A New World Order for High-Growth Firms
Many of my friends and neighbors may have noticed that I haven’t been in town as much lately, and that I’m spending more and more of my time in Kansas City. So why would a hardened MIT denizen who used to think that distant travel meant going to Porter Square now be flying back and forth to Missouri every week?
It’s because the Ewing Marion Kauffman Foundation, which is headquartered in Kansas City, is pioneering new ways to advance our entrepreneurial economy. Kauffman’s president Carl Schramm inspired me the other day when he noted in a CNBC interview that all net job creation over the past thirty years has come from companies less than five years old. So what can we do to keep startups flourishing? I am delighted to be joining the Kauffman Foundation team as a senior fellow as we look out over the economic future and embark on a new approach for increasing both the number of new companies formed and the chances of success for these ventures.
This new initiative is called Kauffman Laboratories for Enterprise Creation. The mission of Kauffman Labs is to create more large-scale, high-growth firms. As someone with a combination of practical experience building companies, and academic experience teaching innovation and entrepreneurship at MIT—not to mention a passion for helping people build great companies—I’m very pleased to be a part of this initiative. It’s a perfect way to continue the work I started at MIT’s Deshpande Center for Technological Innovation.
Bad times are when good people spring into action. Today, more than ever, it’s important to catalyze and accelerate the tremendous inventive spirit of the American entrepreneur. As many have said before, we’ve got what it takes to innovate our way out of the current crisis.
Many budding entrepreneurs today face an unfortunate choice between going to school, or going to the school of hard knocks. In one circle, entrepreneurs can join MBA programs, fellowship programs, or business bootcamps. In another circle, they can dive in and get their hands dirty by starting a company, trying to raise venture capital or angel funding, or moving into an incubator. For the most part, these circles have not overlapped.
The idea behind Kauffman Labs is to create a new hybrid model. In the 2009 Kauffman Thoughtbook, the Foundation’s vice president of entrepreneurship, Bo Fishback, talks about the model of a conservatory, where students not only learn music theory but also play music. This is emphatically not the model most business schools follow today, as the New York Times noted in a well-reported March 15 article. B-schools are still trying to shake their legacy DNA of training the future CEOs of General Motors or the next generation of bankers and consultants. No self-respecting entrepreneur would think that he or she can learn how to run a startup by getting an MBA. Schools of Engineering are still struggling to understand their approach to teaching innovation, a discipline that runs contrary to traditional funding and tenure models.
Academic institutions, to be blunt about it, are the stodgy old incumbents in today’s innovation economy—and I say this as a faculty member at a school that is a hotbed of entrepreneurship. Don’t get me wrong—there are plenty of wonderful things that will always happen at MIT and could only happen at MIT. I am thrilled to continue my role at MIT in parallel with my Kauffman work. But there are many things that cannot happen within the walls of MIT, nor should they. I want to help make those boundaries easier to understand and navigate. It’s time for a disruptive new model, a hybrid between education and company creation.
Entities like Puretech Ventures, led by Daphne Zohar (an Xconomist like myself), are perfect examples of what we at the Kauffman Foundation would like to see more of. Puretech is not trying to be a classic life sciences venture capital firm, but is in the business of creating companies. That may include sprinkling in a little money, but it’s also about validating the science, identifying market needs, and building great leadership and advisory teams. Xconomy has already written about a new Kauffman program that will place “Entrepreneur Fellows” at Puretech and other organizations, and Lesa Mitchell, Kauffman’s vice president for advancing innovation, has spoken prolifically on this topic.
If you take the best of what entrepreneurs might get out of Puretech, the best they might get out of an MBA, and turbo-charge it by adding the best they might get out of accelerators and incubators like Y Combinator, TechStars, DreamIt Ventures, The Foundry, Bizdom U, or the Cambridge Innovation Center, that’s where we’re trying to go. If you connect all of these things through a coordinated mother ship, you get a new level of scale, quality, institutional memory, patience, and also a certain silo-busting neutrality. The Kauffman Foundation is in a unique position to make this happen.
There’s a movement in the philanthropic world to touch the people you’re trying to help directly, rather than giving money to others and hoping they will do it. By creating a new entity to focus on high-growth companies, the Kauffman Foundation will be going directly to the customer, and doing it with its talented people and its quality control. But we’ll also be practicing what we preach; we will be figuring out how to grow and create a high-scale model for fostering entrepreneurship as we go. As my mentor Desh Deshpande likes to say, this is a contact sport. Rather than developing a stagnant formal curriculum for an aspiring entrepreneur to be on the receiving end of, we want entrepreneurs to have a setting in which they can live the messy process and be able to draw on vital resources and kindred spirits. This involves getting in there and living the process with the entrepreneurs. It is real-time, iterative, and immerses us all in action-learning.
With the economy crippled, venture capitalists running from risk, and startup exit opportunities nonexistent (at least for the foreseeable future), somebody needs to create a new world order for high-growth companies. By weaving together many of the initiatives that the Kauffman Foundation already has underway—and building a few new ones from scratch—we will be following a natural progression. In short, we will create the sorts of companies that Mr. Kauffman wanted his foundation to spawn.
And that’s why I’m developing an appreciation for Kansas City, and why my wife is the one out walking our dog these days.