gave the album a polite shrug.

Critics complained it was “too emotional” (As if that were a vice). Years later, the same publications canonized it as one of the greatest albums of all time. Innovation, as usual, was early to its own applause.

Entrepreneurs, take note: if the critics get you too soon, you’re not innovating, you’re optimizing.

Iteration as Category Design

Buckley’s rendition of Leonard Cohen’s “Hallelujah” is not a cover. It’s an acquisition. He took an undervalued intellectual property and reengineered it until it became synonymous with his name. That’s not imitation, it’s category creation.  If you’re not familiar with the song, you might know what Johnny Cash did with Nine Inch Nails’ Hurt, both will bring you to emotions we should all feel.

The song itself is a masterclass in market adoption. Cohen’s original was literate and restrained; Buckley’s was carnal and celestial at once. He once described it as “not a homage to a worshipped person, idol or god, but the hallelujah of the orgasm. It’s an ode to life and love” That duality (spirit and skin) is what made it viral long before virality was a metric.

And because Buckley poured himself into someone else’s creation, Cohen’s version finally found new audiences decades later. The ripple lifted all boats. That’s how great founders operate: build something so good that even your competitors get better because of it.

Water Takes Us Into the Myth of Risk

A friend recalled that days before his death, Buckley scribbled in his notebook, “There’s no end to love, only the end of understanding.” He’d been writing new material, planning sessions with his band, talking about redemption and rebirth. The future was opening wide.

In 1997, while working on his follow-up album, My Sweetheart the Drunk, Buckley drowned in the Wolf River, a tributary of the Mississippi. No drugs. No melodrama. Just a man, fully alive, singing Zeppelin’s “Whole Lotta Love” under the Mississippi Suspension Bridge as the water took him.

It’s haunting to remember his own words from “Dream Brother”:

“Don’t be like the one who made me so old / Don’t be like the one who left behind his name.”

The song was a plea to his friend not to repeat the abandonment of fathers and sons, but it reads now as prophecy; a man trying to break inheritance and fate, swept instead into both.

People love to turn that into a metaphor, but it isn’t tragedy, it’s a parable about risk. Creation doesn’t happen in safe harbors. You wade in, knowing the current can pull you under. Artists and entrepreneurs share that blind faith: that immersion itself is the point, that control is an illusion, that the only sin is never stepping into the water.  Buckley once said, “Music comes from a primal place, it’s the sound of the river in me.” He understood the current as creation itself: restless, alive, and sometimes merciless. To enter that flow is to accept that what moves you may also undo you.

When the market takes you down, it’s not a failure of vision. It’s proof that you played where others watched.

The Business of Feeling

Buckley didn’t sell music; he sold vulnerability. That’s the part the world still doesn’t understand about him or about innovation. You can’t systematize what you’re unwilling to feel.

He could have been a chart-topping pop star, but he turned down collaborations that didn’t align with his values. He refused shortcuts, refused to repeat himself. “I don’t want to be remembered for one thing,” he said. “I want to keep being born.”

That’s entrepreneurship. The rebirth, the perpetual discomfort of reinventing something that works because stagnation feels like death. Most founders don’t fail because the market changes; they fail because they don’t.

Every artist like Buckley is an R&D department for the soul. They prototype emotion. They run experiments on meaning. They find language for feelings the rest of us only sense. And when the world finally catches up, we call it timeless.  He taught, “Be awake enough to see where you are at any given time and how that is beautiful,” reminding creators that awareness, of the present, not the promise, is the only defense against the machinery of ambition.

The Founder’s Grace

Here’s the lesson that everyone, from startup accelerators to civic leaders, keeps missing: innovation isn’t an act of intellect, it’s an act of empathy. It’s feeling before it’s thinking.  It’s believing before seeing, not seeing to believe.

Jeff Buckley lived that truth. He taught through art what business schools still can’t teach through frameworks: that creation is the intersection of mastery and surrender.

He never scaled. He never raised a round. He built something better: proof that even in a world addicted to growth, depth still compounds.

When he sang, “Love is not a victory march, it’s a cold and it’s a broken hallelujah,” he was describing not heartbreak but the entire process of creation. The brokenness is the work. The hallelujah is what we make of it.

To the founders, investors, and creators who still believe you can spreadsheet your way to inspiration: stop mistaking control for competence. Go play your Sin-é. Test your song. Listen to your audience breathe.

And when you find that moment, the hush between notes where meaning happens, don’t optimize it. Don’t brand it. Don’t pivot. Have the grace to let it live.

Because that’s what Jeff Buckley understood better than most entrepreneurs ever will: creation isn’t about what lasts forever. It’s about daring to make something worth remembering at all.

“You and I will rise up all the way,” he sang in “Lover, You Should’ve Come Over.”

Maybe that’s the real covenant between artists and entrepreneurs: to rise together, not by escaping risk, but by daring to create despite it.

The post Startup from the Soul: Grace Is What Matters appeared first on Startup Economist.

This is an article I have been sitting with for years. Incessantly pointing out to founders that they’re getting the MVP wrong or that Lean Startup misled them, I want to throw out provocative notion to challenge us all to ask why, with the clarity of what to do in Lean Startup, and so many practitioners and adherents, do overwhelmingly most startups still fail while everyone says “MVP”

The conventional wisdom we all preach is that 90% of startups fail. Now, my first startup was in 2002, when it was also said that 90% of startups fail. One of two things must be true: either Lean Startup is wrong, or founders are doing it wrong.

Eric Ries gave the world a gospel: build a minimum viable product (MVP), validate it with customers, and iterate toward product-market fit. The idea promised to democratize innovation and de-risk entrepreneurship. Yet nearly two and a half decades later, the success rates haven’t changed (presumably), and venture outcomes haven’t improved. The startup graveyard still fills faster than seats in the accelerator downtown. So, is the method broken? Or are the practitioners?

Lean Startup isn’t the problem

Lean has become dogma. Founders are quoting scripture without understanding the language. Most programs are preaching a process, with Lean Startup the Bible, when the only that works in entrepreneurship is systems.

The Myth of Product-Market Fit

Let’s start with the sacred phrase: Product-Market Fit.

It sounds so elegant that we wouldn’t even question the order of the words and yet the order of the words, alone, has completely upended entrepreneurship: Product first, market second. And that’s the trap. The language itself is misguiding entrepreneurs. When you put “product” before “market,” you condition founders to build before they understand who or what they’re building for.

The truth is, it’s Market-Product Fit. (at least, philosophically)

The market comes first: its behavior, its unmet needs, its price sensitivity, its patterns of adoption. You build only after the market reveals what it will pay for. And yes, I did just say, in flowery language, “what the market will pay for” (not customers) – we’ll get to that.

Steve Blank, the intellectual godfather of Lean Startup, never said “build a product, then validate it.” He said, “get out of the building.” In The Four Steps to the Epiphany (2005), he warned against starting with a prototype. Instead, he taught that founders should start with customer discovery; not interviews, but immersion. Ries codified that work later, but by the time Lean Startup hit the MBA circuit, it had been neutered into process, stripped of philosophy. In nearly every cohort I experience in Startup Development Organizations, founders still are working on their MVP (their solution) having only spoken to, maybe, 10 potential customers. You aren’t listening to us! You didn’t actually read the book. Or worse, you’re surrounded by awful mentors and investors giving harmful advice whom you need to help us remove from the ecosystem (honestly, this wouldn’t surprise me)

The problem is that most founders never truly “get out of the building.” They Google some stats, talk to five friends, and call it customer discovery. Then they burn three months building something no one wanted.

MVP: The Most Misunderstood Acronym in Entrepreneurship

The next misstep is the MVP.

Lean Startup defines the minimum viable product as the smallest thing you can build to start the learning process. That definition was meant to protect founders from over-building, not to give them permission to build badly.

In practice, “MVP” has become an excuse. Founders treat it like a hall pass to push out half-finished apps and call it learning.

If you’re building an MVP to “see if people will use it,” you’ve already missed the point. Your MVP isn’t supposed to prove functionality. It’s supposed to prove demand.

Dropbox didn’t build before testing. Drew Houston made a simple explainer video demonstrating what Dropbox would do, and the waiting list jumped from 5,000 to 75,000. That’s an MVP. It proved people wanted it before they could have it.

Contrast that with the graveyard of “MVPs” that founders build in isolation; small versions of their big dreams, validated by no one, tested with no market.

Academic work has backed this up. A 2018 study concluded that startups using MVPs incorrectly focus on the product rather than the business model, which limits learning and prolongs time-to-market. Translation: you’re building too much, too soon.

Your MVP should be the minimum viable proof not the minimum viable product. Proof of what? That you can acquire paying customers. Certainly not that you can build something (especially these days, a chimpanzee with ChatGPT can build MVPs). Prove you can create demand and a competitive advantage, not deliver a solution.

Customer Validation: The Cult of Conversation

Here’s where Lean Startup really got hijacked: Customer Validation.

Blank’s original meaning was that founders should validate hypotheses through experiments. But MBA programs and startup bootcamps watered that down to “talk to customers.”

So now founders spend weeks collecting polite praise from potential users. “That’s a great idea,” people say. “I’d totally use that.”

You know what that is? Noise.

That isn’t validation, it’s social politeness. Humans hate confrontation, so they rarely tell you that your idea is dumb. The result is a false sense of traction.

True validation only happens through transactions.

When someone gives you an email, that’s interest. When they click “buy,” that’s validation. When they pay and return, that’s product-market fit (er, market-product fit).

This isn’t just opinion. A 2020 analysis by CB Insights on startup post-mortems found that 42% of startups fail because there’s “no market need” – not because the product didn’t work. In other words, founders keep building before marketing.

If you think validation means conversation, you’ve confused empathy with evidence.

Lean Startup Didn’t Reduce Failure Because It Was Never Used Properly

Let’s put data to the claim. The global startup failure rate remains roughly nine out of ten within five years, nearly identical to pre-Lean Startup eras. So let me be clear in establishing that while I’m defending Lean Startup given my point of view, the fundamental fact must be that either it’s wrong, or you are.

I don’t think it’s that the framework doesn’t work; it’s that no one follows it correctly. Instead of “build–measure–learn,” founders are doing “build–launch–hope.”

You treat Lean like a checklist, not a scientific method.

A 2019 Harvard Business Review critique, What the Lean Startup Method Gets Right and Wrong, observed that most teams “fail to apply the hypothesis-driven approach rigorously,” relying on shortcuts that invalidate the learning cycle. In plain English: the method doesn’t fail; the execution does.

The consequences of this misunderstanding go beyond startup failure. Economic development agencies and venture funds have built entire infrastructures around “Lean” principles, incubators, accelerators, government innovation hubs. Yet those systems also misapply the framework. They fund product-builders, not market-finders.

That’s why so many startup programs produce pitch decks instead of businesses. It’s all process, no market. It’s step-function, not system.

We’ve created a culture that celebrates the building of startups, not the selling of them.

If you want evidence, just walk through any coworking space. It’s filled with brilliant prototypes and empty wallets. Founders are still confusing invention with entrepreneurship.

Doing It Right: A Market-First Framework

If you want to do Lean right, you have to start before you build anything. The real sequence should look like this:

1. Discover the market. Who has the problem? What have they tried? What do they already pay for?
2. Prove demand. Build the smallest, cheapest test to show people will pay: a landing page, a pre-order, a prototype with a Stripe button.
3. De-risk before you develop. Use those insights to remove your biggest assumptions.
4. Then build the product that fits.

That’s the inversion most founders can’t make: marketing before development, demand before design.

Marc Andreessen put it, “Product-market fit means being in a good market with a product that can satisfy that market.” The order of those words was never meant to be sequential; it was descriptive. But if you start with the product, you’ll never get there.

So, Is Lean Startup Wrong?

Let’s return to the question. If Lean Startup was supposed to change everything, why hasn’t it?

Maybe because Lean was never supposed to be a “method,” it’s a mindset. It’s about humility before the market, not hustle before the investor.

But today’s founders aren’t humble. They’re pitching before they’re listening. They’re coding before they’re marketing. They’re mistaking validation for affirmation.

So no, Lean Startup isn’t wrong. It’s just being done wrong, and worse, preached wrong, by nearly everyone.

If Lean Startup really worked, we’d have more success stories to show for it. If it didn’t work, it wouldn’t still be the foundation of every accelerator and innovation program on Earth.

That paradox should make you uncomfortable.

Lean Startup is either wrong or you’re doing it wrong. But one of those must be true.

If you’re brave enough to assume it’s you, not the method, then flip it: start with the market, test demand, sell the story, and then build.

If you’re not (brave enough), if you’d rather keep building in a vacuum, waiting for your epiphany, the startup cemetery is still plenty big.

The post Lean Startup Is Wrong… or You Are appeared first on Startup Economist.

In a few weeks, I’ll be in New Jersey, a part of the world that holds a very special place in my heart, as does nearby Philadelphia, thanks to family, foundational memories as a child and with my own kids, and now as roots to call a home. With that trip in mind, I could not have been more delighted than to see the news of New Jersey’s embrace of film, one of the sectors of a regional economy that I’ve come to find leads startups. I love to use movies as analogies for entrepreneurship but what we’ve witnessed through Silicon Valley, Austin and Texas, and Georgia, is that the creative class inspires the difference between tech and innovation.

When the creative class (filmmakers, media producers, musicians, authors, artists, and cultural entrepreneurs) flourishes, so do startups. And if you think that’s a fanciful notion, the newly turbo-charged ecosystem in New Jersey startups is proof that culture, influence and entrepreneurship are not separate tracks, they feed the same engine.

The Garden State’s DNA: Innovation, Industry & Culture

New Jersey isn’t a “second tier” startup market simply because it’s adjacent to New York and Philadelphia. It’s what we’d call a legacy ecosystem built on invention, infrastructure, and adjacency (similar to Bellevue to Seattle). The human geography of New Jersey gives it a unique mix of “big market access” plus “almost-affordable scale” (the analog of Austin vs. Silicon Valley, but older).

The New Jersey Economic Development Authority (NJEDA) says New Jersey excels at “unmatched, diverse talent” and the “largest tech talent pool in the US” by proximity. It also reminds you that from “the incandescent light bulb to ground-breaking cancer research, New Jersey has been … a place where human ingenuity flourishes.”

From a culture perspective, the state has been the birthplace of American cinema, with early film experiments in the late 19th and early 20th century, so when you hear “was Hollywood before Hollywood”, it applies. So, when a major studio investment lands here, it’s not just location arbitrage, it’s tapping into a deep heritage of culture + creativity.

In startup parlance: startups are not just code and SaaS (you should know this by now, despite many still arguing it’s just STEM and tech). They are stories, brands, markets, influence. If you invest in the creative class, you create magnetism: talent wants to be where there is both innovation and culture. That magnetism attracts entrepreneurs, investors and attention.

Inventions and Innovation History: Proof on the Ground

If New Jersey were a startup founder, its “track record” slide would be a highlight reel of innovations. Consider this:

• Thomas Edison set up his Menlo Park laboratory in what is now Edison Township, New Jersey — his lab is where the commercial light bulb, phonograph, motion-picture camera and more came into being.
• Bell Labs in Holmdel, New Jersey delivered world-changing inventions: the transistor, laser technology and more.
• The New Jersey Inventors Hall of Fame records dozens of key inventions tied to the state, from telecommunications to pharmaceuticals.

My point: entrepreneurs often ignore history, yet New Jersey has deep technical roots and a culture of invention; which means for startup founders it’s not just “rent cheaper than NYC” but this place has innovation ingrained.

Macro Economy + Government’s Role in Entrepreneurship

Let’s be frank: innovation ecosystems don’t emerge by accident. State policy, infrastructure, incentives and institutions matter. New Jersey has been aggressive in building startup-friendly instruments.

• The Angel Investor Tax Credit Program: investors who put money into qualified New Jersey “emerging technology” companies can get tax credits (10% of qualified investment up to $500K) through the New Jersey Economic Development Authority (NJEDA).
• The Angel Match Program matches angel investment on a 1-to-1 basis (convertible notes, etc) for eligible early-stage product-based companies.
• Programs like NJ Founders & Funders provide structured introductions between startups and sophisticated angels/VCs.
• The Innovation Evergreen Fund: a public-private LP model co-investing state capital raised from auctioned corporate tax credits ($300 million program) alongside qualified VCs.
• NJ Accelerate matches cash investments made by approved accelerators (up to $250k) and covers six months of coworking rent (up to $25k).
• New Jersey Innovation Fellows which provides income-replacement grants for first-time founders ($200k–$400k per team) plus mentorship and AI-focused cohorts.
• Princeton-anchored AI Hub and Next NJ Initiative public-private center with tax-credit and grant frameworks to spur AI and data-center startups.

As well as VentureLink @ NJIT, Stevens Venture Center, Princeton Innovation Center BioLabs, Rutgers TechAdvance, and HAX Newark (SOSV) anchor the incubator/accelerator network. TechUnited:NJ and BioNJ tie the statewide private sector together.

In my economic development talks throughout the world, almost everywhere is pointing out that it’s time for Corporate and University IP to explore new commercialization models because society is sitting valuable research going nowhere. Imagine my surprise at a wonderful coincidence of timing as Mary Jane Durkin announces, “The NJII Venture Studio helps corporates turn underused innovation into startups without the overhead or risk of doing it internally.” The New Jersey Innovation Institute leverages the resources of an R-1 research university, and deep industry and government partnerships, to accelerate technology, foster innovation, and drive workforce development.

All of this is telling about where you too should be going as an ecosystem: culture-class investments (film, creative, media) don’t just happen; you need place infrastructure, tax/incentive logic, and ecosystem architecture – the exact same thing you need for entrepreneurship and innovation to be viable as well. New Jersey has been building that. IP doesn’t commercialize itself; you need bridges to entrepreneurs such as my Bow Tie scenario or what NJII is doing.

On the macro-economy side: New Jersey brings location advantages (Northeast Corridor transit, dense population, talent access), and the fact that it sits next to two major metro areas gives startups a large marketplace while allowing some cost advantage.

So, as an ecosystem architect or economic-development professional the conditions are present: talent, history, incentive, location. What could be stronger is narrative, culture, and visible “shiny things” that signal success (which is why I’m diving in here and why you all need to know creative class investment is critical).

Notable Companies & Startup Development Organizations

Who is doing what, where are the funnels, who are the funds?

While not exhaustive, recent snapshots show growth: According to NJEDA’s monthly investment summaries, Garden State companies continue to attract capital and rank in the top 10 states for VC dollars.

Cities like Newark are on top of things, Bill Hartnett and Jersey Digs, “The annual Newark Tech Week … featured a strong focus on AI … and plenty of networking opportunities.”

• HAX Accelerator: hard-tech, headquartered in Newark. The NJ partnership with SOSV (its parent) expects to launch 100 hard-tech startups.
• JumpStart NJ Angel Network: a member-led network of experienced entrepreneurs and VCs investing in early-stage tech ventures in New Jersey and the Mid-Atlantic that funnels personal angel capital.
• TiE New Jersey Angels: a broader angels community focused on high-growth ventures.
• Newark Venture Partners (NVP) early-stage VC/accelerator.
• Prysm Capital: a growth equity/VC firm active across technology, consumer, healthcare.
• Foundation Venture Capital Group: Princeton-based, focusing on pre-seed/seed in health-tech and innovation ventures.

New Jersey has multiple entry points for startups, not just in tech but across sectors including creative/production adjacent sectors where we started.

The Film & Creative Investment Signal: Why New Jersey Took the Move

Let’s zoom in there: The state’s investment in its creative class, particularly the film/TV production infrastructure at Fort Monmouth.

Netflix broke ground on its East Coast flagship production campus at Fort Monmouth in May 2025: a roughly $1 billion transformation of a former U.S. Army base (292-acre site) into a high-end production campus with 12 soundstages and 500,000 sq ft of production space.

This creative-class move strategic because film/TV production brings high-visibility, foot traffic, related service-jobs (design, set-construction, hospitality) and culture-capital. This is not just about the studio; it’s about building infrastructure that signals they’re serious about creativity, content, culture, entrepreneurship.

On November 1, Paramount Pictures committed to occupy more than 285,000 sq ft of space.

“This is more than a studio; it’s a statement,” said Governor Phil Murphy at the Netflix groundbreaking ceremony. “New Jersey is open for creative business — and Netflix is leading the charge,” adding later at the opening of the NJ AI Hub, “we are moving forward in establishing New Jersey as a global leader in technology and innovation.”

• The creative class investment builds culture, which builds talent. Having a vibrant production ecosystem will mean more creative professionals, marketers, storytellers, freelancers, vendors, studios: a ripple into enablement for startups.
• It draws attention: when media and production flow, that draws external talent, press, capital. It creates a “cool factor” which helps attract startups that thrive on culture and narrative.
• It diversifies the economy: not all startups are SaaS; many integrate media, entertainment, content, design, creative-tech. With production infrastructure in place, those adjacent sectors become viable locally instead of forced to move to L.A. or Atlanta.
• It sends a signal abroad: if New Jersey is paying attention to culture + infrastructure, then it means local policy and capacity exist for creative entrepreneurship.

In other words: New Jersey is not just offering tax credits; it’s building place-assets. That’s rare.

Texas, Georgia… Why New Jersey Could Be “Next”

Now, a lot of what I’m framing here has to do with my personal experience in Texas with the supposed Live Music Capital of the World and what used to have substantial Texas Film Incentives. Those identities and resources played a large part in being a catalyst for the boom of startups beyond Silicon Valley into Austin and the rest of Texas.

In Texas, the draw of live music and film subsidies (now restored after being ended during years of politics) have helped build creative-tech clusters (game dev, VR, MusicTech). When Texas killed the film incentives, Georgia picked up where production was left to languish as a Georgia leaned in, we started seeing that Georgia Peach logo as film credits rolled; the film-production infusion there also nurtured a broader ecosystem of digital media, game studios, startup ventures.

These states have pursued entertainment/creative investments and then reaped startup/entrepreneurial spill-overs.

New Jersey is positioning itself to lead next wave on the East Coast:

• Georgia once became the “Hollywood of the South” via large studio infrastructure plus state support. Similarly, New Jersey’s Fort Monmouth investment invites the “Hollywood of the Northeast” framing. Or rather, as one spokesperson appropriately noted since New Jersey was historically first, Hollywood is the West Coast of New Jersey film.
• Key difference: New Jersey is leveraging its proximity to the media capital of New York plus film infrastructure plus startup infrastructure I once hoped more of with Austin: not just production, but innovation.
• If the creative class anchors the “attention economy”, then startups (especially consumer-tech, media-tech, game dev, design-led ventures) will flow to where attention is concentrated.

If you’re familiar with these regional deep dives, I always pull from a framework for economic development of startups, so as I wrap up, let’s head there.

How New Jersey Startups Measure Up in 6 Considerations

1. A Culture of Competition, Potential, and Creativity
New Jersey’s creative class is nothing if not competitive. The state has always lived in the shadow of New York’s cultural gravity, which means everything here (music, film, design, tech) has had to punch harder to be seen. That underdog drive has bred both creative risk-taking and commercial ambition. From Edison’s Menlo Park experiments to the reinvention of Fort Monmouth as a billion-dollar Netflix production hub, New Jersey has repeatedly proven that its creative economy thrives on experimentation. The state’s artistic grit and industrial heritage combine into a culture where failure isn’t fatal, it’s tradition (which is what we want in startups).

2. Reasonable Wealth Available
New Jersey’s capital environment is pragmatic and diverse. Angel investors, family offices, and corporate venture arms form a base of “reasonable wealth” (capital that isn’t chasing hype but looking for solid returns in real industries). JumpStart NJ, TiE NJ Angels, Newark Venture Partners, SOSV, and Foundation Venture Capital Group all operate within that space, investing across hardware, biotech, and creative tech. Add to that the NJEDA’s matching funds and evergreen co-investment platform, and founders here have access to disciplined, early-stage capital without the speculative inflation that distorts other markets.

3. Innovative Employers
Bell Labs, Merck, Johnson & Johnson, Audible, Panasonic, and Prudential anchor the state’s employer landscape and each plays a different role in the innovation chain. These companies not only employ thousands of engineers and researchers but increasingly spin off entrepreneurs and intrapreneurs who seed startups across Newark, Princeton, and Hoboken. The hard-tech accelerator HAX (SOSV) in Newark and the Princeton Innovation Center BioLabs exemplify how corporate and academic R&D pipelines now feed directly into startup formation.

4. Little to No Government Interference
New Jersey’s government has found the rare balance of activist investment without administrative intrusion. The NJEDA and Choose New Jersey act less like bureaucracies and more like economic-development VCs; setting frameworks, not rules. Entrepreneurs aren’t forced through endless licensing or political gatekeeping. Instead, the state uses tax credits, matching funds, and incentive programs to lower friction and let the market operate. In other words, it’s public-sector participation without too much; a distinction that lures startups fleeing over-regulated regions.

5. Access to Startup-Experienced People
The density of New York and Philadelphia’s entrepreneurial networks spills directly into New Jersey, giving founders immediate access to startup-experienced mentors, operators, and investors. This is rare and tough to develop. Rutgers, Princeton, NJIT, and Stevens all run incubators producing new venture talent. Communities like TechUnited:NJ and Propelify connect thousands of founders and investors annually, while accelerators such as HAX and VentureLink @ NJIT ensure a continual pipeline of experienced startup professionals. The human infrastructure here is deep, diverse, and globally networked.

6. Credible and Distinct Promotion of the Region
For the first time in decades, New Jersey’s narrative isn’t defensive, it’s distinct. Film at Fort Monmouth, the Princeton-anchored AI Hub, and the innovation branding from Choose New Jersey all position the state as both culturally magnetic and economically modern. The creative-class investment has given New Jersey a visual and emotional identity that transcends industrial nostalgia. As Texas leveraged music, and Georgia leaned into film, New Jersey is now fusing both with tech to tell a new story: a place where creativity funds itself through entrepreneurship.

New Jersey excels at five of the six considerations outright, and the sixth (global perception) is rapidly catching up. It already has competition, capital, employers, freedom, and experience; what it’s building now is a story big enough to match its record.

Where the state still needs improvement is in capital depth and narrative coherence. The capital stack is sophisticated but the state still exports too many deals to New York funds, meaning founders raise across the river instead of across the street (or from further). Optimistically, the solution to this is in both of those challenges – developing the narrative and distinction draws capital attention. The next leap for New Jersey is to mature its local venture tier, to build the connective tissue between angels, accelerators, and institutional VCs, and to develop global coalitions with Startup Development Organizations that operate throughout the world, to expose and connect everyone to there while providing local entrepreneurs with access to the expertise beyond the region.

For decades, New Jersey has been the quiet genius behind its louder neighbors: inventing the lightbulb, building Bell Labs, and birthing American cinema but letting others take the credit or the reigns. To compete globally, New Jersey must articulate its identity as a birthplace of American innovation re-emerging as a creative-tech powerhouse.

Here’s the challenge to you (readers): Too many economic-development efforts treat “startup” as synonyms for “tech cluster” and ignore the creative class. That’s a mistake. The creative class drives attention, culture, place magnetism, and narrative; all of which are essential to building a dynamic startup ecosystem (especially in consumer-tech, media, content, game dev, creative services).

New Jersey is quietly making the smart play whether they really realize it or not: using its film/production resurgence as anchor for startup growth. If you’re a founder or investor looking for fertile ground outside the obvious hubs, consider that where film studios go, talent flows, services scale, and then startups follow.

Here’s the question I leave you with: If you were designing a startup-ecosystem playbook today, would you first invest in software and SaaS clusters or would you anchor it with culture, media, production infrastructure so that the startup magnetism is built, not assumed? New Jersey is choosing the latter.

The post New Jersey’s Creative Class Isn’t Just Showing Up, It’s Becoming the Payoff for Its Startup Economy appeared first on Startup Economist.

The debate over “market failure” has raged for decades, rooted in a false premise that the economy should behave like an equation rather than an ecosystem. This isn’t just academic. The idea of ‘market failure’ keeps resurfacing in policy debates over AI, climate, and housing, as if the lessons of the last 25 years never happened.  As the Austrian economists at the Mises Institute argued years ago, the notion of market failure is itself a myth; a rhetorical tool used to defend intervention when human imperfection makes outcomes inconvenient for planners – markets outperform government. Today, after Web 2.0 democratized information and AI democratizes intelligence, it’s clear that what we once called “failures” were actually transitions: proof that markets evolve faster than governments can reform.

In revisiting this debate, we now have empirical evidence, not just theory, to show that the market was never failing; it was outpacing the institutions trying to control it.

In the 1998 Journal of Economic Perspectives, Nobel Prize winning economist, Joseph Stiglitz, famously argued that government could be made efficient through greater openness, transparency, and participation. “Perhaps we can bring [efficiency] to government,” he mused, framing inefficiency as a curable defect rather than an inherent design flaw – if solved, overcomes market failures. Admirable optimism, sure. But a quarter century later, after both the Web 2.0 revolution and the current wave of AI, it’s fair to ask whether Stiglitz’s “perhaps” still belongs in the realm of economics, or in the fantasy section next to alchemy and flying cars.

Government Can’t Be Made More Efficient; That Requires Determinate Decision

Government can’t be made more efficient; efficiency requires determinate decision – that is, decisions driven by clear incentives, feedback, and accountability, not political negotiation.

The modern economy has now run the experiment Stiglitz never could: we digitized the world, democratized access to information, and let markets and networks evolve under their own weight. What we discovered was that markets learn faster than governments reform. The platforms that defined Web 2.0 (Google, Amazon, Facebook, YouTube) weren’t efficient because regulators decreed it so; they were efficient because inefficiency died on impact. Users clicked away. Data corrected errors in real time. And while that same dynamic gave rise to monopolistic tendencies (reinforced by regulation), it also exposed the core lesson Stiglitz and many of his disciples still seem unwilling to acknowledge…

Web 2.0 was messy, markets are messy, but work. Government, in contrast, remains a pre-digital institution in a post-digital age; where “transparency” means another PDF uploaded to a federal website, and “participation” means filling out a form that leads to a public comment period that no one reads. The irony is that Stiglitz’s own prescriptions (transparency, participation, consensus) are precisely what the internet delivered. And yet, when those same principles were allowed to flourish through private innovation, the push against it dismissed them as dangerous, exploitative, or in need of regulation; ironically, resulting in regulation.

The underlying issue isn’t that markets fail; it’s that economists like Stiglitz used “market failure” as a rhetorical escape hatch whenever government fails worse – to propose the government being more transparent would address it, but not only did government to become so, we uncovered that the failure is a myth. The term became a cudgel to justify intervention rather than a diagnostic tool to understand where intervention actually helps. When Web 2.0 exposed inefficiency in legacy systems (from media to taxis to education) the state didn’t learn from it. It doubled down on control, invoking “public interest” as the excuse for bureaucratic inertia.

And now, with artificial intelligence, we’re watching the same pattern repeat. Markets are again evolving faster than government comprehension. While policymakers hold hearings about “AI safety” and “ethical frameworks,” the private sector is out there solving problems that bureaucracies have debated for decades: optimizing energy grids, improving logistics, predicting disease. These are real efficiencies, achieved through voluntary systems of information exchange and incentives. Yet, to read Stiglitz and his cohort, one might think the true crisis is that innovation keeps happening without permission.

The ideological bias at play is not subtle. The essay from Mises was right to accuse Stiglitz and his intellectual kin of hiding behind “technical jargon” while promoting the expansion of the state as an end unto itself. That tendency has only grown stronger. In today’s academic and policy circles, “market failure” is invoked with theological fervor; rarely to diagnose specific externalities, but to justify preordained conclusions, decisions determined more by ideology than evidence, about the moral superiority of regulation. It’s a linguistic sleight of hand, where every success of capitalism is treated as a problem to be solved and every failure of government as an argument for… more of it.

Let’s revisit the premise. What if the so-called failures of the market (inequality, disinformation, environmental risk) are not proof of capitalism’s collapse, but evidence of its capacity to evolve? AI, for example, is exposing how much inefficiency is embedded in legacy sectors of healthcare, education, and public administration, that have resisted automation precisely because they are entangled with government monopolies. Consider healthcare, where AI diagnostics outperform public systems that still rely on fax machines; or education, where adaptive learning platforms advance while state curricula remain frozen in committee. The market isn’t failing; it’s being restrained.

The better question, then, is not whether government can be made efficient (it can’t, not in the way markets can) but whether technology can reimagine governance itself. We’re already seeing glimpses: decentralized finance (DeFi) that routes around central banks, AI systems that simulate regulatory oversight, open-data protocols that make transparency autonomous rather than bureaucratic. These are not anti-government impulses; they’re post-government solutions to the same inefficiency Stiglitz lamented.

To be fair, Stiglitz’s early work on information asymmetry was revolutionary. He correctly identified that markets aren’t omniscient and that imperfect information distorts outcomes. But what Web 2.0 and AI have shown us is that markets can correct asymmetry faster than government can recognize it exists. The solution to imperfect information is not another layer of oversight; it’s more information, distributed widely and processed intelligently.

Perhaps it’s time to retire the term “market failure” altogether, or at least demote it from gospel to hypothesis. The failures we face now are institutional: a failure to adapt, to decentralize, to let go of the comforting fiction that government can fix what it fundamentally cannot understand.

All this brings us to a simple point: the concept of market failure has outlived its usefulness.

In the end, the myth of market failure persists for the same reason bureaucracy does: both are job security for people whose value depends on complexity. 

The rest of us, thankfully, have the Information Age of the internet, and now AI, to simplify what bureaucracy insists on complicating.

If the internet democratized information and AI is now democratizing intelligence, the next frontier is democratizing governance itself.  A wonderful statement to proclaim in a democratic form government: we need more of what you’re supposed to be.  Efficiency doesn’t need permission and certainly shouldn’t be constrained; letting people determine what’s best isn’t a symptom known as market failure, it’s the market correcting mistakes.

Since market failure is a myth, then what’s actually broken? It isn’t capitalism, it’s communication.

The Real Failure We Can Fix: Information Withheld, Not Markets Gone Wrong

Arthur Hays Sulzberger, the long-time publisher of The New York Times, once admitted a truth far more enduring than he could have imagined:

“Obviously, a man’s judgment cannot be better than the information on which he has based it. Give him the truth and he may still go wrong when he has the chance to be right, but give him no news or present him only with distorted and incomplete data, with ignorant, sloppy or biased reporting, with propaganda and deliberate falsehoods, and you destroy his whole reasoning processes, and make him something less than a man.”

That line, written in the age of print journalism, now defines the crisis of governance in the Information Age. Today, private companies hold richer, more actionable data about human behavior, mobility, and economics than entire governments; and yet, instead of using it to make smarter civic decisions, we shun it. 

Private firms already possess the insights that could make cities, healthcare, and logistics dramatically more efficient, if governments had the humility to learn from them. Strava can show exactly how people move through cities hour by hour, exposing inefficiencies in urban planning, and opportunities. Uber and Lyft can reveal where public transit fails or should exist. Amazon and Walmart track the pulse of supply chains and affordability in real time with Walmart famously known for responding more quickly and effectively to emergencies than FEMA. Google, Waze, and Apple know traffic problems down to the second, yet city planners ignore data that could solve them. Target and Costco understand consumption and inflation better than any CPI index. CVS, Walgreens, and UnitedHealth possess unparalleled insight into public health trends that might meaningfully improve healthcare. Airbnb and Zillow have housing and rental data that could guide zoning and affordability policies. Even platforms like DoorDash or Instacart could illuminate food deserts and access inequality more precisely than federal surveys that arrive years too late.

Yet rather than integrating this private-sector intelligence into public decision-making, governments dismiss or regulate it away under the banners of “market failure” or “data privacy.” Those excuses, while sounding noble, mask a deeper insecurity: bureaucracies no longer control the flow of information (and never should have). Transparency is no longer their gift to bestow; it’s the default state of a connected world. And so, they withhold, obscure, or delay. In doing so, they make citizens less informed, less empowered, and, as Sulzberger warned, less than fully human.

The tragedy isn’t that markets fail to produce good outcomes; it’s that we’ve failed to trust and use the information they generate. The private sector has already built the infrastructure of understanding: real-time, decentralized, and self-correcting. But public institutions, mired in analog processes and political theater, refuse to plug in. We handicap the Information Age with opacity, hiding behind ideological myths about “market failure” that justify control while denying evidence.

Markets didn’t fail us; we fail to use what they reveal. Every dataset locked behind regulation, every public record released as a PDF instead of an API, every study commissioned to rediscover what Uber’s heat maps already show, these are acts of institutional sabotage. They aren’t protecting democracy; they’re preserving bureaucracy.

The Information Age already gave us the tools for smarter governance, tools built by markets that evolved far beyond the reach of twentieth-century economic dogma. The only thing standing in the way is the lingering faith that government inefficiency is virtuous and market intelligence is suspect. The cure Stiglitz once imagined, transparency and participation, isn’t coming from government reform. It’s already here, in the networks and technologies we keep sidelining unless or until we’re engaged to fix that.

If we want efficiency, equity, and accountability, we must stop treating the private sector’s knowledge as a threat and start treating it as the foundation of modern governance. Until then, we’ll keep pretending that markets fail while quietly ignoring the data that proves the opposite; and missing the chance to let intelligence, not ideology, guide our governance.

The post When Markets Learn Faster Than Governments appeared first on Startup Economist.

If startup ecosystems were a fashion statement, most cities would look like clip on necktie that everyone admires for the good intention of dressing it up. In reality, we’ve overserved accelerators that don’t accelerate, misunderstood venture studios as glorified R&D departments, push university IP commercialization on a market that doesn’t want to license, and host investors who don’t write checks at demo days for 6-week-old startups.

Let’s untangle the mess. Let’s talk bow ties.

The Left Side of the Bow: Developing Ideas

Picture the bow tie. On the left, we have Labs and R&D in the bottom corner, Corporate Ventures in the top corner, and Venture Studios in the middle.

Labs & R&D are where discovery happens, but not entrepreneurship. Research labs exist to prove what’s possible, not to build a market. They’re funded by grants, corporations, or universities, and their incentives are academic or internal: publish papers, file patents, improve internal capabilities. Expecting labs to birth startups is like expecting NASA engineers to start SpaceX while on the clock. It’s not that they couldn’t, it’s that they’re don’t. But what they do is invent, inspire, and solve problems.

Corporate Venture Arms, on the other hand, are the innovation departments with expense accounts. They scout technology and startups to secure early access or future acquisition opportunities. When they invest, they usually bring distribution, credibility, and immediate traction, because they themselves are the first customer. That said, unless you’re obligating broader support of your ecosystem by these corporate entities, they’re not “ecosystem building,” it’s strategic procurement with equity upside. And that’s fine, so long as no one pretends otherwise and allows [Corporate] for Startups to take advantage of the entrepreneurs by merely showing up and trying to sell their services.

Then there’s the Venture Studio, sitting in the middle of the left side because a Venture Studio is doing both the research and the development while having the resources and expertise available as a corporate entity could be considered. Unlike the far left, the Venture Studio is more entrepreneurial, with the intent of developing and spinning out new ventures. A good studio builds companies from scratch, combining capital, talent, and operations under one roof. They’re the grown-up children of both R&D and entrepreneurship: owner, operator, and investor all in one. The danger? Studios that act too much like labs (chasing experiments no one values) or operating too much like corporations (building only what suits their internal strategy). When they forget that they’re supposed to serve markets, not themselves, they become sterile innovation factories.

I’m painting the left a little critically so let me back off that a bit before clarifying why I’m doing so. These are critical pieces of your ecosystem! Invaluable partners and players. Where we fail the left is that let corporate ventures work in isolation without demanding more active participation in everything, we either ignore labs (as startup engines) or we’re satisfied that commercializing their IP is the only option. As for Venture Studios, they’re under served by public funding, as cities leaned in on the popularity of the word “Accelerator” to the neglect of the model that developing ideas into opportunities with more purpose.

The Right Side of the Bow: Developing Startups

Now move to the right side of the bow. Here we find Incubators, just right of center, Accelerators in the upper right, and Angel Investors in the lower right. This is where we stop theorizing, move beyond developing, and start launching companies and creating jobs.

Incubators are the classrooms and labs for entrepreneurs. They’re about human development, not product development. A good incubator helps founders validate ideas, refine business models, and survive their first few rounds of rejection. Their business model often relies on ecosystem sponsors (hence my Corporate Venture characterization), small equity stakes, or coalition building with government, university, or VC, to underwrite the costs of an incubator. They’re local, educational, and community driven. When done well, incubators are the glue that binds startups to the broader ecosystem; training future accelerator graduates and connecting them to real mentors.

Accelerators are where momentum kicks in and I want you to visualize them in the upper right of our bow because that’s the expectation you should have of them – taking the entrepreneurs who have run through the gauntlet in the middle and accelerating them: up and to the right. Their purpose is not to “help startups” but to amplify those already working. They should take developed startups through partnerships, exposure, and investment. The successful accelerator looks less like a classroom and more like a Formula 1 pit crew: short, intense, and brutally effective. If an accelerator isn’t driving growth, customer acquisition, and funding, it’s not an accelerator, it’s a co-working space with a logo problem.

Finally, Angel Investors, the lifeblood of the right side. Angels fund the chaos before institutions can stomach it. They provide experience to the earliest of ventures because they themselves should have been there and done that. Their capital bridges the gap between ideas and seed rounds so I have it lower on purpose: they’re foundational. Unfortunately, too many “angels” today are just rich professionals playing Shark Tank. They invest like bankers, not founders, demanding forecasts and collateral instead of risk and resilience. When angels misunderstand their role, startups start acting like small businesses, optimizing for revenue instead of learning. When investors won’t behave as Angels should, you need to be pushing them to be LPs in venture capital funds when a team is more capable of good decisions. Without doing this, innovation dies, founders fail, and startups are little more than wasted efforts, because the investment class is misleading.

The Knot That Matters: Entrepreneurs

First let’s acknowledge that a proper bow tie isn’t the black clip-on you got for prom. A bow tie is messy, unique, and not easy to tie until you’ve practiced a few times in the mirror.

The far left and right sides rarely play well together directly but through that knot in the middle, and effective support of the entrepreneurs, both sides thrive. Labs and corporates want IP and control. Angels and accelerators want returns and speed. Somewhere between them, Venture Studios and Incubators could hold it all together; with infrastructure in place to enable the entrepreneurs.

Imagine this alignment: Venture Studios as the private, sector-focused partners; Incubators as the public, open-access programs. Studios develop what they know is valuable, leveraging deep expertise. Incubators amplify that work, teaching entrepreneurs in the same domain and expanding the network around those emerging companies. We find entrepreneurial people in both Venture Studios and Incubators and it’s those people who are most meaningful to both sides: Corporate Ventures and R&D as well as Accelerators and Angels – they put in the work that transitions ideas and opportunities into ventures.

What might that Civic infrastructure be?

What I find in most cities is that they lack even an active Facebook Group for founders. Now, I’m not saying start a Facebook Group, but for crying out loud, when your city proclaims to serve entrepreneurs, but that community can’t even connect, find help, or get advice, with readily available infrastructure, how long do you want to keep fooling everyone? I hear of startup events AFTER they’ve taken place, with ecosystems even lacking the fundamentals of infrastructure that announces and promotes what’s going on. My point being, a Facebook Group is freely available, and with most people using Facebook in some way, you aren’t even using that to help everyone?? Again, not that you actually should, Facebook Groups are rather impotent these days.

I’m talking to you cities, that’s why I called this civic infrastructure – when you leave the community to put this in place on their own, they’ll do it with their own self-interest, spin up dozens of different versions, and merely fracture everyone into silo’s that harm more than help.

• Do you have a CRM of all the mentors in your community? Come on, Hubspot is free.
• Are you providing everyone running incubators or startup programs to use a tested and validated methodology? Founder Institute is in 200-some cities and can be used to put programs on it.
• A centralized platforms for startup–investor relationships, deal flow management, and transparency? Turn on Gust or Visible Connect
• Why isn’t there data infrastructure for mapping, tracking, and benchmarking the local startup ecosystem – give policymakers and investors visibility into what’s real with StartupBlink or Dealroom
• Do you even have a Slack or Discord with everyone on it? Odds are, you don’t because you left that to some local community builder to try, when the reality is that you could allocate some public funding to maintain it better and keep it accessible to everyone.
• Where is your local Eventbrite or Meetup Pro? Not the city or local accelerator using Eventbrite, where is the City Funded Eventbrite that hosts everything related to startups? A shared public calendar infrastructure for all entrepreneurship-related events.
• We should even be bridging government, academia, and entrepreneurs for funding and workforce access so set up OpenGrants

Now, imagine that stack of infrastructure being in place for everyone right under our knot. All entrepreneurs, mentors, and advisors, with ideas and IP funneled in from the left, while developed opportunities emerge to the right to be picked up by Angels and Accelerators. An optimized ecosystem would have Venture Studios and Incubators working hand-in-hand, perhaps even working together (why wouldn’t a Venture Studio space host the same-sector incubator so that the domain expertise of the Venture Studio team is right there for the other founders developing startups??). A studio that runs an incubator doesn’t just gain deal flow, it gains a feedback loop. The incubator brings ideas, talent, and energy; the studio provides focus, capital, and operational know-how. This partnership turns startup development into an ecosystem engine, not a series of one-off events.

Why We Keep Failing to Tie It Right

The failure comes from confusing roles. Governments fund accelerators to create jobs but ignore that accelerators need startups ready to scale as well as startup experienced mentors and advisors who know how. Corporations build labs but don’t let the inventors own their ideas. Angels demand five-year forecasts from founders who still live on ramen. And everyone forgets that innovation ecosystems aren’t supply chains, they’re symbiotic systems – or necks that need a bow tie (though granted, my analogy falls a little short here).

If you’re an accelerator bragging about how many ideas you get from universities, you’re mistaking research for readiness. An Angel Investor showing up for the award show before returning to their law firm isn’t being pushed to be active as needed. That Company Startup program is a PR stunt and if you’re not demanding more from them, you’re letting them pretend to be innovative and supportive at the expense of the entrepreneurs. And if you’re an economic development office funding programs because a consultant told you it’ll “attract innovation,” congratulations: you’ve hired McKinsey to tell you how to breathe.

The bow tie metaphor doesn’t just look handsome, it’s diagnostic. The left side produces knowledge and potential; the right side commercializes and scales it. Studios and incubators tie them together. When any side dominates or misunderstands its role, the knot unravels like a prom date at the after-party: the ecosystem collapses when the party runs too long.

The post Put a Bow on your Startup Ecosystem appeared first on Startup Economist.

If cities were startups, Portland would be the one that never hired a PR firm, preferring instead to let its product (culture) speak for itself. For investors, that confidence has been both its charm and a challenge. Portland is inventive to the point of eccentricity, independent to the point of obstinacy, and so allergic to self-promotion that it sometimes forgets capital markets don’t fund mystique. 

But make no mistake: Portland has all the ingredients of a high-growth ecosystem, so while I go right to the punch of criticism, it’s out of the love that I prefer to share in developing ecosystems, uncovering what we can do better while celebrating the exceptional.

A City Built on Innovation and Ideals

Portland’s economic and cultural DNA goes back to the Oregon Trail itself (sorry Gen X, not the game that defined our childhood and established our fear of dysentery): risk-takers, prospectors, loggers, shipbuilders, and dreamers who literally bet their lives on unexplored frontiers. That streak of ingenuity persisted through the timber and shipping booms of the 19th century and the manufacturing and high-tech revolutions of the 20th. By the 1980s, Portland was already cultivating an identity as an early tech and design hub (one of the first to adopt another “silicon” moniker as the Silicon Forest) while maintaining its obsession with sustainability and livability; a cultural trait that became the city’s brand long before cities had brands.

It’s the kind of place where Nike was born in the trunk of a car, where Intel made Hillsboro farmland into one of the densest semiconductor employment zones in America, and where Tektronix quietly created the blueprint for what would later become Silicon Valley’s culture of spin-outs and garage startups. Even HP, Precision Castparts, and Columbia Sportswear have deep roots here. Today, Portland’s creative class continues that lineage through companies like Elemental Technologies (acquired by Amazon), Vacasa, Urban Airship (Airship.com), and Puppet; firms that grew out of Portland’s unique mix of engineering talent and countercultural spirit.

And the culture keeps compounding. As Rick Turoczy, managing director of the Portland Incubator Experiment (PIE) and editor of Silicon Florist, recently highlighted, Portland’s startup headlines are shifting from survival to scale. “Customer.io hits $100M ARR,” he noted, alongside Oregon Venture Fund raising its next round and the Oregon Startup Center rebooting, evidence that Oregon’s innovation economy is maturing into something more self-sustaining. The fires of early creativity are starting to produce sustained heat.

The Entrepreneurial Culture of the Pacific Northwest

What makes Portland’s founders distinct isn’t their obsession with scale or blitz-scaling but their obsession with craft, authenticity, and social purpose. Call it the Patagonia effect on code. Portland companies don’t just build; they build responsibly. A study from the Brookings Institution noted that Oregon’s startup density has consistently outperformed most of the U.S. outside of California, despite lower levels of venture capital. Why? Because founders here actually build sustainable businesses before they raise.

That’s where Duncan Miller’s critique of venture culture fits neatly into the Portland ethos. “Venture capital is glamorized,” he writes. “Founders are celebrated for raising millions before building anything real. But what if getting VC money early is more curse than blessing?” The city’s founders would nod in agreement. Portland isn’t anti-investor; it’s pro-customer. As Miller says, “There are two ways to start a business: customer validation or investor validation. They are not the same. One leads to a sustainable business. The other often leads to inflated expectations, misaligned incentives, and premature scaling.”

That’s Portland in a nutshell: slow burn over fuel dump. Founders here understand that “VC money is fuel; it makes things go faster. But if you don’t have a working engine, you’re just burning cash.” It’s why many of Portland’s best companies (like Wieden+Kennedy, Instrument, Treehouse, and Simple) were bootstrapped long before some of them attracted venture attention. Bootstrapping builds muscle. And if Duncan Miller’s axiom holds true that “Net worth ? groceries. Cash flow is king,” then Portland has long been a cash-flow city in a net-worth world.

Portland Startup Infrastructure and Investors

Portland’s startup infrastructure has matured considerably over the past decade.

• Portland Seed Fund, a public-private micro-VC launched in 2011 that has invested in more than 150 startups including Wild Fang, Cloudability, and Madorra.
• Oregon Venture Fund, which manages roughly $300 million AUM and backs regional winners like Vacasa and Sila Nanotechnologies.
• Elevate Capital, one of the first early-stage funds in the nation led by a BIPOC founder (Nitin Rai), focused on women and minority-owned startups.
• Rogue Women, a fund born out of Rogue Venture Partners that now stands on its own with a focal point on women-founded companies.
• Cascade Seed Fund, focused on supporting early-stage startups in the Pacific Northwest, emphasizing hands-on mentorship and investment in diverse founders.
• Voyager Capital and Diane Fraiman, investing in the modern economy through AI-driven business solutions, software-driven hardware, sustainable agriculture, and supply chain in the Pacific Northwest and Western Canada.
• VertueLab, a climate-tech incubator partnered with the U.S. Department of Energy, funneling SBIR and STTR funding into sustainability startups.
• Portland Incubator Experiment (PIE), born from Wieden+Kennedy’s creative ecosystem, blurring the line between design studio and accelerator.
• Built Oregon, a non-profit venture fund that champions consumer product companies.
• Portland State University Center for Entrepreneurship and Business Accelerator, critical feeder programs linking academic research with commercialization.
• Metro Region Innovation Hub, where you can hear from Portland founders, learn from their experiences, and find tools
• Angel Oregon from Oregon Entrepreneurs Network (tech, food, bio), designed to support early-stage technology startups based in Oregon and Southwest Washington by offering investment-readiness education, mentorship with successful local entrepreneurs in their sector, and connectivity within the local technology community
• Technology Association of Oregon, professional networks aligned with job functions in the technology industry designed to help members build connections

Notable of the Portland Seed Fund is the Intrepid Oregon Fund (IOF), a new effort to address the challenge of IP commercialization (typical in Universities) that most of you are working through since licensing University IP is increasingly weighed as unnecessary.  Anchored by a $4 million initial investment by Business Oregon through its Commercialization Gap Fund program. IOF will invest in early-stage companies less than five years old, in sectors that are primarily technology and science-focused such as digital health, healthcare IT, bioscience, medical devices, climate-tech, advanced manufacturing, advanced materials, and natural resources.

Even as this infrastructure expands, the lesson from both Miller and Portland’s own track record is clear: investment should follow validation, not precede it. “VC can be fuel on a fire,” Miller says, “but only if there’s a fire.” Portland’s founders have learned to spark the flame first.

The Economy Beneath the Surface

Oregon’s GDP has been growing at roughly twice the national average since the pandemic recovery period, driven by semiconductors, green tech, and advanced manufacturing. Intel’s $20 billion expansion in Hillsboro cements the Portland metro as a key node in America’s CHIPS Act supply chain. At the same time, the region is balancing one of the nation’s tightest labor markets with an affordability crisis; great for talent retention if you can afford to live here, problematic if you can’t.

The state government plays a hands-on role in entrepreneurship through the Oregon Innovation Council, Business Oregon, Oregon Growth Board, as well as Oregon’s Regional Innovation Hub strategy, each of which channels public funds or resources into local ecosystems. But as with so many public initiatives (looking at you Europe), the programs are often fragmented and burdened by red tape; a point repeatedly raised in national discussions on startup economic development policy. Government backing exists; efficiency, experience, and focus remain the missing links.

Applying the Six Considerations of Startup Economic Development

Drawing from 6 considerations Startup Economic Development, let’s assess where Portland excels and where it lags.

1. Culture: Of competition, potential, and creativity
   Portland’s creative DNA is undeniable. From design to digital media to sustainable tech, it’s a city where ideas are currency. But creativity must coexist with competition to drive innovation – if that’s what is appealing to the city. Portland excels at collaboration but hesitates at conflict; it celebrates artistry but occasionally undervalues ambition. To evolve, the city could encourage competitive drive alongside its cooperative ethos, fueling potential without losing authenticity. The goal isn’t to trade kindness for cutthroat behavior, but to cultivate a culfaceture where winning ideas are tested, challenged, and refined in the open.
2. Capital: Reasonable wealth available
   There’s money in Portland, just not always moving with startup velocity. The region benefits from family offices, exits from tech and manufacturing, and a surprisingly deep pool of affluent professionals. Yet as with Seattle’s early years, much of that wealth remains parked in real estate or index funds rather than startups (problems plaguing most cities). The problem isn’t capital scarcity, it’s capital courage. Oregon Venture Fund, Portland Seed Fund, and Elevate Capital prove that local investors can thrive here; the next leap is mobilizing more of Portland’s latent wealth into angel and early-stage investment.
3. Employers: Innovative companies as anchors
   Great ecosystems orbit great employers. Portland has them: Nike, Intel, Columbia Sportswear, Adidas North America, and Daimler Trucks, as well as iternet era influencers Google, AWS, and ebay, eash larger than the wave of mid-sized tech innovators from Vacasa to Puppet. These firms don’t just create jobs; they serve as training grounds for intrapreneurs who later become founders and, importantly but often overlooked, as fallback when entrepreneurs need to return to stability in a job. Portland’s challenge isn’t a lack of employers, it’s deepening their participation in the startup pipeline through venture arms, procurement programs, and shared R&D initiatives. When corporate innovation and startup creation intersect, talent stops leaving and ecosystems mature.  This is easily fixed with some collaboration and infrastructure that enables shared goals through common effort.
4. Governance: That there is little to no government interference
   Portland’s public sector has long been engaged in economic development, but sometimes with the over-engineered complexity of its famous bridges. The best governments in startup cities don’t manage founders, they remove friction. Oregon’s tax incentives, innovation grants, and public funds are valuable, but entrepreneurs still find themselves tangled in slow processes and policy ambiguity. The city’s opportunity lies in deregulating thoughtfully: streamlining zoning for innovation spaces, cutting bureaucracy around small business formation, and focusing government on enabling infrastructure (startup platforms, mobility in transportation, housing), not running accelerators.
5. Talent: Access to startup-experienced people
   Talent here is abundant, creative, and increasingly technical. Portland’s workforce draws from Nike’s marketing minds, Intel’s engineers, and Wieden+Kennedy’s storytellers. Yet what’s rare is startup-experienced leadership – people who have raised capital, scaled teams, and navigated exits. Programs like PIE are bridging that gap by connecting local founders with global mentors, but Portland still needs to import experience while exporting innovation. The more serial entrepreneurs the city attracts, the faster its learning curve shortens.
6. Promotion: Credible and distinct positioning of the city as a startup hub
   Portland’s story sells itself, it just doesn’t do so much. The city is known for coffee, bicycles, and breweries when it should also be known for code, capital, and climate innovation. The regional narrative must shift from lifestyle to leverage: Portland as the place where sustainable products, ethical AI, and conscious capitalism are born. Credible promotion isn’t boosterism, it’s honesty about what makes the ecosystem distinct. As Rick Turoczy frequently reminds in Silicon Florist, Portland doesn’t need to imitate Silicon Valley; it needs to be confident enough to be Portland.

Portland’s potential isn’t theoretical, it’s structural. The city already has the culture, capital, employers, and infrastructure needed to compete globally. What it needs is confidence in its own model of sustainable innovation: less regulation, more risk-taking, and a louder, more credible narrative about the kind of future being built here. When that alignment happens, investors won’t just visit Portland, they’ll stay.

Here again, Miller’s framework resonates. “When a founder gets validation from an investor, they often stop seeking it from customers. Money in the bank feels like traction but it isn’t.” Portland’s next growth phase will depend on avoiding that trap; staying customer-led while embracing capital as a tool, not a trophy.

What Portland Does Right and What Comes Next

Portland understands sustainability, community, and craft better than almost any city in America. Its next evolution must be from craft to scale, from values to valuation. What it might explore more is a shift to more structure: integrating global networks, measurable outcomes, and data-driven entrepreneur assessment into what has long been an artisanal ecosystem.

“Venture capital needs founders to survive, but founders don’t need VC to start. Get customer money first. Build strength. Then, if needed, bring in VC to turn a small fire into a bonfire.” – Duncan Miller

It’s precisely that disciplined, customer-first mentality that defines Portland’s future.

The question for investors is simple: Would you fund this startup called Portland? It has a brilliant team, strong IP, a cult brand, and an unparalleled talent pipeline. Its unit economics (culture and quality of life) are off the charts. What it needs is growth capital and go-to-market strategy and maybe a playbook for turning Portland’s authentic ingenuity into a scalable, investable economy.

“It’s a question akin to the journey that brought so many Americans toward the West Coast, a journey that involved a choice of paths. One fork of the fabled Oregon Trail led to the “get rich quick” promises of the Gold Rush in the Bay Area. The other led to homesteading and settling down to build a quiet and sustainable life in what would become the state of Oregon,” added Turoczy. “Neither of those endpoints has strayed far from that foundational ethos, even today.”

For me, Portland is irresistible because it embodies what entrepreneurship should be; driven by vision, values, and the willingness to experiment. It’s a city that takes risks for the right reasons. I want to help it build the infrastructure that translates that idealism into economic impact. If you care about sustainable growth, authentic innovation, and human-centered technology, you’ll find your people here.

So, investors, look at what’s brewing in Portland. You might discover that the next great American startup isn’t a company at all. It’s a city re-engineering capitalism itself.

The post Startup Investors, Let’s Get to Know Portland, Oregon appeared first on Startup Economist.

He was no wizard. Magic is the soft word we use when we can’t explain how someone bends the laws of reality. Willy Wonka bent them with sugar, steel, and science. His factory wasn’t a place of spells, it was a cathedral of chemistry, a machine that turned the imagination of children into industrial-scale production. He wasn’t born rich. The money came from work, obsessive, unrelenting work. From an engineer’s mind and an artist’s hunger, he built a world from cocoa beans and a dream that soured. Betrayed by Slugworth, the archetypal industrial spy (so it seems), Wonka did what so many brilliant founders eventually do: he lost faith in the world and shut the gates.

If there was magic, it wasn’t in his candy. It was in his control. Over his formulas, his workforce, his factory, and his vision. He was a maker. A capitalist genius. Damaged, yes, but in that damage, a reflection of the founders who would follow decades after being inspired as children in front of the television.

The Industrialist Behind the Illusion

To understand why the startup boom of the early 2000s felt so familiar, you have to remember that those entrepreneurs grew up in the 1970s and 80s. We didn’t worship venture capitalists or MBAs. We grew up with Doc Brown’s time machine, two nerdy teenage boys who create a perfect woman using a computer and a doll, a Real Genius, The Manhattan Project, an Inner Space, and a team of friends that invent proton packs. Our patron saint of invention was Gene Wilder in a purple coat, walking out of his factory on a cane, pretending to be frail before somersaulting to his feet. That scene, famously demanded by Wilder against the director’s objections, set the tone for everything that followed. He told them, “From that time on, no one will know if I’m lying or telling the truth.” That’s entrepreneurship in a sentence. The founder’s paradox: the reality distortion field. The limping magician who suddenly cartwheels into control. Every successful founder pitches that way: feigning humility, promising wonder, concealing the mad precision underneath.

Wonka was the perfect entrepreneur long before we had a word for “startup.” He built a vertically integrated supply chain from jungle to packaging line. He imported labor through global arbitrage; paying the Oompa-Loompas in cocoa beans, their chosen currency, rather than dollars. It sounds scandalous until you realize it’s the same logic that built modern manufacturing: offer safety, dignity, and abundance to those escaping worse conditions, and they’ll build empires with you. He wasn’t exploiting them, he was protecting them, giving them purpose and prosperity inside a closed ecosystem (let’s not get into the actual history of the story found in the book; that misses the point I’m making here). Ask anyone who’s run a startup in stealth: sometimes the only way to innovate is to seal the doors and control every variable.

Gene Wilder’s Determination and Creativity: The Founder’s First Pitch

Wonka controlled everything. That was his genius and his flaw. His world was a symphony of mechanical precision: chocolate rivers, lickable wallpaper, Everlasting Gobstoppers. Each product was a proof-of-concept that bridged physics and psychology. His confections weren’t magic tricks; they were feats of engineering.

And yet, at the earliest stages of his innovation, he taught us why so many founders fail now when they build an MVP without doing the market research: The Three-Course Dinner Chewing Gum was food science gone rogue. Fizzy Lifting Drinks were the aerospace industry in a bottle but with a dangerous implication. The Television Chocolate Room was early-stage quantum teleportation wrapped in an irreversible joke.

He warped reality not with spells but with equations and where it worked, he changed the world, but because he only let the customers in the workshop when he felt he was ready, he also had a lot of experiments gone wrong. Machines, chemicals, and willpower make science indistinguishable from magic, the heart of a startup, teaching us it’s possible to invent a better world, and yet the movie also set the stage that if you disregard the market (as so many of you do these days, until you want to let people in), you’re more likely to cause harm.

Every detail of his operation anticipated the startup ethos. His factory was the prototype of Apple’s design lab, SpaceX’s hangar, and Google’s X division rolled into one. Every room was a skunkworks project. Every Oompa-Loompa chant was a company manifesto about the consequences of bad user behavior. When Augustus Gloop fell into the chocolate river, it was a product demo gone wrong. When Violet Beauregarde inflated into a blueberry, it was a failed beta test. When Mike Teevee disassembled himself to reach the television world, it was VR before its time; cautionary tales about overusing technology before safety testing. The entire film is a parable about innovation without marketing, curiosity without caution, and the founder’s moral responsibility for what they create.

The Marketing of Wonder

Wonka was a capitalist Prometheus, stealing the fire of industrial chemistry to create joy instead of power. He sold not necessity but novelty. His customers weren’t hungry, they were bored. He understood the real business model of the modern age: we don’t buy to live; we buy to feel alive. He turned candy into experience, just as the startup generation turned software into lifestyle. The chocolate river wasn’t food manufacturing; it was content marketing. It existed to be remembered, to inspire awe, to turn children into evangelists. Long before brand loyalty had a name, Wonka built the most powerful kind of marketing there is: myth.

And the myth worked. Even his collapse was instructional. Like any founder in a frothy market, he was burned by betrayal. Slugworth stole his IP, just as Netscape was crushed by Microsoft, just as countless dot-com startups were cloned by giants with more capital. Wonka’s response, to close his gates and go underground, foreshadowed the first startup crash. He fired everyone and automated his plant, relying entirely on what he could trust: his machines. His code. His hands. When human loyalty failed, he turned to systems. The 2000s founder did the same with servers, networks, and codebases. Both knew that the only way to eliminate betrayal was to replace people with precision.

But the film isn’t cynical. That’s the genius of Gene Wilder’s performance. Beneath the control and the madness, there’s tenderness; a desire to find one person pure enough to inherit it all. The golden tickets weren’t marketing gimmicks; they were due diligence. Wonka was running a succession plan. The interviews weren’t on Zoom… they were death traps disguised as delights, stress tests of moral fiber, he used his flawed MVPs not to find customers but to find his co-founder. The children who failed weren’t punished by magic; they were eliminated by consequence. Greed, vanity, and gluttony don’t scale. Only curiosity, gratitude, and integrity do. Charlie Bucket wasn’t rewarded for innocence; he was rewarded for restraint. When he returned the stolen Fizzy Lifting Drink, he passed the founder’s test: can you wield power without losing your soul?

When Wonka finally turns to Charlie and says, “Don’t forget what happened to the man who suddenly got everything he wanted,” he’s speaking to every entrepreneur who ever raised a Series A. The lesson isn’t about greed; we learned about gravity. The higher you climb, the harder reality will pull you back. Founders who forget that are doomed to end up like Violet, forever inflated by their own hype.

So, when the kids of the 70s and 80s grew up and started companies around 2000, they were channeling the same energy they saw in that factory: audacity, control, and wonder. The Internet was their chocolate river. Venture capital was their golden ticket. Their startups promised to warp the world, not with magic, but with code. They built social networks instead of candy machines, apps instead of Everlasting Gobstoppers. They made mistakes, exploded a few bubbles, and sang a few moral lessons along the way. But the spirit of it (the manic blend of genius, risk, and ethics) was pure Wonka. Which is my point in observing the film of 1971 – that it BOTH inspired and taught us the critical role of storytelling, teams, and feedback: causing the boom of success among the generation that grew up with those lessons.

To those of us who grew up wanting a better life for Mr. Bucket, Mrs. Bucket, Grandpa Joe, Grandma Josephine, Grandpa George, and Grandma Georgina, Wonka and Charlie taught us a factory is an incubator that inspires and tests, there are risks in launching without marketing, that every pitch deck is his song, and that a soft launch is a set of golden tickets that validate possibilities. The founder’s office, with its whiteboards and prototypes, is where ideas bubble and explode and turn blue before they’re ready for market – prototypes, not MVPs, which need to be put in Bill Candyman’s store.

We romanticized possibilities, people, and spaces, for the same reason children romanticized Wonka’s world: because inside them, we glimpse the fusion of science and story, discipline, and dream.

The Real Magic of Making Things

Willy Wonka didn’t cast spells. He engineered delight. He didn’t perform miracles. He manufactured them. He was the archetype of the modern maker: half artist, half capitalist, wholly obsessed. And he left behind a lesson the startup generation can’t afford to forget: the real magic isn’t in what you make; it’s in how much control you can bear to lose when it finally works.

That’s why, twenty years later, the kids who grew up with Gene Wilder became the entrepreneurs who built our modern world. They saw that the wildest dreams weren’t fantasy, they were prototypes. That science could feel like sorcery if you worked hard enough. That a factory could be a laboratory of joy. And that the song matters as much or more than the science.

And if you listen closely, under the hum of every server farm and the buzz of every accelerator, you can still hear the faint rhythm of an Oompa-Loompa song: a warning and a promise that creation always comes with a cost. But to those of us who watched Wonka walk out on that cane, stumble, and somersault into glory, it was worth it. Because he showed us what the world looks like when imagination gets to build the machines.

The post Willy Wonka Inspired a Generation of Founders appeared first on Startup Economist.

What if the problem isn’t that cities can’t build startups, what if the problem is they’re building the wrong kind of systems?

In the frenzy to claim, “innovation district,” many regions forget the fundamentals: connections, capital-fit, customer access, and context. In a recent panel for Founder Institute, I brought together three ecosystem practitioners, Levi Velez Reed (Seattle/Bellevue), Elizabeth Packer, AICP (Washington, D.C.), and Hunter McFarland (Tulsa), to dig into what really works and what should in startup ecosystems throughout the world.

What emerged wasn’t more accelerators or photo-op pitch nights. It was collaboration, coalition, and startup ecosystem infrastructure (social, financial and institutional) that’s built intentionally. Let’s walk through their insights, consolidate the evidence, and surface what you, as an economic-development leader, VC, or founder, should actually act on.

Tune in to our event here and then read on as I ramble through my intro:

Bellevue/Seattle: Capital in the Shadows

Levi Velez Reed knows the Seattle region has enormous technical wealth and corporate density, yet he starts from the ideal foundation for in any community, we can do better. He notes:

We have a real lack of very early-stage investors. Most of our high-net-worth individuals made their wealth as corporate executives … They want to invest on pre-seed terms with seed-stage traction.

In other words: the money is there, but not the risk posture. Reed’s program, Startup425, works at the public-sector interface, supporting businesses “of all sizes” rather than only chasing unicorns.

He points out that Bellevue is punching above its weight:

Out of the roughly 18 unicorns based in the Seattle area, about half are headquartered in Bellevue … The city’s administration is more forward-looking.

Which means a suburban-adjacent locale is gaining the startup halo while regional capital remains locked in conservative patterns.

Why does this matter? Because research shows that venture capital and innovation activity are heavily concentrated in very few places. A Brookings Institution report (July 2025) found “30 metros (with San Francisco and San Jose central)…” dominate the emerging AI economy. Without active investor education and risk-capital diversification, even regions with strong assets lose founders to other cities.

Tulsa: Retention-Oriented, Not Just Attraction-Oriented

Tulsa, not traditionally viewed as a “startup mecca,” is playing a more strategic long game. Hunter McFarland frames it this way:

Tulsa is doing a lot of amazing things. It’s one of those ecosystems where everyone is one coffee away.

He’s referring to the mindset: intimacy, connection, trust. Build in Tulsa, supported by local foundations and state resources, helps founders “from ideation to scale, through both non-dilutive and equity-based funding programs like TechStars.”

We probably have five true VC firms,” he said. “We need people to invest in our companies and not take them away.

Here’s why that mindset matters: a region that incentivizes retention of companies, not just their launch, flips the conventional model. The infrastructure is less about spectacle, more about durability.

McFarland’s point, that early-stage capital is only half the issue; the rest is aligning incentives for founders to stay, spotlights an often-overlooked metric of ecosystem health.

Washington, D.C.: When the Public Sector Picks Up the Venture Playbook

Elizabeth Packer is rewriting the script for D.C. as a tech ecosystem more than the nation’s capital.

Five years ago, D.C. wasn’t really thinking about tech as a driver of our economy … Now, we’re focused on growing our private sector as a generator of jobs.

There they launched the D.C. Venture Capital Fund to support early-stage companies that commit to staying and hiring in the region. They added an international “soft landing” program for non-U.S. based startups.

“Cybersecurity and fintech are booming because companies want to be close to where decisions are made,” she observed. Yet she also recognized the headwinds:

Maryland and Virginia often offer more competitive incentives … We see founders who want to stay in D.C., but affordability pushes them elsewhere.

This mirrors international findings: the Organisation for Economic Co?operation and Development (OECD – OCDE) notes that strong ecosystems require not only resources but structure: networks, institutional quality, regulation and culture.

What the Evidence Says: Ecosystem Health Isn’t About Hype

• The OECD emphasizes that the health of regional entrepreneurial ecosystems depends on “access to finance, talent and skills, networks and institutions.”
• The Kauffman Foundation shows persistent gaps in access to capital for certain groups: “gaps in entrepreneurial activity… Barriers can prevent people from ever becoming entrepreneurs or slow their decision to start up.
• The Brookings Institution finds that while “capital exists,” it is geographically concentrated, leaving many regions underserved.

In plain English: you can’t fix a city’s startup ecosystem simply by planting co-working spaces and hiring a “Chief Innovation Officer.” You must fix the plumbing underneath: Who’s investing? How are they investing? Are there real customer pathways? Is government a helpful or hostile actor?

What Cities & Investors Should Do

1. Investor education is indispensable. Seattle has capital; what it lacks are investors willing to seed risk. Training, networks and structure (like angel groups) change investor behavior.
2. Retain the companies you help launch. Tulsa’s emphasis on keeping founders local isn’t romantic, it’s smart. Regions that lose scaling firms lose the brain-capital loop.
3. Public agencies must learn to move at startup speed. D.C.’s shift to venture investment and collaborations such as Penn West, show government can adapt, but only if they treat founders like stakeholders, not recipients of grants.
4. Customer-first, not funding-first. As Hunter put it: “A lot of our companies have early funding but no customers … They realize their ideal customer isn’t here, so they move.”
5. Measure ecosystem health differently. Instead of counting accelerator graduates, ask: How many local startups raised follow-on rounds? How many founders stayed city-based? How many jobs created from local firms?

Don’t Ask If Your City Can Be Silicon Valley

Ask: can your city be what your city is for entrepreneurs?

If you’re imitating coastal models without adapting to your culture, resources, and realities, you’ll build a mirror image of someone else’s problem.

Levi’s candid summation:

We need more sophistication and understanding among early investors… It’s not just about writing checks; it’s about being a value-add beyond capital.

And Hunter’s reminder: “We need people to invest in our companies and not take them away.”

Stop modelling ecosystems around what looks good. Model them around what actually works. Every region has its niche. Entrepreneurs don’t need more theatre, they need a system that makes them visible, fundable, and sticky.

So, if your region were a startup, would you invest in it today?

Couple of ways we can accelerate your change to better impact entrepreneurship

1. Making investors available is easy when you appreciate that it isn’t local. We can solve a big part of the infrastructure need for you. Learn more here.
2. Through my work in Startup Economist, let’s better map your ecosystem and uncover opportunities, I’ve done so for Bellevue (Seattle), Washington D.C., and many more, if you want to be next, let me know.

What’s your region’s biggest bottleneck right now: Capital? Founders? Retention? Investor sophistication? I’d love to know.

Another great event upcoming for City Leaders, Economic Development Offices, and Ecosystem Builders: How to Unlock Your Region’s Entrepreneurial Potential for Economic Growth, to explore how data-driven infrastructure can make it happen – Register to Attend Here

The post How Real Ecosystems Outperform Hype: Startup Ecosystem Infrastructure appeared first on Startup Economist.

Until Cities Get That Straight, Startups Will Keep Starving for Capital

It’s a weird day when the world’s entrepreneurs sound like customers complaining about a bad product.

“We can’t find funding.” “Investors aren’t taking risks.” “There’s no capital in our city.” You’ve heard it a thousand times; it’s the economic equivalent of Yelp reviews from startups that believe they’re entitled to be served. And I’m concerned, because in a strange inversion of logic, cities, accelerators, and economic development offices rush to solve the wrong problem. They’re not fixing the product. They’re fixing the reviews.

We’ve somehow forgotten that venture capital is itself a business, with customers of its own. The customer of a VC isn’t a founder; it’s a Limited Partner (LP). The pension funds, individual investors, endowments, and family offices that fund the funds are the paying clients. Venture capital firms, like any other business, have to deliver a return to their customers.

The “product” they’re selling to LPs is the startup.

So, when the startups in your city aren’t getting funded, it isn’t because investors aren’t available, it isn’t that investors are cruel, or the system is broken, or the government hasn’t hosted enough “meet the VC” nights with deli plates and Hello My Name Is stickers. It’s because the products (the startups) aren’t good enough to sell and that is in part because the ecosystem needs work. Why startups struggle to get venture capital funding is because the way you’re supporting the ecosystem isn’t working.

The Product Feedback Loop Nobody Wants to Hear

Every time founders lament the lack of capital, they’re giving feedback. But it’s product feedback, not customer feedback. The customer (the LP) isn’t buying. And the customer isn’t buying because the product (the startup) AND your market aren’t offering value commensurate with the risk.

If a car company blamed consumers for not buying a faulty vehicle, we’d laugh. But in startups, we treat it as noble suffering. Founders and cities rally behind “capital deserts” promising networking events, demo days, and warm intros, instead of facing a simpler truth: if capital isn’t flowing to your region, your product isn’t compelling enough.

I just hosted an economic development event and in our discussion of startups, we polled the audience asking the challenges to scaling startups in your region. The majority conclusion?

Lack of access to capital (We’ll be writing up the talk and sharing the video shortly, make sure you’re subscribed here if you want to get it). Now, I share that, because that’s the opinion of local governments and economic development offices. We lack access to capital. And yet, this has been researched, the primary reasons venture capital isn’t sufficiently available in a city are risk aversion, lack of a network, and startup quality – follow? You don’t lack access to capital and you’re addressing the wrong problem if you think it’s merely making investors available.

The Real Market of Venture Capital

Venture capital is a two-sided market. On one side are investors (LPs) seeking returns. On the other side are startups seeking capital. The venture firm sits in the middle, much like a wholesaler. It doesn’t manufacture startups, it curates them, packages them, and delivers them to its customers, who are the investors buying exposure to risk-adjusted innovation.

If LPs aren’t reinvesting in funds that focus on your city or your ecosystem, it’s not because of some national conspiracy against your address. It’s because the funds haven’t proven that product-market fit works there (product-market fit, a startup sector term meaning that what a startup offers fits what the market values). If venture dollars aren’t flowing, it’s because investors don’t see scalable startups worthy of that flow – and that’s not alone founders’ fault: it’s your ecosystem, the startup programs, the mentorship available, and more.

Cities Are Treating Venture Capital Like Tourism

Economic development offices are throwing money at “venture capital attraction” programs as though venture funds are visiting tourists; bring them in, show them the sights, tour the innovation hub filled with local character, let them shake hands with some founders, and maybe they’ll leave a few dollars behind. It’s the same thinking that turned startup accelerators into ribbon-cutting ceremonies.

But capital doesn’t show up for good hospitality. It shows up for good economics.

Cities shouldn’t be hosting investor summits; they should be building markets that serve founders and mitigate risks; the kind that generate the data, customers, and confidence that make LPs invest in the funds that back those regions.

In short, if the startups are the product, and the LPs are the customer, then the role of a city is to strengthen the supply chain. That means refining startup quality, expanding founder education, promoting opportunity, aligning with universities and R&D, and ensuring early customers exist within reach. You don’t need to attract VCs; you need to build a market worth their inventory.

Building Better Products and Better Markets

Want investors to fund your startups? Stop trying to sell the story and start building the infrastructure.

1. Focus on Founder Development, Not Pitch Training.
   Don’t teach founders how to raise money; teach them how to build something worth funding. Programs like Founder Institute, Y Combinator, and Techstars succeed because they filter ruthlessly for execution, not charm.
2. Fund the First Customers.
   Create procurement programs that buy from local startups. Cities could seed their own innovation economy if they treated startups as vendors instead of vanity projects.
3. Professionalize Angel and Mentor Networks.
   Local angels need to be actual angels (not business investors) and mentors must be expected to have startup experience. Foster co-investment through structured syndicates. Support the mentors who aren’t just skilled, they’ve been through the startup ringer.
4. Measure Outcomes, Not Events.
   Track founder retention, capital raised, and startup growth, not attendance at pitch nights. LPs care about measurable ROI, and so should cities.
5. Build Domain Clusters That Make Sense.
   Stop chasing “tech.” Chase the specific industries that fit your DNA: healthcare in Nashville, logistics in Bentonville, semiconductors in Phoenix. You can’t fake an ecosystem any more than you can fake a product.

The Hard Truth: The Problem Isn’t the Capital

When founders complain that they can’t find capital, cities respond by trying to import local wealth to meetups. They host events and court people with money in an effort to encourage check-writing. But they rarely ask why investors aren’t already there. Worse, pulling business investors, wealthy community members, and capital familiar with real estate or oil is only going to frustrate matters more because startups are high risk investments unfamiliar to such people.

Capital is fluid. It hunts for yield. It’s not sentimental about geography or narrative. When it doesn’t come to you, it’s not because it’s hiding, it’s because it’s unimpressed.

The brutal reality of venture capital is that it’s a market like any other. If the customers (LPs) aren’t buying the product (startups), the problem isn’t the supply of capital. It’s the quality of inventory and the market in which it’s available.

The Fix: Stop Selling, Start Building

If your city wants venture capital, stop marketing to investors and start manufacturing scalable startups while developing your supply chain as a market in which they thrive. That means cultivating entrepreneurs who understand markets, unit economics, and the discipline of execution, not just the pitch deck template.

It means listening to the real feedback; the kind that doesn’t feel good. When capital skips over your region, it’s not rejection. It’s a signal.

As with any business, product feedback is your path to improvement – in this case, the customers are already telling you it needs work. The goal isn’t to attract capital, it’s to deserve it.

If your economic development strategy doesn’t yet understand that venture funds have customers, it’s time to redesign your startup ecosystem as though you were building a business, because you are. Let me know if I can help.

The post The Customer of Venture Capital Isn’t the Founder, It’s the Investor appeared first on Startup Economist.

Every generation believes it’s living through the end of the world. With all that’s on social media and in the news now, ours might finally be right, but not in the way we think. And you reader, entrepreneurs, investors, and economic development leaders, are the people we need rising to the challenges.

R.E.M.’s It’s the End of the World as We Know It (And I Feel Fine) isn’t just a relic of late-80s college radio that holds space in my brain. It’s prophecy with rhythm; a lyrical panic attack set to jangly guitars. Michael Stipe didn’t just write a song; he captured the manic absurdity of a culture pretending it was under control while everything it built teetered on collapse. The Cold War, Wall Street, tabloid politics – it was all unraveling under the weight of its own confidence.

Sound familiar?

We’re humming the same chorus in a different decade. The headlines are no longer about mushroom clouds and Madonna but about AI taking jobs, crypto burning billions, kids glued to screens, cities drowning in housing crises, and politicians arguing over which apocalypse is most profitable. The internet, supposedly our global enlightenment project, has become the world’s largest anxiety machine.

And yet, everyone’s walking around smiling. Economic development offices hold ribbon cuttings for accelerators no one joins. Venture firms issue performative blog posts about being supportive while quietly doubling down on the same five founders from Stanford. Governments host innovation summits with the PowerPoint slides they used before COVID. All set to the beat of “and I feel fine.”

Let’s not pretend: no one feels fine (except maybe, for your AI)

R.E.M.’s chorus wasn’t optimism; it was irony. That “and I feel fine” is the collective whistle of a species pretending the ground isn’t shaking. It’s the emotional equivalent of a startup founder answering “Great!” when you ask how things are going, knowing the burn rate and the investor pipeline say otherwise. I’m speaking to every single one of you I know because I know we all do it; consider this your permission to breathe and stop pretending.

Founders live in that space between chaos and confidence. It’s where imposter syndrome and resilience share a bunk bed. The cultural myth of entrepreneurship (garage-to-glory) teaches us to perform certainty even when the floor’s collapsing. That’s fine when it’s individual psychology. It’s dangerous when cities, governments, and entire economies start doing it too.

Take your pick of “fine” facades.

• The federal government proclaims small business growth while early-stage capital availability falls off a cliff.
• Startup accelerators brag about hundreds of graduates while quietly avoiding any mention of how many still exist two years later.
• Local EDOs celebrate the arrival of a Fortune 500 satellite office as if that’s innovation, when it’s really outsourcing with a press release.

We’ve industrialized pretending everything’s fine. And that’s the real end of the world. Not asteroids or AI but the slow death of honesty in how we build the future.

Art as a Mirror

Art has always been how we process collapse.

When Stipe rattled off his breathless list, “Leonard Bernstein, Leonid Brezhnev, Lenny Bruce, and Lester Bangs,” it wasn’t random nonsense; it was culture eating itself in real time. A list of icons and ideologues, mashed together in media.

Fast forward thirty years, and we’ve replaced rock critics with influencers, Brezhnev with billionaires, and Bernstein with AI-generated symphonies. The chaos hasn’t changed, just the chorus.

Music, film, and art give us rehearsal space for reinvention. They show us that collapse is always a prelude. Punk didn’t destroy rock; it raged it. Hip-hop didn’t shatter pop; it redefined ownership, language, and cultural power. Tech is supposed to do the same and yet somehow, the startup world turned disruption into a brand with a book instead of revolution.

Entrepreneurship is fundamentally one of our great art forms; instead, we’ve commodified it. Demo days are talent shows. Accelerators are subscription models. And innovation (once rebellion: disruptive innovation) has become a cover band at the fall festival where economic development departments chase local headlines instead of outcomes.