New York, Stockholm, Tel Aviv, London, Tokyo and Singapore. These are only a handful of diverse geographies that stand united in their quest to emerge as powerful innovation hubs. These cities are fuelling local economies and disrupting the global innovation landscape by nurturing a new breed of digital startups. As per the Global Startup Ecosystem Report 2021 by Startup Genome, they consistently dominate the global startup ecosystem rankings. Also, on the list of rising ecosystems in the world are Hyderabad, Bengaluru, Delhi and Mumbai.
What do these trends suggest? Despite the pandemic—or perhaps on account of it—these geographies have strengthened their position as vibrant innovation clusters and are increasingly being viewed as viable alternatives to Silicon Valley. As innovation ecosystems become nimbler and more dynamic, leaders are seeking to create an integrated landscape that helps startups grow, enables corporates to invest in talent and R&D and attract other stakeholders to effectively participate in a collaborative environment.
However, the question remains: what makes—or breaks—an innovation ecosystem that builds sustainable businesses and stimulates economic growth? Here, I examine the key factors that aid in shaping a unified innovation ecosystem:
A robust funding environment
Financing an innovation ecosystem is critical to creating innovative products and services. Entrepreneurs can build sustainable businesses only if they have adequate access to funding and financing options. Some flourishing ecosystems—more than the others—have brought funding to the top of the agenda to enable entrepreneurs to find innovative solutions for unique challenges.
For example, funding is key to establishing Tel Aviv’s thriving tech scene. Besides top venture capital support, Israel also receives ample funding from the government. It raised a total of USD 6.55 billion and produced 19 IPOs even amid the gloom of the pandemic in 2020. The country’s maturing startup landscape is ripe for investors seeking to diversify their portfolio into AI, cybersecurity, and other high-tech areas.
As Israel’s example shows, a sustainable and resilient funding environment that is conducive for deal-making is paramount to an ecosystem’s long-term success.
A collaborative culture
In my view, the cornerstone of an innovation ecosystem is the connection and collaboration fostered among key stakeholders. Competitive advantage can only be achieved if a culture of collaboration and interdependence is encouraged to support innovation.
Also, only through mutual collaboration among stakeholders, new markets can be created, and customer needs addressed better. For example, as ecosystems worldwide have shown, a robust corporate-startup collaboration will democratise and promote innovation. This is particularly true in Germany where the changing nature of corporate innovation has resulted in several corporate-startup partnerships in robotics, MedTech and FinTech. German engineering multinational Bosch launched Startup Harbour, an open innovation program that fosters collaboration between the corporate’s business units and startups.
Industry associations such as FICCI, CII and The Indus Entrepreneurs (TiE) are also key collaborators in the innovation ecosystem. They open networking doors for entrepreneurs and connect them with people who matter in the industry. Membership in such associations could also help startups build their brand and reputation in the larger innovation ecosystem.
A connected ecosystem
The entrepreneurial spirit of ecosystems can only be sustained if stakeholders provide adequate infrastructural support for startups. Ecosystem builders should focus on creating an innovation capability that promotes policy initiatives to foster a startup culture. Entrepreneurial ecosystems can flourish only if the government takes proactive interest in formulating policies that address the needs of all ecosystem stakeholders.
Capacity-building measures include implementing an innovation policy that focuses on R&D to address new market needs, especially in the wake of the pandemic.
In recent years, Japan has emerged as an innovation powerhouse for multiple reasons. It has forged organic connections with local and foreign startups and embraced digitisation to solidify its presence as a key player in the global ecosystem rankings.
The development of an ecosystem also depends on the role the media plays in supporting entrepreneurs. The mainstream media has the responsibility to cover the local and national innovation ecosystems in their reports, to shape the public perception of entrepreneurship. In the digital era, social media also plays a powerful role in promoting local businesses and startups.
A collective knowledge-sharing platform
The best innovation ecosystems protect the Intellectual Property Rights (IPR) of entrepreneurs and innovators and focus on building partnerships with the desired stakeholders. Silicon Valley is a fine example of how a mature innovation ecosystem has prioritised protecting the valuable IPR assets of its innovators. The Silicon Valley ecosystem is experienced in litigating high-profile IPR disputes and driving innovation and technology disruption. Its enabling policies and regulations make it the preferred destination for startups from across the world.
The best ecosystems are also those where entrepreneurs are actively invested in giving back to the startup community through mentoring initiatives. I strongly believe established entrepreneurs should pay it forward to ensure that early-stage startups avoid making the same mistakes as them.
An empowered talent pool
As per the 2021 Global Startup Genome Report, Telangana was ranked in the top 15 Asian ecosystems for affordable talent, among the 280 entrepreneurial innovation ecosystems analysed and 140 ecosystems ranked. It is a testament to the critical need for ecosystem builders to focus on bringing together talented people to work on innovative ideas.
If ecosystems aspire to attract more investments into their region, they must nurture a varied talent pool to drive productivity and competitive advantage. They should seek talent both from within the geography they operate in and from outside regions, too. In an increasingly complex business environment led by disruptive tech startups, a strong talent ecosystem that supports diverse skillsets is undoubtedly the need of the hour.
Cities like New York and Boston are magnets for attracting top-notch global tech talent that supports their mission to become innovation hubs.
Overcoming the barriers and forging ahead
For startup ecosystems to punch above their weight and seize new opportunities of growth, they need to overcome major barriers that pose an impediment to innovation. First, a weakly implemented innovation strategy stymies innovation. It results in lack of clarity on the role each stakeholder needs to play to achieve the ecosystem’s innovation goals. Second, a lack of agility in idea validation delays speed to market and limits the scope for iterations. Third, when ecosystems rest on past laurels of innovation success, they hold back on harnessing their strengths to create a roadmap for resilient innovation processes. Finally, an ecosystem’s innovation strategy should not be inward looking and layered in complexity. The stakeholders should be customer-centric and agile in identifying new revenue streams and approach innovation from a cross-disciplinary perspective.
An inclusive and thriving innovation ecosystem should embrace a global worldview to innovate at scale and speed. In my view, only when leaders are proactive and start seeing value in building such a cohesive ecosystem, will innovation-driven entrepreneurship flourish.