International best practices on supporting startup ecosystems

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Startups, here defined according to Steve Blank as “an organization formed
to search for a repeatable and scalable business model”, are high on the agenda of all policy makers in all countries. The reason for this is obvious. Although startups represent a very small share of all companies, the impact of some very successful startups to economies can be significant. They generate new jobs and tax income, as well as develop new services and solutions, which fuel the renewal of more established businesses and industries. However, most new startups fail and only very few are able to scale up and grow. Therefore, for each successful startup there will be dozens – or even thousands – of other startups. Recently, the number of new startups has increased rapidly, especially in ‘hotspots’ like Silicon Valley, New York, Singapore, Berlin etc. The reasons for this ‘startup boom’ are various and have many context specific factors, but some general trends can be identified. First, as a result of fallen product development costs, new startups can now be built much easier and more cheaply than for example 10 years ago.

Second, the decrease in costs to build a new venture has also catalysed the growth of venture financing industry, as investors are able to spread their investments in more companies than before.

Third, the development and dissemination of new management practices such as Lean Startup methods, has helped to launch (and fail) new startups rapidly. Finally, also large corporations have recognized the importance of agile research and development practices and have started their own startup accelerator programmes to build their own business ecosystems and speed up their research, development and innovation (RDI) processes.4 As the operational environment of startups has become increasingly global, it raises a question of why startup activity seems to focus on some specific local hotspots. In order to answer this question we need to have an understanding of the dynamics and needs of building a successful startup. A framework developed by Startup Commons (Figure 1) provides a good overview of the purposes of this paper.

First, startups need an idea and a clear vision of its implementation. This requires building a team, defining concepts for the new products and services, as well as setting up a viable strategy and committing to its implementation. Second, startups need to validate their products and services and get first customers and resources for further development. Third, once the product or service has been validated and the business model is in place, the startups need to scale up by attracting new customers and getting into broader markets. As competition has become more intense and global, startups often need to compete against startups from all over the world. In order to be able to succeed in global competition, startups needs various different resources in the different phases of their development. Ideating and concepting new products and services require the right people and talent, and efficient collaboration between them. Developing and validating concepts requires (in addition) access to seed funding and potential customers and end-users. Finally, scaling up and establishing the company requires growth financing, access to networks and strong business competence (e.g. through mentors or advisors). In practice, all this calls for efficient and open knowledge transfer, trust, face-to-face discussions and connections to experts of various different branches. These resources are best available in thriving startup ecosystems.

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