How Technology Shapes the Entrepreneurial Ecosystem
Structures of engrained power.
This article is a part of the series “How to Build Thriving Start-up Ecosystems: Five Information Patterns for Success.”
The Internet in combination with AI has made it easier for start-up founders to create websites, match with potential co-founders, and mass email investors. Yet instead of technology enabling a massive shift in access to entrepreneurial opportunity, the reality is a lot more complicated. Thirty years since the development of the World Wide Web, as of 2024 women have gone from zero to only two percent of venture-backed start-ups (Pitchbook). Black founders and founders of color raised 1.2% of venture capital last year (Crunchbase). For all the tools the internet has made available to founders, the power disparities in America’s entrepreneurial ecosystem have largely remained the same.
To create more equitable entrepreneurial opportunity for founders, Community Information Designers must understand how technology, and the systems of power enforced by it, impact the world around their students.
Information Versus Insight
Today’s entrepreneurs can access hundreds of free business plans online, launch a product page in minutes with Wordpress and Squarespace, learn about their competition with Crunchbase and FS6, or hire developers and designers on Upwork and Toptal.
In a landscape where entrepreneurs have access to all the information they could need, it seems paradoxical that the rate of successful start-ups is in decline. An overlooked reason for this is that founders are drowning in irrelevant information. Information “noise” obfuscates what course of action founders should take and makes it more likely they will waste valuable time going in unproductive directions.
This information overload is not an innate part of entrepreneurship. Google has become such a part of daily life that it is often overlooked that the website is a human-designed entity, one that is paid for by advertisers when you click on their websites. Google profits when you search a lot, not when you quickly find what information you need.
To create insight over information overload, Community Information Designers play an important role as curators. An effective CID understands the founder’s unique field and gives them information that is relevant to their situation at a relevant time.
Scarcity of Attention
This information noise has also shifted where founders face problems in the investment pipeline. It used to be hard to find contact information and get in touch with a potential investor. Today there are several websites that help entrepreneurs connect with angel investors. Though technology has made it easier for founders to make initial connections, it has replaced the problem of connection with the problem of scarce attention.
Email automation tools have drastically increased the number of in-bound emails venture firms receive while the size of venture firm teams have remained largely the same. Because there are now more potential entrepreneurs for a firm to follow up with, entrepreneurs need more than a compelling story to capture venture capitalists’ attention. They need warm personal introductions. Since 40% of venture capitalists went to either Harvard or Stanford, entrepreneurs outside of these social networks have an increasingly small chance to be noticed when reaching out through cold calls.
Technology has also shifted the ways founders and investors meet in person. Websites like Eventbrite and Meet-up help founders find out whether investors will be at start-up networking events which encourages them to go. However, often this creates a “pitching” dynamic where dozens of founders try to quickly get venture capitalists’ attention. Investors become stressed as they are inundated with pitches, and over time the highest quality investors move towards smaller, private communities where they can have fewer high quality meetings (Sourcescrub). Founders then need to pay or share similar educational backgrounds with investors to join these private events, once again cutting non-affluent entrepreneurs off from access.
Community Information Designers play a crucial role to create spaces where their founders can gain the opportunity to meet with investors while ensuring these events are highly curated so investors are not fatigued with irrelevant pitches. The founders that are at these events should be in relevant verticals for the investors they meet with and at the right moment in their company’s trajectory for investors’ stage of investment focus.
Filtering Creates Assortive Investing
The internet has made “assortive mating” in romantic relationships common where people select partners who share a high degree of similarity. Where once a doctor might have married a teacher or secretary that lived down the block, now with the ability to search online through hundreds of bios in an evening, people are more likely to pair up with those of similar earning potential or career ambitions. This same assortive behavior has increased in the start-up world for co-founder pairings.
On CoFounderslab an entrepreneur can search for potential co-founders who went to specific schools and can also see a person’s gender, height, weight, and race through their photo. Years ago an Ivy league graduate that might have been happy with a co-founder that lived in their neighborhood and went to a state university can now search farther afield for a co-founder that also went to an Ivy League and worked at a FAANG company.
Filtering also creates greater assortive investing. While traditionally angel investors invest within 40 miles of their homes, in recent years the geography of start-up funding has widened to global cities like Stockholm, London, Berlin, and Tel Aviv. However, where years ago an investor might have been happy with founders that do not hold MBAs but live in their city, they now can search for teams globally that fully match their desired investment theses.
While technology has the power to build bridges between people across the globe, today’s filtering mechanisms are designed so that global bridges are built between the same kinds of people.
Forms Influence Assumptions
As attention for customers and investors becomes scarce, founders are encouraged to apply to accelerators which give them a sort of stamp of approval for investors. To get into an accelerator, founders encounter an unassuming technology: the form. Forms help accelerators source potential companies to invest in by asking founders questions. While accelerators might pitch themselves as innovators, in actuality they largely select for founders that match previous successes. Founders know this, so they try to tailor their applications as much as possible to previous successes. There is no more popular accelerator than YCombinator, and the questions it asks on its application set up a system where founders, in trying to gain acceptance, end up wasting their time on the wrong facets of company creation.
On YCombinator’s application page, questions include where founders live and where they plan to live. Location is a quiet assessment of founders’ net worth since coastal cities and Silicon Valley are more expensive locations but investors feel have the “best” networks.
Another question is how long founders have worked on their company full-time. The supposition is that only full time founders are serious. This both assesses a founder’s age (it is much easier to be full-time at twenty-two than at forty-two with a family). This question also quietly assesses the disposable income and class of the entrepreneur.
YCombinator’s application also includes a question on whether the founders write code. While tech is likely to be an important facet of companies in the coming years, the assumption that only technical founders can succeed blocks out whole new kinds of company models and founders that have deep knowledge of a certain customer base or unique insight on the market.
Although subtle, forms powerfully shape entrepreneurs’ assumptions of who can and cannot be successful. Some founders assume they cannot be successful if their experience does not reflect the suggested response to a form. To combat this, many co-founders try to look more attractive on these forms, even if their actions detract from progressing towards a successful company. This might mean moving to a coastal city that decreases their runway, finding a technical co-founder that might not be a good fit, or developing an app too early. All of these are common mistakes founders do because the questions asked on forms shape founders’ understanding of the pathways to success.
In the short term, accelerators might successfully use these forms to pattern-match founders to previous successes. But slowly they will find that they have a smaller number of companies all attacking similar markets in the same ways with this approach because their forms have created an artificial bottleneck in the entrepreneurial ecosystem.
Building Consciously
It is important for CIDs to understand the technological system that surrounds and envelops their universities. It is a system where information and access appear initially abundant, but can create overwhelming information noise. It gives the appearance of access, but replaces the problem of connection with scarce attention. It is a system where subtle cues influence founders to waste time worrying about the wrong things.
Then, it is the work of CIDs to design curation to help make action out of information noise, to be intentional with events to combat scarce attention, and to help founders build revenue generating companies that do not get distracted by cues on application forms. This work is incredibly important for the future of universities and the entrepreneurship ecosystem as a whole.
