@2_C11W1_Day_2_Envisioning_Ecosystems_STERN SS EDITS FINAL.pdf

Ecosystems index

1. @MIT_REAP
Overview:
Envisioning Ecosystem
Impact
Day 2
10:00 –10:45 AM
1©2024 Stern

2. @MIT_REAP
z
MIT Sloan School of Management
David Sarnoff Professor of Management
Co-Faculty Director, MIT Regional
Entrepreneurship Acceleration Program
Scott Stern
2©2024 Stern

3. @MIT_REAP 3
Day 2:
Envisioning Ecosystems Workshop
©2024 Stern

4. @MIT_REAP
MIT REAP Theory of Change
4©2024 Stern

5. @MIT_REAP
No one is “in charge” of entrepreneurship…
5©2024 Stern
STAKEHOLDERS

6. @MIT_REAP 6©2024 Stern
MIT REAP System
SYSTEM

7. @MIT_REAP 7
Key Strategic Interventions
©2024 Stern
What key priority can “unlock” change
in the rest of the system?
ECOSYSTEM
STRATEGIC
INTERVENTIONS
COMMERCIALIZATION &
ACCELERATION PROGRAMS
HUMAN CAPITAL AND
WORKFORCE DEVELOPMENT
INNOVATION
PARTNERSHIPS
INVESTMENT
AND RISK CAPITAL

8. @MIT_REAP
MIT REAP Theory of Change
8©2024 Stern
SYSTEM
SYSTEM

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Entrepreneurship and Economic Growth
©2024 Stern

10. @MIT_REAP@MIT_REAP ©2024 Stern 10

11. @MIT_REAP@MIT_REAP ©2024 Stern 11

12. @MIT_REAP 12
Lord Kelvin
“I often say that when you can
measure what you are speaking
about, and express it in numbers,
you know something about it; but
when you cannot measure it, when you
cannot express it in numbers, your
knowledge is of a meagre and
unsatisfactory kind; it may be the
beginning of knowledge, but you have
scarcely, in your thoughts, advanced to
the stage of science, whatever the
matter may be.”
©2024 Stern

13. @MIT_REAP
Is Entrepreneurship on the Decline or in a Boom?
13©2024 Stern
Quantity Based
Measures:
Outcome Based
Measures:
PWC/NVCA MoneyTreeReport
Decker, Haltiwanger, Jarmin, and Miranda (2013,2015)
Haltiwanger, Jarmin, Kulick, and Miranda (2015)
Hathaway and Litan(2014a, 2014b)
20082009201020112012201320142015
"Billion $"$30.$20.$23.$29.$27.$30.$50.$59.
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Ven ture Ca pita l In ves tmen ts in U.S. (B$)

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How Can We Assess a Range of
Policies and Programs?
©2024 Stern

16. @MIT_REAP
These well-intentioned approaches
often end…in the Boulevard of
Broken Dreams
Many regional efforts to accelerate
through entrepreneurship fail to turn
“ideas” into action, or fizzle out after
an initial burst of energy and initiative
Far too often…
16©2024 Stern

17. @MIT_REAP 17©2024 Stern
To align stakeholders and policymakers,
need for shared understanding…
Can we develop meaningful and actionable
(and real-time) metrics for IDE ecosystem
assessments?

18. @MIT_REAP 18
SMEs & IDEs
©2024 Stern
Small-/Medium-sized
Enterprise (SME)
Income over time
Income
Time
Innovation-Driven
Enterprise (IDE)
Income over time
Income
Time
0 25 50 75 100%

19. @MIT_REAP
The Startup Cartography Project
Welcome!
19©2024 Stern

20. @MIT_REAP
(at or near the time of founding)
Three Steps to Measuring Entrepreneurial Quality
20©2024 Stern
Business Registrations
“Digital Signatures”
of Growth Potential
“Success” outcomes can
be mapped to initial
“digital signatures”

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Business registration is a practical and non-controversial
requirement for ventures seeking a meaningful growth outcome.
Public, comprehensive and comparable over time and location.
©2024 Stern

22. @MIT_REAP
Harvard Book Store & Amazon
A Tale of Two Bookstores
22©2024 Stern

23. @MIT_REAP
Change in the Probability of Growth
HasShortName 248%
FirmNamedafterFounder -70%
Corporation(NotPartnershiporLLC) 405%
TrademarkinFirstYear 501%
PatentandNoDelawareRegistration 3,534%
NoPatentandDelawareRegistration 4,470%
BothPatentandDelawareReg. 19,640%
SectoralControls Included
StateControls Included
How do “Digital Start-up Signatures”
Predict Growth? (NB: Prediction NOT Causal)
23©2024 Stern

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A New View of the Skew
©2024 Stern

25. @MIT_REAP
Entrepreneurial Quality Statistics
25©2024 Stern
Startup Formation
Rate
(SFR)
Number of
companies founded
SFR
Entrepreneurial
Quality Index
(EQI)
Average estimated
quality within a
group of start-ups
EQI
Regional
Entrepreneurship
Cohort Potential
Index (RECPI)
The number of
startups within a
particular region
expected to later
achieve a growth
outcome
RECPI
Regional
Entrepreneurship
Acceleration Index
(REAI)
Estimates the ability
of an ecosystem to
convert
entrepreneurial
potential into
realized growth
events.
REAI

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Silicon Valley
Los Angeles
©2024 Stern

27. @MIT_REAP 27©2024 Stern

28. @MIT_REAP 28©2024 Stern

29. @MIT_REAP
The Quality of Entrepreneurship in Kendall Square
29©2024 Stern

30. @MIT_REAP 30©2024 Stern
What does your entrepreneurial
ecosystem “look like” today?
In five years?

31. @MIT_REAP
Research
Highlights:
Using Entrepreneurial Quality
Estimates for Research and
Policy Insights
31©2024 Stern

32. @MIT_REAP
Entrepreneurial Quantity and Economic Growth
32©2024 Stern

33. @MIT_REAP
Entrepreneurial Quality and Economic Growth
33©2024 Stern

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The State of American Entrepreneurship (RECPI / GDP)
RECPI / GDP shows a sharp
rise in potential during the late
1990s, followed by a drop (but
NOT a collapse) in 2001 and
more moderate increase after
the Great Recession.
Nowcasted Index tracks
closely and documents
“boom” since 2010
Guzman and Stern (2016)
©2024 Stern
3.00E-05
4.00E-05
5.00E-05
6.00E-05
7.00E-05
8.00E-05
9.00E-05
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US Aggregate Entrepreneurship
Regional Entrepreneurship Cohort Potential Index (RECPI)
by Year
1988-2012
Data for 34 US States, accounting for 83% of US GDP
RECPI / GDP
RECPI / GDP 95% Confidence Interval
RECPI (Nowcasted) / GDP
Peak of
dot-
com
bubble
Great
Recession

35. @MIT_REAP 35
Decline in REAI indicates scaling failure…
©2024 Stern
Guzman and Stern (2016)

36. @MIT_REAP 36©2024 Stern
0
50
100
150
200
250
300
350
200720082009201020112012201320142015
Relative Percentage
Change
Change in Entrepreneurial Quantity
i6 SitePortland (City)
0
50
100
150
200
250
300
350
Relative Percentage
Change
Changes in Entrepreneurial Quality
i6 Site (Nowcasted)Porltland (Nowcasted)
No changes in quantity But an upward (noisy) swing
upward in qualityaround i6 site
What Happens to Quantity and Quality
after the i6 Program?

37. @MIT_REAP
The Impact of Research Institutions on the Quantity and Quality of Entrepreneurship
More Than an Ivory Tower:
37©2024 Stern
0
0.02
0.04
0.06
0.08
0.1
Average RECPI by year
Without research university
With research university
-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
University
Research
University
non-Research
National Labs
Change in RECPI From
Change in Univ R&D
RECPI

38. @MIT_REAP
The Ecosystem Impact of R&D Tax Credits
38©2024 Stern

39. @MIT_REAP
The Startup Cartography Project
Welcome!
39©2024 Stern

40. @MIT_REAP
Built around two principles:
40
The Startup Cartography Project
©2024 Stern
Measurement of Entrepreneurial Quality:
●Using predictive analytics and business registration records
●Apply the ‘Entrepreneurial Quality’ approach developed at MIT to account for
the vast differences between different types of firms.
User-Focused Design:
1.Visualization of entrepreneurial ecosystems (at multiple geographic
levels) and an ability to track entrepreneurial dynamics over time.
2.Data repository for use in a wide range of research and policy purposes.
3.Research archive to learn about entrepreneurial quality.

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The Startup Cartography Project –Evolution of Metros
©2024 Stern
www.startupcartography.com

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The Startup Cartography Project –Miami 2014
©2024 Stern
www.startupcartography.com

43. @MIT_REAP 43
Diversity & inclusion as consciousmetrics….
©2024 Stern

44. @MIT_REAP
A few dimensions to consider for your regions
44
Gender?
Geography? (e.g., city/rural)
Socio-economics?
Age?
Ethnicity?
©2024 Stern

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Entrepreneurship and COVID
©2024 Stern

46. @MIT_REAP
New Businesses, Pre and Post COVID
46 46©2024 Stern

47. @MIT_REAP
Driven By a Rise in Entrepreneurship in Historically
Middle-Income Black Neighborhoods…
47
Bui, Q. NYT, May 2021,
See NBER WP 28787
47©2024 Stern

48. @MIT_REAP
Internal Tracking:
●Measure the entrepreneurial quality of your region in real time to better
evaluate and track your ecosystem and programmatic progress over time
External Communication:
●Effectively communicate ecosystem priorities (your MIT REAP strategy) to key
stakeholders in your region
●Celebrate your progress and successes over time
●Co-author an academic paper with MIT on entrepreneurial quality specific to
your region
48
How could YOUR TEAM use this type of approach?
©2024 Stern

49. @MIT_REAP 49
Planning: Levels of Ecosystem Measurement
1. Ecosystem Shared Assessment (Required):
Systematic measurement of inputs and selected outputs of IDE Ecosystem, including measures
of I-Cap, E-Cap, Clusters, and Economic and Social Progress
2. Ecosystem IDE Performance Statistics:
Additional measures of overall ecosystem performance over time, including risk capital metrics
(venture capital funding and stages), number of “successful” scale-ups (IPOs, acquisitions), and
metrics of ecosystem economic performance (jobs, etc.)
3. MIT REAP IDE Ecosystem Metrics:
Population-level real-time measures of the quantity and quality of entrepreneurship at an arbitrary
level of geographic and temporal granularity
©2024 Stern

50. @MIT_REAP
Level 1: Customizing Your REAP Dashboard
50©2024 Stern

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Level 2: Ecosystem IDE Performance Statistics
©2024 Stern

52. @MIT_REAP
Level 3: REAP IDE Ecosystem Metrics
52©2024 Stern
Startup Formation
Rate
(SFR)
Number of
companies founded
SFR
Entrepreneurial
Quality Index
(EQI)
Average estimated
quality within a
group of start-ups
EQI
Regional
Entrepreneurship
Cohort Potential
Index (RECPI)
The number of
startups within a
particular region
expected to later
achieve a growth
outcome
RECPI
Regional
Entrepreneurship
Acceleration Index
(REAI)
Estimates the ability
of an ecosystem to
convert
entrepreneurial
potential into
realized growth
events.
REAI

53. @MIT_REAP 53
Number of Start-ups (born
after 2003)
©2024 Stern

54. @MIT_REAP 54
Number of Start-ups (born
after 2003) with more than
10 employees
©2024 Stern

55. @MIT_REAP 55
Number of Growth Start-
ups (born after 2003) with
more than 50 employees
©2024 Stern

56. @MIT_REAP 56
Number of Scale-ups (born
after 2003) with more than
100 employees
Scale-ups come from
Clusters and Cities
©2024 Stern

57. @MIT_REAP 57
LABii
Longitudinal Australian Business
Integrated Intelligence
eStrategy Tracker
GEM Australia
©2024 Stern

58. @MIT_REAP
from LABii
QLD Example of EQI Modelling
58©2024 Stern

59. @MIT_REAP
MIT REAP Focus Mexico
59 ©2024 Stern

60. @MIT_REAP 60 ©2024 Stern

61. @MIT_REAP
Key Questions:
•What data do you need?
•Who is going to access and evaluate this data?
•Who is your MIT REAP Data Rockstar?
* Please refer to MIT REAP Data Overview
61
What is your plan of action?
©2024 Stern

62. @MIT_REAP
•Your MIT REAP Data Rockstar must be able to access and interpret key
economic data (e.g., on patents, new firm formation) as well as have the
analytical capabilities to work with large data sets and work with MIT REAP
faculty to execute on your MIT REAP dashboard and indices.
•You are strongly encouraged to engage local PhD students or faculty in MIT
REAP ecosystem measurement activities.
•Papers for them, an ecosystem assessment tool for your region!
62
Who is your MIT REAP Data Rockstar?
©2024 Stern

63. @MIT_REAP
How Can You Use Analytics
and Metrics as You Drive
Your REAP Strategy?
63©2024 Stern

64. @MIT_REAP 64©2024 Stern

65. @MIT_REAP
Thank you!
65©2024 Stern

66. 10:45 –11:00 AM
Break
NOW
11:00 –11:45 AM
Overview: The Engine Accelerator
NEXT
@MIT_REAP