This is a post I wrote for Lighting Labs. I think it is a good one to start off this blog.
First of all, what is a catalyst? Think back to your days of high school chemistry. A catalyst is a substance that starts or speeds up a chemical reaction while undergoing no permanent change itself. Catalysts usually work in small amounts and can produce very large changes. They are rate multipliers. In business, as in chemistry, this can be a great thing.
Every start-up ecosystem should look for and promote catalysts. They can create the positive inertia that makes the difference between community growth and stagnation. But, they are often illusive and not initially recognized or well capitalized upon.
So what are some catalysts to look for in the start-up world? Well, here are some big ones.
- funding activity
- big wins
- focusing events
Lets explore these.
Funding Activity. Access to capital is the life-blood of every start-up ecosystem. The ability to put money into a company at the right time can allow strong teams with strong products to become strong companies who compete on a global scale. But, funding activity alone is not a catalyst. It takes more than just dollars. It takes specific activity to be a catalyst – activity that increases investor participation and provides new avenues of access to both investors and entrepreneurs.
New angel networks are catalysts. They concentrate investing power, mitigate risks for individual investors, and often leverage public funds for economic growth. These networks have a multiplying effect because they get more investors off the sidelines and into the game. They provide the avenues and processes for entrepreneurs to gain better access to capital. And, if done well, they can provide the burst of excitement that the start-up community needs to seed growth. We should all promote angel networks.
Big Wins. Big wins in the start-up world are companies that experience hyper growth. These companies serve as catalysts for several reasons. First, they provide an example for other companies to follow. Second, they provide good jobs. Third, they usually bring wealth to those who back them (wealth that can be put into other high growth opportunities). Fourth, and most importantly, they seed the start-up community with entrepreneurs who now have the experience of the hyper growth journey. Once these experienced entrepreneurs re-engage in the community, they multiply their influence into several companies and bring more interested capital into the start-up ecosystem. We should all celebrate the big wins.
Focusing Events. Nothing excites a community like a major event, especially one that highlights the best qualities of the community itself. The Lightning Lab was one such event in New Zealand. It brought together more early stage investors into one place in New Zealand than has ever been done before. It demonstrated the strong talent level and determination of young entrepreneurs in New Zealand. But, most importantly, it provided a framework to recognize and grow the entire start-up community. We should all appreciate focusing events like Lightning Labs and build upon them.