StartupBlink Blog

National and local economies are constantly evolving, and one of the driving forces behind this change is the emergence of startups. These businesses have the potential to disrupt entire industries, create new jobs, and drive economic growth.

In this episode, Eli David and Martin Jordana discuss the impact of startups on national and local economies. If you look forward to gaining further knowledge of startups and their economic influence, listen and get more insights!

We define a  startup as any business that applies an innovative technology-enabled solution that has the potential to achieve scalability. But how do governments view startups? There are a few different perspectives governments might have. 

One consists of a lack of understanding of their value and no effort put into developing the local or national startup ecosystem. The second is viewing them as just “hype” and putting some effort into being seen as they also have startup ecosystems. The last and most successful perspective is recognizing startups as an engine of economic growth and taking them seriously.

Economic Implications of Startups to National and Local Economies

Startups are a vital force when it comes to job creation. They are creating new jobs directly and indirectly through the supply chain and support services they require. According to the OECD (2022), on average, young firms in member countries make up approximately 20% of employment but are responsible for almost half of all new jobs created over time. This increases employment and has many indirect positive impacts on the economy, such as increasing purchasing power and generating more income tax revenue for the government.

But the impact of startups goes beyond job creation and tax revenue. They bring fresh ideas and new technologies to the market, driving innovation and competition. This can lead to increased productivity, economic growth, and even the creation of new markets. They also attract investment from venture capitalists and angel investors, which can help to fuel economic growth and spur innovation.

The Case of Israel & Canary Islands

Israel, often referred to as the “Startup Nation,” is a prime example of how startups can drive economic growth. With a population of just over 9 million, the country’s thriving startup ecosystem has produced numerous successful companies, including Waze, Wix, and Mobileye. Israel’s startup scene is particularly renowned for its strength in technology.

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One of the reasons for Israel’s success in the startup world is the country’s focus on innovation and technology. The government has made significant investments in research and development and has created a supportive environment for entrepreneurs. One of the reasons for Israel’s success in the startup world is the country’s focus on innovation and technology. The government has made significant investments in research and development and has created a supportive environment for entrepreneurs.

The Canary Islands, a popular tourist destination, is another example of how startups can fuel economic growth. The islands already have a strong tourism industry, but recognizing the importance of diversifying their economy, they partnered with StartupBlink to develop and support their startup ecosystem. The COVID-19 pandemic, which led to a sharp decline in tourism, highlighted the importance of having a diverse range of income sources for sustainable economic growth. The Canary Islands case illustrates that relying on a single external source of income can be risky, and startups are a great way to provide an alternative source of income and drive economic growth.

Should every economy get involved in startup ecosystem development?

The startup ecosystem is a vital part of any economy, and governments must take the initiative to develop and support their local startup communities. However, many governments may hesitate for various reasons, such as fear of failure, lack of time and resources, or feeling that it’s too early for them to get involved. But it’s important to remember that the journey of developing a startup ecosystem is a long one, and those who enter the game early are more likely to succeed.

Kingston is one example of a small city advancing its startup ecosystem. Despite its small size, Kingston is cultivating a vibrant and thriving startup community thanks to the efforts of local government, business leaders, and the startup community itself.

The COVID-19 pandemic has highlighted the importance of innovation and adaptability in an economy. A stagnant startup ecosystem can also lead to a brain drain, with talented individuals leaving the country searching for better opportunities elsewhere. This is something that many cities and countries have experienced, with examples such as the founders of billion-dollar startups Shopify and Ethereum, who left their home countries to launch their businesses elsewhere.

It’s important to note that the future of global startup ecosystems lies in cities, not countries. People today are increasingly living in urban areas, and regardless of the size of a city, it has the potential to become a thriving startup hub. The development of startup ecosystems in cities is the key to future innovation and economic growth.

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About Us:

StartupBlink is the world’s most comprehensive startup ecosystem map and research center, working with over 100 government entities worldwide. StartupBlink’s global startup ecosystem map has tens of thousands of registered startups, coworking spaces, and accelerators, creating a robust sample of innovation globally.

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