When it comes to entrepreneurship-driven regional growth, a few big population centers garner the glamor, whether Boston, Northern California’s Bay Area, Bangalore, or Beijing. This is not mere optics: the large portion of the $50 billion global venture capital pie fueling entrepreneurial growth is concentrated in or near a few big urban regions. Furthermore, mega-cities seem to be natural hotbeds for growth: as just one example, London, with around 10 million people, currently has a 50% greater incidence of high growth firms compared to other UK regions, and a quarter of the high growth firms in the nation overall.
But the visibility of megacities masks the reality that billions do not live in these entrepreneurial epicenters. In fact, midsize cities and their associated regions are where most people live, work, and play, and will continue to do so into the future: Forecasts tell us that even in 2050 megacities will still number just a few dozen, while thousands of midsize cities (.5 to 5 million people) will house 92% of the world’s urbanites.
Learning how to speed up growth to increase prosperity of this massive middle would have immeasurable societal value. Enter Manizales, Colombia, a typical metro region of half a million people, struggling with the number one problem facing similar regions everywhere: giving more people more opportunity to make a decent living. Located in the heart of Colombia’s coffee region, in 2012 Manizales was a good place to grow up and get an education, and an even better place to retire, safe and surrounded by beautiful scenery. However, during their prime working years, most Manizalenos would move to Bogota (7 million people) or Medellin (2.5 million people) for the opportunity to find good work with good income.
But during the last four years, a powerful change has been taking place. Scaling Up Manizales (Manizales-Más in Spanish), an economic development coalition of local institutions and the Babson Entrepreneurship Ecosystem Platform (BEEP), which I created and lead, was launched in 2012 with the ambitious aim of revolutionizing the pursuit of opportunity. Through a coordinated, systemic, prolonged intervention with dozens of institutions and thousands of individual participants, new growth of the local companies we trained has directly created over 1033 jobs, fueled by dozens of new private sector financings. Increasingly, entrepreneurs are bringing businesses back from Bogota, and investors are coming from Medellin looking for growth opportunities. Independently, Michael Porter’s Social Progress Index in 2016 specifically highlighted opportunity in Manizales as significantly higher than both Medellin and Bogota. And the impact on Manizales’ culture has not gone unnoticed: “Manizales-Más has opened our city to the world,” was how one young university student put it to me.
Scaling Up Manizales – and other subsequent scale up projects which Manizales has helped to inspire, such as Scale Up Milwaukee; Scale Up Rio; Scale Up UK; Scale Up Vaud; and Scale Up Denmark – consists of four interrelated spheres of activity, namely: demonstrating, communicating, investing in, and sustaining new and more rapid growth.
1 – Quickly demonstrating new growth
Generating fast, demonstrable growth of local firms is fundamental for scaling up any regional economy. The key is focusing on small-but-significant growth events and showing that they can occur within months. Usually when talking about entrepreneurship-driven growth, people think it’s restricted to big wins such as investments in billion dollar “unicorns” and even larger exits. For us, growth events mean simply concrete, directly observable achievements that foreshadow future success: for example, new customer contracts, initial export sales, new bank or equity financings, expanded production capacity, or expanded people platforms (e.g. strategic hires).
To rapidly facilitate new growth events over several years, we have developed a six-month, 120-hour “Scalerator” that consists of monthly 1.5-day, scale-focused workshops and related activities. Scalerator’s distinctiveness comes from its relentless focus on impacting the “Three Cs of Growth” – customers, capacity, and cash – and translating them into quick wins in the marketplace. But the Scalerator is very different from your typical startup accelerator: in our program, startups of any sector or age are accepted only if they have already demonstrated real market traction, high levels of ambition, and have a significant ownership stake. We believe that it is not the age of the asset that is important, but rather, the value infused into that asset that drives scale.
Thus, in the Manizales Scalerator we rejected out of hand over 200 startup applicants, no matter how promising the idea, instead accepting all comers who met the criteria, including 2nd and 3rd generation family businesses, some of which appeared to community leaders as stagnant. The criticism came quick, but the seed of the new culture had been planted: growth, not start, was the goal. In short, the organizing principle of scaling up a midsize city like Manizales is not growing the number of new firms, but increasing the number of firms with new growth.
Growth events were almost immediate: An entrepreneur with a line of men’s underwear entered export markets for the first time. A second generation bakery concept started opening up new stores and hiring more people. A plastics subcontractor launched a line of proprietary pet toys, doubling headcount to over 50. Four cohorts later, the average growth of the 56 Scalerator companies has been 48%, with over 1,300 new business contracts (excluding retail) and the region’s first exports. The average participant in the first cohort has actually doubled its sales.
Our Scalerator is critical not only for stimulating new growth, but also for demonstrating to local leaders that with intense doses of scale-focused training, mentoring and simple cheerleading, growth can be the new normal.
2 – Broadly communicating growth
Growth per se is great, but it doesn’t have much spillover impact on a region’s economy if no one notices. We teach entrepreneurs and community leaders alike that talking publicly about growth is neither self-indulgent nor immodest; on the contrary, telling growth stories for all to hear is a strategic necessity if we want growth to spread broadly and sink deep into the culture.
The good news is that when people learn how to break growth down into its component parts, there is much more to see and talk about than just the unicorns that now dominate the dialog; to push the metaphor, squirrels, birds and foxes (i.e. actual developments that are more achievable) can be much more prevalent than people think. The bad news is that getting people to talk openly about their own and others’ growth is not a natural act. First, they need to be willing to communicate about success, which can actually be dangerous (in many places successful entrepreneurs are attractive targets for kidnap and ransom) or considered heartless or arrogant (some local church leaders in Manizales had taught that it is more blessed to be poor than wealthy). People also need to learn how communicating about their own and others’ growth in fact benefits them. Entrepreneurs need to learn that highlighting their own growth attracts talent, investors, and customers. University leaders need to learn that trumpeting others’ growth helps students get internships and brings growing entrepreneurs – and potential donors – into classrooms. Mayors and other public officials need to learn that communicating growth helps make their cities more attractive to businesses and investors and helps them to compete with megacities for talent.
In the second place, even if the stakeholders understand how they benefit from communicating about growth, they need to learn how to effectively talk the talk. In Manizales we taught leaders that concrete, quantitative messages (“We just received a $500,000 contract in Ecuador that will increase our 2014 sales by 40%”) are more motivating to others than vague inspirational ones (“We have grown more rapidly in the last year than at any time in the past”); and that frequently talking about quick concrete events is more impactful than repeatedly referencing the once-in-a-blue-moon big successes. Finally, they need to understand that they should communicate growth in terms that are idiosyncratically important to them – that generic, omnibus growth messages such as “exit” or “investment” or “big sale” do not have universal impact.
In short, as one Manizales stakeholder put it, communicating growth meant exercising muscles they did not even know they had. But making growth a legitimate discussion topic and an integral part of the culture is having a cumulative effect. It has brought out over 19,000 people to attend events highlighting various aspects of scale up. 200 video clips on growth-related topics have attracted over 22,000 views and many thousands more people are following Scaling Up Manizales on Facebook and Twitter. President Santos even made a video touting Scaling Up Manizales’ impact.
3 – Training stakeholders to support growth
When it comes to stimulating new entrepreneurial growth in cities, it takes an ecosystem. Entrepreneurship ecosystems are composed of many different stakeholders and include large companies, universities, banks, media, and the government, all of whom push and pull more local companies to grow more rapidly. The typical appeal to stakeholders of investing in growth is that it is good for the community and thus part of their social responsibility. In contrast, our scale up methodology assumes that selfless contributions of time and resources – donating blood, if you will – for growth can only go so far. But it is not enough for stakeholders in scale up to have intentions to invest in growth. They also need to learn specifically how to make those investments.
In Manizales, we have held nearly 100 of educational events and training programs specifically targeted to bankers, media, potential angel investors, large companies, and universities. We taught lending officers how to talk to businesses that were afraid that taking debt onto their balance sheets was riskier than maintaining a flat-growth business. We taught journalists how to interview entrepreneurs and elicit their stories of growth. We helped the leading NGOs start growth projects for their own constituencies. Working with the MIT Venture Mentoring Service, we created a platform to identify and train the best and most experienced professionals and executives how to mentor growing firms, which has led to an elite corps of three dozen active mentors who have spent at least one hour every month for three years helping local entrepreneurs grow. And we convened two dozen investors and investment professionals from around the country in a unique, closed-door Financial Innovations Workshop to see the growth first hand and then to invent financial instruments that would help them profit from financing the growth.
4 – Building local capacity and getting out
Smart, self-sustaining scale up of regional economies requires beginning with the end in sight. Even before launching Scaling Up Manizales in July 2012, with bands celebrating in the cordoned-off city center, we had begun talking to the local stakeholders about how BEEP would leave the scene after five years or so. Despite our awareness that the precise exit date might shift, always having the 2017 horizon has forced all of us to continually confront the question of how growth will carry on after BEEP’s involvement in leading the program ends.
The primary ingredient for sustaining growth is, of course, growth itself. Once the stakeholders see and experience that more growth is possible and is beneficial to them, it is relatively easy to convince most of them that investment is important and then to show them how to make it.
In concrete terms, sustainability means building local capacity to maintain and even accelerate the growth. To accomplish this in Manizales, we have been proceeding along two parallel paths: One has been to encourage, and at times to push, the local team, now six full-time members and dozens of committed volunteers, to take on more of BEEP’s role, whether in terms of mentoring companies, conducting the leadership retreats, communicating growth, or holding public events. As of this writing, all of Scaling Up Manizales’s programs and events are self-managed, with the exception of the Scalerator, which is scheduled for hand off in 2017.
The other path has been to develop the abilities of the local universities to train entrepreneurs and entrepreneurship faculty in the principles of fostering rapid local growth. We had a ready model for such capacity development in Babson’s student venture accelerator program. So we created a university-led task force, coached by BEEP faculty, to pilot Add Venture-Más – a fairly standard student-based incubation and acceleration program that takes startup entrepreneurs from a product concept to initial sales over a three-month period. Once this was up and running, local faculty took on full responsibility for all aspects of the program, supported by the Manizales-Más team, and only occasionally advised by BEEP.
Scaling Up Beyond Manizales
The simple but inspiring words of that young student conveyed what the statistics could not: Manizales-Más has instilled scale up ambition deep into the fabric of this region, and has indeed opened Manizales to the world. If cities could have a self-concept, today Manizales’ self-concept would be of a healthy, ambitious and proud city. Part of the local pride has come from the fact that Manizales has received international recognition from the World Bank, the Inter-American Development Bank, the UK’s Scale Up Institute, and presentations at Harvard and Babson. Our subsequent experience in Milwaukee and Rio de Janeiro has only served to strengthen the case that these scale up methods and the four spheres of intervention described are applicable to a wide range of midsize cities, even in very different cultures and economies. And as scale up projects proliferate, they are contributing to the blossoming of a Scale Up Movement that will catalyze ambitious, growth-driven entrepreneurship in hundreds of these cities around the world.