You Need Healthy Soil: The Secret to Building Entrepreneurial Ecosystems

Beyond incubators and pitch competitions: How to create sustainable business communities that work

Every community wants to build the next Silicon Valley. They host startup weekends, launch incubators, and create economic development plans with "innovation" mentioned numerous times.

Most founders know the truth: there's a gap between well-intentioned ecosystem support and what entrepreneurs need to succeed.

In my recent conversation with Alfredo Mathew, former educator, Co-Founder of ESO Ventures, and Founder & CEO of SPCC.1, we explored this disconnect and uncovered a framework to build sustainable entrepreneurial ecosystems outside major tech hubs.

🏗 The Misalignment Problem

"Ecosystem building lacks a business model," Alfredo told me plainly. That's where things fall apart.

Economic developers chase grants but haven't run P&Ls. VCs want unicorns but ignore the on-ramps. Philanthropists fund pitch competitions but not payroll. Universities teach theory without practice.

The result is that resources concentrate in a few geographic hubs while most communities struggle to retain talent and build sustainable businesses.

Alfredo said, "You can't have an ecosystem of all giant corporations. A forest needs undergrowth and healthy soil."

Only businesses planning to leave survive in smaller markets without that foundation.

🌱 "If Entrepreneurs Aren't at the Table, Game Over"

Alfredo's most emphatic point is that everything starts with the entrepreneurs.

"If the entrepreneurs aren't at the table, if you don't have people who'll put skin in the game and want to create the businesses—it's over."

Not consultants, politicians, or support organizations. Actual founders willing to take risks, invest their own resources, and build something from the ground up.

"Business owners must take risks, invest their own money first, and jump first."

This founder-first approach contrasts with many ecosystem-building efforts that focus on infrastructure, capital, or programming without verifying committed entrepreneurs ready to use these resources.

In Oakland, Alfredo's ESO Ventures targeted sole proprietors ready to grow into employer businesses. They led with practical support rather than fancy programs or abstract theories. They identified people with skin in the game who needed specific help to level up.

🌿 The Full Partnership: Public + Private + Philanthropic + People

Alfredo's "four P partnership" aligns the remaining resources for success with entrepreneurs as the foundation:

1. Private Sector: "Private capital doesn't care about ideology; it cares about profit."

Public funding fluctuates. Philanthropy pursues new trends. Only private capital can sustainably scale businesses.

"Private capital doesn't care about ideology," Alfredo notes. "It cares about return. If you're building something profitable and repeatable, you can get private capital to sustain and grow it. If not, you'll struggle."

ESO Ventures deployed $6 million in low-interest debt to help 500+ small businesses become investable. They recognized that bridge capital was essential to help founders transition from an "interesting idea" to a "viable business."

2. Public Sector: "Utilizing public funds to foster economic vitality"

Government isn't the enemy. Public dollars need to create momentum, not dependencies.

Alfredo leveraged a $25,000 community college contract into $22 million in public funding. He did this by demonstrating his model created tax revenue, jobs, and sustainable businesses.

"Most states have poorly used workforce development and small business support funds. How do you use public dollars to create more tax revenue and a positive cycle?"

3. Philanthropy: "Funding that makes the economics work"

Sometimes the numbers don't add up, especially in underserved markets. That's where philanthropy plays a role.

"Philanthropy is important when the economics don't make sense. For public-private purpose, you need catalytic funding."

The key is using philanthropy to close specific gaps, not to finance ongoing operations.

⚙️ Start With Success: The Bottoms-Up Approach

While Alfredo's framework makes sense, how do you begin?

I shared our experience in Rapid City, South Dakota—a non-coastal market where we've been building founder-first:

1. We identified a promising founder building PropertyMeld (property maintenance software).

2. We supported them with a small investment and mentorship.

3. They grew to over 90 jobs in our community.

4. This success story became our "beacon" that attracted others.

5. Now those founders are mentoring and investing in the next generation.

"You're doing it from the bottom up, which is right given your assets. Find niche businesses, provide AI on top, but your domain expertise is the area we value most."

This approach contrasts with top-down economic planning and proves more sustainable. One success story unlocks more resources than multiple strategic plans.

🎯 "40-Year-Olds Make the Best Entrepreneurs": The Experience Advantage

Alfredo's provocative point challenges Silicon Valley's focus on youth and inexperience:

"I think 40-year-olds make the best entrepreneurs. Most people need life and real-world experience before they're mature and ready to drive a business."

He referenced psychotherapist Carl Jung, who wouldn't take students until they were 35-36 and had achieved success in other areas:

"You gotta build your chops. Your best work is in your forties and fifties. 40-60 is when you're ready."

This insight significantly impacts ecosystem builders everywhere:

1. It redefines target entrepreneurs. Instead of pursuing 22-year-old dropouts, we should support experienced professionals transitioning to entrepreneurship.

2. It values domain expertise. People with 10-15 years in an industry understand solvable problems and have networks to leverage.

3. It acknowledges emotional maturity. Running a business requires resilience, patience, and self-awareness that come with life experience.

4. It challenges coastal biases. Non-coastal markets often have experienced professionals with deep industry knowledge and limited access to startup support.

5. It aligns with demographic reality. With Americans living and working longer, mid-career pivots into entrepreneurship are becoming more frequent.

This perspective offers a compelling alternative narrative for communities building entrepreneurial ecosystems outside traditional tech hubs. Instead of competing for 22-year-old computer science graduates, focus on experienced professionals with industry expertise ready to solve familiar problems.

🤖 AI as Co-Founder: Democratization or Concentration?

Our conversation turned to AI's impact on entrepreneurship, revealing both potential and concern.

Alfredo worried that AI might concentrate power. He said, "I'm concerned people will compete against monopolies, and the larger enterprises will see what individuals are doing, either acquire, copy, or block innovation."

I cited tech history examples where open source tools (Linux, PostgreSQL) created alternatives to monopolies:

"Does a company specializing in wildland fire management need all that compute? No. They need an LLM to make decisions with their specific data."

Key takeaway for founders: AI rewards domain expertise. The most valuable applications come from niche solutions built with specialized knowledge:

• The orthodontist incorporates AI design into braces.

• The civil engineer develops AI for environmental compliance.

• The property maintenance business streamlines customer communication.

Education is essential for ecosystem builders. Founders need to know enough to leverage AI in their domain.

🧩 "You Are Not Your Business": The Delegation Imperative

Alfredo shared a revealing story about a water shop where everything had to go through an unavailable owner:

A young woman there said, 'Oh, please don't do it. Oh my God. These machines break down all the time. We can't order the parts because everything has to go through the owner. He doesn't delegate or trust anyone.'

The lesson was clear: "You are not your business. Don't make yourself part of it. Figure out how to exit and let it thrive without you."

I agreed, sharing how we evaluate startups partly on whether the founder has built systems that can run without their constant presence. I said, "If you're essential to every aspect, you're building the business the wrong way."

This highlights the importance of teaching founders to build assets, not just employment, for ecosystem builders.

🧱 Practical Next Steps for Ecosystem Players

For Solo Founders:

• Start with domain expertise: Build in areas where you have extensive industry knowledge.

• Design for delegation: Create systems that do not depend entirely on you.

• Leverage open-source AI by using tools like Mistral or Llama to create specialized solutions.

• Join founder communities: Find successful founders and learn from them.

For Mentor/Investors:

• Take equity, not just fees. Align your incentives with founder success.

• Focus on founder education. Help them understand AI and delegation from the beginning.

• Connect across sectors: Build connections between public, private, and philanthropic resources.

• Showcase local success stories to draw in more capital and talent.

For Local Government:

• Repurpose existing funds by redirecting workforce and economic development dollars to founder support.

• Create procurement opportunities by becoming early customers for local startups.

• Measure business creation, not just jobs: Track new employer businesses, not only employment.

• Be patient with capital. Set realistic timeframes (5-7 years) for ecosystem development.

For Educational Institutions:

• Connect domain experts with tech tools: Help experienced professionals start their own ventures.

• Teach practical AI application: Not just theory, but real-world implementation.

• Partner with local businesses to create internships and practical projects.

• Highlight local success stories: Celebrate entrepreneurs and other careers.

🌟 The Ultimate Goal: Ownership, Not Just Income

"Entrepreneurship isn't just about creating a job," Alfredo concluded. "It's about creating an asset with greater value beyond your labor."

In a world where wages rarely build wealth, ownership is essential. That's why entrepreneurial ecosystem building is important—it creates pathways to ownership for more people in diverse locations.

Communities can build sustainable economic engines that do not depend on Silicon Valley's attention or approval by aligning entrepreneurs first and then bringing together private, public, and philanthropic resources around them.

The forest needs undergrowth. Let's build the healthy soil that enables it.

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What has your experience been with local entrepreneurial ecosystems? Are entrepreneurs at the table in your community, or are there missing pieces? Let me know in the comments.