A quick look at successful companies in the startup ecosystem will uncover what looks like family trees of generations of entrepreneurs that supported the next generation and significantly stacked the odds in their favor. As tech and innovation become more widespread, it’s important to consider just how powerful these “mafias” are as predictors of success and what this entails for the future of tech.
What follows are three scenarios that show how these networks begin and evolve.
Let’s say we are analyzing a place known for the birth of modern tech, where the entrepreneurial ecosystem is more or less homogeneous.
What started off as just a handful of founders tinkering on a new project has turned into a massive interconnected web of newer companies that benefit from previous generations that paved the path before them.
Next, let’s say we are in a major world city that is known for its strength in many industries as well as being the biggest melting pot in the country. However, the tech industry got a later start there and therefore has taken longer to blossom.
By virtue of its population, this city inherently leans more toward diversity of culture and thought. However, it lags in specialized talent and number of successful exits compared to Scenario 1. However, it is making significant progress into recreating the conditions for success that Scenario 1 enjoys.
Lastly, we are now in a smaller town in the Midwest, which has historically been known as a big contributor to the country’s manufacturing and agriculture sectors. While it can point to a handful of successes, tech culture is still very nascent.
Why go through these simplistic examples? For any ecosystem, success begets more success. A successful generation of founders will have incredible resources and know-how to pass along to the next generation, and this next generation of winners will pass it on to the next, in essence making success inevitable to an extent for founders that are able to benefit from this valuable support.
However, it is incredibly difficult to get the flywheel spinning at high velocity – and even then, there is no guarantee that the flywheel will even spin! If it does, the latest generations will carry forward many of the same characteristics of previous generations, in essence perpetuating most aspects of what a successful founder looks like. Unfortunately, the first flywheel to get spinning in the tech boom was highly homogeneous, therefore diversity is still sorely lacking and diversity debt is clear and present. However, as tech ecosystems sprout in other geographies, we have a great chance of recreating what these powerful networks look like, which in turn influences what kind of products and services are brought to market.
What does it take to even the playing field? How can we make it so that talented entrepreneurs have the same access and opportunity to achieve success? These are loaded questions with no simple answer, but I know that VCs who are able to recreate these mafia effects for the best talent, no matter which network they were born into, will be the most successful going forward.