This four-part series addresses why tracking and measuring the activity of your entrepreneurial ecosystem is crucial to its long-term sustainability and the economic success of your community. Part 1 of this series covers why measurement is important, Part 2 discusses what to measure, Part 3 provides insights into how to measure and Part 4 delves into how to report your data.
Part 2: What to Measure
As stewards of economic progress, your decisions wield significant influence in shaping a landscape where innovation flourishes, businesses thrive and communities prosper. Data is essential for helping you make informed choices.
Yet, according to Michael Carmona, senior director at MOSourceLinkSM and KCSourceLinkSM: “When you think about economic development, there’s a lot of really great data that talks about industries and workforce, but there’s not been as much of an emphasis on the entrepreneur and the small business community. KCSourceLink and MOSourceLink, along with our partners, have played a big role in making sure there is some data available to show stakeholders and decision-makers the impact in that space.”
In the second article of this series, we delve into the metrics crucial for ensuring the success of a dynamic entrepreneurial ecosystem—from financial and economic indicators to the cultural and socio-economic benchmarks indicative of a thriving entrepreneurial landscape.
Although measuring an entrepreneurial ecosystem can be difficult, these metrics provide decision-makers with a roadmap for engineering and realizing such an environment, not just envisioning it.
You Are Here
Before embarking on any journey, it’s crucial to understand where you currently stand. This holds true for entrepreneurial ecosystems as well. Measuring the current condition of your entrepreneurial ecosystem provides a baseline for future development, improvement and intervention.
Start by inventorying the resources already available in your community—create an asset, or resource, map, if you will. The resources on your map may include incubators, accelerators, co-working spaces, educational and mentorship opportunities, networking events, funding sources and others.
Mapping your current resources not only reveals your ecosystem’s assets but also is a step toward discovering its gaps—further assessment can show that the resources you have on hand do not always align with what you need.
For example, more targeted research can reveal the types of entrepreneurs (e.g., tech startups, social enterprises, or traditional Main Street small businesses) in your community as well as their demographics. By comparing existing resources to these demographic realities, gaps become apparent. Awareness of these gaps helps you to tailor solutions in terms of support and distribution of resources.
Remember: No two entrepreneurial communities are alike. Measuring your ecosystem’s current state identifies its unique challenges and opportunities. By uncovering these insights, communities can eliminate redundant processes, focus on solving specific problems and create a more supportive environment for entrepreneurs.
Where to Head Next
Once you’ve started your measurement journey by gathering baseline data about the demographics and resources currently comprising your entrepreneurial ecosystem, it’s crucial to determine the metrics, or indicators, you’ll use to measure success moving forward. Measuring demonstrates the impact of your initiatives—and it keeps stakeholders, community members, and partners informed and engaged.
Cameron Cushman, assistant vice president of innovation ecosystems at the University of North Texas Health Science Center (HSC), said: “Without it [data], nobody knows the health of your entrepreneurial ecosystem. You can’t make policy decisions, you can’t make funding decisions, right? Investors don’t know how they’re doing … incubators and accelerators don’t know how they’re doing … if you don’t have any of this kind of data.”
As you contemplate what success looks like for your entrepreneurial ecosystem and how to measure it, keep in mind that various stakeholders will define success differently. Your metrics may vary, therefore, even within the same ecosystem, depending on who you are measuring for.
“Policymakers care about jobs,” said Cushman. “Investors and startups care about funding.”
Even without consistent metrics from community to community or among the programs within a community, measuring success typically involves tracking these basic metrics:
- Jobs Created. The number of jobs generated by startups and small businesses within the ecosystem.
- Entrepreneurs Served. The number of individuals who have received support, mentorship or training.
- Funds Allocated. The amount of capital (1) allocated to various programs and initiatives designed to support entrepreneurs or (2) directly invested in startups and small businesses.
- Revenue Generated. The total revenue businesses within the ecosystem generate.
- Businesses Started. The number of new businesses launched.
Highlighting specific program successes and showcasing the stories of entrepreneurs who have thrived within the ecosystem can also be powerful ways to illustrate progress. Cushman, for example, said, “We chose specific metrics on our dashboard to give a comprehensive overview of the main message that entrepreneurs and small business owners contribute an outsized share to economic development through job creation, innovation, and solutions to complex problems.”
Carmona underscores that it’s essential to use the right metrics for the right stage of an ecosystem’s development. Early-stage ecosystems may focus more on job creation and business starts, while mature ecosystems may prioritize revenue generation and international expansion. Customizing your metrics to align with your community’s stage of development ensures you are measuring what truly matters.
Drilling Beyond the Basics
Maria Meyers, associate vice chancellor and executive director of the UMKC Innovation Center, notes one aspect of measurement that has changed drastically during the past few years: Measures are becoming more sophisticated. There is an interest in outcomes, or what happens to clients and a community, versus inputs and outputs, which are focused more on a program’s numbers.
For instance, she says, more questions are arising about why people of color and women are not successfully growing businesses at the same rates or the same size as other demographic groups.
“So that changes how you measure, right? We’re starting to see demographic information on where the capital goes and who’s getting what,” she said, “so you can see where the gaps are. We’re taking measures and breaking them down a bit more.”
Rather than tracking that the result of an entrepreneurial training program was an increase in jobs or sales for the participating businesses—typical measures of economic development—there is a growing focus on the deeper impact of those jobs or sales. Meyers said: “We’re beginning to see an interest in things like change in wealth of communities, which takes measurement a step beyond the jobs. It leads to measuring the salaries those jobs pay and whether that’s shifting the wealth gap in a community.”
Carmona has witnessed the same trend. “Measuring impact has always been one of the top items everybody tries to figure out,” he said. “I worked with a health department to develop a pilot program that looked at entrepreneurship and economic opportunity as a means to address health and violence in communities. We would like to show measurements to connect the impact of entrepreneurship to increasing life expectancy in the community—lowering violence in communities, for example.”
HSC’s Sparkyard is built upon the SourceLink model that connects entrepreneurs with resources and provides information about the local startup community through data analysis. Cushman said the Sparkyard team is pioneering new metrics that “help create a more well-rounded view of our ecosystem, including first-of-their-kind measurements on diversity, equity and inclusion (DEl) and topophilia (love of place).”
Carmona said that to demonstrate the kinds of outcomes mentioned above, entrepreneurial ecosystems must figure out how to pull together different pieces of data and “have a very easy-to-understand methodology—it’s important to show how you put the numbers together. We have an opportunity to look at stacking different sources of data to tell deeper, more impactful stories.”
Measuring for Sustainability
Sustainability is a vital aspect of any entrepreneurial ecosystem. Measurement plays a pivotal role in ensuring an ecosystem can thrive and continue to support entrepreneurs for the long term—and by extension, the communities in which entrepreneurs operate.
Sustainability metrics may include:
- Retention Rate. How many startups and businesses remain active and continue to grow within the ecosystem over time?
- Entrepreneurial Satisfaction. Are entrepreneurs satisfied with the support and resources available?
- Resource Utilization. Are resources being used effectively, or is there underutilization or redundancy?
- Resource Diversification: How diverse are the available resources, and is there a healthy mix of financial, mentoring, and infrastructure support?
- Ecosystem Health. What is the overall health of the ecosystem, determined by monitoring factors like the diversity of industries, the availability of funding, and the strength of support networks?
- Community Engagement. Is the community actively engaged and contributing to the growth of the ecosystem—and its entrepreneurs?
By measuring these factors, community builders can identify areas where sustainability efforts may need to be adjusted or enhanced so entrepreneurship can thrive for years into the future.
SourceLink Affiliates Pave the Way
Determining which metrics to use to determine the health of an entrepreneurial ecosystem—and ultimately its success—is an evolving process, one that’s dependent upon where you are in your measurement journey, the development stage of your ecosystem, and several other factors. As noted previously, typical impact measures, like jobs, can’t in themselves tell the complete story. Nor do they provide a reliable roadmap for where an entrepreneurial community should focus.
SourceLink affiliates, however, are at the forefront when it comes to better defining what to measure.
In an article Meyers wrote for the IEDC journal, she asserts the first year of building a network of support should focus on its:
- Access: Make resources visible through a website with a central calendar and resource directory—and market it through community presentations, media, and social media platforms.
- Strength: Create linkages to form a network that works together to support entrepreneurs and change the community. Collaboration among service providers strengthens the network because communication keeps all resource providers aware of the resources available and also identifies gaps.
- Reach: How many network partners are in your community? How many network partner meetings occur—and how often? How many entrepreneurial events are published on a centralized community calendar?
IASourceLink, an example Meyers cites, operates a statewide network of several hundred business service providers. The accompanying graphic illustrates the access (web visits, hotline calls, and directory searches), strength (partners, calendar events and satisfaction survey results) and reach (friends and followers, sources of traffic) of their network ecosystem.
As noted, what to measure changes as an entrepreneurial network matures. Good examples of SourceLink affiliates that focus on more advanced measures are KCSourceLink and Cushman’s Sparkyard in Fort Worth.
For the past several years, KCSourceLink has published “We Create KC,” a series of ecosystem reports on jobs, capital and corporate engagement that uses more targeted data to tell the story of how entrepreneurs, investors, universities, service providers and community leaders work together to shape a better and brighter Kansas City.
Likewise, Sparkyard publishes several online dashboards to showcase the new metrics they have pioneered to create a more well-rounded view of Fort Worth’s entrepreneurial ecosystem, including DEI and love of place.
National efforts are also underway to help communities address ecosystem metrics. The Ecosystem Building Leadership Project (EBLP) is a national project working to accelerate understanding and adoption of ecosystem building in communities. Included in its work is defining—and refining—the metrics necessary for evaluating and building effective and successful entrepreneurial communities.
In the intricate landscape of entrepreneurial ecosystems, navigating through various metrics and deciding on those appropriate for your community as it evolves may seem daunting. Yet, amidst the complexity, shining examples of affiliates that illuminate the path forward do exist. By emulating these role models, you can find inspiration and guidance for determining the metrics you need to continue building a thriving and dynamic entrepreneurial ecosystem.
Part 3 of our series on entrepreneurial ecosystem measurement covers how to start measuring, including methodologies and measurement instruments.