In a previous blog post, I unpicked the jargon to explain what an entrepreneurial ecosystem is. The tl;dr (1) is that “an entrepreneurial ecosystem is the supportive environment in which entrepreneurship can flourish”. There are certain key institutions (2) that we can point to which indicate the presence of an entrepreneurial ecosystem, for instance, accelerator programmes, incubators, and investors. (If the jargon is confusing, this article, penned by our friend Alison Partridge, provides a comprehensive and easy-to-read glossary of terms.)
But how do we assess the strength of our region’s entrepreneurial ecosystem? How can we tell whether or not the interventions spearheaded by TEAM SY have made any difference?
Different approaches to measuring the strength of an ecosystem
How we measure an entrepreneurial ecosystem is a hot topic in theory and in practice. Through my PhD research, I came across a number of different approaches. In fact, some academics argue that the strength of an entrepreneurial ecosystem is impossible to measure, for instance, in one article, the argument is made that, “work on ecosystems in other contexts has found that, because of their complexity, they cannot be effectively assessed using simple, “count-based” metrics … Traditional metrics used to measure entrepreneurial activity, such as the number of jobs created or counts of firms founded, may provide a baseline, but do not fully capture the health of the ecosystem.”(3)
Alongside the academic debates, there are also some more practical approaches, for instance Startup Genome which publishes an annual report ranking national entrepreneurial ecosystems based on metrics across six factors: performance, funding, market reach, connectedness, talent and experience, and knowledge. In a similar vein, StartupBlink draws on data from their own (user-populated) map alongside insights from their global partners to inform an algorithm which then ranks city and country ecosystems based on quantifiable metrics such as the number of startups, coworking spaces, accelerator programme, and key figureheads. The Aspen Network of Development Entrepreneurs reviews and synthesises a number of different approaches to measuring an entrepreneurial ecosystem, concluding with its own tick-box matrix which practitioners can use as an assessment tool for their local entrepreneurial ecosystem.
The extent to which it is useful to rank our own entrepreneurial ecosystem against others is debatable. In startup lingo, it is a bit of a “vanity metric”: it gives us a warm glow to know that we are doing well, but unless we use that knowledge to do something differently to improve the environment for locally-based entrepreneurs, it ultimately doesn’t tell us very much about what is working and what could change. (That being said, using a high ranking for PR or inward investment purposes can be very useful, within a broader narrative about what the entrepreneurial ecosystem here has to offer and how to access it.)
There is, however, value in understanding the strengths and weaknesses of the South Yorkshire entrepreneurial ecosystem in and of itself, rather than as a comparator to other places. It was this knowledge which informed the design and development of the original TEAM SY approach, and it is critical to understand what we have achieved and what needs to be built upon as we move forwards into the next stage of the South Yorkshire entrepreneurial ecosystem. The approaches referred to above use count-based metrics to inform their rankings, as this is generally seen as an ‘objective’ way to compare and contrast different entrepreneurial ecosystems. But count-based metrics do not provide the full picture: there is no way of “counting” the all-important interactions that occur on a daily basis within an entrepreneurial ecosystem, and without this, we are missing a piece of the puzzle. To provide a more complete assessment of the impact of TEAM SY, it is therefore important to consider both the tangible outputs and the intangible outcomes.
TEAM SY impact: the tangible outputs
Count-based metrics may not provide the full picture, but as a project funded by the European Regional Development Fund, we are contractually obliged to measure certain outputs that demonstrate the impact that we’ve had, and so this is a sensible place to start. Our 16 programme partners will be very familiar with these outputs: we ask them for regular updates to tell us how many companies they have supported, how many of these are new companies founded in the last 12 months, how many new and innovative products or services have emerged, and how many jobs have been created. As we approach the end of our funded period, we are truly delighted that the combined efforts of all of our partners has meant that we have over-achieved in our target of number of hours of support delivered, and are very close to reaching our targets for the number of new products created. The final figures will be released post-June, but let’s take a moment to celebrate our achievements so far:
TEAM SY interim output figures to 31st March 2023
Number of startups supported
Number of hours of support delivered
Number of jobs created
Number of new products created
Although it isn’t an ERDF requirement, we have also been keeping track of the companies within the TEAM SY family who are raising investment. With their participation in TEAM SY programmes, entrepreneurs have been able to strengthen their business models and professionalise their investment pitch decks. Many have had the opportunity to pitch to investors, for instance, the Unrest accelerator cohort who pitched at a demo day at the Barbican in January 2023. We have supported other entrepreneurs through our partnership with NorthInvest who are building out the South Yorkshire Angel Hub. NorthInvest’s South Yorkshire Investment Manager Giles Moore is expertly forging relationships with angel investors and entrepreneurs alike, and he is in the particularly valuable position of having had experience on both sides of the table, as entrepreneur and as investor. Giles is passionate about supporting entrepreneurs and has worked directly with many of the TEAM SY founders to develop their pitch decks. He’s also hosted a number of very well attended investor lounges, where startups have pitched to investors and gone on to raise investment as a result.
These combined efforts, as well as spin-out raises from the University of Sheffield, mean that Sheffield has seen a 54% growth in early-stage Venture Capital investment over the past year, and a 149% growth rate over the past two years, according to Dealroom. This represents the second highest positive growth rate of any city in the UK over the past year and accounts for £33m in 2022 and £21.4m in 2021. A significant proportion of these companies have been supported through TEAM SY, so there is some direct tangible impact there.
TEAM SY impact: the intangible outcomes
So far, so tangibly good. Now, what about some of the intangibles? We know from other entrepreneurial ecosystems around the world that valuing the intangibles is really important. For instance, in Espoo, Finland, their approach is to value qualitative anecdotes not just quantitative metrics (4). The beauty of the TEAM SY project is the emphasis that has been placed from the beginning on doing things that are much harder to measure, but that are just as important for an entrepreneurial ecosystem to flourish. These include the connections we’ve brokered, the increased vibrancy of the ecosystem, the connectedness of the communities, the narrative we’ve developed, the opportunities we’ve spotted, and the introductions we’ve made.
Much of the ‘evidence’ base for this is anecdotal. It comes out in the stories we hear of projects that have emerged from opportunities we have spotted, or stories of entrepreneurs who have gone on to successfully raise investment on the back of an introduction we have made. Sometimes those stories never make their way back to us, and it can be very hard (nigh on impossible) to attribute later successes to a TEAM SY initiative – after all, businesses and entrepreneurs have multiple touchpoints along their journeys, and one of the beautiful things about the South Yorkshire entrepreneurial ecosystem is people’s willingness to be helpful to entrepreneurs. But despite the difficulty of attribution, we mustn’t forget that stories (qualitative) play a hugely important role alongside metrics (quantitative). (5) There is a vast array of these stories on the Capital Enterprise website and YouTube channel. Specifically related to South Yorkshire, do take a few minutes to listen to Dash Tabor (CEO & Founder of Tubr) and Dan Blaney (CEO & Co-Founder of Ferrio) talk about how TEAM SY helped them on their business journeys.
The investment landscape is another area where the stories matter, alongside the quantitative investment raised as referred to earlier. As well as the headline figures demonstrating an increase in early-stage investment in South Yorkshire, we must also recognise that this increase in and of itself is an attractor for other investors to come to the region – a rising tide lifts all boats. The thesis driving TEAM SY has always been that a concentration of acceleration programmes leads to a higher number of startups who are at a credible stage to consider investment, thus attracting more investment and startups into the region. We are seeing this play out – there is confidence in the region as a source of exciting and investable startups, as evidenced by the likes of Mercia who have brought on board Investment Manager Chris Borrett as a dedicated resource for the region, and similarly Newable who have appointed Thom Webb as Director for the North of England.
Moreover, the visibility and knowledge of startups raising has acted as inspiration and encouragement for other early-stage startups, who are now also seeking investment. When we recently asked the entrepreneurs in our networks about their investment ambitions, we discovered that over 100 South Yorkshire based startups are currently looking to raise, with 90+ of these seeking pre-seed, and 15+ seeking seed / series A. From the perspective of an entrepreneur, it is far easier to envisage pursuing a certain path (in this case raising investment) if your peers are doing so too, not to mention the invaluable bonus of having other people within your networks to learn from.
TEAM SY as a catalyst for resources and networks
Another way of thinking about the strength of an entrepreneurial ecosystem is to use a matrix developed by University of Edinburgh academics Ben Spigel and Richard Harrison, which assesses the munificence / sparseness of resources alongside the strength / weakness of the networks to establish how well-functioning an entrepreneurial ecosystem is. (6) In a nutshell, the argument made here is that an entrepreneurial ecosystem needs both the resources (for instance, the institutions mentioned in the opening paragraph) and the networks that enable entrepreneurs to easily access those resources. It is not enough to just have the resources – they have to be within an entrepreneurial ecosystem where the networks are strong.
With its innovative approach to ecosystem development, TEAM SY has worked to move the dial for both resources and networks: we’ve vastly increased the munificence of resources available to entrepreneurs through the provision of pre-accelerator and accelerator programmes, and we have also worked hard to increase the strength of the networks within the entrepreneurial ecosystem, ensuring that entrepreneurs are accurately signposted and that information sharing between institutional elements is happening more regularly.
Taking this into account, I think it’s safe to say that South Yorkshire’s entrepreneurial ecosystem has moved out of the bottom-right quadrant which is characterised by few resources and weak networks. We’re not Silicon Valley (nor do we want to be!) but I think that we are holding our own alongside other UK cities and regions that have a similar entrepreneurial makeup and economic profile, more so than previously.
Recognising the impact of TEAM SY and building on its success
As the largest city in South Yorkshire, there is a natural gravitational pull towards Sheffield. We were not surprised therefore when startups.co.uk ranked Sheffield as the best UK city outside of London in which to start a company in their 2022 annual list.
It came as a bigger surprise when Eli David, the CEO of Startup Blink, reached out on Twitter to share the stat that Sheffield had experienced the most rapid rise nationally and globally, moving from 164th up to 11th in their list of “Top UK Cities for Startups”. As I mentioned earlier in this blogpost, lists and rankings like this should be treated with a degree of caution – we definitely don’t want to rest on our laurels, and it’s really important that entrepreneurs continue to experience the positive impact of being part of a strong entrepreneurial ecosystem. But, it’s a great story, it adds to our regional narrative, and we should take pride in the increased recognition of Sheffield as being a great place to start and scale a company.
TEAM SY has played an integral role in strengthening the entrepreneurial ecosystem here in South Yorkshire. But there is more to do. It could well be argued that the idea of a ‘regional’ entrepreneurial ecosystem is a fallacy – in particular in a region that is so geographically spread with poor transport links between the different areas. In future iterations of TEAM SY, we would love to get even more local – I envisage Super Connectors in each town and city that are truly embedded in their locality, whilst also being able to make connections at a regional level and benefit from the overarching regional narrative. TEAM SY has been a fantastic catalyst to kickstart the entrepreneurial ecosystem here, and it will be exciting to see how we, as a region, maintain the momentum and go from strength to strength. Watch this space!
1. And in the interests of jargon-busting, tl;dr is Internet-speak for “too long; didn’t read”. https://dictionary.cambridge.org/dictionary/english/tldr.
2. Institutions can be both formal and informal. With regards to an entrepreneurial ecosystem, formal institutions refers to organisations and individuals, for instance, anchor organisations such as universities, entrepreneurial support organisations such as incubators and accelerators, the public and private sectors, mentors, coaches, and investors. Informal institutions refer to more intangible aspects such as social norms, the culture of a place, its entrepreneurial spirit, supportive government policy, and networks.
3. Roundy, P. T., Bradshaw, M. and Brockman. (2018). The emergence of entrepreneurial ecosystems: A complex adaptive systems approach. Journal of Business Research, 86(1). pp 1-10.
4. Alison Partridge wrote a blog post which covers Espoo’s approach and success: https://urbact.eu/communities-play-together-stay-together.
5. Indeed, if we take a Theory of Change approach to measuring impact, then equal importance is placed on both qualitative outcomes and quantitative outputs. It is a tool which is well used in the NGO / development / social enterprise sector, but I’ve not yet seen it used in an entrepreneurial ecosystem setting before. I might write a blogpost about it, but in the meantime, you can have a look at: https://www.theoryofchange.org/what-is-theory-of-change/.
6. Spigel, B. and Harrison, R. (2017). Towards a Process Theory of Entrepreneurial Ecosystems. Strategic Entrepreneurship Journal, (12). pp. 151-168.