What is an entrepreneurial ecosystem?

By Laura Bennett

Entrepreneurship – the creation of new businesses through innovative products or services – is essential for economic development, no matter what sector, vertical, or geography. To twist the famous phrase, “no man is an island”, let’s make the bold claim that “no entrepreneur is his or her business alone”. There is often a degree of hero worship around entrepreneurs – and certainly they deserve to be lauded, it is a bold move to set up your own business and shoulder that responsibility. But there are a host of other factors that contribute to the success of new entrepreneurial endeavours, and those should not be overlooked.

Entrepreneurs – those intrepid individuals who create those new innovative businesses – access support from a range of institutions, organisations, and individuals. Institutions such as local universities, funding bodies, incubators, accelerators, and co-working spaces are the more tangible aspects of an entrepreneurial ecosystem – they are often the elements you will find mapped out on an ecosystem map. There are two such examples in Sheffield, one created by my colleague Samantha Deakin, and the other created by the Synergy Project, led by my other colleague Ceri Batchelder along with Mel Kanarek who is one of the Directors of Sheffield Digital (link will be updated once this resource is online).

But new businesses also emerge from (and are dependent upon) the conditions of a place – spatial, social, cultural. To take an extreme example: a new business starting up in Gaza City will be very different from one starting up in Sheffield. It would serve different markets, would have access to different resources, and would be influenced by the culture in which its founders operate. An example closer to home: a startup in an urban Northern UK city may well be quite different to one in a rural South East town, operating under differing local government structures with varying levels of funding and political buy-in. These cultural, societal, and political influences are the less tangible aspects of an entrepreneurial ecosystem, but they are just as important as the more tangible ones mentioned above.

So, an entrepreneurial ecosystem encompasses both the components that support entrepreneurs and the conditions within which entrepreneurship is embedded. Like any concept, there are varying definitions, but broadly, it is agreed that an entrepreneurial ecosystem comprises the following components:

• talent & workforce; 
• large companies; 
• sources of funding; 
• markets; 
• support services & mentors; 
• incubation & education for founders; 
• universities; 
• entrepreneur’s informal networks, 

… that sit within the following conditions:

• Physical infrastructure of a place
• Cultural and societal norms
• Government policy

This list of features of an entrepreneurial ecosystem have been identified as commonalities between places that enjoy a high level of successful entrepreneurship. But this clean list of bullet points belies the fact that each place will have its own specific mix of cultural norms, societal expectations, historical industry strengths, physical infrastructure, political support, not to mention different tangible aspects such as co-working spaces or business support programmes. 

The trap that it is easy to fall into is to assume that this list is like the ingredients of a cake – put them all together and the next Google will emerge from the oven. It is an attractive idea: create the ecosystem and entrepreneurship will surely follow, bringing economic growth, talent, jobs and innovation. But it is not as simple as “copy and paste”: for any entrepreneurial ecosystem to be successful, it must be rooted firmly in its locality, drawing its strengths and identity from the characteristics of the place. 

That being said, where there are gaps in the entrepreneurial ecosystem, it makes sense to address them. It was in this spirit that the TEAM SY project was initially conceived, responding to challenges and barriers that are specific to South Yorkshire, and building on several years of supporting and stimulating the entrepreneurial ecosystem in London. You can read more about the TEAM SY approach in this LinkedIn article by Darren Balcombe, Deputy CEO of Capital Enterprise. Of course, London is a different beast entirely to South Yorkshire, so from the beginning there was no attempt to directly copy and paste the approach. Rather, the Capital Enterprise team worked with stakeholders in the region to identify where the TEAM SY project could most add value. You can read more about our approach to our ecosystem work in this blog post about the role of the TEAM SY Super Connectors.

So, the answer to the question “what is an entrepreneurial ecosystem?” is not as straight-forward as we might hope – as with any big concept, behind a seemingly simple phrase lies entire realms of discussion and debate, and not just in academic circles, but also amongst policymakers and practitioners. It can be all too easy to speak in jargon and throw buzzwords around like confetti. Like many big concepts, the more you think about an entrepreneurial ecosystem, the more questions arise. But, if we are to be concise (and if you are looking for a go-to definition), we can sum it up as the following: “An entrepreneurial ecosystem is the supportive environment in which entrepreneurship can flourish”. For a bit more depth, we can add that a range of different institutions make up that supportive environment, for example, public sector bodies, universites, and business support programmes. To take it further, let’s throw in the societal, geographical, and cultural aspects, i.e. “context matters”. 

With a more thorough understanding of the phrase “entrepreneurial ecosystem” it is easier for us to recognise all the often unseen support that goes into any successful venture. Whilst the entrepreneur might shoulder the risk, they do not need to carry this alone. Ensuring that entrepreneurs are able to access the support and resources that they need from the environment in which they are based increases the chances of success for those bold individuals.