MIT Sloan Associate Dean for Innovation Fiona Murray
From City A.M.
Increasingly, it is innovation-driven entrepreneurs who are providing effective and scalable solutions rather than aid agencies or governments.
Traditionally, the focus of entrepreneurship in the developing world has been on creating small- and medium-sized enterprises serving local markets. However, that emphasis must shift from small firms to what MIT calls innovation-driven enterprises: start-ups that can scale for significant impact.
Building an innovation-driven enterprise is full of challenges for any entrepreneurial team. They must find an appropriate beachhead market, prototype and pilot, and recruit and retain top talent. They also require specialised entrepreneurial finance at each stage.
For development entrepreneurs, access to appropriate types of capital is a significant constraint.
Their challenges are not just about the limited availability of institutionalised venture capital, but to the full range of “risk capital” options, from initial financing by friends and family and angel investors to VCs, private equity and commercial banking. The creation of a pipeline of financial instruments is a critical bottleneck.
As we dig out of the first snowstorm of the year, we are reminded of one of the great appeals of Silicon Valley: the beautiful weather! And yet we both see – having just co-taught a course at MIT looking at entrepreneurial regions around the world – that Greater Boston and Massachusetts have many sources of competitive advantage that still make it a leading global hub for entrepreneurship and innovation, with new opportunities in 2014.
As an ecosystem, our New Year’s resolution should be to do all we can to ensure that the whole is greater than the sum of the parts. This is not always easy: research at MIT has taught us that at least five key stakeholder groups matter in such an entrepreneurial ecosystem – a model we refer to as the ‘pentacle’, consisting of: entrepreneurs, universities and ‘risk capital’ (of course), but also large corporations and even government policy makers.
Entrepreneurs are serious players in today’s innovation economy, leaders who can generate wealth, create jobs, and transform the lives of customers and employees alike. And yet only a few women can be found among the entrepreneurial elite. When you examine the venture-capital money going to fund the Biogens and Akamais of tomorrow, only 7 percent is won by female entrepreneurs. Although it is true that fewer women overall found businesses — and those they create tend to be in industries that don’t appeal to venture capitalists (VCs) — research shows that other factors are at play.
Each time I organize panels for my students at the MIT Sloan School of Management, I listen as VCs list their investment criteria: market size, competitive advantage, customer need. But when pressed about the uncertainties inherent in their evaluation, the VCs inevitably fall back on their assessment of the company’s leaders. “I ask myself: Is this a person I want to have breakfast, lunch, and dinner with,” one man told the class. “Are they the first person I think about when I get up in the morning?” asked another. This approach struck me more like a search for a soul mate than for a financial investment. In this process, female entrepreneurs fair poorly. Read More »
We heard the presidential candidates discuss their views again Tuesday night, and it is clear that they agree on at least one thing: jobs and job creation policies are critical to the future of the economy. Yet like many politicians, policy makers, and pundits, the candidates continue to gloss over what both men certainly know to be true: Not all jobs are created equal.
Based on our work at the Martin Trust Center for MIT Entrepreneurship, we see two clear and distinct routes to new job creation.
MIT Sloan Sr. Lecturer Bill Aulet
There are small- and medium-sized companies created to offer traditional goods and services to a local or regional market. Think “mom and pop” operations. They include your yoga studio and the pizza place down the street. While valuable to the economy in general, these companies are not large enough to serve as a growth engine for the entire economy. They do, however, offer important opportunities for employment and provide valuable services. Read More »
Some people think that the first step of innovation is asking for $10 million. We have grown accustomed to the idea that landing that kind of money from a granting agency or a venture fund is a prerequisite to execute on an idea for a new technology or market —or for that matter, even come up with a good idea in the first place.