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A Gameplan for Local Ecosystem Builders After SVB

A step by step guide for how ecosystem builders can use the SVB crisis to attract more capital to their communities and build a more resilient local ecosystem

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To avoid damage from the SVB fallout, local ecosystem builders must be proactive about using the moment to build more resilient & robust local ecosystems

Even though the SVB crisis played out on a national level, the effects will be felt locally. To best prepare for the aftermath and build more resilient local ecosystems for the future, local ecosystem builders must be proactive in their approach to ecosystem building

There are three areas that ecosystem builders can begin to address immediately, creating 8 discrete opportunities for action. We break each of them down below: 

  1. Increase Funding Availability
  2. Facilitate Access to Information
  3. Create a more Interconnected Ecosystem

Increasing Options for Business Funding

We don't need to tell you about the importance of local capital, and we know it is not easy to build or attract new local funding sources. However, the SVB fallout presents a real opportunity for ecosystem builders because it has the attention of many funders & has increased the concern of many individuals and institutions over the status of their local tech economies. In this way, post-crisis is the best time to act to establish new avenues for funding in your ecosystem.

Here are three unique opportunities that SVB created for local capital access: 

1. Get High Net Worth Individuals off the Sidelines

When it seemed possible there would be a massive liquidity crisis, many previously unengaged high-net-worth individuals (HNWI) raised their hands to support local companies should they have needed bridge financing. As Upsurge Baltimore reported, there are often millions (if not billions) of dollars on the sidelines of local ecosystems, often held by wealthy individuals who are not involved in the tech community. Ecosystem Builders should take advantage of this  attention and individual's desire to get involved. But attention can be fickle, so this should be done quickly.

Immediately, ecosystem builders should put out a call to members of their HNW community to invite them to a meeting that introduces them to the ecosystem and establishes an avenue of communication with the ecosystem

Some may be ready to open their pocketbooks, but likely most won't be immediately willing to invest. That's totally fine! The point is to get them engaged. For those who are willing to support financially, but not make investments, you can have them on a roster of people who may be able to provide short-term loans for companies in case of emergencies. This is a great way to get them more familiar with startups and how they are financed - bridge loans for operating companies are lower risk than equity investments, but it opens up the relationship and possibility for future equity investing.

For those who to be a resource for companies, but not financially, you now have the opportunity to connect them to startups as advisors, foster their involvement in the tech ecosystem, and open up their networks to local companies.

2. Create Partnerships with Local Banks

After SVB, many local and regional banks stepped up to offer their support to local companies and ecosystems. Given focus on smaller banks caused by SVB, many of these banks are more willing to offer enhanced services to local companies to win their business. This is a great time for ecosystem builders to open a line of communication with these funders to establish long-term partnerships with the ecosystem.

Ecosystem builders should take advantage of this opportunity to establish founder-friendly banking options in their local communities

While banks don't have full flexibility in how they deliver services, due to various regulations, examples of founder-friendly banking practices include: 

  1. Willingness to open accounts for businesses with low starting balances and little to no fees
  2. Extension of debt (loans or credit lines) to businesses without asking for personal guarantees
  3. Reduction of check deposit holds for younger accounts (which can often hamstring new businesses who need to make payroll but can't access deposited funds)

Which services local banks will offer depend largely on their policies and their willingness to participate, but the SVB fallout provides a good opportunity to start these conversations and secure a partnership. Ecosystem Builders should engage all of the local and regional banks around their ecosystem and start the conversation about if & how they are willing to work with entrepreneurs and younger companies, laying the foundation for a robust local banking ecosystem in the future.

3. Use the Moment to Rally Larger Funders

Many ecosystem builders are looking for opportunities to get larger funders to support the ecosystem, including big local corporations, foundations, and family offices. Similar to the dynamic with high net worth individuals, this is a great moment for ecosystem builders to rally these larger institutions around supporting the ecosystem.

Ecosystem Builders should bring together the bigger potential funders in their ecosystem for a conversation about how they can create a more robust local capital network

The first part of this meeting should focus on what could have happened in the local ecosystem had the liquidity crisis played out, to gentle remind overyone of the consequences if there is not enough capital in the ecosystem. This lays the groundwork to start a conversation about how the ecosystem could create a more robust capital system and safety net.

Some ecosystem builders may have an existing capital/funding project they are trying to get support for. If that is the case, then use your existing pitch and materials after framing the urgency around the SVB situation. If you do not have an active capital project, you can still have a productive conversation. The focus becomes brainstorming with the stakeholders what type of funding vehicle they would be willing & able to participate in.

Some possibilities include: 

  1. An Emergency Bridge Capital Fund, meant to bridge existing companies if they ever hit a temporary liquidity crisis but otherwise have stable cashflows or investment. This is a lower-risk option that may be more appealing to hesitant institutions
  2. A Debt Capital Fund, which provides younger companies with real business models access to debt financing (such as lines of credits or loans), that most traditional banks can't (or won't) underwrite
  3. A new Equity Capital fund, which functions as a standard equity investment vehicle, like a local VC fund. This is the hardest to set up, but it is a major benefit for local ecosystems to have a locally managed fund

Even if this is just the start of the conversation, it lays a strong foundation for how institutions in your ecosystem can collaborate together to create a more robust capital infrastructure.

Facilitating Access to Ecosystem Information

Members of your ecosystem must be able to easily access the information they need about local resources, recent news, and organizations that can support them

The SVB crisis highlighted a major issue within ecosystems: it can be very hard for founders to find the information that they need, when they need it.

Many companies were scrambling to figure out which local institutions could support them, what funding options existed in their local ecosystems, or which mentors they could turn to for advice. If your ecosystem does not have a centralized place for entrepreneurs to check, many founders cannot access vital information when it matters the most.

But access to ecosystem information is not only important in times of crisis - having an easy way for members of your ecosystem to explore resources, local businesses, and support organizations is critical at many points in a company's journey. Whether they are searching for resources to help them get set up, trying to find their first investment, looking for their first new hire, or searching for a law firm that can support them through an acquisition, founders constantly need access to information about the assets that exist in your ecosystem.

Additionally, access to ecosystem information is critical to ecosystem builders. You need to easily know who is doing what in your ecosystem, what programs are active, and what gaps could exist. The only way to do this is to have robust data on your entrepreneurial ecosystem in a navigable format. There are two main ways that ecosystems do this: 

4. Setup an Online Ecosystem Platform

Many ecosystems now have online tools that facilitate this (disclaimer: EcoMap works in this space). Often, these platforms look like websites, where entrepreneurs and ecosystem builders can easily filter through local resources and support organizations. Some platforms require you to provide the data, whereas others come pre-populated with this information (such as EcoMap's platforms). In addition to hosting valuable information about your ecosystem, many of these platforms come with features such as program management, 1-1 support tracking, ecosystem CRMs, matching tools, ecosystem analytics, and more.

5. Consider an Ecosystem Chatbot

If your ecosystem doesn't want a separate platform, or if you already have one that doesn't get used, you might want to consider a Chatbot that helps people navigate your ecosystem. This way, they can access real-time information about what exists in your ecosystem through an easy-to-use, conversational interface. Chatbots are a great option because you can embed them in any existing website, or even across multiple websites in the ecosystem. Additionally, users can have a conversation with the chatbot to identify the help they need. The introduction of chatbots is a very exciting development for ecosystems (again, we're biased here).

However you choose to do it, ensuring that everyone in your ecosystem can access the information they need is critical to ensuring a robust, equitable, and well-functioning business community.

Creating a more Interconnected Ecosystem

The more interconnected an ecosystem is, the more supported local companies are

Interconnectedness refers to the degree to which assets are connected within your ecosystem. If you want to dive into the theory, we have a ton of articles about this topic, but the takeaway is that ecosystems need to be highly interconnected in order to be effective.

Highly interconnected ecosystems means that many people, resources, and organizations have relationships with many other people, resources, and organizations in the ecosystem. These relationships can be formal, such as partnerships, or they can be informal, such as friendships.

Regardless of the type of relationship, the goal is for the ecosystem to be as connected as possible. Why is this important?

Higher interconnectedness within ecosystem translates to three core benefits: 

  1. Information flows more quickly - people can more easily access the information they need through relationships with trusted connections, partners, and advisors
  2. Support is mobilized more effectively - when help is needed, like in the SVB crisis, it is easier to rally members of the ecosystem to support a founder, company, or the broader community when everyone is well connected
  3. Ecosystems are more efficient - many ecosystems suffer from the duplication of efforts, lack of clarity and alignment, and ecosystem politics, all of which are reduced with more interconnectedness

We could go on for hours about why interconnectedness is important, but most ecosystem builders understand this inherently. Instead, we want to focus on how ecosystems can use the SVB crisis to drive interconnectedness in their communities. Here are three ideas: 

6. Gather the Ecosystem for a Moment of Connection

Similar to how ecosystem builders should immediately gather HNWI and funders, they should also gather members of the tech community who were affected by the crisis directly or indirectly.

To be frank, the last weekend was incredibly traumatic for many companies. Many founders spent 2 days coming up with worse-case-scenario plans for how to survive with little to no access to cash. Even non-exposed founders and other ecosystem players had to consider emergency options - in all, it was stressful for everyone.

Bringing the ecosystem together to celebrate the avoided crisis, give individuals a place to discuss their experiences, and provide a space for them to just be with eachother goes a long way in forming important, long-term ecosystem relationships.

7. Gather Entrepreneur Support Organizations for a Moment of Reflection

Additionally, you'll want to bring together the entrepreneur support organizations in your ecosystem to debrief what happened, analyze your ecosystem's response, and identify areas of improvement for the future.

The SVB crisis is a great conversation starter for how you can build a more resilient and responsive tech community, because nearly everyone at the table will have a shared understanding of what happened (and if they don't, you can send them this article).

In this meeting, it's important to give space for ESOs to all share how they - or those in their network - responded to support founders, and then start a shared conversation about if those responses were sufficient and effective, and what would have been needed if the full crisis had hit. This is not meant to criticize how your ecosystem did (or didn't) respond, but rather to be more prepare in case something happens in the future, near or far.

8. Establish a Consistent Gathering Event for your Ecosystem

Finally, this is a great opportunity to set up a consistent ecosystem meetup if you don't have one already. It doesn't have to be formal and it doesn't have to cost money - in Baltimore, we have Equitech Tuesday, where everyone in the tech ecosystem just gathers at a local brewery space each Tuesday evening just hang out.

Many local restaurants and bars (even hotels) are willing to be venues for this for free, because it brings a ton more traffic and spend than they would normally get on a weekday. The main costs are around marketing the event until it has enough word of mouth traction.

From there, you don't even need one person to always be there - you can rotate the ecosystem "host" through members of your community, which provides even more avenues to increase casual involvement with your ecosystem.

Summary: 8 Ways Ecosystem Builders can use this Moment to Build a Stronger Ecosystem

While SVB was a very disruptive event, it also opens the door to real opportunities for ecosystem builders. Here's a summary: 

  1. Get more high-net-worth individuals involved in the ecosystem
  2. Establish founder-friendly partnerships with local banks
  3. Start the conversation of new funds with local institutions
  4. Get an online platform to facilitate access to information in your ecosystem
  5. Consider getting a chatbot to make it easy for people to find what they need
  6. Bring together the ecosystem for a night of celebration
  7. Reflect on your ecosystem's response and how to improve it
  8. Establish a continual ecosystem gathering to drive connection

The SVB crisis had the potential to hamstring local ecosystems, and those that do not act to make their ecosystems more resilient for the future are still at risk. But every crisis introduces opportunity, and there is a real opportunity for ecosystem builders to use this moment to lay the foundation for stronger, more resilient, and more equitable entrepreneurial communities.

Because building resilient ecosystems is what you do - and you're awesome for that.
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