Start-up ecosystems are built over decades

Niranjan Gidwani, Consultant Director, Charter Member Tie Dubai, Member Superbrands Council.

Start-up ecosystems are popping up all across the country and the world, with varying levels of success. Let us focus on the mix of ingredients that are needed to make a good start up ecosystem thrive over time. These are not any hard and fast rules, but rather good guiding principles which one can observe in great and successful start-up destinations in the world.

Some of the key ingredients of a truly good start-up ecosystem are as follows.

# It always starts with great ideas which turn into great businesses

Start-up ecosystems must have access to great ideas. Going forward, and into the future, we would seriously need to think building super platforms over features and loads of wisdom over just interesting widgets. The ratio of successes is very small. Therefore, working on really big ideas would be of immense help.

# Access to talent, and over time, building up of strong bench-strength of budding entrepreneurs

Also, entrepreneurs who have learned from prior mistakes, are ultimately going to dictate the success of their businesses, and in turn, the success of the ecosystem.

# The best ideas and the best talent are useless without the capital to fund their vision

It is critical that the capital is available to embrace each stage of development, from seed to early to growth stages of businesses. Having seed stage, but not Series A or Series B stage, is a recipe for a likely flame-out of that start-up when they hit the wall in that level of their growth.

# Access to Customers

To me, this is the most important piece. Customers drive revenues. Revenues impress investors. Investors fund growth. Growth leads to big exits. Big exits lead to a robust ecosystem. This often means that there need to be tight partnerships between early-stage ideas with later stage companies to buy those services. Especially those who are supportive to helping the local start-up community.

Some of the key stakeholders of a robust ecosystem are:

Entrepreneurs

A good ecosystem would need experienced teams running start-up businesses. With a good balance of needed skill sets from planning, strategizing, use of technology and understanding a fair amount of financing.

Mentors

First time entrepreneurs need to be able to ask questions from experienced leaders, to help get them up the learning curve, without making the same mistakes of their predecessors. A good pool of mentors who are willing to give back in some form to build up a strong legacy.

Investors

These could be small individual angels, organised angel networks, venture capital firms, private equity firms, family offices, corporations or other funding sources. A steady and well understood money flow begins to build confidence in the ecosystem.

Incubators

They could facilitate everything from shared office spaces for start-ups, going to formal start-up accelerator programs with formal educational curriculum. The breed of entrepreneurs tends to learn from each other when they are in close proximity to each other.

Universities

A lot of the super business ideas are born from the research and ideas inside of universities. Having a healthy technology transfer process for these ideas to be monetised by business leaders is key.

Corporations

Big companies can help in many ways. They invest through corporate venture capital funds. They become potential customers of new local start-ups. They have pain points of their own, that a local start-up can build and solve for them. They are often the exit for start-ups that have gotten large in size.

Events

There are many groups in town that help organise and propel the ecosystem. This could be industry trade associations, venture capital associations, entrepreneur networking groups and chambers of commerce.

Government

Whether it is at the city, county or state level, the local government can and does play a very important role. That could include providing tax incentives for start-ups to launch in their city, tax free profits on any capital gains in a start-up to help stimulate investment, passing ecosystem friendly laws like free access to the internet, or establishing venture capital funds with a portion of their treasury, granting of long-term residency visas to lock in potential talent.

Service providers

The lawyers, accountants, bankers, recruiters, agencies, advisors, and consultants in the community, all play a role. The more experienced they are with start-ups, the better advice they will bring to the ecosystem.

Once a start-up is successful, money that simply goes into the bank account, or into safe real estate investments, does not help the ecosystem. The money needs to round trip back into the community.

If we learn lessons from Silicon Valley, it prides itself on failure as a badge of honour, as the lessons learned in one bad start-up, will apply to the next good start-up. It takes a couple cheerleaders at the top that are going to plant the flag and have everyone rally around those goals for the community.

Preferably, somebody that can put their money where their mouth is and can lean on their deep reservoir of key relationships in our region.

It is generally harder to build a robust community in smaller towns. There simply isn’t enough activity, breadth of industries or depth of expertise in any one industry to be effective. Better to be in a town big enough to support an ecosystem or prepare for a fair amount of travel between a bunch of smaller regions that have been aggregated into one community.

The best start-up ecosystems feed off each other. Ecosystems are not built-in years; they are built over decades. That is why Silicon Valley’s start-up ecosystem is as big as it is; they have literally been working on it since the 1970’s, a fine-tuned machine after 40 years of optimisation.

KEY TAKEAWAYS

If we learn lessons from Silicon Valley, it prides itself on failure as a badge of honour.
The lessons learned in one bad start-up, will apply to the next good start-up.
It takes a couple cheerleaders at the top that are going to plant the flag and have everyone rally around those goals.
A lot of the super business ideas are born from the research and ideas inside of universities.
Start-up ecosystems must have access to great ideas.
A good ecosystem would need experienced teams running start-up businesses.

The best start-up ecosystems are not built-in years, they are built over decades, which is why Silicon Valley’s start-up ecosystem is as big as it is.

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