Startups are booming in 2019, and the latest Global Startup Ecosystem Report shows that this success is spreading more widely.
By Katya Puyraud
The latest Global Startup Ecosystem Report is out, and it’s proving as illuminating as ever. The insights from more than a million companies in 150 cities provide a complete snapshot of the startup landscape, and how countries around the world are looking to raise their game. While some of the takeaways are expected, others point to an interesting future – and one which could challenge the traditional big players.
From tackling the classic conundrum of the ‘next Silicon Valley’ to female entrepreneurs and tech anxieties, the report raises some fascinating questions, and demands some fast answers. Here are six of the most interesting lessons from the 2019 Global Startup Ecosystem Report, and what businesses can do to take them onboard.
The ‘next Silicon Valley’ is a misnomer
The decline of Silicon Valley is often touted as inevitable, maybe more in hope than expectation. Articles are constantly trumpeting the ‘next Silicon Valley’ as Berlin or Paris or Singapore, and proclaiming that talent is going to start pouring out as soon as somewhere else can stump up the funding. While Silicon Valley might not dominate forever, this is a warped view, and the Startup Ecosystem Report proved it.
We’ve got enough distance from some of these claims to see the truth in them, and while it’s not terminal for Silicon Valley, it’s not bad for those cities either. The reality is that there isn’t likely to be another Silicon Valley at all. Instead, the likeliest scenario is that lots of miniature Silicon Valleys pop up in cities around the world. While the Bay Area will always be a draw, improved funding and support will see more homegrown businesses staying put, and boosting their local economy.
This series of smaller hubs around the world will produce fewer businesses with more of a specific industry focus, based on the specialisms and talent available in the locality. From Helsinki with its clutch of mobile and video game developers, to the many startup cities in the La French Tech scheme, the proliferation of tech startups means that cities can hone in on one sector and provide tailored support. Investors with those interests and specialisms can then pick their market, and raise those businesses even higher.
Startups are becoming more globalized, but success is still measured in terms of exits, and in that sense the US still dominates. But it’s likely that this dominance will become less relevant as both funding and talent become more decentralized. Myriad countries around the world are now producing great tech and startup talent, and the lure of Silicon Valley (and America as a whole) is diminishing slightly. Its success isn’t in danger, but the Bay might have to work a bit harder to lure companies from the comfort of home.
As tech rises, so will consumer anxiety
As breaches of trust and mistakes by social media firms have come to light, a chasm of mistrust has opened between the public and large tech companies. While they didn’t cause it, startups and smaller firms will still have to deal with this ‘techlash’, facing down difficult problems without the resources or existing user base to help them through it. The advent of GDPR last year has compounded this problem, placing a legislative burden on smaller firms to be more careful with user data, or risk destructive penalties.
However, this wariness about technology shouldn’t be the death of innovation. To the contrary, the breadth of tech startups – and the advent of ‘deep tech’, merging software with engineering – shows that companies are taking this as a challenge. A greater awareness of technology and the concerns around it are making people work harder to come up with solutions, and opening new commercial avenues for the startups who are willing to offer them.
In this transition, trust and transparency will be absolutely pivotal. By building these elements into your business and platform from the earliest stage, these values can be given room to permeate through the business, and will project themselves outwards to consumers without having to sell them too hard. By taking an active role in reassuring consumers and being responsible advocates, small firms can rebuild this trust with greater agility and confidence than the big companies – potentially giving them a leg up on the competition.
Outsource less, learn more
When you start a business, it’s often necessary to take on more work than you feel capable of doing. Becoming successful means having a reliable income, and you may not trust your staff enough to delegate things straight away. As you expand, each new staff member or scale-up to bigger premises requires financial security – and that often means taking on additional clients. At a point, it starts to feel like outsourcing is the only way to relieve that burden.
According to the report, you should resist that temptation where possible. Using a new model with data from over 34,000 companies, they found that the most successful businesses kept more of their processes in-house. By recruiting in areas they were unfamiliar with and investing in training and progression, they retained control of appreciable resources, as well as the capacity to oversee the work, and ensure it lived up to their high standards.
This is a particular issue if the thing you’re outsourcing is something you’re not familiar with. Whether it’s social media and SEO or something more industry-specific, shifting a problem can feel like it frees you up from worrying about it, and lets you concentrate on what you do best. But without knowing how something is done, it can be hard to quantify whether the company you’ve outsourced it to is doing it right, or what the timescales and deliverables should be. By facing the problem head-on, you’re adding new strings to your bow, and preparing yourself for bigger challenges to come.
Diversity breeds success
There can be no doubt that better representation of people in business leads to better businesses. A wider range of people means a wider range of ideas, helping to solve problems and project authenticity to a wider audience. The latest report demonstrates that diversity pays dividends – as do many other reports and studies – but also that there is significant room for improvement.
One demonstration of this diversity is in the increase in tech exits from around the world; 68% of the wealth they generate was captured by the top 10 startup cities, but this figure is down from 87% in 2012. More tangible however is the increase in female startup founders, and how they are reflected in that top 10. While only 14.1% of tech startup founders around the world are female, seven of the top 10 cities posted a higher average, with New York and Shanghai drawing at 22-24%.
Interestingly, five of the top 10 startup cities for female founders were outside the US, and of the American cities, Silicon Valley was way off the pace. More worryingly, Silicon Valley ranked bottom for Latino representation, despite the Latino population making up 30% of nearby San Jose. For all the work that’s been done to encourage people into entrepreneurship – and particularly the tech sector – more work is needed to present business as an equal opportunity, and encourage the risk-taking that leads to great ideas.
Startups are booming in 2019, and the latest Global Startup Ecosystem Report shows that this success is spreading more widely. Capital and talent are being distributed across the world, while governments are taking more interest in tech businesses, and providing the benefits and incentives to match. More still needs to be done to encourage diversity and risk-taking, however, and support a startup ecosystem that reflects the whole population.
Former journalist Katya Puyraud is the co-owner of Euro Start Entreprises, helping businesses get started in Europe and around the world. Since 2007 Euro Start Entreprises has provided support and business advice to companies in over 30 countries worldwide. You can find her on Twitter here and Facebook here.