Startup ecosystem is sprouting up all over the world. Everywhere you look, there are ambitious founders and creative startup teams looking for novel ways to find a great product-market fit and solve the world’s problems.
However, innovative ideas can only be translated into action within a system designed to foster them. Entrepreneurs require a welcoming environment in which to launch startups that will have an impact not only on the local economy but also on society as a whole.
But, what exactly is a startup ecosystem?
What is a Startup Ecosystem?
Startups do not exist in a vacuum and cannot exist in one. They are born in a specific context as components of a much larger entity – a network, a system – than themselves. Entrepreneurs are surrounded by a community of people, organizations, and other startups. This is referred to as a startup ecosystem.
The Merriam-Webster Dictionary defines an ecosystem as “something (such as a business network) that is thought to resemble an ecological ecosystem, particularly because of its complex interdependent parts.”
Interdependence is the keyword here. An ecosystem cannot function or exist without the other members; they are linked in a mutually beneficial relationship.
Members of a startup ecosystem work together to foster innovation in their local community – whether that is a specific city, region, or building complex – and to create and scale new businesses using the pool of resources available to them.
Let’s take a closer look at what a startup ecosystem is.
What Represents a Startup Ecosystem?
Of course, there is no exact recipe for what should go into the pot when constructing a startup ecosystem. However, each local ecosystem requires a few key ingredients in order to thrive.
Startups are, of course, an essential component of any startup ecosystem. They are the driving forces behind innovation, disruption, and progress. They shape the local ecosystem and contribute significantly to economic growth.
Startups create more jobs than large corporations, which helps to boost local economic development. When a startup is acquired or goes public, it generates revenue for its shareholders, which can then be reinvested in the ecosystem. This accelerates its maturation, which eventually leads to economic growth.
A high concentration of startups can also have an impact on the cities in which they establish themselves. Startups moving into the Poblano innovation district in Barcelona, for example, has completely transformed the neighborhoods, bringing more life to it than the abandoned industrial area had ever seen. Restaurants, coffee shops, and gyms have experienced unprecedented growth, and new businesses are opening on a daily basis to capitalize on the opportunities presented by the burgeoning neighborhood.
Startups come in a variety of colors, shapes, and sizes, ranging from early-stage ventures to high-growth scale-ups. They all play distinct roles in the ecosystem. However, they are only a few planets in a universe filled with countless celestial bodies and ever-changing cosmic phenomena.
The Startup Map of Barcelona lists all of the city’s innovative new businesses.
Money is a close second to talent as the most important resource for startups. Few startups survive for long without the support of an investor or a financial institution, which is why they are an essential pillar of any startup ecosystem.
Angel investors, venture capital firms, crowdfunding websites, private and government loans and grants, and other funding providers all have a place in an ecosystem.
Accelerators and Incubators
Incubators and accelerators are programmers that assist startups in achieving success by providing mentorship, guidance, training, strategy, partnerships, R&D, and funding. They play an important role in getting startups, particularly those in their early stages, off the ground. Access to an accelerator’s resources and network can make or break a startup that hasn’t established itself in the ecosystem.
Since the founding of the first seed accelerators, Y Combinator in 2005 and Tech stars in 2006, accelerators have spread all over the world, and local ones have begun to emerge. In 2016, 3,269 startups were accelerated in the United States and 3,701 in Europe, with investments totaling $107,264,392 and $50,124,145, respectively.
Incubators and accelerators frequently provide physical space for startups to establish their offices.
Co working areas
Startups, particularly those in the bootstrapping stage, frequently lack the funds to afford their own office space. Co working spaces are shared offices where startups can rent hot desks or private offices for a fraction of the cost and without committing to a long term contract.
Saving money on rent isn’t the only reason startups join co working spaces. Most co working spaces provide a long list of perks, such as unlimited free coffee, gym membership discounts, and lunch deliveries.
Most importantly, co working spaces have their own communities and frequently host events where entrepreneurs can broaden their network and explore potential collaborations with other businesses. Startups based in co working spaces frequently have access to the freelancers they require.
Consultancies, agencies, and freelancers
Agencies, consultants, and freelancers are frequently underappreciated, despite the fact that they are critical to the operation of startups – and ecosystems.
Lean startup teams frequently seek outside assistance to solve problems that they cannot solve in-house due to a lack of know-how, skills, tools, or time. Consultants are called in at this point. They’re experts in their respective fields, and they’ve previously worked with other startups. They bring invaluable knowledge and experience to the table, assisting early-stage startup teams in gaining a competitive advantage.
Startups can save money and get high-quality work on short deadlines by partnering with freelancers and agencies. They can also hire talent for short-term projects and collaborate with outstanding professionals who are not geographically limited.
How to Build a Startup Ecosystem?
Building a startup ecosystem is not an easy task, but if done successfully, it can be extremely beneficial to an economy on both a local and national scale for many years to come. There is a good reason why local governments around the world have increased their efforts to boost their local startup ecosystem, in order to make it an integral part of their overall economic development plans. At Brisk Logic, we try to understand the impact of these ecosystems and global trends by creating a global map of startup ecosystems that includes some of the world’s best startup hubs.
Entrepreneurs, accelerators, mentors, investors, government, educational institutions, corporations, and service providers are just a few of the many components that go into creating a thriving startup ecosystem.
To keep all of these components working in synergy and the ecosystem flourishing, the ecosystem’s developers must employ strategies.
Here are five strategies for growing your startup ecosystem:
1. Analyze your ecosystem’s data:
To begin building your ecosystem, you must first understand where it is now. Attend local events (which you can find on Meetup.com), open pitch nights (if they exist), and talk to entrepreneurs about the challenges and difficulties they face.
Download the Startup Ecosystem Rankings Report 2020 to see how your ecosystem ranks globally. This report ranks 1,000 cities and 100 countries worldwide, providing insights into each ecosystem.
2. Improve the ease of doing business
National and local governments would be wise to develop better policies that are more startup-friendly. This includes lowering startup taxes, providing incentives, streamlining the registration process, and granting startup visas to international entrepreneurs.
Local governments are generally cautious in their actions, which makes sense. Their entire ecosystem is at stake. However, inaction and excessive bureaucracy are silent killers of ecosystems.
3. Ensure that the ecosystem has networking hubs
There must be startup hubs, even on a micro-level, for a startup ecosystem to thrive. Co working networks, accelerators, and business conferences are examples of this. This enables the startup community to collaborate and thrive. While the Coronavirus’s ‘new normal’ has hampered this, startup resilience allows it to continue virtually.
A startup can greatly benefit from connecting with the community. Not only to sell the startup’s product or service but also to find other resources to assist the startup’s growth. Mentors, investors, partnerships, and even simply learning from other startup founders are all examples of this. A plethora of possibilities.
Brisk Logic has a global startup community of approximately 35,000 members, and we help to keep them engaged by organizing weekly pitching events.
4. Strengthen the investment ecosystem
Funding is critical for early-stage startup ecosystems in order to keep the ecosystem alive and well. If there is a scarcity of investors in the early stages of the ecosystem, the government must fill the void until they arrive. Startup ecosystem developers must support startup founders, especially during times of crisis, when running a startup is more difficult than it has ever been due to the virus. If you are a startup founder who is having difficulty here, you may find a grant that is suitable for you on this report.
5. Promote your ecosystem
It is critical to do everything possible to let the world know what makes your startup ecosystem unique. This includes your ecosystem’s talent or human resources, what they are good at, and what special projects they have completed. Alternatively, it could include your city’s universities and what they specialize in – whether business, R&D, or any other sector. Finally, inform the world about the ecosystem’s achievements, which may include startups in your city winning startup competitions or hackathons, or receiving significant funding rounds.
Developing a startup ecosystem benefits both the private and public sectors. The best startups in an ecosystem that go on to become unicorns are likely to come from a global startup hub, such as Reddit in San Francisco, USA, or Glove in Barcelona, Spain. This benefits the public sector in terms of economic growth through job creation and taxation, and it benefits the private sector by attracting more investors, high-quality talent and clients, a strong knowledge base, and the development of a strong entrepreneurial culture.
Finally, either lead it or leave it. If you choose to stay in a relatively poor ecosystem, it makes sense to contribute to its development. Branding yourself as the ecosystem’s leader raises the visibility of your project.
Please visit Brisk Logic‘s Ecosystem Partnership to learn more about how private sector companies can help the startup ecosystem grow.