Organizational Success is Only as Functional as the Ecosystem That Supports it
by Sreedevi Devireddy 16 March 2018
Big companies stem from visionary entrepreneurs, smart executioners, and perhaps a bit of luck. But organizational success is only as functional as the ecosystem that supports it. This would imply that companies currently in a position to tremble economies once started up and thrived to become so. It is as simple as that.
At the surface, the easiest name that comes to mind is the Silicon Valley – a prime ecosystem that breathes entrepreneurship and innovation, now known worldwide as a hotbed for high-value companies. But have you ever considered why this region of California, in particular, continues to remain fertile for businesses to start and grow?
There are a couple of reasons, and they aren’t as intuitive as you might have imagined.
An Inside Look: The Valley’s Success
Silicon Valley is easily equated with the 19th century California Gold Rush. The only difference being that the former does not appear to be diminishing any time in the near or far future. But let’s take a look at what catapults the region as a spectacularly stable place to launch any type of business.
Consider the Trifecta
Silicon Valley centres into a focal point between the private sector, the U.S Government, and academia. It’s this convergence that creates an environment unlike any other in the world. Berkley and Stanford University, being at the epicentre of the valley, provides for a constant flow of new entrepreneurs and talented minds on an annual basis.
Launching a business under California law is a fairly effortless endeavour, which is bolstered yet by the fact that non-compete agreements are void in the state.
“What results is a steady stream of well-trained engineers, marketers, business people, researchers; a highly available stock market appetite for stock flotations; people with experience in business; and a vibrant venture capital community, including how and why business failures happen.” -- Vint Cerf, Chief Internet Evangelist at Google
An Abundance of Amenities
Business amenities are although a luxury finds itself in the abundance in the valley. This makes the place an attractive destination for investors, conventions, and more. Think world-class hotels at reasonable prices, highly-rated restaurants, sports arenas, conference centres and other unique entertainment options.
Bear in mind that if a target market exists, its most readily found in the Silicon Valley with their culture and representation as early adopters for exciting new trends.
High Density of Investors
It’s simple enough to find wealthy investors by the droves in the area, who organize themselves as venture capitalists and angel investors. Incentive? An earnest desire to make money work, instead of paying large taxes on earnings annually, many investors put their money to work. It’s advantageous in the hope that a handful would grow to return high dividends in the years to come.
Ironically, a thriving start-up ecosystem is also best described by the number of start-up deaths. This urges further investment despite considerable failures, the sheer volume of new businesses meaning there would always be success stories.
High Density of Investors
It’s simple enough to find wealthy investors by the droves in the area, who organize themselves as venture capitalists and angel investors. Incentive? An earnest desire to make money work, instead of paying large taxes on earnings annually, many investors put their money to work. It’s advantageous in the hope that a handful would grow to return high dividends in the years to come.
Ironically, a thriving start-up ecosystem is also best described by the number of start-up deaths. This urges further investment despite considerable failures, the sheer volume of new businesses meaning there would always be success stories.
Inspiration From the Past
Incredible success stories from decades past serve to inspire both breeds of entrepreneur and investor. It makes it easier – psychologically – to imagine future victories individualistically.
The sheer number of successful, experienced entrepreneurs and investors generously ready to offer advice only serves to add volume to a great start-up culture. For some of them made names for themselves with their willingness to offer free connections and advice to new start-ups in their spaces.
A Renewed Outlook Towards Failure
As stories of success serve to encourage, so do those of failure. Despite the media narrative that states otherwise, the valley has witnessed its fair share of failures. The day-to-day determination to succeed at the risk of near-constant failure is absolutely pervasive among entrepreneurs in the valley.
Experts suggest that what makes Silicon Valley the most talked about the ecosystem in the realm of start-ups is probably its mantra to fail fast; while the rest of the world stagnates at don’t fail.
While it’s easy to represent the United States of America with just one region, the truth is, that other hot pockets exist within the country also. Much of the reasoning stands true with those states, cities, or areas also. New York, Chicago, Seattle, Austin, Sao Paulo, and Los Angeles come to mind.
An Outside Look: The Rest of the World
The Global Start-Up Ecosystem Report and Ranking by Startup Genome recently ranked the hottest cities to enable a start-up culture and foster an ecosystem for the same. It covers a year of research that spanned 300 partner companies and 10,000 start-ups.
How Do Cities Help in Growing and Sustaining Vibrant Start-Up Ecosystems?
The report assessed eight major factors: market reach, technical talent, funding, resource attraction, start-up experience, founder ambition, strategy, and corporate involvement. Question is, who has the best claim to the throne as other cities and regions become just as or more supportive of a start-up ecosystem as the United States of America.
Where Does Europe Stand?
In 2017, Europe featured six representatives in the report’s annual top 20. It included London at #3, Tel Aviv at #6, Berlin at #7, Paris at #11, Stockholm at #14, and Amsterdam at #19.
Despite the Brexit of 2016, London remains strong in the start-up environment, moving up three places since the report in 2016, and improving in categories of funding and start-up experience since 2015.
London is Europe’s Tech Capital with nearly 5,900 tech start-ups with the fourth highest start-up output in the world today. This is an undeniable – rapid – growth, owing to a strong and well-balanced ecosystem. However, the scale-ups have resulted in some challenges for its early stage start-ups in competing for experienced talent. This is often an issue that comes with fast ecosystem growth.
Stockholm pays tribute to Scandinavia’s great work culture and its outward approach in the start-up scene. Recent years have seen huge success stories in the form of Spotify and King, the latter being the company behind the addictive Candy Crush Saga.
A Special Look at Israel - Lemons Can Always Be turned into lemonade
The story of Israel’s founding is itself a lemons-to-lemonade story. After endured over 2,000 years of harassment and being exiled from their native land, the place is often now known as the Start-Up Nation, which through its vibrant ecosystem and human capital, generates more start-up companies than large industrial nations such as Korea, Germany, Canada, the UK, China and even Japan. Corporate giants such as Apple, Facebook, and Google have their biggest R&D Centers in Israel outside of the U.S.A.
However, in comparison to the United States, Israel attracts twice as much venture capital investment per capita. The stat soars to over 30 times against all the members of the European Union combined. It justifies its rank as the second most innovative nation in the world in the World Economic Forum’s Global Competitiveness Report 2016-2017.
There are several reasons that attribute to its success. You could highlight its Silicon Valley-esque failure culture. Or, point at its government’s special purpose $600,000 risk-free loan that assures that when a promising start-up fails – they do not have to pay its government back.
Israel has been able to build a good ecosystem with the government, the Israel Defense Forces, corporates, venture capital firms, and start-ups in alignment. Over 140 engineers and technicians per 10,000 employees make Israel boast the highest number of technology professionals and scientists per capita in the world.
When you club these points to the fact that several universities within the country marks for a mandatory Minor in Entrepreneurship, leading to the creation of over 100 student-led businesses annually with posted revenues exceeding $32 million, it stands for a phenomenal recipe for ecosystem success in the realm of start-ups.
Where Does Asia-Pacific Stand?
While the U.S.A entrusts its private sector to maintain growth, governments in Asia and Europe have covered and established clear goals to support the growth of their innovation ecosystem.
Singapore is one of the places where the government’s played an active role in creating a start-up friendly environment. In 2017, the country ranked #1 in talent. This could be attributed to innovative policies that began in the 1990s.
Beijing and Shanghai ranked at #4 and #8 respectively in 2017’s Global Ecosystem Report. While the former is attributed to great performance at creating large scale-ups, Beijing continues to suffer from a lack of global connections of its start-ups.
On the other hand, Shanghai presents with strong early-stage funding, attracting talent and resources from across the world. This added to their start-ups’ global connectedness as opposed to their counterparts in Beijing.
Where Does Asia-Pacific Stand?Where Do We Go from Here?
Other cities and geographic areas continue to grow and establish themselves as growing forces in the world of entrepreneurship and start-ups. Many once considered it near impossible to replicate the success of the U.S.A, helmed by Silicon Valley. And yet, the very region finds several others nipping at its heels today.
Its latest World Economic Outlook update, released in Davos on the sidelines of the WEF, projects India to grow at 7.4% in 2018, while the global growth forecast stands at 3.9%, India has steadily strengthened its place into becoming one of the most vibrant landscapes for start-ups, and in terms of sheer volume – with around 5,200 start-ups in 2017 – stands as the third largest ecosystem for the same. It’s also benefitted greatly from an increased involvement of the government in promoting entrepreneurial ventures
India stands as an example, ranked at #40 in the World Economic Forum’s Global Competitiveness Report 2016-2017. The list rounds off at the twenty best cities to consider for entrepreneurial inception, and it’s a progressively positive step to find the sub-continent among it. According to a recent report by NASSCOM’s Startup India: Bengaluru and Delhi-NCR, surged ahead in fostering vibrant entrepreneurial cultures and creating supportive environments for startups to prosper, but nevertheless, the Startups Are Moving Into Smaller, Tier 2 Cities for Sectoral Growth benefits, and Investors are ready to support, thus spreading the wealth and innovation across the country.
With nearly $3.1 billion allocated to the scheme Start-Up India, the government aids entrepreneurial initiatives with reduced inspections, tax exemptions, innovation hubs, and an improved bankruptcy code. It would be interesting to see if such ventures help India cover ground over its western counterparts.
At the end of the day, an ecosystem is far removed from the hands of an entrepreneur, no matter his or her brilliance. And that is one key to start-up success often overlooked - its foundation.