The rapid change in consumer demand and the continued subscription of frugal innovation is driving startup growth. It is crucial to develop an ecosystem that can help the startups to propel after inception. Such initiatives will help to heighten the next phase of growth.
This article tries to give a comprehensive guide on the development of a startup ecosystem by exploring its chief components and core features. Though it is not an exhaustive list, it can help new entrants to find support to grow in new surroundings.
What Is A Startup Ecosystem?
When one or more entrepreneurs set up a company to create a unique service or product of the market, it is a startup. However, this definition is somewhat confusing with the traditional business model where business inception happens with the sole purpose of supplying products to market.
There are many key aspects where the startups differ from the non-traditional ways of business. Such differences can be in factors like:
- Teams made of passionate individuals
- Technological advancement
- The disproportionately high risk of failure
- Focus on adaptation
- Non-traditional financial methods
Experts who worked with thousands of startups define them as ‘a new business that uses innovative solutions. Such innovation can be either a unique business model or technological expertise.’ Many of them also suggest that a startup is a ‘state of mind’.
What Isn’t It?
Now that we somewhat have an idea of what a startup is or what the experts tell us a startup to be, we can touch on the crucial aspect of what it is not. However, it is worth mentioning that none of the definitions is entirely objective, and many have tried over the years to set or assign numbers that can help narrow the scope.
The numerical criteria that most people often put into play for assigning, ‘what makes a startup a startup’ includes revenue, number of employees, or profit. Such formulas often have different responses as not all people agree with the quantifiability mechanism.
Although, you should know that the valuations which most angel investors refer to use numerical mechanisms only.
Many such expert ranking opinions often disregard the startups that have:
- Publicly traded companies or unicorns valued above $ 1 billion,
- Real estate listings or local directories and service providers.
While referring to any such ranking systems or evaluation methods, you should be careful in looking up the details.
An environment where the startups and their supporting players can easily operate is a startup ecosystem. You can consider multiple factors when defining a startup ecosystem. The first step towards such a feat is identifying a particular location that will be able to quantify the innovation and growth of the startup ecosystems.
You can consider two varying sets of rankings, which focus on the interactions of the key players within the ecosystems, namely cities and countries. In the era of the global economy, the determination of the origin of a startup can be a difficult task.
Although the most vital criterion is the presence of a startup ecosystem, it should have ancillary resources complementing it. The creation of a thriving startup ecosystem can happen with the presence of
- Startup organizations,
- Service providers,
- Investor networks,
- Co-working spaces, and
- Other players.
The combination of such multiple external and internal factors fused to create a proliferating startup ecosystem.
Components of Startup Ecosystem
The components of a startup ecosystem that act as a support function can be further classified into soft and hard infrastructure systems. Along with the startups, there are numerous crucial components that every startup ecosystem needs to function.
Incubators, co-working spaces, HR partners, and accelerator programs all need to be part of a healthy ecosystem for creating essential services and necessary opportunities. All such entities come together to offer young entrepreneurs space to get their ideas screened, get funding, and secure a place for office at reasonable prices.
Whatever domain your startup may cater to, there is a need for a budding entrepreneurial spirit and a great team. The creative collaboration of such a team can help shape an idea into a big business reality. The presence of a Strategic HR business partner can be of great help to aid in today’s talent strategy formulation.
If you refer to the journey of most new entrepreneurs, you will see self-funding is the most popular path that they opted for. However, the presence of certain entities can make your entrepreneurial journey easier and can be vital to the overall success of the ecosystem. These can be:
- Angel investors
- Government loans
- Venture capital firms
Therefore, as you can see, the startup ecosystem is a complex, diverse, and changing institution that can flourish and propel with the right mix and support. It is also crucial to note that it can collapse easily if all the moving pieces are not in sync.