Fast-growing companies and startups were once the lot of Silicon Valley and Seattle. Now it's not. Today, the United States boasts several innovation centers: Austin, Miami, New York and Washington. In recent years, similar centers have appeared in Europe - Amsterdam, Berlin, Helsinki, London, Paris and Stockholm. But this phenomenon is no longer limited to developed economies. Startup culture has gone global.
China tops the list of innovators, closely followed by India. However, unicorns (private companies with valuations above $1 billion) can be found in a wide variety of countries, including emerging markets and emerging economies such as Brazil, Indonesia, Israel, Israel, Nigeria, Singapore, South Korea, and Japan.
The largest share of fast-growing companies is in financial technology, or fintech. Other key sectors of the digital economy are not far behind:
electronic commerce,
internet software and services,
healthcare,
educational technologies (EdTech),
artificial intelligence,
cybersecurity ,
logistics and supply chain delivery.
Significant activity, growth and value creation can be found in the sectors associated with the transition to green energy . Back Market, a Paris-based company valued at $5.7 billion, promotes the recovery and recycling of electronics, thereby helping to solve the growing problem of e-waste in the world.
Biomedical science - with its applications in medicine, health care, agriculture, and synthetic biology (creating new biological parts, devices, and systems, or redesigning those that exist in nature) - is another notable area of innovation.
The digital realm has become a particularly fertile ground for innovation around the world. Its growing availability is ensured by the rapid spread of mobile Internet. There are over 6.6 billion smartphones in the world today. The market for digital services provided via the Internet is huge and covers almost 84% of the world's population.
A combination of public and private investment has improved the speed and quality of mobile Internet connectivity and reduced the cost of Internet access devices and data streaming. India is a prime example of how affordability and affordability support the emergence of new economic ecosystems in which innovation, entrepreneurship and the expansion of consumer services can thrive.
Low barriers to market entry encourage the development of digital startups. Capital requirements are low and there is a large and growing supply of creative talent to staff startups. For many digital services companies, costs are concentrated in software and development, and affordable cloud computing services eliminate the need to build and manage a vast information technology infrastructure. The marginal cost of generating leads is low. Scaling may not be a trivial task, but it's also not very expensive.
For Internet companies, the overall address market is huge. In many areas, such as software, it covers the entire globe. According to Chinese estimates, the average distance between a seller and a buyer on e-commerce platforms is approximately 1,000 kilometers, compared to five kilometers for a traditional retail or service business.
Internet business is not only stealing customers from traditional companies, but also serving consumers that traditional companies have never attracted. In emerging economies, there is a strong incentive to invest in digital infrastructure and the expansion of mobile internet to align profit-driven private business models with the goal of inclusive economic growth.
Although the Internet has removed many geographic barriers, fast-growing companies cannot appear anywhere. They remain concentrated in entrepreneurial hotspots. For example, out of 24 unicorns in Germany (as of March 2022), 17 are based in Berlin and five are based in Munich. Of the 24 largest unicorns in France, 19 are based in Paris and one is based in the suburbs of Paris.
This concentration reflects the importance of local ecosystems that support entrepreneurship:
venture capital industry,
equity growth platforms,
legal and recruiting services,
effective regulatory framework.
A variety of hard and soft infrastructures can also increase the efficiency and dynamism of the innovation process, but they tend to evolve over time.
Multinational corporations often drive progress in these ancillary sectors using their experience, capabilities and global connections. But these companies are not just applying the same business model in a new environment, using existing staff to guide the process. Opportunities vary from country to country, and addressing local needs requires an understanding of local issues—so companies must look for talent with detailed local knowledge and connections to local entrepreneurs.
Such talents must be integrated into the overall structure and culture of the company. But it is a highly interactive local area network that forms the core of an entrepreneurial ecosystem that helps turn innovative ideas into viable businesses. Experienced angel investors are often a key part of such a network. So do investors who see themselves as company builders, not just risk takers. Universities play an important role as open meeting places and sources of young potential entrepreneurs.
In our digital age, all countries can and should strive to develop centers of innovative entrepreneurship. To be successful, they must cultivate its key ingredients:
human capital,
infrastructure of digital networks,
favorable regulatory environment
policies to encourage funding.
In all their efforts, startups must use an understanding of the local ecosystems in which innovation thrives. Tech entrepreneurship has gone global, but its heart still beats locally.