How start-ups can turbocharge global productivity growth
January 2, 2017 Editor 0
Attendees at Republica Berlin 2016, an annual conference on digital culture for entrepreneurs from around the world.
Photo Credit: © Victor Mulas/The World Bank
We have witnessed in recent years the emergence of technology start-up ecosystems across the world. New technology trends are reducing the costs as well as the barriers of access to markets and resources for developing technology start-ups. If in the 1990s an entrepreneur needed $2 million and months of work to develop a minimum viable prototype, today she would need less than $50,000 and six weeks of work.
Entrepreneurs are also surging in emerging economies. India hosts major start-up ecosystems in New Delhi and Bangalore, with their start-ups having raised $1.5 billion in funding in 2016, respectively. São Paulo ranks among the top 20 start-up ecosystems with more than 1,500 active start-ups, closely followed in the region by Santiago and Buenos Aires. Warsaw hosts around 700 active start-ups, and Nairobi is the home of leading African start-ups, such as Ushahidi, M-Pesa or Brck.
Tech start-up ecosystems present new opportunities for emerging economies. Local entrepreneurs develop new business solutions that address domestic demands. For instance, in Kenya, M-Kopa is addressing the demand for energy in off-grid locations, a major issue in the country’s rural areas. Unicorns, those start-ups that raise more than $1 billion, are no longer a U.S./Europe-only phenomenon. Indian, Chinese and Indonesian start-ups, such as Lu.com, Flipkart or Go-Jek, have reached this valuation, and African Internet Group from Nigeria is poised to be the first African unicorn.
Start-up ecosystems also create new jobs. Data from New York City’s ecosystem on employment generated in the tech start-up ecosystem shows that most of the jobs generated by tech start-ups are not in start-ups themselves, but in local traditional industries that either are influenced or disrupted by start-ups. Think about a bank or a retail company that has to react to a mobile app providing finance or retail business and that needs to hire new talent to develop a competing app. More than 40 percent of these new jobs do not require a college degree. These are jobs like building a website, a basic database, a web or mobile app.
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