With the recent release of studies of Beirut and Dar es Salaam – utilizing an ecosystem network mapping methodology endorsed by the Global Entrepreneurship Research Network – Victor Mulas and Kathy Qian of the World Bank have made an important contribution to our knowledge of how startup ecosystems are formed, their internal dynamics, and what makes them grow and achieve sustainability.
While we understand that startup ecosystems are communities of stakeholders, we are just beginning to gain insight into their internal dynamics. By generating data around startups in the technology sector and analyzing how they connect with their local economies – driving productivity and employment in the process – Mulas and Qian have added a deeper level of understanding about how ecosystems advance through various stages of development.
Entrepreneurs in the tech sector are emerging across the globe, fueled by increased access to digital resources and other global tech-led cost reductions. Because technology is a key driver of productivity and economic growth – the World Bank cites research finding that 70 to 80 percent of the productivity gap between developed and developing economies results from lags in adopting technologies – creating and absorbing new technology is a critical challenge. Tech startups are an effective mechanism for addressing this. Therefore, building effective entrepreneurial ecosystems is a primary goal of policymakers and practitioners alike.
The GERN-endorsed network mapping methodology was initially developed by Endeavor Insight to analyze New York City’s tech ecosystem – a prime example of the new urban startup ecosystem model. With more than 14,500 startups and nearly a $6 billion in venture capital investment, NYC today is one of the largest and most vibrant tech startup ecosystems in the world. But this was not something widely predicted or anticipated a decade ago. Because it has a lot in common to ecosystems emerging in cities worldwide, last year Mulas produced an influential report on the New York City ecosystem.
According to Mulas, the policies that the city employed provide valuable lessons to policymakers with similar goals in their economies. Although New York is distinguished in many ways as a city (see, Gotham and Greater Gotham by Mike Wallace), the challenges it faced when developing the tech ecosystem are similar to those confronted by other cities. These include: a small and decentralized entrepreneurship community; a lack of technical talent; limited affordable space for entrepreneurs; and a lack of available seed finance.
By utilizing the same methodology – which includes in-depth surveys of startups and support stakeholders in each ecosystem – the results of the Beirut and Dar es Salaam studies are comparable to New York and to the other ecosystems studied to date. This provides a better understanding of the status of the respective start-up ecosystem, and, most significantly, offers policymakers and other stakeholders key evidenced-based recommendations for supporting and sustaining their ecosystem.
In addition, Mulas and Qian have provided the GEN family with a framework for developing assessments of our respective ecosystems through an examination of five key ecosystem elements:
- Networking Assets – how well developed the e-ship community is as a network of stakeholders and how supportive the community is of startup success
- Skills – how well-prepared founders are (through their education and work experience)
- Support Infrastructure – includes accelerators, incubators, other places where founders can access advisors and mentors, events,
- Finance – the general availability of funding and investment
- Constraints – regulatory bottlenecks to establishing and operating a business.
The World Bank’s findings identify key gaps in Beirut’s and Dar es Salaam’s ecosystems that can now be addressed through policy and programs based on international best practices. Going forward, these studies, and others in the pipeline, provide valuable knowledge to the leaders of GEN’s in-country affiliates, who are well positioned to design and lead innovative new initiatives that address critical ecosystem gaps and challenges.