[MUSIC] My name is Michael Goldberg, and I'm a Professor at the Weatherhead School of Management at Case Western Reserve University in Cleveland, Ohio. Welcome to Beyond Silicon Valley Growing Entrepreneurship in Transitioning Economies. Thank you for making the time to take this course. I'm thrilled by the opportunity to have a dialogue with you about how to grow entrepreneurship in transitioning economies. In this first lecture, we're going to discuss what this course is about and what you can expect to learn. Let's get started. In the upcoming lectures, we will examine in depth what I'm calling the Cleveland Case Study. In my home town of Cleveland, a massive effort has been undertaken over the past 10 years to support the growth of entrepreneurship. This was not done through private capital, as is the norm in Silicon Valley, but rather through government and donor support. Over the upcoming lectures, we'll be looking in depth at this unique approach to supporting an entrepreneurial ecosystem as it functions here in Northeast Ohio. We'll also do some exploration on how it's being done in other transitioning economies around the world. In this course, our lectures will contain three consistent components. First, we will start from the perspective of an entrepreneur. You will get an entrepreneur's view about the topic at hand, whether it be the role of government or accessing angel investment. Second, we will hear the perspective of thought leaders from Cleveland's community about how the region's strategy to support entrepreneurs was devised and implemented. And finally, we'll provide some international context as we learn from people around the world about their experiences supporting entrepreneurship when the private sector alone is not providing the necessary resources. The lectures are just one part of the course. I'm also excited to learn from you about the dynamics and conditions for entrepreneurship in your home community. We'll do this through discussion boards, assignments and quizzes, interactive discussions, and your final project. And now a little more about Cleveland, which will serve as our springboard for examining the support of entrepreneurial ecosystems. Although Cleveland was struggling ten years to ago to launch start-up companies, a hundred years ago Cleveland was thriving and considered one of the most important U.S. cities. Optimism abounded, and the city was home to some of America's greatest businesses. >> If we were to build a time machine and go back to Cleveland in the period 1910 to 1920 we, we'd find a community that was extraordinarily confident about its future. Confident because its industrial production was, was, was rising. Confident because some of the businesses here United States Steel American Steel and Wire Sherwin Williams, Glidden Company Grasselli Chemical were among the most powerful businesses in the United States in leaders and innovation. The, nobody could foresee an end of that. >> John Grabowski is a professor of history at Case Western Reserve University and author of Encyclopedia of Cleveland History. The world's most famous entrepreneur at the time, John D Rockefeller, started his business in Cleveland in the 19th century. >> If we were looking backwards in Cleveland 100 years before today, we're sitting here in 2013, we're in probably the most remarkable decade of the city's history. 1910, 1920, the, the city is going from the sixth largest to the fifth largest city in the United States and, and it's impelled in terms of population by, by its creativity and its industry. And it's kind of what we call the Rockefeller effect. You know, in 1920, Cleveland's the fifth largest city in the United States and its industrial production is the fifth most valuable. And it gets to that level because during the Gilded Age, in the decades leading up to that, you have a number of entrepreneurs, call them visionaries if you want. >> As the 20th century wore on, Cleveland's Rockefeller magic disappeared. >> Right now we're sitting in Cleveland, the city of Cleveland, let's, let's, let's exclude metropolitan areas, now, the 47th largest city in the United States, was once the 5th largest. I think that juxtaposition of rank, really astounds people and, and the question is what happened. So the quiet crisis of 2000 is one aspect of what happened, but by the 1950s, Cleveland was, was beginning to lose it's, it's, it's a lock on heavy industry. Some historians will argue that, that Cleveland became so focused on heavy industry, on traditional production that, that it lost sight of the need to create new disruptive technologies. Baiju Shah was working in the Cleveland office of the strategic consulting firm, McKinsey and Company in 2002, on a study that tried to identify what the community could do to dig itself out of the quiet crisis. >> And that's when we started looking at the more fundamental realities of our economic base, and realized that it, due to globalization, and a lack of reinvestment in new enterprises, be they technology or non technology. Well, our companies were thriving. They we're thriving with less and less local employment. That forced, I think, the civic leaders to say well, for 20 years we have been focused perhaps on an incomplete solution for, for revitalizing our region. >> Jackie Acho was also on the McKinsey team. >> So in 2001 Northeast Ohio had suffered a lot of blows. We had lost several big companies, and we weren't replacing those jobs with anything new. So we really had a lack of entrepreneurship, and we had a declining economy. And you could really feel it everywhere. >> Since the 1980's, Dorothy Baunach had been involved with technology based economic development in Cleveland. Baunach headed up a non-governmental organization called NorTech, and was a leading voice advocating for a new path for economic growth. >> We need entrepreneurs in an entrepreneurial culture, and that was something that we had in the early 1900s, but by the late 1900s we were used to having big businesses and milking cash cows for all we could and we forgot about how to be innovative and entrepreneurial. And so you really had to instill that culture back into the community. >> Things hit an all time low as national media outlets took notice of Cleveland's lack of entrepreneurial activity. >> Our rankings were bad, our companies were going away we didn't have much entrepreneurial activity at all, and we weren't even really sure what we were supposed to do about it. >> Cleveland's leaders wanted to revive entrepreneurship in the region. >> So in 2001, Entrepreneur Magazine ranked us 61 out of 61 places, and that's really not where we wanted to be. We knew he, we had everything in place, all the elements there to make us better, but we just had to figure out they way to do it, the formula to do it better. >> Brad Whitehead was another key player on the McKinsey team tasked with making recommendations to Cleveland's community leaders on how to move the local economy forward. >> And I recall at the time there was this great debate. It was this chicken and egg debate about well, is the problem that we don't have capital or is the problem that we don't have investable ideas. And I think we thought, that is probably an interesting intellectual discussion. But probably the answer is, yes, we lack capital and we lack investable entrepreneurs investable ideas, so let's get working on both at the same time. >> So beginning around 2002, Cleveland embarked on a focused and huge undertaking to try to grow entrepreneurship. Since the market was not creating and funding new companies in Cleveland organically, the community looked to new funding sources, primarily government and philanthropy. Ray Leach, a successful entrepreneur originally from the region who started and sold several companies, was recruited back to Cleveland to run a newly created venture development organization called JumpStart. >> When I first got engaged in, in the opportunity to be a part of this thinking and this acting, I thought this has absolutely no chance of working because Northeast Ohio, it's such a predominantly manufacturing oriented economy. The people there don't get it. They don't have the skills, and through a series of conversations that I ultimately convinced myself really because of the passion and the vision that the community had that, you know, maybe this does have a chance, and it is my home community, and you know, I'd love to part of its evolution. >> Bruce Katz from the Brookings Instutution in Washington, and the author of The Metropolitan Revolution, looks at how cities across the U.S. try to grow their economy. Katz' book was published in 2013 and examines Cleveland's intervention to support entrepreneurship. So what happened here was a group of very smart philanthropies in particular the Gund Foundation, the Cleveland Foundation really began a process of, of intervening in very smart and deliberate ways in what really makes metropolitan economies work. Innovation, entrepreneurship, manufacturing, trade, and, this is one of the most successful network models around the United States. >> Katz also stresses the importance of the role of government in transforming Cleveland's economy. In 2002, the state of Ohio implemented a ground-breaking initiative called, the Third Frontier, which is an internationally-recognized, government-funded, technology-based economic development initiative. >> I think the Third Frontier program was, was very important to provide the kind of investment for technology firms. In many respects, private capital hasn't quite kept pace with this, particularly in parts of the country which are perceived as places where the, you know, next economy has not come to land. So, the states do have to intervene when you have this market failure, in a way. >> Although Silicon Valley's famed ecosystem developed over time by benefiting from the support of government and donor resources, now the majority of capital and support for entrepreneurs there is coming from the private sector. In Cleveland and other transitioning economies around the world, government and donor resources are being utilized in partnership with the private sector to try to support the growth of new start-up companies. Cleveland's attempt to support the growth of entrepreneurship have been in place for over ten years, and it has certainly seen some successes and certainly many ongoing challenges. The impact of entrepreneurship ser, support programs is not felt overnight. It takes years, if not decades, for progress to be made, even in places like Silicon Valley. Some of the key forces at work in Cleveland that led to developing a more entrepreneurial environment include first, recognizing that there was a crisis and that something needed to be done to address it. Second, a coalition of strong community leaders who were passionate about making changes and willing to work together. Third, rapid creation and implementation of a plan for the city and region. Fourth, money and support from philanthropic and government organizations for new ideas and entities, like the Third Frontier and Jumpstart to grow an entrepeneurial mindset and community. During the upcoming lectures of the course, you will hear how this story unfolds. How entrepreneurs include untapped into the resources provided to grow their fledgling companies, how the leaders in the community dreamed up and implemented these initiatives, and importantly, we'll look at how this has worked or differed in communities around the world. Upcoming lectures will cover government involvement and support of entrepreneurs, the role of philanthropy, the creation of intermediary organizations, the role of anchor institutions in fostering entrepreneurship. Finally, we'll examine various initiatives to provide entrepreneurs capital and mentoring, including development of seed accelerators, promotion of angel investment and networks, and increasing access to venture capital. Thanks again for choosing to take this course. I look forward to all of us learning from one another about how to grow entrepreneurship in transitioning economies. See you next time. [MUSIC]
