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The Entrepreneurial Ecosystem

by Greg Cangialosi on November 30, 2011

I’ve been holding off on my writing until my new blog is finished (cangialosi.net), but things are taking a bit longer than anticipated. In the meantime, I’ve been accumulating topics that I want to start writing on and figured why wait, everything is going to get ported over to the new blog anyway.

It has been almost 5 months since I sold Blue Sky Factory. Since then, I’ve transitioned myself out of the day to day of the business, spent a month in NYC, traveled for weeks in Italy with my family, spent a ton of time trying to help reboot Baltimore’s local tech council, completed a consulting project, completed a handful of angel investments, and have finally settled back into Baltimore and have begun thinking about whats next. Along the way, I’ve spoken with many entrepreneurs, investors, & visited a bunch of startup accelerators & incubators, and have been thinking a lot about the entrepreneurial cycle, and how it relates to the creation of entrepreneurial communities.

This is a topic that I have been giving a lot of thought to given my recent exit, especially as it relates to my hometown of Baltimore. In Baltimore, we seem to have this void of a truly functioning entrepreneurial ecosystem, yet we have all of the pieces of the puzzle, right here, right now. I’ll add some color to this later in the post.

The Entrepreneurial Cycle:

First, lets define the “cycle.” In my mind, the entrepreneurial cycle is the experience of starting a company, scaling a company, and successfully exiting (selling) a company. These events can be both large and small (both in size and scale of the company, and the financial implications), and take anywhere from months to decades to complete. In some cases, the experience comes with investment, and for others, like myself (this time around), bootstrap with no investment and grow organically. The experience comes in many different flavors.

So, What Happens Next?

Every entrepreneur takes a different path in the cycle of entrepreneurship. However, one of the big questions about the cycle is, WHAT HAPPENS AFTER AN ENTREPRENEUR EXITS?

A few, but certainly not all, of the answers to this question I’ve learned by talking to and watching others who have been through the cycle are as follows:

- They start another company (this is the most likely outcome)
- They start angel investing.
- They get involved on philanthropic or activist levels.
- They start consulting or get a job (unlikely but it happens).
- They tune out and fade out of their community.

In established entrepreneurial communities, this is a bit of the norm for an entrepreneur. However, these actions in non-entrepreneurial communities add value, but can often be a missed opportunity to help create, nourish and sustain an entrepreneurial community. Certainly, starting another company and or investing in other companies are a good thing, but these actions can be much more efficient when there is a proper ecosystem in place. This takes time to build.

What is an Entrepreneurial Ecosystem?

I am talking about an ecosystem that attracts and supports entrepreneur’s at every stage of their growth. A community where there is an abundance of: co-working spaces, startup accelerators, incubators, local and state support, involvement from local colleges & universities, vibrant community organizations, amazing events that celebrate this ecosystem, and clear bridges to the funding community at every stage of a company’s growth.

To me, a functioning ecosystem for entrepreneurship looks like this:

Nucleus Layer: Where idea’s, connections, partnerships, co-creations happen.

Enablers: Co-working facilities, community events (Startup Weekends, Hack-a-thons, meet-ups, association & membership events, etc..)

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Innovation Layer: Ideas go from concept to reality. Making things happen.

Enablers: Active angel & seed investing community, startup accelerators, bootcamps, incubators, etc…
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Growth Layer: Building the companies in our ecosystem – a pathway to growth.

Enablers: Active regional venture capital investment & local & state participation in financing.

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Sustainability Layer: Keeping the entrepreneurial wheel turning.

Enablers: Active & syndicated angel investing, state & local programs to facilitate and stimulate activity. University entrepreneur programs & support networks. Entrepreneurs giving back and feeding the overall ecosystem.

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Entrepreneurs that come from entrepreneurial ecosystems help to continuously plant the seeds of the next generation through mentoring, angel investment, assisting in associations or groups that support these efforts, and by ultimately launching another company.

This kind of functioning ecosystem is currently missing in Baltimore. All of this is here, but we still need to connect the dots.

Building the Ecosystem:

Brad Feld said it best in his recent post on building entrepreneurial communities, and that is that there are leaders and there are feeders. Let the entrepreneur’s be the LEADERS, and have the FEEDER’s encourage and support them. Taking the long view (as Brad says 20 years), this is definitely the right approach. This type of community doesn’t happen overnight. However, there are things we can do to accelerate the process.

So, for communities, like Baltimore, that have all of the “raw materials” right here, right now, the best thing we can do to start threading the community together is to give back and focus on the areas that need input and action. Building the layers of that ecosystem and linking them together is the hard work, and the work that takes the time.

In my opinion, this type of activity is not only what Baltimore needs, but is what this country needs, now more than ever. Simply put, the building of entrepreneurial communities keeps the economic wheel turning. On a macro level, I’m talking about economic development, job creation, etc.. We all know these things stem from the entrepreneurs who start companies, innovate in industries, and make things happen. The more support we offer the innovators, the more innovation will occur. How many jobs have been created in NYC or Silicon Valley over the last 5 years? Lots.

There are several entrepreneurial communities that already give back to the ecosystem that supported, nurtured and grew them over time. However, we need this kind of participation on a MUCH wider scale. We need it in the secondary and the tertiary markets just as much as the major ones.

How Am I Contributing Locally?

I’ve always been a doer, and so understanding, at least through my eyes, some of the challenges that we are facing in my hometown of Baltimore, its hard to complete the cycle and just sit on the sidelines to see “what happens next” in our community. There is a lot of blocking and tackling to be done in our city – and I suspect many cities all over the US and internationally.

So, what am I doing to help further develop the entrepreneurial ecosystem in Baltimore? Here is a start:

Baltimore Angels:

As of mid November, I’ve officially taken point and am helping to lead the Baltimore Angels group. We are a loose group of angel investors who have been active for the past 2 + years and have done a half dozen or so deals. The group just went through a slight lull in meeting due to great things happening, like the main organizer, Dave Troy, raising almost a million dollars in funding for his new startup 410Labs (disclosure: I’m an investor). The group was in need of some renewed focus and some additional structure, so thats what we are doing. In 2012, the group will be meeting every month and collaborating with other angel groups and growth stage venture capital firms, and other supporting organizations within the region to ensure we have an active angel investing function in the city / region of Baltimore.

Startup Accelerator

One of my passions is being at the intersection of ideas and watching them come into reality. Its a big reason why I named my latest entity Nucleus Ventures. I like to be close to the nucleus of ideas, where the raw energy of making something happen is taking place. The startup accelerator model is nothing new, but has gained traction all over the country and the world. Long story short, we need one in Baltimore and I am working diligently to try to make that happen in early 2012. I am hoping that we will be able to create a space and a program that will attract the best and brightest entrepreneurs to come to Baltimore and make their dreams a reality.

Greater Baltimore Technology Council

I am convinced that now more than ever there is a need and a role for a local technology council. In Baltimore, ours has been going through a large transition. We’ve had leadership changes, staff changes, and an overall change in the need the community has for the tech council. I am a co-vice chairman of the council and have been spending a lot of time helping the staff, along with other board members renew the value proposition and membership model of this organization. My hope is that the tech council will renew its value proposition to the community, and take advantage of all of the amazing inertia points that we have happening in Baltimore. The GBTC is a connector, a facilitator, and needs the support of the local community to thrive.

So, that’s my perspective on entrepreneurial ecosystems, and my take on where we stand today in Baltimore. What do you think? Am I off base? These are the things I feel need to happen in our communities to make them entrepreneurial.

I would love to hear your take. Comment away, and as always, thanks for reading.

{ 33 comments… read them below or add one }

John November 29, 1999 at 8:00 pm

Greg,

Conceptually, I agree with you about the entrepreneurial ecosystem. I seem to disagree about the implementation. Ultimately its all about the implementation and the doing. You mention Startup Weekend and Hackathons, which are great at getting people to start doing things, but are never enough time to actually finish anything. Even the accelerators don’t give enough time. I have seen a statistic that half of all companies in an accelerator don’t get far enough along to even demo their product 3 months later.

I am not that impressed with the accelerator concept. It comes the closest to being its own ecosystem, but you pay a high price in terms of the type of company that fits into the model. They seem to be designed around high growth software companies that can be flipped to someone else a short time later. I doubt that Blue Sky Factory would have fit into this model.

I believe the answer lies in bringing together a more diverse group that focuses on small problems. I think open innovation and collaborative consumption should play a big role in an entrepreneurial ecosystem. If you read Sara Sarasvathy and effectuation you should have an idea of my philosophy about an entrepreneurial ecosystem.

John

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Sean Lane November 30, 2011 at 8:17 am

Right on, Greg! Great post. After moving one of my companies to Baltimore a few months ago, I've noticed an incredible amount of energy in the "nucleus". Like you said, I think the key is to harness that energy and ensure "fusion" occurs before "fission" happens. Among other things, Baltimore is the city underestimated potential. It will be the critical job of serious leaders to industrialize the ecosystem and implement the structures necessary to harness the energy. I'm in. Let me know how I can help!

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Greg Cangialosi November 30, 2011 at 1:11 pm

Thanks Sean – I appreciate the comments and the thoughts. Its great to have you on board in Baltimore and willing to do the great things that you working on! Looking forward to helping build the ecosystem with you!

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John Marsh November 30, 2011 at 12:23 pm

Was reading your post. It’s interesting because I think there are a lot of people that have “good” ideas when it comes to entrepreneurship – some of these ideas are half-baked, some are ready for market but have no marketing behind them, some are ready to roll but need financing. What I have noticed, being in the position that I have (i.e. the sidelines at DBED), is that entrepreneurs, especially tech entrepreneurs generally talk to themselves. You always see the same people at these events, workshops and etc. The challenge is to grow the community but keep it focused. And by focused I mean that we may have too many associations, incubators and programs all trying to do “good” but aren’t connected. Think of it this way… Baltimore has Art Empowerment Zones all over Baltimore. Are they connected? Do they meet regularly? Do they share ideas regularly? Or are they just tax zones that encourage the creation of art? Or is the “ecosystem” too disconnected?

I wish, as a small business/entrepreneur community, we could have the “power” to really evaluate and take stock in the opportunities – finance, business development, marketing, etc. We should be asking ourselves: How effective is the ETC or the Beehive? What is working? What is not? Who in the city is leading this? What is TEDCO doing right/wrong?

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Greg Cangialosi November 30, 2011 at 3:24 pm

John –

Thanks for the thoughtful comment. Very good insights. You are right in the sense that there needs to be multi-disciplinary integration within the tribes that exist in our market. Think betascape, we need the artists and the design community FUSED with the technology and startup scene. Your point is well taken in regards to the technology world talking to themselves and running into the same "cast of characters."

In regards to the questions you ask at the end, they are good ones. I won't answer them as I can't in detail, however I can say they are all on the verge of developing and supporting initiatives that will help attract and retain entrepreneurs to our region.

I'd love to hear more ideas on how we can fuse the design / artist community with the technology community. Thats where the magic happens. Maybe a themed accelerator just for that? :-)

Thanks again for reading!

Greg

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John Marsh November 30, 2011 at 3:43 pm

Sign me up if you want to get a group/think tank together.

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Ed Chalfin November 30, 2011 at 12:39 pm

Fantastic post, Greg. I think you are spot on, and I am glad to see people like Sean on board. I am in as well and look forward to helping you make things happen as part of Baltimore Angels and anywhere else that you think I can contribute effectively.

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Greg Cangialosi November 30, 2011 at 1:12 pm

Thanks Ed – I appreciate the thoughts and the help with the BA!
Greg

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Rob Rosenbaum November 30, 2011 at 12:57 pm

Good stuff…I agree with everything you said and want to add one more element. I think you missed the celebration of entrepreneurs. This celebration can be as simple as thanking an individual for taking the risk to start a company to as great as a large public acknowledgement of one of our local success stories. Somewhere in that continuum of celebration will also be the need to accept the inevitable demise of a number of local startups. After a failure is may be the most important time to seek out that risk taker, thank them again for doing something that the vast majority of people do not have the courage to do. Make them feel good, not bad, about what they did!

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Greg Cangialosi November 30, 2011 at 1:13 pm

Rob – spot on. I do mention the need for "amazing events that celebrate this ecosystem" as a part of the overall community – in particular the entrepreneurs – we need the TechNites and beyond! Celebration is a big part of this. Thanks so much for reading!

Greg

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Rob Rosenbaum November 30, 2011 at 12:58 pm

Continued from above…..Another way to look at this to consider the entrepreneurial community here in Baltimore as a team that has all the players but not all of the necessary leaders and coaches. The best way to build and motivate a team is to lead by example, encourage and coach. You are a willing, public personification of this approach. What I am suggesting is that we find and celebrate the other leaders in our community. They do not have to become a local celebrity, just knowing they are alive and well in our community will allow them to lead from afar. When the entrepreneurial team sees and hears about all of these role models the A-players will inevitably become more motivated and active. I could go on but maybe at another time in another forum would be better.

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Greg Cangialosi November 30, 2011 at 3:25 pm

Right on Rob! :-)

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Sam Diener November 30, 2011 at 1:41 pm

Greg,

Great post.

I certainly agree that the country is in desperate need of small business Entrepreneurs to help jump-start the economy.

I have been impressed watching from afar (Philadelphia) the way Baltimore has grown wings with regards to entrepreneurship and new business development. Angel groups, accelerators, and tech councils are elements that certainly MUST exist to encourage growth.

One of the big questions centers around entrepreneurial talent. How does a small city like Baltimore compete to keep and attract talent when there are other cities casting large and resourceful shadows…. such as NYC, DC, or Philly?

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Greg Cangialosi November 30, 2011 at 3:31 pm

Sam –

Thanks for reading. Good points and great question. The answer in my mind is that each one of the secondary even tertiary markets is to each have their own "functions" as listed above threaded together. That is step one. The second piece is to then thread these markets together. One example that people are talking about in the fb Baltimore Tech group is the thinking of the Northeast Corridor ie. the Amtrak Corridor as a "region" – there is strength in banding together. I personally think Baltimore plays well with DC/ NoVA, Philly and NYC. First though, we need to get our own individual houses in order :-)

Thanks Sam.

Greg

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Mike Lombardi November 30, 2011 at 2:56 pm

Great post Greg! I'm excited to do my part and if you see anything further I can do to help, let me know!

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Greg Cangialosi November 30, 2011 at 3:32 pm

Thanks Mike! Glad to have you involved. I'll be in touch later today re your email :-)

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Sharon Webb November 30, 2011 at 3:21 pm

Fantastic post, Greg (and not just because you gave us a nice shout out)! I especially like your metaphor of threading the community together. No doubt among the most important priorities for this Region is the ability to connect the risk-taking dreamer-doers – from indie crowd to start up to growth and mature company entrepreneurs – so all benefit from the others' experience while at the same time supporting, broadcasting and working together to attract resources that feed entrepreneurial growth. We are all in this together. Your leadership is appreciated and inspiring.

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Greg Cangialosi November 30, 2011 at 6:47 pm

Thanks Sharon – appreciate your support and the kind thoughts. This is a thread the needle mandate now, and we need to fire on all cylinders. I don't think it will take 20 years to build our ecosystem as we have the parts here now. Looking forward to seeing how the GBTC can play a key role in being a central nexus point for us all.

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John Wasilisin November 30, 2011 at 4:15 pm

Greg,

I couldn’t agree more with your thoughts on our region having the necessary assets to make us every bit the entrepreneurial hotspot we should be. Shining a light on entrepreneurs and celebrating their successes were some of the primary goals of the Entrepreneur Expo that TEDCO, in partnership with a number of other organizations, held in mid-November. Successful entrepreneurs like yourself, who took the time to share experiences, allowed newer entrepreneurs to learn your lessons and strike a sort of “mentor/mentee” relationship, which you have addressed as a critical element of the entrepreneurial ecosystem. Keep TEDCO and future Expos in mind as we all take on this task.

Thanx…John

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Greg Cangialosi November 30, 2011 at 6:48 pm

John your event is exactly the type of thing that needs to take place more often in our region – as you and Rob say, celebrating the entrepreneur and bringing them out. Letting them shine, and letting them also do the work that is necessary to help build this larger ecosystem. Looking forward to continuing to work with TEDCO and making great things happen. Thanks again for reading.

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Caroline Baker November 30, 2011 at 4:46 pm

Excellent topic. As you can imagine, I am especially interested in the role that universities play in supporting and creating this ecosystem. :) Our campus community is incredibly vibrant and creative. One of my goals is to find new ways to build connections between our campus community and the broader business/tech community. From my perspective, the most critical element of this ecosystem is trust.

Trusted relationships streamline the flow of information, ideas and support. So a key question for me is: How do we build trust within this ecosystem? I’d love to hear your thoughts on this. My sense is that the first step is to always be looking out for others in the community, in addition to yourself. Thoughts?

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Greg Cangialosi November 30, 2011 at 6:53 pm

I agree Caroline, trust and alignment are key factors in this whole thing. I think when the mandate is all for the greater good of the ecosystem, and the pieces align then things can happen. Take universities – UMBC, a vibrant, creative institution for sure. UMBC and others are KEY players in developing the workforce of the future. How do we align UMBC with the external ecosystem? How do we get students who are SERIOUS about starting businesses and being innovative to feel comfortable expressing their ideas, doing idea competitions, or business plan competitions, having them judged and showing them a clear path to an accelerator that seed funds them, mentors then and spins them out into the greater region. They then move into our co-working spaces, our incubators, etc and are introduced to the funding community. Not all will make it, but the ones that do will be growing, creating jobs and building the region. I want to thread that kind of thing together with you and Greg Simmons :-) When there is alignment there is trust. What do you think?

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Greg Cangialosi November 30, 2011 at 6:53 pm

and that accelerator should be at UMBC :-)

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Caroline Baker December 1, 2011 at 8:02 am

Absolutely. I am 100% on board. (Alignment of goals and priorities won't instantly create trust but it's a critical foundation.)

Our aspiring student entrepreneurs need to know that there's a support system and a pathway. In addition to encouraging mentoring, I think we should create entrepreneurial apprenticeships for our youngest entrepreneurs. I'll start looking for models of this. Lets get together when Greg is back!

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Ron Schmelzer November 30, 2011 at 5:20 pm

Great article! However I find it very odd that the so-called leaders of the enterpreneurial scene in Baltimore find it so hard to reach out to other experience entrepreneurs in the community. For example, my experience as a mentor AND investor in TechStars Boston, as well as my numerous angel investments, plus my two fairly sizable exits are continually ignored. I couldn’t even get press for my latest acquisition, which is a big puzzle given Baltimore’s need for successful exit stories.

It seems that too much of the Baltimore entrepreneurial scene revolves around the same half-dozen entrepreneurs and folks like me who have a significant amount to add (not to mention capital willing and able to invest) are continuously ignored. I am still VERY actively engaged in TechStars, which is one of the nation’s largest and most successful incubators, and yet not a single soul here in Baltimore has reached out to me to either get involved or otherwise connect with that group.

I’ve even reached out to you, Greg, to provide my thoughts and guidance on my over 5 years of angel investing advice, but that was ignored. I know you’re very busy, but I think that one of the problems the Baltimore scene has is that it has a significant amount of “cliquiness” and closed-group activity, not enough reaching out to outsiders (and yes, I still consider myself an outsider even though I’ve been building businesses here in Baltimore since 2005), and a press that’s reluctant to cover new startups or activities from new folks or “outsiders” like me.

So, I’d say Baltimore has to do a much better job of embracing entrepeneurs, new startups, and activity that may be happening outside of the group of people that seem to continuously get the focus of attention in our area.

My .24 cents …

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Sharon Webb December 1, 2011 at 9:37 am

Calling all rising and serial entrepreneurs! The GBTC is here to support, promote and collaborate on any and all efforts to raise awareness of your accomplishments, lessons learned and ideas to enrich our vibrant community. We are an available platform for your stories, ideas, insights and to broadcast activities around the region. Beginning in January we will launch the first of a quarterly series celebrating entrepreneurs and their stories in an "unplugged" format where 3 entrepreneurs are highlighted and audience participation is central to the program.

Ron – come tell your story!

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Ron Schmelzer December 1, 2011 at 11:03 am

@Sharon – that’s awesome! Yes, count me in – I definitely want to do what ever I can to help increase the entrepreneurial momentum in the region.

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Sharon Webb December 1, 2011 at 10:34 am

Calling all rising entrepreneurs, serial entrepreneurs and community resources dedicated to tech and innovation community growth! The GBTC is dedicated to serving as steward and amplifier, as an available platform: broadcasting, collaborating and supporting community intersections of art/tech, universities and business community. Have you attended one of Andrew Hazlett’s Evil Plan’s meetings? Post ideas on our blog, submit white papers or articles of interest, join us for a podcast.

Beginning in January we will launch the first of a quarterly series (open to all) highlighting area entrepreneurs in an “unplugged” format where three entrepreneurs will be spotlighted with audience interaction as central to the program.

Ron – come share your story!

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Greg Cangialosi November 30, 2011 at 7:15 pm

Ron –

Thanks for reading! Appreciate your thoughts and insights on your perspective on the Baltimore scene. I know we have spoken about your perspective and view on Baltimore in the past when we met and discussed your new startup and your experience at TechStars. All good stuff.

From my perspective, your comment resonates with why I wrote the post. Look at John Marsh's comment as well in regards to including the design & arts community into this mix. They are vibrant entrepreneurs as well, and I think we can all agree that when we mix art and science wonderful things can happen. So, lets make that happen – we will be discussing how soon.

Take your Baltimore TechBreakfast for example. Unfortunately, I haven't been to one yet, but you clearly are a intertia point for gathering local entrepreneurs and from what I understand its a "diverse crowd" or aka other people than the usual "clique" as you put it. So, how do we leverage that? How can the GBTC help you with that? Is that always at the ETC? How about moving it around and networking through some other groups? One of my gripes is how everything revolves around the ETC :-) We need more spaces and other spots for the community to gather.

As for the Angel Investing thing, sorry I am pulling a blank! I know you were looking for possible angel investment in your new startup but in regards to hearing about your 5 years experience with angel investing, I'd love to hear all about it! In fact, I openly invite you to come and join the Baltimore Angels group and start taking an active role in helping us with the group. We have big plans for 2012. Our next meeting is Dec 6th – next Tuesday. Feel free to attend. Ping me for more details.

In conclusion, you basically hit on the core issue with Baltimore and the region – the notion of the "cliquiness" – also commonly referred to as "tribes" – there are a lot of them and they need to come together. Are you in with helping to make it happen around here? If so, let me know how you think I can help you.

Thanks again for reading!

Greg

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Ron Schmelzer November 30, 2011 at 7:20 pm

Hi Greg – I love you – your comment exemplifies why I think you’re an asset to this scene.

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Mike December 1, 2011 at 4:57 pm

Greg, I think the innovation layer is the most neglected for sure. Not even considering the funding angle: I'm thinking about all the smart people helping to create those cool events and spreading all those ideas — how do we get those folks to start building companies? I credit SocialDevCamp way back in the day for helping put me on my current path.

Some might consider me to be part of the cliquey group that Ron described. I don't know if that's true or not but I do want to say that I got nowhere in Baltimore until I started blogging, tweeting, and attending events where I started meeting people. So Ron with your tech breakfast, I think that will pay great dividends in terms of connecting with smart, helpful people in town.

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Greg Cangialosi December 4, 2011 at 12:59 pm

Thanks for reading Mike. I agree the "innovation layer" needs some TLC for sure. I am glad you brought up SocialDevCamp – I thought those were very inspiring and helpful events that brought out such a broad group of the Baltimore ecosystem – developers, marketers, designers, educators, entrepreneurs, etc.. seems like we need to do more of those types of events as they are feeders to the innovation layer. The SocialDevCamps offered an outlet for the raw, creative energy to be expressed.

We need to continue to program like that in town and celebrate the wins and the things that come from it! Thanks again for reading and sharing your thoughts.

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Tim Askew December 5, 2011 at 1:58 pm

Greg;

Great to hear your articulate this life cycle.

I would love to hear your thoughts on how we, as a community, can keep reliably keep the growth-phase companies in town. When they pull up roots, so do a lot of the people who make the ecosystem hum.

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