Startup ecosystems are springing up in all corners of the world. There are ambitious founders and creative startup teams everywhere, keen to find unique ways to find a great product-market fit and solve the world’s problems.
However, innovative ideas can only amount to action within a system that’s built to nurture them. Entrepreneurs need a supportive environment to launch startups that could one day have an impact not only on the local economy but on society as a whole. But what is a startup ecosystem? From self-contained initiatives like Station F in Paris to city blocks like Silicon Roundabout in London and 22@ in Barcelona, there are lots of examples.
Let’s explore what goes into making one, what its most important resources are, what conditions affect its development and lastly, how to start growing one of your own!
What is a startup ecosystem?
Startups do not and cannot exist in a vacuum. They are born in a specific context as parts of an entity – a network, a system – much bigger than themselves. Entrepreneurs are supported by a community of people, organisations and other startups that surround them. This is what we refer to as a startup ecosystem.
The Merriam-Webster Dictionary defines ‘ecosystem’ as “something (such as a network of businesses) considered to resemble an ecological ecosystem especially because of its complex interdependent parts.”
The keyword here is interdependence. One member of an ecosystem cannot function or exist without the others, they’re linked in a mutually beneficial relationship.
The members of a startup ecosystem work together to foster innovation in their local community – be that a specific city, a region, or a complex of buildings – and use the pool of resources available to them to create and scale new businesses.
Now, let’s take a closer look at what makes up a startup ecosystem.
What makes up a startup ecosystem?
Of course, there is no recipe for exactly what should go into the pot when building a startup ecosystem. However, there are a few key ingredients that each local ecosystem needs in order to thrive.
2. Colleges, universities and other education programmes
3. Funding providers
4. Incubators and accelerators
5. Coworking spaces
6. Agencies, consultants and freelancers
7. Service providers
8. Advisory organisations and mentors
10. Media and blogs
12. Supportive Government agencies
13. Research organisations
Building a thriving startup ecosystem is not as simple as mixing together all the right ingredients. Brilliant entrepreneurs, adventurous investors and well-organised events are important – but not everything. There is a range of external and internal factors that influence the development of each ecosystem.
The global and local financial climate, the available market (in other words, access to customers), the region’s international business relations, the maturity of the ecosystem, the extent of government incentives and the level of startup ecosystem management (including branding) can all determine the entrepreneurial activity that an ecosystem is able to manifest.
Startups can hardly be expected to flourish in the middle of a global financial recession. Nor would you expect them to grow or during a national economic meltdown.
Market size is also key. Having access to a large potential market – such as that of China or the United States – is very different from only being able to target customers in a limited geography. Strong international business relations are therefore crucial for scaling startups in smaller or less powerful countries.
Maturity and risk
Young ecosystems face different challenges to more mature ones. In established ecosystems, big exits release the capital and talent. This is what’s needed to build new startups and give investors a reason to be willing to take more risks.
Oversight and preferential treatment
Ecosystems with less government support will struggle where ecosystems with sufficient state incentives thrive. The way a startup ecosystem is managed and represented on an international level via branding can make all the difference.
*This story is covered by Swiftnlift Business Magazine