Succeeding Outside of Silicon Valley: How the Rest Will Rise

The day after I got home from our fifth Rise of the Rest tour, where we toured startups across the U.S, I turned on the TV to watch one of the ugliest moments in the history of American civil society. This post isn’t about politics -- if you want to know my views on this race, or the views of Steve Case, the founder of the Rise of the Rest initiative, visit Twitter -- but it’s incredibly discouraging that the debate about the future of the American economy hasn’t included entrepreneurship.

We’ve got the wrong cultural narrative around how to create jobs. Our folks in public office are obsessed with what you can buy, not what you can build. Trade policy, securing the latest 1,000-person company, stadiums, they make for great ribbon-cutting stories for elected officials but are too often a red herring for what creates a thriving economy.

Yet our day in Phoenix, and our entire Rise of the Rest tour, illustrates how cities can create a different cultural narrative.

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According to the Kauffman Foundation, nearly 100 percent of net new jobs are created by entrepreneurs, but the topic of entrepreneurship hasn’t been discussed in either presidential debate. As I’ve traveled the country, though, I’ve seen entrepreneurs create a different story. Kevin Plank started Under Armour from his basement, and now, Baltimore has a transformed waterfront and civic infrastructure. Kim Jordan started New Belgium as a side project when she was a social worker, and now the country’s third-largest brewery is 100 percent employee-owned, and is going to turn janitors in Colorado and North Carolina into millionaires. Entrepreneurs change the game.

The Rise of the Rest is an initiative to create a thriving entrepreneurial economy for everyone in America, even if our presidential candidates aren’t paying attention. And if we want to have an economy that works for everyone, we need to make sure it includes everyone, and the existing structures have a power dynamic that don’t.

After five tours, and 25 cities, what have we learned about how the Rest can Rise? Steve Case calls it the “Three I’s”:

1. Interconnectedness

“If you want to go fast, go alone; if you want to go far, go together.”

Steve Case often quotes the African proverb above, and it should be a mantra for every startup ecosystem. When you’re a startup ecosystem leader, it’s extremely challenging. It’s nearly impossible to raise a seed fund, run an accelerator, or open a co-working space. There’s no money, and your family has no idea what you’re trying to do. And the temptation in every startup ecosystem is to get competitive --if other people are successful, that’s less money for you.

In Phoenix, we heard that post-2009, the ecosystem was fragmented and competitive. After the real estate bubble, wealth plummeted and startup organizations were rare. But over the last couple of years, led by Mayor Greg Stanton and a range of ecosystem leaders, we are seeing a geographically and demographically diverse group of ecosystem leaders coalesce.

And entrepreneurs themselves are leading the way. Brad Jannenga, the co-founder of Phoenix-based WebPT, is building a warehouse for the next generation of startups. Phoenix leaders are no longer seeing a position of scarcity; they’re seeing a position of abundance.

2. Inclusiveness

“If you’re not being intentionally inclusive, you’re being unintentionally exclusive.”

My firm Village Capital is invested in one Phoenix-based startup, eMoneyPool. Founded by brothers Francisco and Luis Cervera, sons of immigrants, eMoneyPool manages, electronically, “money pools,” a financial service that 30 million Americans participate in. If you’ve never heard of a money pool, you’re not alone. These informal savings groups, patronized largely by immigrants, are off the formal financial services radar but receive a billion in payments a week.

Freada Kapor Klein, co-founder of Kapor Capital, often quotes the above mantra in investing in and hiring an inclusive range of founders. eMoneyPool is a billion-dollar market opportunity, but one that people who aren’t in the immigrant communities don’t see. Fortunately, SeedSpot, a Phoenix-based accelerator, supports entrepreneurs from under-represented backgrounds and helps founders who identify massive market opportunities that mainstream venture capitalists don’t see build the next great companies.

Phoenix is a city that is over 50 percent African-American and Latino, and like many Rise of the Rest cities, Phoenix has the opportunity to change who gets to found the next great company in America.

3. Impact

Everything you do has an impact -- positive or negative. There’s no separation between what you do every day and what you care about. We kicked off and closed the day with Michael Crow, the president of Arizona State University, who has created a model for what higher education can be in the 21st century. He has, for example, teamed up with Starbucks CEO to create a program where Starbucks baristas can have ASU degrees paid for. He has created much more direct pathways to employment for students pursuing affordable degrees. And he has recognized that college is for two things -- getting a quality education and pursuing a career --and separated those two different objectives into two different offerings, each affordable to people who are left out of the current economic system.

President Crow is looking for entrepreneurs who will create an impact on the next generation of the American economy, and he’s not alone. In Phoenix, and other Rise of the Rest cities hit hard by the Great Recession, we see investors, institutions, and startups who don’t want to create the next photo-sharing app, rather they want to create businesses in sectors such as financial inclusion and education that will make the economy work better. This should be the dominant narrative in how to make the American economy work again.