Wrapping up 2024 and on our way into a fresh start, whether you celebrate the holidays or ring in the new year, something most of us will experience in the next few weeks is a shift in the culture we typically experience. People are warmer, perhaps more social, and in the spirit of giving gifts or well wishes; the point that I want to encourage you appreciate is that the culture we experience changes a bit, and I want you to capture that in your hearts and minds because it should help you see that it isn’t funding, education, or tech, that fosters startup communities, it’s culture.
Article Highlights
Entrepreneurship Is Culture: The Missing Ingredient
When you appreciate that entrepreneurs are a type of person rather than a role in your community, you begin to transform the culture of your economy from believing you can help start businesses, to instead enabling the entrepreneurs who do. Startups are not born of innovative ideas, billions in funding, or even cutting-edge research, those are qualities that contribute to startups; at their core, startups are born by entrepreneurial people, and those people only really rise to the occasion when the culture encourages —a dynamic interplay of risk tolerance, capital availability, and government support (or hindrance).
If you’re not making the connection, or you still mistakenly believe that fostering startups is like supporting small businesses, think of entrepreneurs as athletes and your economy as akin to sports. A culture that is more excited about music than sports, isn’t likely to accomplish much in football or baseball. Without media attention, fans, and advertisers, the industry itself struggles to get along. More importantly, while you have people more than capable of being pro athletes, they can’t compete without teams, programs, and training to be their best; and that training doesn’t take place when someone in the 20s decides to have a career playing sports, it’s a result of a culture in their youth, that inspires them to pick up a ball with friends, to run or bike into town, or lift weights at school. A government and culture that stifles this, can’t compete – and as much can equally be said of athletes and sports as can be said of entrepreneurship and tech.
No amount of investment available, innovation spaces opened, or incubators operating can turn adults into founders if the culture isn’t first in place to inspire, support, train, and reward people for trying as they mature.
Most the world is fueled by good intentions, wanting to encourage entrepreneurs and knowing that startups create jobs, but most of the world is focused on the wrong measures and as a result, they’re contributing to startups failing while hoping they’re making a difference.
While many governments around the world recognize the importance of fostering startups, their efforts often fall short because they misunderstand an essential trifecta. It isn’t about throwing money at the problem; it’s about building an ecosystem where risk-taking, failure, and recovery are celebrated.
The European Problem: Risk Avoidance
Let’s me temper the fact that I’m about to be critical of Europe here while indeed, not being a part of the ecosystem myself. Keep in mind, I study this and do the work with cities and countries necessary to developing their economy for startups. I want to focus on Europe for a moment because I was asked to, “So what does Europe have to do to become competitive in the tech space?” and my perspective celebrated; what you’re reading now, here, is a more elaborate explanation of what I’ve been talking about with Europeans already.
Despite billions in government funding allocated to foster innovation, many European countries struggle to create thriving startup ecosystems. The issue isn’t a lack of resources — it’s cultural. “Money comes from the government, and we aren’t really celebrated for taking risks or failing,” one Croatian entrepreneur told me during my time there. This statement captures the heart of the problem.
Government money often comes with strings attached, favoring safe, incremental ideas over bold, disruptive ones. And because governments dominate the funding landscape, private investors — who bring not only capital but also mentorship and accountability — are sidelined. Why would angel investors and venture capitalists’ step in when government funds fill the gap, albeit inefficiently?
A 2021 report by the European Investment Bank found that while Europe’s venture capital market is growing, it still lags far behind the United States, both in terms of volume and the average deal size. This lack of private investment stifles the critical ecosystem of experienced advisors who understand the high-stakes, high-reward nature of startups. Consider, the ideal motivation and support of a founder is an investor who demands a return on investment a result exceptional accomplishment but who can also advise the founder from their own experience; respectfully, academics at the University or good intentioned government officials aren’t up to that task, removing the role investors can and should play in your ecosystem, by merely providing the funding from taxpayers, counter-intuitively kills entrepreneurship.
So, Is Government: Friend or Foe?
Governments can play a pivotal role in shaping startup ecosystems, but often, their involvement backfires. High levels of regulation, coupled with the over-reliance on government grants and university-led programs, often do more harm than good. Universities and government officials are rarely the best advisors for startups. Their incentives are misaligned. Universities prioritize research and academic accolades, while governments often aim for politically safe outcomes, which leads to funding mediocrity over innovation.
In the United States, the situation is somewhat different but not without its flaws. While Silicon Valley thrives on a unique combination of risk-tolerant capital and a culture that celebrates failure as a steppingstone, other parts of the country falter by imitating the wrong aspects of that success. Cities like Austin and New York have glimpses of the right ingredients, but local programs often miss the mark by emphasizing commercialization or research-heavy approaches or providing the wrong kind of mentorship. Most cities support a startup hub and then celebrate their accomplishment through the media, really just hoping to win over voters for trying, without realizing that they’re likely harming would-be founders.
What Needs to Change?
- Foster a Culture of Risk and Reward: Startups thrive where risk is rewarded, and failure is seen as part of the journey, not the end of it. This requires a cultural shift, one that celebrates entrepreneurial success stories and normalizes the struggles that come with building a company. A study by the Kauffman Foundation highlights this point, showing that regions with a high density of entrepreneurial role models and mentors see significantly higher startup success rates. For countries lacking this cultural fabric, the first step is education — not in “entrepreneurship” curriculum but in a k-12 culture of teaching children that shows what’s possible and how failure builds resilience.
- Attract Private Investment: Government funding has its place, but it should complement, not replace, private investment. You can develop policies that attract venture capital, we’ve explained it here, but I’d still bet your city is failing to do this and likely discouraging investors. Policies that incentivize angel investors and venture capitalists — such as tax breaks or co-investment models —can help build a robust network of experienced investors who provide more than just capital. In Israel, for example, the Yozma program successfully jumpstarted its venture capital industry by matching government funds with private investments, a model that has since been emulated globally.
- Reduce Regulatory Burdens: Overregulation is a startup killer. While some oversight is necessary, governments must create an environment where startups can move quickly and adapt. The World Bank’s Ease of Doing Business Index consistently shows that countries with simpler business regulations see higher levels of entrepreneurial activity.
- Rethink Education and Advisory Models: Universities and government-led startup programs often offer the wrong kind of advice, focusing on research-heavy approaches that stifle innovation. Instead, ecosystems should prioritize real-world experience. This is where accelerators, incubators, and private-sector mentors can make a meaningful impact. Silicon Valley’s success, for instance, is deeply rooted in its network of seasoned entrepreneurs who actively mentor the next generation.
Tailoring Economic Strategies to Startup Contexts
You should not aim to replicate Silicon Valley! But you should learn from the culture of that ecosystem to better understand why it works so well – it isn’t tech or capital. Built on a foundation of individualism, risk tolerance, and market-driven dynamics, the United States generally has a cultural advantage but even then you can see that cities within the U.S. struggle or succeed – I assure you, everyone is trying the same things: demo days, coworking spaces, startup hubs, entrepreneurial curriculum, and incubators -> recognize that if everyone is doing that, what works is something more. Take elements of understanding the implication of culture, adapt them to their unique sectors, strengths, and economic contexts.
For example, Finland has found success by blending government support with private sector involvement through initiatives like Tekes (now Business Finland), which provides funding but also actively connects startups with private investors and international markets. Similarly, Singapore’s Startup SG initiative has created a thriving ecosystem by offering grants, mentorship, and access to global networks without stifling private investment.
Entrepreneurship is fundamentally a cultural question, supported by capital and shaped for good or bad by government policies.
Countries that focus on just one or two of these elements will continue to fall short. To succeed in tech startups, nations must cultivate a culture that celebrates risk, attract private investment to provide more than just money, and implement government policies that enable rather than hinder innovation.
The question isn’t whether your country can compete in the global startup race; it’s whether you’re willing to do what it takes to change the culture, policies, and investment landscape to make it happen.
Very nicely said
This is an exceptionally great answer.
Fantastic article. Thanks for sharing Paul O’Brien
Cheers Edwin Rogers. A lot to come of AI that can help in this regard.
Reading this has inspired me to think: I have a new concept for you… Entrepreneur IQ.
Let me explain.
I’m a footballer. Read: European football. Aka soccer. I started playing when I was a kid. Without giving away my age, let’s just say back then my parents – RIP, God bless them both – got some dirty-ish looks when they said, “Our kids play soccer and only soccer.” Back then that was almost as UnAmerican as communism. ?
Enter the impact of culture on performance. Futbol. the world’s sport, is finally massive in the USA as well. Hundreds of thousands of kids play and yet our XYs struggle to make the World Cup, play for the best European teams., etc. We’re good. We’re better. But given the numbers, underachieving.
Why?
My theory is… culture. We have plenty of (male) kids with plenty of world class skill. The problem is, we don’t think about the game the same way Europeans, South Americans, etc. do. We lack Football IQ. And while believe in neuro plasticity, dedicated practice, etc I don’t believe Football IQ can be taught. It’s primal. Maybe there’s even a gene or two for it?
Entrepreneurs? Likely same / similar. Those with genius-level Entrepreneur IQs are a direct byproduct of culture, that impact starts *young*
Curtis Forbes ^ not far off from what we’ve talked about
Mark Simchock
https://fi.co
Jordan Jocius great recommendation, I’ve been heavily involved as a Director. That role is what led me to discover these realities; that, despite the program being among the best in the world, if the local Directors and mentors are inexperienced, small business professionals, or consultants – the cohorts struggle. And despite having this program, if the ecosystem and culture are cannibalistic, siloed, unsupportive, or investors sitting back, it won’t work.
I hear people complain about their experiences with FI elsewhere in the world, and yet when I look at why, it’s not because of Founder Institute, but the people and culture there. This reflects why I said that merely putting incubators in place, won’t solve the problem.
Bang on! Thank you for sharing your insights.
Best read of the year for me. Thanks Paul O’Brien for writing this down and Robin Schaffer for pointing me to it.
Neil Pollock
Cheers Chris Holscher and Robin Schaffer . We can do better by entrepreneurs ?
Paul O’Brien Valuable feedback for Founder Institute. Thank you for sharing. Honestly!
Jordan Jocius my pleasure; I’ve shared it quite a bit in the past so since we’re exploring it, let me elaborate:
1. Think regionally not locally. When we brought it to Austin, we pushed to make sure the mentors were drawn from throughout Texas
2. Require rigorous exclusion. Yes, exclusion. We were harsh in Austin, that if you didn’t get the work done or didn’t make the grade, you were done. And we started on day one saying that 2/3rds of the room wouldn’t get through it
Why? Because we’re not here to coddle you. We’re here to make it clear when you are wasting YOUR time (and ours)
3. We actively removed mentors. Not based on scores or feedback about them, but upon discovering that they were selling something or promoting themselves. If you aren’t there to teach founders what they need to do *without you* then get out
4. Incubator not Accelerator. FI still mixing this up, I think. Accelerators have to accelerate what startups are doing and should ONLY get involved post-seed. If they don’t actually Accelerate (and many don’t), they need to be shut down. FI is an Incubator, it teaches, requires work, and is cut-throat; pre-seed. Calling an FI an Accelerator puts it in the wrong class of SDOs and sets the wrong expectations
Hopefully goes without being said, that my point is that most places don’t do this… Directors are community builders and mentors are consultants. This alone is why most cities struggle.
One necessary solution is to lessen the oppressive taxes on the highest earners. Your point about risk is a good one, the risk/reward ratio is currently skewed artificially poorly because the reward for success is so blunted by high taxes.
Nice writeup. Good take.
Although, perhaps for the government funding being a bad thing.
Yes, government officials are bad at investing and a spending goverment makes people lazy. But most deep innovation, that needs a 5, 10 or even longer term to become profitable, in the end has to come mainly from government.
I believe ASML in The Netherlands comes from government subsidies to what used to be Philips and DSM. Philips invested 4 million and got a 11 million (!) goverment subsidy. https://hollandhightech.nl/nieuws-agenda/nieuws/zonder-deze-voorloper-van-t-nationaal-groeifonds-was-asml-nooit-zo-groot-geworden (Dutch article, translate it)
Now, just ASML alone has a market cap of 270 billion and 42.000 employees. It even gives the entire Netherlands a seat at the world stage and from the tax profits nowadays another 1000 startups could easily be funded from it.
Yep agreed. I hope you notice on some other comment threads (where I might have been overly critical), those deep tech or government funding circumstances overshadow the point of the question though. They are meaningful but you risk discouraging VC, or emphasizing academic research or University entrepreneurship. That does not a healthy startup ecosystem make, not alone. Lots of places have that, and the question validly persists – because it’s actually not about that, it starts in kids… It starts with a culture that encourages disruption… Fail that, and all University/Gov money does is support the fewer people who are pursuing that direction in particular. Most aren’t.
100% on culture. And it starts with the kids. But it remains a difficult story. The Netherlands is Calvinistic. It is not okay to fail, you should save money, not flaunt it, and you shouldn’t stick out from the general public. Let alone take risks.
It made us a rich and entrepreneurial country nonetheless. But there are a million factors at play. In the end a society does what they have learned back in the day works or did not work for them. In Germany’s case they are very strong on regulating privacy now. In The Netherlands coorperation and communication was strong because otherwise we’d flood. German quality control worked great in the industrial age, but they’re falling way back now.
Perhaps what you say is what it comes down to.
Did it make it a rich and entrepreneurial culture though? I’m not asking from a judgmental point of view, I’m actually curious. Rich, yes. Problem solving? Clearly. Starting businesses, yes.
But most people misinterpret entrepreneurial as owning businesses or doing startups; that’s not what the word actually means, and that’s why I point out that entrepreneurship is cultural.
Oxford University did a study of 22,000 startups and they found that only about 8% of the population is actually entrepreneurial: risk tolerant, fixated with solving problems, investing themselves often without permission or resources. Such people are usually not starting businesses, they’re found in jobs; standing out from everyone else because they’re difficult to manage, constantly doing other things, etc.
Entrepreneurial people, it’s found, actually tend to struggle financially, and even with mental health issues, given the fact that they’re constantly taking risks, trying to fix things, and doing so at their expense, without support.
We mistakenly associate entrepreneurship with business ownership because a higher percentage of entrepreneurial people start businesses BUT we also see that entrepreneurial people also often fail at business ownership at a higher rate than others – because they take risks at their own expense. Appreciate doctors, dentists, auto repair, etc. are all examples of business ownership where the person is *less-likely* an entrepreneur (they succeed), and make no mistake, we absolutely find entrepreneurial doctors, dentists, and mechanics.
Point underlying all this being though, if you want to compete with tech startups, you must foster the entrepreneurial people. You’ll still have founders, tech professionals, investors, researchers, and scientists, but without the entrepreneurial VERSIONS of those people, and without the entrepreneurial people in all the other sectors and roles of the economy, you’re less likely as an ecosystem to have the creative and inspiring risk takers that are the catalyst of that competitiveness.
This is good, with one exception. I think that “government officials and university programs are not good startup advisors” misses how massive the government/university combo is as a startup economic engine in R&D-heavy sectors. SBIR/STTR tech transfers and royalty/profit sharing at universities are quite an amazing system for startup generation. Hell, Stanford MBAs alone, many of whose start-ups are advised and nurtured by the university, have some of the highest Unicorn ventures in the world. MIT and Harvard are not far behind.
I don’t have the sources in front of me, but the SBA SBIR/STTR program has a 15x+ ROI.
Yes, it is, but in the question of competing in tech startups, you need entrepreneurs and the culture, not the R&D or the grants.
What you’re suggesting is exactly why most places get it wrong. I’ve been in a few different ecosystems Silicon Valley and Austin in particular, and the number of people who promote SBIR in Texas is astounding, relatively speaking. And I’m not saying those aren’t valuable resources, that’s not what the question asks.
Many of the Sanford founders were advised and nurtured by the industry – I used to lecture there. And in Texas? They don’t have me lecture, because I didn’t go there or don’t agree with their curriculum.
Don’t misunderstand me, I’m not complaining and there are expeditions, what I’m pointing out is it is entirely cultural. Governments and Universities are filling gaps that shouldn’t exist in this context
What context? Research? No, obviously not, that’s not the question. Schools and governments fund that well. MBAs? MBAs don’t The question is startups, and SBIR doesn’t do anything to help make those work, it’s a capital source – and when such capital sources get in the way of investors getting involved, investors don’t.
Grants and University research don’t inspire kids and young adults that they can be founders, culture does. And putting these things in place, or having them, is evidence that something is amiss, because founders and investors can thrive without them.
Great comments. And yes, culture is so important.
On specifically tech this is only partially true, about the US. Many tech startups are in other random states. Investors can travel when it’s worth it, just like they travel to Europe, only if it’s worth it. But it misses a bigger point about the US being a business friendly and start your own small business culture, even outside of startups.
Careful, macro-economically, that kind of thinking is what stifles ecosystems. You can always give an exception… Yes it’s possible that a tech startup can be elsewhere and yes it’s possible that investors might go to support it, but generally they don’t.
That’s the question being asked. Why don’t they?
Yes, U.S. is friendly to small business too, that’s the same thing: culture, low government interference, and not dependent on University. The subtle difference is that the culture of startups (and economics) is different from that of small businesses.
New York is pretty decent in some sectors such as finance and digital health. I think for dHealth they’re on par with Silicon Valley. Boston is also exceptional for anything biotech.
So that’s what you mean with entrepreneurial. My take of an entrepreneur is, or was, somebody that owns a business.
Talking about ‘Entrepreneurial mindset’ – I get this. There are a lot of people that have a business, but basically work as an employee in that business.
Is an entrepreneur definable as somebody willing to take risks and usually struggles financially? As you say – there is proof there is. And there certainly are a lot of restaurant owners, which from a business money making point of view, is usually not a good idea to start with. The owners just want to do it though.
Where you write ‘risk tolerant, fixated with solving problems, investing themselves often without permission or resources. Such people are usually not starting businesses, they’re found in jobs’ – does not compute for me. It’s anecdotal but all entrepreneurs I know are like this and by far most people in jobs do not like risks and are not fixated with solving problems.
Agree the disruptors should be cherished and supported!
So what business/personality term would you use to distinguish someone like Richard Branson from Michael Dell? Both successful CEOs and business owners; clearly very different from one another.
We can identify people like Dell and Branson in our daily lives: at work, teaching, investing, in healthcare, etc. What is the word that distinguishes Branson from Dell?
genecraft, For sure. Not dismissing that in the least; the strengths of specific sectors are secondary though to the question. If the region doesn’t have a culture that enables this, it can’t work for startups – you could have strong academics (Tokyo), major industry (former Detroit), or research and development (Israel), but those cities reflect the other side of my answer; that when a city doesn’t have the culture that causes entrepreneurship, those strengths don’t manifest as startups. New York certainly has some, just as I said Austin has some, but we can also look to New York and Austin (which are stronger then most) to see what they’re still missing to be better.
Both as entrepreneurs. With a totally different character.
Branson can certainly be described as adventurous, brave, risk seeking. Dell isn’t that, but one can hardly become a billionaire without having an entrepreneurial mindset. Both are entrepreneurs and have an entrepreneurial mindset. I believe you use a different meaning for the word ‘entrepreneur’. Whether that is right or wrong, I don’t know, I’ve yet to come across somebody else to use it like this. But you seem pretty certain. Are we just talking semantics?
Though in startups, we can’t just dismiss things as semantics because that causes confusion, misinformation, waste, and harm; founders need facts.
So sure, you consider them both entrepreneurs but you also say they have a different character.
Our difference is because you say entrepreneur = business owner, but Jean Baptiste Say, largely considered the person who identified entrepreneurs, wouldn’t, because he studied Adam Smith’s Wealth of Nations and found that Smith neglected the person who is like Branson. Character, or as I put it, personality type, distinguishes the two and what Say identified was that in business owner != Entrepreneur.
Social scientists tend to agree, with even 16 Personalities / Myers-Briggs (whether you buy into the profiling or not), coining ESTPs as the entrepreneurs; because it isn’t what they do (own businesses) but how they behave and work.
Most people don’t use it properly, so I’m not surprised you don’t run into many; most people don’t work in trying to make entire ecosystems of startups more efficient. People use it generically because Media and pop culture started doing the same… The word Entrepreneur is this era’s scientist or astronaut; it’s sexy to be one so everyone with a business service, brand, or influence, uses it to appeal to business owners as being entrepreneurs.
The reason it matters in the context I explained previously is that Oxford University studied 22,000 startups and found that only about 8% of the population is like this… And thank those people correlate with 80% of startup success. Astounding! Doesn’t mean a founder must be like this but that if they’re not, get someone who is (i.e. Wozniak had Jobs)
Peter Thiel nails it: “Startup success depends on a culture that celebrates risk-taking and tolerates failure.”
Entrepreneurial ecosystems aren’t built through government funding alone, but through a mindset that sees failure as a learning opportunity, not a shameful endpoint.
Cultural transformation precedes economic innovation—and that’s the real startup currency.
“Cultural transformation precedes economic innovation” really a poignant observation. Yes.
Paul O’Brien Yes, of course. But you know me… read someone else “stuff” and my brain automatically distills it. I like the idea of {some sport here} IQ. It works. Therefore, we should together start using the idea of Entrepreneur IQ and perhaps abstractly… a community’s Startup IQ.
Cause, like ya said, there’s too much pointless noise on the runway, in the pipeline, in the signal, etc.
This is an excellent answer, and post. I’m going to dig into your blog some more later: I’m an entrepreneur with an economics background, so this is delightful reading.