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How to Create a Startup Ecosystem that Thrives

How to Create a Startup Ecosystem that Thrives

What challenges will cities face in establishing a startup ecosystem, and what is the most effective approach to overcome them?

Startup ecosystems can be challenging to develop, but many cities have successfully built their own startup communities. When we talk about smart cities, an effective startup ecosystem is the key success ingredient.

For the local startup community to succeed, cities must have startup talent and founders who actively build the startup ecosystem day by day. Cities also need investors willing to take risks on startups outside of startup hubs, who will mentor startup founders and other build startup ecosystems.

In many cities, startup entrepreneurs also migrate to other startup hotspots. It is critical for startup communities to retain their employees and founders for them to develop.

[Related: Innovation Starts With “I” in the Reinvention Revolution]

Startup ecosystems provide new opportunities for cities.

Startup ecosystems can be beneficial for cities as they allow startup technology to flow into the city and become a part of its culture. There is no better way for startup communities to grow than if startup founders, investors, and mentors work together to build a thriving startup ecosystem.

In cities, establishing vibrant startup ecosystems can assist city officials in "test fast fail fast." I'd advocate keeping an eye on Miami and the increasing startup environment. Mayor Carlos Suarez has been working hard since the start of the epidemic to change Miami's image, which was previously that of a tourist and entertainment technology hub.

To learn more, I spoke with Lukasz Skarka and Shaun Abrahamson about overcoming the challenges of establishing a thriving startup community in cities. Skarka is the head of CEE Investments, the number one "Most Active Investor in Energy" by PitchBook and PWC's "State of Climate Tech 2020" report. Abrahamson is the Managing Partner of Urban Us, a venture fund that invests in businesses changing cities to address climate change.

Here is my evaluation.

Connecting the dots.

Łukasz Skarka tells us that:

Cities hold extensive knowledge on the past and current issues that surround them but face significant problems leveraging this knowledge within the global startup world. On the other hand, the local administration's support is very limited when a startup starts its journey in a given city. This creates growth challenges for both parties.
This is why it's extremely important for officials to keep an outreach far beyond their local knowledge - looking for startups abroad, corporate partners, opportunities for their supported startups. There are more and more relevant platforms that support connecting all those leads to find a match, but it's still something that needs organic work and understanding from officials.

Understanding time constraints.

Good things take time. Expecting changes to happen overnight can lead to premature declarations of failure. According to Skarka:

Officials need to understand that it's a process that will take time, effort, capital and cannot be reached during a period calculated in single-digit years.

Getting proper support for changes.

Skarka says:

Promoting a hackathon, providing office space, easing the fiscal burden, increasing tax incentives for early-stage companies... Some of those issues can be handled on a local level, but some need state or nation-wide support, which can create gaps or time-lags in making this happen. It is critical to identify what is mutually dependent, analyze the complexity, and if possible how to align interest to maintain focus and take action.

Recruiting the right way.

Shaun Abrahamson says:

Recruit people, not companies.

[Related: How to Audit Your Company for Unconscious Bias]

Finding quality investors.

Abrahamson's advice:

There simply is no substitute for doing 100 early-stage startup deals no matter what other experience investors think they bring to the table.

Making connections with customers.

Abrahamson puts it this way:

More than investors, customers solve many problems. And cities usually are already in touch with many people who could be customers in sectors like real estate, hospitality, local government, logistics, etc.

Telling a better smart city story.

I felt that the narrative of the city should be included in how to tell it. City leaders prioritize human touch to attract talents, new entrepreneurs, angel investors, venture capital firms. I mean telling smart city stories along with success stories. To start, city administrators must reach out to the local community and beyond to create a startup-feeding mechanism; open data, pilot projects, and engaging residents are all required.

Making city administrations into tech-savvy, agile teams.

We see that the solutions to current problems — the pandemic, climate change's consequences, and people fleeing unstable regions — demand an agile and multi-disciplinary approach when considering cities' futures.

There is a pressing need for government agencies to create new regulations that would work in tandem with cutting-edge technology.

Procurement systems in city administrations need to change. Shaun Abrahamson suggests city leaders:

Find a way to work around your current procurement system. It favors large incumbent players because it's slow. Offering pilots to startups for small amounts of money doesn't help them because it leaves investors with questions about how much customers need the product...and this makes it very hard for startups to raise money. Changing procurement will increase exposure to the best startups, and those startups often present new opportunities to learn.

Another tip.

All around the world, city leaders are building platforms and initiatives that facilitate cities learning from each other. Abrahamson shares with me:

For smaller cities, teaming up with other cities is a great way to learn. In a group of cities, each can pick a specific area to develop expertise. For example, one might focus on an issue like MaaS, where another could focus on automating housing permits.

To create future cities and entrepreneurial culture, we must establish transparent collaborations, make data accessible to all, and discover innovative ways to interact with urban dwellers.

In the end, it is all about developing smart, resilient cities by integrating different startup solutions to address the most critical challenges. And building more resilient communities requires an integrated approach of city leaders, startup ecosystem players, and citizens at large.

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Arzu Tekir is the Founder and CEO of Urbanite Venture, a growth consulting firm helping urban tech companies transform cities. She is a business strategist working with the leaders of cities and organizations to create positive change. She helps entrepreneurs develop growth strategies and access funding. She has been featured in various media outlets including The Guardian, National Geographic Energy Challenge Blog, Jazeera Magazine, Bloomberg HT TV, and NTV-MSNBC. As a sought-after speaker, she gives talks and moderates discussions on smart and sustainable cities.

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