For most of the people, when they hear the word “startup”, an image of a clueless kid wearing New Balances and dreaming of becoming a millionaire overnight pops up in their head. Unless the startup becomes huge and very successful, attracts a lot of investment, no one really thinks about the benefits that startups may bring to our economy.
We are aiming to remove that swearword attribute from this poor word and remind the world that owning a startup or working for one, could not only be your dream come true but also very beneficial to the economy. In other words, why everyone should consider to encourage startup entrepreneurship.
The Global Entrepreneurship Monitor (GEM) is describing entrepreneurship and it’s importance in the perfect way: “Entrepreneurship is a uniquely powerful mechanism for economic and social development, generating incomes and jobs while enabling and enriching individuals and communities. Truly, an engine for change.”
Let’s look at the key reasons why we should encourage startup entrepreneurship:
1. Startups create jobs
You might be thinking, yes startups create jobs but other businesses do too, so what makes startups more special?
We can answer that in one quote and by looking at the US as an example. Vivek Wadhwa, a member of Harvard’s Labor and Worklife Program, states: “Without startups, there would be no net job growth in the US economy. From 1977 to 2005, existing companies were net job destroyers, losing 1 million net jobs per year. New businesses in their first year added an average of 3 million jobs annually.”
In the table above, provided by the Federal Reserve Bank of St. Louis, we can see that startups create more than double jobs when compared with everyone else.There are some great examples. The American economy managed to gain back all of the jobs that were lost during the economic downfall. How? thanks to the jobs created by new startups. It’s concluded that 95% of all the companies in the US are businesses with less than 50 employees, which makes them crucial to the economic strength of the country. It is a crazy amount, right? But that’s not the whole charm of startup entrepreneurship.
Startups revitalise areas that they are based in
In a 2017 report by the Progressive Policy Institute, it is shown that the private sector job growth is significantly higher where the startups are active. As a contrast, regions with fewer startup activities, experience less than half the job growth. In other words, startups have a direct impact on the cities that they make their homes.
Now you might be shaking your head and saying that, sure, startups provide jobs but they do not last. That is partially true. Every business is risky but startups tend to be more fragile. But look at how Alibaba impacted Hangzhou, Microsoft changed Redmond and Google transformed Mountain View, California. All these companies started small, but as they grew bigger. They also significantly transformed the cities where they were based.
Startups create job diversities
Startups don’t only improve employment patterns by creating new jobs, but they also create more diversity in jobs. How? By providing career opportunities to both, experienced and young professionals. So, thanks to startups, graduates and other talents have a chance to get more valuable and hands-on work experience. Startups simply are the ideal form for employing and activating the Y generation.
Wait, before you feel like dropping everything in order to find and help a promising but struggling startup. We have more reasons why everyone should encourage startup entrepreneurship. Let’s dive in!
2.Startups bring innovations
Product and service novelty is a very important characteristic of a lot of new entrepreneurship. Startups are the best form of implementing inventions and they are a great tool for commercializing technological and other novelties.
Yes yes, we know, the word innovation is as cursed as word startup. The word innovation has become almost meaningless due to its overuse. An image of a kid who is wearing trendy sneakers pops up to the head once again. But this time he or she is a marketeer. “Innovation” nowadays is more like a sales pitch, everything now is an innovative product, design, service and so on. But that is not explaining why we should encourage startup entrepreneurship. So it is enough of bullying the word innovation.
Let’s talk what is innovation and how it can be measured.
For that, we have to get back to the Global Entrepreneurship Monitor (GEM) newest report – (GEM 2019-2020 report). And it is mind-blowing, look the tables below:
This table is showing the proportion of adults starting a new business with products or services that are either new to their area, new to their country or new to the world:
While this graph is depicting the proportion of people that are starting a new business with technologies or procedures:
As you can see in the graphs above, tons of startups have brought either a product, technology or service which was a complete novelty in their region or country. And as a wide-known fact, quite a few startups boosted the economy with astonishing revolutionary technology and created new industries over time. As an example, Alibaba single-handedly transformed the trading world for SMEs in China, a country that was, at that time, infamous for its countless trade entry restrictions. Not sure if we need more examples – google it. This was quite punny, sorry about that.
So why startups have a tendency to be more innovative?
First, startups attract talented creative people who usually are highly motivated risk-takers. You know, the people with the all or nothing attitude. And, of course, startups high stakes motivate their employees to do whatever it takes to reach the goal.
Second, startups are free from a multilayered corporate bureaucracy, which makes them more agile and able to turn an idea into a product. With faster decision-making the product can be improved upon consumer demand.
While startups are more focused on cool technology and cutting-edge innovation, giants like Microsoft and Google, often acquire startups because of technology startups have developed. Then integrate it into their business, and therefore keep their competitive edge. Vivek Wadhwa says: “when technology’s top guns join these companies, they seem to make a smaller impact than those that don’t get hired.”. He is claiming that we should encourage startup entrepreneurship. If we want to see more innovation, startups must be equipped with seed funding.
3.Startups provide us with healthy competition
Startups can also contribute to economic dynamism by spurring innovation and introducing a healthy amount of competition.
The beauty and the curse of the startup’s flexibility are that new entrepreneurs can bring fresh ideas to the table, much needed to stir innovation and generate competition. As we have mentioned earlier, startups are more flexible, and as a result, they can try implementing all the craziest ideas. In this way, they can compete in-between themselves while trying to improve their product or service and become stronger than their competitors. That kind of competitive attitude brings innovation and constant strive for perfection.
Startups that are promoting research-innovation, high-tech, as well as knowledge-based services, are very closely affiliated with educational institutions. They connect institutions and contribute greatly to the research work at universities and, of course, research institutions. As a result, startups have transformed into a more of a fatherly figure that everyone wishes for. And they work as a role model – inspire students and researchers to execute their ideas via a startup. Which simply leads to students becoming more curious, hard-working as they want to become the one . Someone who can make their dream come true. You know, to become next Larry Page.
Startups bring different mindset to society
Besides bringing competition to businesses, educational institutions – startups are also transforming our society into a more proactive one. Startup entrepreneurship brings a new mindset, which is inspiring people to deepen their knowledge and creativeness. The population is starting to increasingly realize that they have a liability for their work and how their career developed. In other words, take action into their own hands and not just follow the path predicted by someone else.
As we just saw, startups not only bring jobs, diversity of jobs but also transform everything around them. Bring innovation, inspire people to be more proactive and creative. So just imagine what your startup could do for the economy of your own country? Think about it! So, let us all play our part in nourishing the entrepreneurship ecosystem wherever we live on this planet, and make our contribution to evolving towards a more prosperous society. Start your startup now!