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Boston - Relay Foundation

Boston

Boston (Not to Scale)

Patching Up Giants

Overall Trends:

Boston is one of America’s greatest cities, I don’t see anyone arguing with that. As we all saw first hand, no matter the crisis the city always emerges stronger and more resilient. During our time in Boston we had the chance to explore the Social Entrepreneurship, the Design Thinking space, and Human Resource space. If there is one thing that these three points highlight, it’s how the city has become increasingly capable of leveraging their insane amount of intellectual capital coming out of MIT, Harvard, and the like for a different kind of social startup.

There has been some people talking in the shadows behind Boston’s back (and to its face) after it dropped from the Number 2 spot in the US for startups, being replaced by NYC. There’s a great piece on this by Sarah Lacy, and the two arguments for this drop are based on culture and adaptability. Under the culture heading, Boston was always a bit more closed off in terms of talent. If they found a good person, they hired them and made them sign an NDA with a specific clause saying you can’t hire anyone from the company you are about to work for. An NDA is a document that pretty much stops people from spreading certain pieces of knowledge with new bosses in the future, but with this clause it might even stop groups from starting businesses based on the knowledge and relationships gained in working. So while we have Silicon Valley entrepreneurs making a business, selling a business, and then using that money to build another business and make other new entrepreneurs rich so they can start their own ventures, Boston’s talent tends to stay put.

This then affects their ability to adapt to markets. If the number of ventures is relatively small because the number of people leaving to start new companies is small, this means you don’t really have the diversification and competition that comes from a more open startup ecosystem. Then, if the market demand changes from enterprise companies to mobile apps or web (which is exactly what happened), you are far less capable of building the required companies because you have your existing talent and support infrastructure tied up in legal contracts.

So how does this all apply to social innovation and social impact? Well, Boston doesn’t really have a shortage of amazing people doing great things. The reason I mentioned the previous point is that there is a real possibility that the social impact focused companies in the area might actually be immune to this structural stagnation, if one could put a name to it. The nature of social enterprise, social impact, and the entire for-profit impact space is that it tends not to have as much labor as it would like. It also attracts people who are driven by causes that are important to them and so they are less likely to switch ventures or leave and start their own without good reason. These two points have created, from as far as I have seen, a situation where these specific NDA clauses can’t really exist. Social enterprises tend to talk. They tend to be aware of what’s going on with similar organizations in the space and the trials they are going through. It would be insane for a social venture aimed at feeding people to stop their employees from working on a different cause (if they so chose). It would be out of spite and it would cripple the space.

And so it doesn’t happen (again, from what I’ve seen so far). Perhaps the more stringent NDA follows a different kind of startup, one that has massive amounts of Intellectual Property. Or perhaps the social impact space isn’t developed enough to need them, or the ventures are too early stage or they don’t take on venture funding so they don’t need to give them out, or many other reasons. There are a great many questions on ‘Why’ it isn’t happening. All I can say is, it isn’t happening. More research needs to be done in order to see if this relationship is based in the nature of social enterprise or if this case is specific to Boston.

Granted, with support from groups like MIT and Harvard, perhaps you don’t really need the extra help? We shall see.

Answer to Question 1:

Key Handoff: Social impact in Boston is a hands-on game.

Let’s talk about MIT for a second. MIT is one of the top schools in the world in regards to intellectual and research capital (not to mention capital). Students leaving this University have access to powerful networks to develop the infrastructure behind their ideas. We see this powerful combination of ideas and capital crucial to the starting stages of companies living through D-Lab.

D-Lab is a comprehensive support program aimed at assisting MIT alumni with the creation of social enterprises that address systemic social issues. It’s important to note that Social Enterprise is view as purely product-based with D-Lab. There’s no social App for iPhones. There are new tools that enable farmers that grow Moringa seeds to use the oils from the seed to create alternative gas and double their revenue. D-Lab grads don’t just alleviate pain, they pull it out from the root. We are excited to this focus on products for large systemic social issues; however, we are also looking forward to seeing how D-Lab grows in terms of who it chooses to supports.

D-Lab, especially the Scale-Ups program, are heading through a growing pain from which they can emerge even more magnificent than they already are. Here’s the situation. D-Lab sources exclusively from MIT Alum. This makes sense for a young organization. You want to get solid talent with solid ideas so when you go for funding and support the impact is predictable. It’s a solid way to build a solid brand of trust and consistency without leveraging a solid network unnecessarily. The issue with this is that D-Lab is then at the mercy of whoever applies. If the grads don’t show up with strong work, Scale-ups needs to make due. Opening the program to a larger group of people would definitely increase the labor on the front-end to find the best fitted teams, but the win is that the average quality of the teams will increase. This means more impact and this is awesome.

Now that little point aside, let me tell you everything D-Lab and Scale-ups is doing right.

The best part about the D-Lab is that it epitomizes the balance between creating a workshop for education and for creating impact for social change. Eric, one of the head honchos, discussed with us how important it is to maintain this balance with the alumni they work with. While we all want to dream of big ways to cause impact and we want to be made better in the process of saving the world, we must also be shrewd business people and ensure our idea will be profitable. Our networks are finite resources. The lesson for support organizations is this: find out where your programing and support falls on the ‘Education – Impact’ spectrum. If you are more education focused, don’t expect much impact because people going through your program won’t be focusing on impact; they’ll be focusing on learning how to make impact and these are two dramatically different things that a good many schools and development programs either haven’t realized or don’t want to admit. If you are impact focused, don’t worry too much on developing the teams when you get them. Screen better. Simply put, focus on what you are good at and partner with other groups rather than trying to do everything yourself at the same time. It’ll make your life so much easier.

The Amazing, All-in-one Moringa-nator. Not actually its name, though.

Answer to Question 2:

Key Handoff: Hiring right is next to godliness.

Before I tell you a story about Startup Institute and Harvard Innovation Lab, I need to hit a key issue with startups that have built an initial product and are starting to make some money. The issue is that they need to hire new people to keep up with demand and yet startups, historically, are completely terrible at hiring. They are so good at solving problems that the whole ‘company culture’ and ‘talent pipeline’ side of things tends to fall away. This is fine because no one’s perfect. How startup communities have been dealing with this issue has changed over time but I think Startup Institute has found a powerful and robust way of minding the gap.

Here’s what they do. SI goes into a community (they just recently expanded to NYC, so go them!) and sources from hundreds of applicants that want to learn how to make an impact from day one in their startup jobs. They then train the people who they found to be the best fit for the startups in the area that need talent and train them on one of a few skills ranging from marketing to developing. I will note here that the skills they chose to offer in the first place are tied to the kinds of skills that scale stage startups need, which shows deep market awareness as well as business acumen. Also, the mentors for the training come from the startups that need talent so you get startups investing in talent and getting a clear understanding of who they like while keeping costs low on the mentoring side. And no, they aren’t paying me to say any of this! After the training their class, they let the students pitch to the startups in need of talent, turning the startups into investors for a day. After the quick one-minute pitches, there is a long, long networking period where the pitchers can meet the pitchees and lock down those jobs.

Now to talk about how this model obeys some rules that every HR support program needs to follow to be successful. To begin, be aware of what your market wants. SI talks to the startup field in the space all the time. They are deeply connected to the major players. This informs their application strategy, their outreach strategy, and their marketing plan. Then, when they look through the applicants, they look for people who both meet those needs and have a few specific skills like doing very well under pressure having a clear sense of direction in chaos. The training is provided by the startups that need the work in the first place, as I mentioned, which helps the mentors to know who can be coached and so on.   At the actual event, SI knows the pitches aren’t the main thing. They merely start the conversation. What matters is the mingling afterwards. This is why SI has 50 pitches in 50 minutes and then two straight hours of networking. It’s usually the other way around and I cannot say how happy I was to see they flipped it.

So all of you support organizations looking to help social startups grow, start making friends! Start locking in what stages they are in, what skills they need, and what kind of people they want to work with. Then, when you’re ready to host an event, think about holding something like what SI is doing. Your startup ecosystem will thank you for it.

As an extra ‘oomph’, I want to mention Crashpad. Crashpad is a house of startups that takes community to the next level. A startup house is insanely difficult to do right, so I’ll have some thoughts and notes on the best and worst practices of it soon!

Pre-pitch conversation over at Startup Institute in partnership with Harvard Innovation Lab.

Answer to Question 3:

Key Handoff: Impact Angel networks soar when they agree on measurement.

Linking back to what we were talking about before, with Boston tending to be more closed-off in terms of hiring, developing talent, and growing second-stage startups, there is a way in which this is quite a good thing. To explain why, let me talk about Angel Investors for a bit. Angels are investors that tend to go after very, very early stage companies. They like strong teams with clear markets and they are looking to help the company with more than just money (or at least the good ones are). They can often have ten or more companies funded at any one time and are looking for, at least based on the national average, a 2.5x return on any money put into the company overall for their fund. A great read on the more nuanced parts of Angels is here.

The angel community is very strong in Boston, and I would argue because the closed-off process has created deep friendships and a strong love of the city. Most Boston angels are born or schooled in Boston, are involved with business or a specific industry that the startups they support are in, and they love the idea of helping Bostonians do amazing things. Let that be another lesson. Angels do what they do for more than just money; they want to live the startup experience, they want to support the next generation, or they want to give back after a successful life. It’s not just money for them.

As the Angel space is rather developed in Boston, you see a trend for the more experienced Angels banding together into Angel Networks. One of the largest, Investors Circle, hits all the attributes that I wanted to go over.  Launchpad Ventures is another good one that targets transformative technologies, and what’s more transformative than systemic social change? These groups pool capital, leverage their networks for good deals, and help grow the Angel space by bringing in new Angels who are in need of an existing infrastructure before they can do awesome things. The big obstacle for these amazing groups, as is always the case with impact investing, is measuring the impact. This existing and constant difficult is made worse, though, because they have to agree on what impact means.

You see, the groups and networks of Angels are made of people who might not otherwise know one another. They can be strangers, and yet they will be expected to pool their investments together on the same ventures. In situations like this, there are some difficulties when it comes to what to measure. What is the real impact of a startup that feeds children in Nairobi, and how does it compare to the startup that educates poor children in Chicago? Can you compare? In instances like this, most angel groups go to a democratic vote and the winners pick who to invest in. This can cause some friction among angels and if the disagreement is bad enough the collective might lose a few people after a round of investments. If there was a consistent way to ascertain and compare the impact of disparate ventures this stress could happen less often and the impact entrepreneurs would be better off for it. Most larger networks have their own standards and use them as a tool during the application process. This way the networks don’t let anyone in that might be too far off from what others are thinking in terms of impact. The smaller networks, however, often do not have these agreements in place and run into conflict before their first investment, so a standard charter that they could use and then evolve over time would be amazing.

We won’t be doing anything like that in this piece, but keep it in mind that measuring impact is based on measuring the financials of the business, which are cut and dry, and all of the random inputs, outputs and outcomes that are required for sustained social impact. In short, it’s tough and open to conflict. There are organizations that are looking to tackle this issue across the globe (SIPA at Columbia University, ACSEP in Singapore, and the GIIN, for instance), but there is as much disagreement as agreement.

That’s a good thing though, I think. The debate is so heated because we care so much about what’s at stake.

Those who don’t document their failures are doomed to repeat them…

 

Next up, Chicago!

Bruce