How are governments influencing the success of their startup ecosystem?

The role that governments play in countries that have a successful startup ecosystem has not still been well discussed. When we think of startups and a great startup culture, we only imagine the crucial role that entrepreneurs play. But governments in startup economies have progressively played a critical role in developing a startup culture by creating better policies, reducing tax burden, easing migration of talented workers, having developed infrastructure, etc.

Governments have also encouraged a culture of innovation and research by creating programs and educational institutions to create talent and tech developments in an economy. Such governments that have adapted with the times and encouraged startup development have helped raise the standard of living and economies of their countries. In StartupBlink research, downloadable here, which ranks 954 cities and 125 countries globally, we discovered that government supported countries ranked higher in startup ecosystem rankings.

Also, governments are aware that they need to provide more support locally not centrally. Hence, most state governments play an important role in executing policies and building a local startup ecosystem. When a startup ecosystem is built from scratch, the government plays a more important role than when its already established in a city.

In this article, we will go over the top countries where governments have succeeded in making their startup ecosystems successful.

Estonia Government Startup Initiatives

Big names like Skype, Pipedrive and TransferWise are startups from Estonia that have made a real impact in the technology world. As many as 66% of Estonian entrepreneurs have expressed satisfaction with the government for being supportive and launching great initiatives. Estonia is quoted as the world’s most digitally advanced societies. As per StartupBlink, Estonia ranks 13 globally among 202 countries, based on the strength of its startup ecosystem.

It has even gone ahead and introduced a digital e-Residency back in 2014 and their new Nomad Visa will be launched in early 2019. e-Residency aims to provide non-Estonians access to Estonian services such as company formation, banking, payment processing, and taxation thereby making them ‘e’-residents. While the upcoming Nomad Visa enables tech talent to freely work from anywhere in Estonia.

Startup Estonia is a government initiative that has aimed to boost its startup ecosystem. They have several initiatives like conducting events, creating marketing and branding strategies and training programs for startups. They also assist in educating the local investors, attracting foreign investors and starting accelerator programs. Estonia also has Startup Visa encouraging non-Estonian startups to set up in Estonia.

Israeli Government’s Startup Initiatives

Israel government has been at the forefront of investing and nurturing a prosperous startup ecosystem. Israel is home to successful startups like Houzz, Mobileye, Similar Web, Waze, Wix, etc. Israeli government has invested time and resources in supporting their startup ecosystem. R&D spending, smart policies, etc. have been some of the instrumental measures that the Israeli government has taken early on to grow this entrepreneurial culture.

Israel ranks 4 globally among 202 countries, based on the strength of its startup ecosystem on StartupBlink. That is a very strong position globally. As mentioned earlier, their government has been investing heavily in R&D and innovation. They have set up Israel Innovation Authority (originally Office of the Chief Scientist) to facilitate innovation, research, tech advancements and entrepreneurship. It also manages incubator programs and encourages Open Innovation. Giants like Microsoft, Intel and Google have been able to innovate easily by staying close to startups in Israel.

Although Israel started off as being a public and trade economy, the government actively moved towards exploring the potential of private sector since 1980s. They kickstarted the venture capital wave by creating a program called “Yozma” in 1993 by offering attractive tax incentives to foreign VC firms. Israeli startup area is called “Silicon Wadi” covering entire country concentrating around Tel Aviv.

Lithuania Government’s Startup Initiatives

While Eastern Europe still has not reached its full potential, its Northern neighbours such as the Baltics (Lithuania, Estonia and Latvia) have come a long way in terms of development. Lithuanian government has taken several measures to encourage startups. Startup Lithuania, a government backed program, has been created to help non-EU entrepreneurs to set up their business in the country. Additionally, it is also developing the current startup ecosystem further.

The first in Europe, Blockchain Centre (BC) has also been established in Vilnius in 2018, putting Lithuania as one of the global leaders for blockchain. Lithuanian government along with Bank of Lithuania have been trying to actively grow in fintech space. And in 2017 alone, 35 new fintech companies registered in Lithuania. Although, the startup ecosystem in Lithuania is still growing, there are several success stories from the country like MailerLite, Vinted, Integrated Optics, etc. StartupBlink ranks Lithuania at 22 globally from amongst 202 countries.

Finland Government’s Startup Initiatives

Finland is another European country whose startup ecosystem is ever-evolving. Finnish government has launched Startup Residence Permit in 2018. This enables that entrepreneurs who have started or will start a business in Finland will get a residence permit. Talent Boost Program is another initiative started by government to attract international talent and investors and to boost innovation.

Helsinki Business Hub is another example of an organization that helps in business in Helsinki focussing on sectors like ICT (Information and Communications Technology), Healthcare, Smart cities, Smart maritime and Investor relations. Finland ranks 19 globally among 202 countries, based on the strength of its startup ecosystem on StartupBlink. For a country that small, this is a very good rank.

Portugal Government’s Startup Initiatives

Portuguese government is aggressively trying to improve Portugal’s startup scene. StartUP Portugal is Portuguese government’s strategy for encouraging entrepreneurship focusing on developing the current startup ecosystem, funding opportunities and internationalisation. Through this, startups can also avail financial backing as an alternative to bank loans. Apart from this, there are around 20 more measures underway due to this program, like Startup Voucher where there is support during ideation phase.

Lisbon is fast becoming a startup hub. With accelerators, startups and coworking spaces coming up in the city, Lisbon is attracting entrepreneurs heavily. Startup Lisboa is an incubator located in the city. A recent startup success story at Lisbon was when Web Summit, an annual global tech conference, was moved from Dublin to Lisbon since 2016. This was because of the buzzing startup scene in the city and better infrastructure. We rank Portugal 24 globally among 202 countries where major startups like Uniplaces, Talkdesk, Zaask, etc. are located.

Bulgarian Government’s Startup Initiatives

This is another European country to be in the list. The Bulgarian government has been actively trying to bring talent from EU to Bulgaria and retaining it. Already known as a country with tech, engineering and mathematical talent, Bulgarian startup scene has been on an upward graph since 2015. In 2018, the government has announced a fund of 150 million Euros to promote entrepreneurship. They are also trying to get giant global companies to set up their offices in Bulgaria.

EU already invests almost $1.5 billion in Bulgaria through a program called JEREMIE (Joint European Resources for Micro to Medium Enterprises). A part of this fund goes for a direct investment to small businesses and another part goes VCs. An example is Eleven, a VC that helps local startups go global. In 2018, the first Sofia Startup Expo is scheduled to take place marking a step in the right direction for development of startups. On the StartupBlink startup map, Bulgaria ranks 31 globally among 202 countries.

Ireland Government’s Startup Initiatives

Already known as a startup haven due to low startup corporation tax, Ireland is a hub for startups. They also have Double Tax Agreements with many countries to avoid double tax for corporations. As a result, several global companies have set up their headquarters in Ireland to reduce their tax burdens. Dublin is the headquarters to many large corporations as well like Google, Facebook, Twitter, LinkedIn, etc.

Irish government has also set up initiatives like Immigrant Investor Programme (IIP) and Start Up Entrepreneur Programmes (STEP) which aim to promote startup growth from migrant entrepreneurs. And Ireland’s Investor Visa falls under the IIP. As per Startupblink, Ireland ranks 16 globally among 202 countries, based on the strength of its startup ecosystem. This is a very good global rank.

Conclusion

While this list is not exhaustive, there are several other countries whose governments are actively involved in growing their startup ecosystems. Some examples are Japan, India, Germany, USA, UK etc. In United States, which is also the home to Silicon Valley, the government is still very involved in nurturing startups. The government in association with the Kauffman Foundation have launched The Startup Act that enables more job creation through entrepreneurship.

Likewise Germany is known as a powerhouse of technology, engineering, innovation and research and global startups like Rocket Internet, Research Gate, Wunderlist, Babbel have been started from Germany. Most governments realize the value of having a budding startup ecosystem and its positive effects on local economies. Such governments have also understood the value of investing time and resources into quality startup ecosystem research.

If you are looking to learn more about the startup ecosystem ranking of your country, you can read our latest report here.