New businesses create more than one third of all U.S. jobs. Their growth is often determined by whether they can raise capital.
Research by Ted Zoller, director of the Center for Entrepreneurial Studies, reveals a way that communities can identify the sources of venture capital most likely to drive entrepreneurial growth and a path for unleashing its economic potential.
The Kenan Institute speaks one-on-one with Zoller about his research.
Here are excerpts of the interview with Ted Zoller.
Kenan Institute: What drives you to work with entrepreneurs?
Zoller: I honestly think I have the best job at UNC because I have the opportunity to work with hundreds of entrepreneurs. The common denominator is that they see something that’s not there and they build it. They don’t ask why not. They ask what could be.
I think that the potential of working with entrepreneurs will serve as a force to invigorate our economy. If we could unleash the potential of what I see in the entrepreneurs that I work with throughout our economy, we’re going to be in a great position in the United States.
I was an entrepreneur and I’ve spent my time at Kenan-Flagler helping entrepreneurs build their vision for what their enterprises can be, to realize the potential they bring to the market, the potential they bring to the economy, and how they can transform the economy through their work.
It’s always bothered me that entrepreneurs, who have such amazing visions, have such a significant challenge in raising the money to realize their dreams. So I’ve contemplated this idea of identifying a way to help entrepreneurs acquire the funding they need to realize their capabilities. This concept is called the “Dealmakers Algorithm.”
I’ve identified a process to use transaction data to infer the preferences of investors. I’m going to use that data to help entrepreneurs identify those who can fund their ventures.
Kenan Institute: How does your Dealmakers Algorithm work?
Zoller: Under the old model, venture capital was geographically concentrated, mostly in California and Silicon Valley. Yet the innovation potential is distributed geographically, all over the country.
My hunch is that social networking will allow us to better correlate our capital sources and our innovation sources so we’ll start to see investment and innovation coming together, not in geographic pockets but where innovation occurs.
What we’ve found is that regions that have a very cohesive social capital network tend to give birth to new entrepreneurial enterprises. The serial entrepreneurs and serial investors who tend to know one another build a rugged economy, an economy that creates new firms.
In Silicon Valley, for instance, 98.6 percent of serial entrepreneurs and investors know one another. In any other hotspot in the United States, including the Research Triangle Park, the ratio is roughly 60 percent. That’s a big distinction.
My hope is that by using this algorithm we might be able to create a more cohesive social capital network and bring our entrepreneurial leaders together, particularly serial entrepreneurs and serial investors. I’d surmise that those people who do it repeatedly are the most facile, the most successful, and the most transformative in their impact on the economy.
Kenan Institute: What can we do with this knowledge?
Zoller: First, we can bring dealmakers together, serial entrepreneurs and investors, to help inform public policy. These are individuals who know how to build entrepreneurial ventures. They know precisely what the barriers are to building new enterprises. They can help inform new public policies and can communicate it back to the people that build new ventures.
Second, we can help regional economies identify investors. I find that bringing entrepreneurs together is a body contact sport but it’s not very precise. We often don’t know who’s interested in doing what. The Dealmakers Algorithm can help identify those who would be most inclined to invest in entrepreneurial ventures.
Third, we can identify the senior people in the economy, the dealmakers, who can bring up the next generation. Young entrepreneurs need mentors, need leaders, need teachers. My sense is that the dealmakers, those who have serially developed new ventures, can serve as those mentors.
By creating an ecosystem, bringing our serial investors together with our garage entrepreneurs, we’re going to create rugged, high-growth, high-velocity entrepreneurial opportunities.
Ted Zoller’s Dealmakers Algorithm identifies serial entrepreneurs and serial investors who are driving entrepreneurial growth.
Learn more about:
|•||Center for Entrepreneurial Studies|
Frank Hawkins Kenan Institute of Private Enterprise
Kenan-Flagler Business School • The University of North Carolina at Chapel Hill
Campus Box 3440, The Kenan Center, Chapel Hill, NC 27599-3440 USA
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