Global Startup Ecosystems 2018

My colleagues at the Global Entrepreneurship Network and Startup Genome have released a new report that’s definitely worth a look.  The Global Startup Ecosystem Report 2018 offers a state of the field look at what’s happening with technology startup ecosystems around the world.  Here’s a few highlights from this year’s publication:

  • America’s global dominance in the startup world is eroding, while other nations, especially China, are becoming major players in the tech world.
  • New ecosystem hotspots are gaining traction.  Keep an eye out for Frankfurt, Helsinki and Lisbon!
  • Fast-growing startups are concentrating in two broad areas:  Vertical sectors, such as transportation and Uber, that rely on the third wave of the Internet; and those firms that rely on “deep tech”-major technology breakthroughs such as AI, Blockchain or life science innovations.
  • “Hot” sectors are undergoing an interesting transition.  Current growth sectors include advanced manufacturing and agtech, while new funding  levels for adtech, gaming, and digital media are falling.

(NOTE: The report is free, but registration is required.)

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Strengthening Economies in Wyoming

I’m continuing to work with my colleagues from the National Association of Counties and the National Association of Development Organizations on a project to aid coal-reliant communities in the West seeking to develop economic diversification strategies and programs.  We’ve been holding a series of workshops over the past year, and you’re invited to attend our next session.   Strengthening Economies in Wyoming will be an opportunity to engage national and local experts in developing strategies and program that help coal-reliant regions replace lost jobs and identify new economic growth opportunities.   The event will be held on June 21-22 in Gillette Wyoming, and registration is free.   This should be a very interesting set of discussions.  Wyoming has one of the US’s least diverse economies, but is making a major push to identify new economic engines.  A new statewide effort called ENDOW (Economically Needed Diversity Options for Wyoming) is getting a lot of attention, and is sparking fascinating conversations about Wyoming’s economic future.  Hope you can join us in June!

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Coping with Adversity: Regional Resilience and Public Policy

I’m in the midst of reading an interesting new(ish) book that should also interest my fellow economic developers.  Coping with Adversity:  Regional Economic Resilience and Public Policy (by Harold Wolman, Howard Wial, Travis St. Clair and Ned Hill) takes a deep dive into one of the most complex issues facing community builders:  why do some communities bounce back from economic crises while others stay distressed and challenged?  This comprehensive study examines the economic performance of every US metropolitan area between 1978 and 2007, with a particular focus on how they responded in the face of “shocks” (i.e., a natural disaster or a major economic hit such as plant closings).  Over this time frame, the authors identify more than 1,500 different employment shocks.  These shocks are shrugged off by nearly half of all regions as the economic hit does not trigger a wider downturn.   For those regions that do face a downturn, 65% recover within four years as they return to previous rates of economic growth.   A smaller share of regions lack resilience and teeter into a longer term chronic economic distress.

The authors use this data and six detailed case studies of resilient regions (Charlotte, Grand Rapids, and Seattle) and distressed regions (Cleveland, Detroit and Hartford) to ask a critical question:  what works in promoting economic resilience?  This is a complex question—that’s why it takes a whole book to discuss!!  But, I’ll try to briefly summarize.  The authors find that there are no specific community characteristics or policies that ensure resilience—all communities face economic shocks and it’s unrealistic to expect immediate recovery.   But more resilient places tend to have a better educated workforce, more industry diversity among their export oriented sectors, and a perceived business-friendly climate, including right-to-work laws.   In terms of policy, they find that state and local economic development programs appear to have a limited short term effect in addressing economic shocks. However, these policies do matter over the longer term, as they serve to improve a region’s overall economic competiveness and community assets.

My cursory summary doesn’t do justice to this very extensive and detailed analysis.  The authors are all based in academia, but bring a practitioner’s perspective to the issues.   This is not a dry academic tome—it’s a very readable, compelling, and realistic look at challenges caused by economic shocks and the real life difficulties of responding and recovering.

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Free Radicals: New Ideas for the Gig Economy

The rise of the independent workforce is one of the most important trends in our economy today, yet the topic is invisible in our public discourse.  With the exception of Sen. Mark Warner (D-VA), I can think of few public officials who even acknowledge that independent work is now the norm for a large share of our workforce.  And, because protections for these workers and solo entrepreneurs is minimal, many of them face precarious situations related to health care, retirement, and workplace protections.

Here in the US, we’ve opted to ignore this elephant in the room.  It’s too complicated to discuss!   It is a tough topic and solutions are not easy, but it’s time to at least start discussing solutions. Thankfully, our colleagues in the UK are beginning to have these types of public discussions which I’ve blogged about in past posts.  A new study from Demos, Free Radicals, is the latest example of new thinking about the future world of work.  This is a long study that contains many insights, but a few stand out.  It finds that most independent workers (80%) like the work and intend for this to be a permanent situation.  Seventy percent note that they do not intend to take “regular” work.   What does this mean?  It means that these are not “gigs.”  Instead, they are a new way of working which requires protections and benefits just like traditional jobs.  This is an issue that isn’t going away.

The study also includes a host of interesting policy recommendations.  A few new ideas include:

  • Automatic enrollment for independent workers in a pension fund with small government matching investments.
  • A new “engagers tax” for firms that use free lancers.  These funds would help support the proposed pension plan.
  • Development of new financial tools for savings and retirement that are geared to the independent workforce.
  • Refinement of other benefits, such as maternity and paternity leave, to extend similar protections to independent workers.
The report includes thirty different new ideas for improving the safety net for the independent workforce and it’s well worth a read.  
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Broadband Matters: Yet More Evidence

When it comes to economic development, especially in rural areas, broadband matters. That’s a pretty banal statement, akin to saying something like Tom Brady is a good quarterback.  Yet, it’s true in so many ways.  We’ve often talked about broadband as means to link businesses to the global marketplace or to bring the “wonders” of the Internet etc. to homes in rural regions.  But, a new analysis in the Daily Yonder shows that broadband may be even more important that we thought–it may be the deciding factor in where people, especially millennials, decide to live, work, and play.  The study  examined recent (2010-2016) population trends in rural America and found some interesting patterns.  Rural counties with the highest population growth among millennials were also those with the lowest levels of digital divide, based on the Digital Divide Index created by researchers at Purdue.   Meanwhile, the rural places with poor digital divide scores saw an average population decline of 3.2 percent.  This population decline among millennials was even higher at 6.6. percent.  Rural counties with better broadband access saw average population growth of 7.5 percent, and 13.5% among millennials.  While it’s too early to claim this study as the last word, the research does suggest that if you build it, they might come.  But, if you don’t build it, they’ll probably leave.  Broadband will be the essential infrastructure behind any effort to spur growth and attract new residents to rural regions.

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On the Road Again . . .

The end of April is turning out to be extremely busy in terms of speaking engagements.  If you happen to be attending any of these events, give me a holler. I’d love to catch up.

Hope to see you on the road!!

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Ecosystem Mapping In Depth

Many of our customers at EntreWorks Consulting want help with mapping their innovation and entrepreneurship-related ecosystems, i.e., the set of regional actors and networks that support the start and growth of businesses.  For example, we’ll soon be releasing results from an Appalachian Regional Commission project on ecosystems in Appalachia.  Mapping ecosystems can be challenging.  There is no one best way to proceed, and sources of data can be difficult to access.  It gets easier if you have lots of funding, which is rarely the case.  (See these excellent World Bank studies for examples of in-depth and high-level, high cost mapping efforts).

If you’re interested in tips for ecosystem mapping, I can highly recommend a new and very detailed guide from the German Agency for International Cooperation.   The Guide for Mapping the Entrepreneurial Ecosystem does what the title promises, offering a very hands-on set of tips on how to understand your regional ecosystem and how to measure its capacities and performance.  As the Guide’s subtitle suggests, it will help you to observe, analyze, and visualize what’s happening with innovation and entrepreneurship in your community.

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Does Startup Support Work? New Evidence

I’ve blogged a bit in the past about how new research techniques, especially randomized controlled trials, are providing new insights into what works in innovation and entrepreneurship policy.  (The Innovation Growth Lab is a great resource to track recent trends.)  It’s actually getting tough to keep up with new research, as useful studies and reports seem to be coming out on a daily basis.  The latest example comes to us from Geoffrey Barrows in a report published by the French Association of Environmental and Resource Economists (FAERE)This study asks the basic question:  Do business accelerators and startup business competitions work?  In other words, do the world’s many business accelerators and business idea/plan competitions actually produce better business outcomes in terms of jobs, profitability, innovation and firm survival?  Barrows studied 460 different programs and competitions that took place in 113 countries, engaging more than 20,000 firms.  He finds that the competitions have a big impact.  Competition winners have a 64% higher rate of survival, and their employment levels exceed non-winners by 47%.  Finally, competition winners also win in the quest for capital, as the average winner typically raises an additional $260,000 in follow-on funding.   We should expect that accelerator graduates perform well–after all, that is our goal!  But, it’s still helpful to have new and strong evidence that these programs work.

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EntreWorks Insights, March 2018 Edition

The latest edition of EntreWorks Insights, our quarterly e-newsletter, is now available. This issue looks at interesting new legislative proposals under consideration in the US Congress.  A future issue will look at new ideas from the States.  You can view back issues and subscribe here.

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New Data on US Business Formation

The quality of official data on startups and entrepreneurs in the US is generally quite poor, especially when compared to what is captured in other developed economies.  Meanwhile, government funding for key programs like the decennial Census is declining.  But, it’s not all bad news as some new data sources are coming on line.  The latest is the US Census Bureau’s Business Formation Statistics dataset, which was just unveiled last month.  The BFS tracks when individuals apply for a new Employer Identification number, via the Internal Revenue Service’s SS-4 form.  The BFS, which tracks data at the state and county level, should give us an excellent picture that projects a location’s future entrepreneurial potential, i.e. are there lot of local folks starting new companies?

A related research paper assessing the BFS results offers some tantalizing ideas on how this data can be used.   It finds that regions with shale gas activity showed much higher EIN application numbers.  Similarly, and not surprisingly, EIN applications were also higher in places that have recovered most quickly from the Great Recession.  Finally, a related National Bureau of Economic Research paper finds that the number of new EIN applicants with potential to create new jobs still falls below levels found before 2008.

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