 Fostering entrepreneurship has become a core component

of economic development in cities and countries around the

world.
• The predominant metaphor for fostering entrepreneurship as an
economic development strategy is the “entrepreneurship
ecosystem.”
• It should come as no surprise, however, that as any innovative
idea spreads, so do the misconceptions and mythology.
Definition
• The term ecosystem was introduced by Tansley (1935) in a biological context.

• He describes it as the whole of living and nonliving organisms interacting with

one other.

• The entrepreneurial ecosystem is a relatively new perspective within the field of

entrepreneurship but is now one of the most discussed topics in that field.

• Of course, this biological interpretation should not be taken too literally.

Nonetheless, it has some similarities when comparing it with its economic

counterpart.
Dr. Buzeye Zegeye
 An entrepreneurial ecosystem or entrepreneurship ecosystem is the social and economic

environment affecting the local or regional entrepreneurship.

 Entrepreneurial ecosystems are defined as a set of interdependent actors and factors

coordinated in such a way that they enable productive entrepreneurship within a

particular territory.
 The entrepreneurial ecosystem often narrows entrepreneurship down to high-growth

startups or scaleups, claiming that this type of entrepreneurship is an important source of

innovation, productivity growth, and employment.

 Moore (1993) was the first one to use it in an economic context. He argued that

entrepreneurship does not exist in a vacuum, hereby emphasizing the

importance of its environment.

 An ecosystem should create a flow of talent, information, and

resources to address each stage from ideation and launch to growth

and scaling.
 This modern systematic view of entrepreneurship has been termed the

entrepreneurial ecosystem by Daniel Isenberg.

The entrepreneurial A set of interconnected
An entrepreneurial
ecosystem is a complex set entrepreneurial actors ecosystem contains a set of
of elements aimed at (both potential and individual elements within a
making the environment existing),Entrepreneurial region —such as human

conducive for entry, capital, an entrepreneurial

organization, Institutions,
culture and supportive
survival and growth of and Entrepreneurial organizations that interact in
entrepreneurship in a process entrepreneurial complex ways.
region. organizations
It emphasizes self-organizing and self-regularizing mechanisms for
competitive market policies.
The combination of formal institutions (government regulations and
taxation system), informal institutions (corruption perception) and
physical conditions (access to finance, supportive infrastructure, a stable
political environment, a skilled labor force and a formal economy) are
expected to create an entrepreneurial ecosystem where the entry, survival
and growth of firms will be at its highest rate.
 It includes

1. Leadership
• Unequivocal support
• Social legitimacy
• Open door for advocate
• Entrepreneurship strategy

2. Government
• Institutions support such as investment support
• Financial support .e.g. For R &D Start up funds
• Regulatory framework and incentives e.g tax benefits
Enabling Policies
and Leadership
 The focus should not be mainly the
provision of capital but creating the
conducive environment for businesses by
providing key policy which will resonate
well with the diverse group of
stakeholders who symbiotically drive the
growth of the entrepreneurial ecosystem.
Enabling Policies
and Leadership
This is also where the buzz for economic development can first be
created with how governments provide leadership through policy
direction and create some kind of legitimacy for the general population
to want to try their entrepreneurial skills

Isenberg affirmed that government cannot do it alone and that they must
engage the private sector early as it is the private sector best advantage
to develop a self-sustaining and profit driven market which are outcomes
of a successful entrepreneurial ecosystem
Appropriate Financing
Financing Includes
1. Micro loans
2. Angel investors, friends and families
3. Zero stage venture capitals
4. Venture capital funds
5. Private equity
6. Public capital market
7. debt
Zero stage venture capital: founded in 1981, by Paul Kelley
Zero Stage Capital is a venture capital firm that
invests in emerging growth companies in the following
technology sectors: information technology,
communications, life sciences, and energy technology
An angel investor: Angel investing is when a high net-worth
individual (angel investor) invests in a growing business. Angel
investing happens when an investor invests a large amount of
money, or capital, into a business during its early stages. This capital
injection is typically paid back through equity in the venture or
convertible debt.
What is venture capital?: Venture capital is a form of equity
financing where a VC firm—or group of investors—invests in an
early stage or emerging company in exchange for an equity stake in
the company. The drawback of working with VC is firms often
require a controlling stake in your company, meaning that you lose
full control of the business you’ve built. This can result in you no
longer being in the driver’s seat of your company, opening you up to
the opinions and decisions of the venture capitalists with whom
you’re working.
Appropriate Financing
This is directly related to the policy issues
as it can influence the outcome of how
venture financing is done, the regulation
and strengthening of the financial
institutions, the presence of early stage
funding in forms of micro-loans, angel
investors and rich family are key to
raising the number of start-ups.
Appropriate financing can be greatly influenced after the
initial government contributions to early stages start-ups who
go on to scaled up through venture capital funding and end
up going public or the owners sell the venture (“cash-out”),

Need for is only important in the beginning of an ecosystem formation

because this can be imported from outside the ecosystem once there start
to emanate success stories of entrepreneurial achievement that have
scaled up and gone global.
 Societal norms to pursuing entrepreneurship
as against taking up paid employment.

The general disposition towards such things as

failure or huge economic mistakes resulting in
loss of investments is a very important factor
Conducive Culture that will influence entrepreneurial mindsets.
 Societal norms to pursuing entrepreneurship
as against taking up paid employment.

The general disposition towards such things as

failure or huge economic mistakes resulting in
loss of investments is a very important factor
Conducive Culture that will influence entrepreneurial mindsets.
 Society reaction towards massive wealth creation and what status
entrepreneurs command can be a driving force compelling many people to
start their own venture and try to be creative, should society encourage
these, there is high tendencies for innovation, creativity and
experimentation to become a norm which can contribute in no small means
to the evolution of an entrepreneurial ecosystem

Enlightenment program can be driven by government and business

development organizations to raise the level of public awareness and
propagate the importance of entrepreneurship.
 The entrepreneurial community also has to
create its own culture as soon as the
ecosystem takes form and actors are
identified, this will enhance the sharing of
experience and expertise.

Also, the entrepreneurial community can

quickly absorb failed entrepreneurs and
learn from their failure.
An entrepreneurial ecosystem will obviously not
evolve in a vacuum, it does not revolve around
financial incentives alone, there are certain basic
economic and social factors that need to be present.
 The need for ancillary infrastructures and other
support cannot be over emphasized in the budding
stage of an individual entrepreneur as well as for the
evolution of an ecosystem.

Entrepreneurs spend nearly half of their time during making contacts and networks with other
entrepreneurs and related agencies.

Silicon Valley’s economic success was attributed to its relatively open,

Dr. Buzeye
non-hierarchically ‘regional network-based industrial system’ with
porous boundaries.
 Quality Human Capital

Large numbers of start-ups is encouraging, meaning even with a high

rate of start-up failures we can still have substantial contribution to the
ecosystem, coupled with the existence of educational institutions
offering not necessarily entrepreneurship or technological specific
academic and professional degrees can make significant contributions to
the human capital base of an entrepreneurial ecosystem.
Human Capital in the form of experienced
managerial and technical talent is required to
ensure entrepreneurial success. Training
institutions and outsourcing support should
respond to growing needs for skills in the
marketplace.
 Venture Friendly Markets

Developing the market in an evolving entrepreneurial ecosystem can be

challenging when introducing innovative products, this can be due to the need
to generate a reasonable number of early adopters, the need to make product
licensing less cumbersome, good and credible experts in productizing and a good
channel of innovation exportation to a global market
Wider global linkages beyond those connecting That as well as engaging in localized learning,
firms to product markets play an important role firms also seek to build channels of
in the development of entrepreneurial communication with selected external partners
ecosystems. to access more specialized knowledge and
assets not available locally”
Discussion Question of the chapter
👉 Please list out and explain cause for SMEs
failures in Ethiopia
👉 How do you evaluate the Entrepreneurial
Ecosystem in Ethiopia for the born and
development of start ups