Important Factors A Healthy Startup Ecosystem Needs

There is an ever growing number of entrepreneurial hotspots, also called startup hubs, which appear on Europe’s map. These have either developed recently or are part of an entrepreneurial heritage from the industrial age for example. But one thing is for sure – they did not evolve by chance. Instead they have developed themselves at their own pace and terms. What all hotspots have in common is that they are build upon a pre-existing ecosystem or built a supportive system alongside their development.

In the following we will try to analyze why and how these startup ecosystems developed and what’s their impact on a thriving entrepreneurial economy.

Why Does A Startup Ecosystem Succeed?

Some economies rooted in the industrial era did not succeed to adapt the changes happening around them. However, some systems that succeeded had either support from their stakeholders or innovative geniuses within them.

Most of the economies which have a strong SME backbone are lucky to have innovators among their stakeholders. Despite this benefit small companies often face competition from bigger players, meaning that they have to move fast – improve their products or services to keep up with competitors and build their audience. One way to improve their offerings is to strengthen their existing portfolio or disrupt the status-quo, bringing a market to life.

Moreover, the surrounding ecosystem should also be able produce new players in the market that assist the startups throughout. Based on the existing skills and competencies both players would benefit from the new opportunities. There might even be potential for a new competence or market to arise. Once these “new” markets get attraction the whole ecosystem gets on whirlpool speed. More and more stakeholders and innovations appear – the circle closes & becomes fruitful.

Early innovators either expand or harvest their merits. Once they have harvested they will generally move on to something new and eventually enhance and diversify the ecosystem. Each harvest will attract new hunters and farmers who in return would like to reap the benefits of their business. And make it thrive. This way the ecosystem grows organically and benefits economy on a wider scale. Moreover, a fruitful ecosystem needs resources – a successful harvest attracts these resources from any point of the globe.

Success breads success.

Seeding The Conditions

As stated, such ecosystems either develop themselves by building on existing conditions or are created by innovators. Economies where such an ecosystem is not present often struggle with a lack of innovators and  entrepreneurs. In these economies favourable conditions could be created exogenously, e.g. supportive governmental schemes or role models from outside. Without being directive or interfering the market as it is would bias its natural tendency.

Every budging economy needs role models – those who have gone through the school of hard knocks and are willing to share their story. Nonetheless these stories need to be heard and understood as well as disseminated. On the other hand, it should be made clear that ecosystems are made from very divergent stakeholders and should not be uniform since a monotone economy will not breed innovators due to a lack of stimulation and inspiration. A healthy ecosystem needs to be open and (eventually) interlinked.

In conclusion: favourable conditions and open borders are desperately needed to breed a successful economy and startups.

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