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What Is Startup Ecosystem?

A startup ecosystem is formed by people, startups in their various stages and various types of organizations in a location (physical or virtual), interacting as a system to create and scale new startup companies. These organizations can be further divided into categories such as universities, funding organizations, support organizations (like incubators, accelerators, co-working spaces etc.), research organizations, service provider organizations
(like legal, financial services etc.) and large corporations. Local Governments and Government organizations such as Commerce / Industry / Trade departments also play an important role in startup ecosystem. Different organizations typically focus on specific parts of the ecosystem function and startups at their specific development stage(s).

Composition of the startup ecosystem

  • Ideas, inventions and research i.e. Intellectual property rights (IPR)
  • Entrepreneurship Education.
  • Startups at various stages.
  • Entrepreneurs.
  • Start up team members.
  • Angel investors.
  • Startup mentors.
  • Startup advisors.
  • Other business-oriented people.
  • People from other organizations with start-up activities.
  • Startup events.

External and internal factors

Startup ecosystems are controlled by both external and internal factors. External factors, such as financial climate, big market disruptions and significant transitions, control the overall structure of an ecosystem and the way things work within it. Start-up ecosystems are dynamic entities which progress from formation stages to periodic disturbances (like the financial bubbles) and then to recovering processes.

Several researchers have created lists of essential internal attributes for startup ecosystems. Spigel suggests that ecosystems require cultural attributes (a culture of entrepreneurship and histories of successful entrepreneurship), social attributes that are accessed through social ties (worker talent, investment capital, social networks, and entrepreneurial mentors) and material attributes grounded in a specific places (government policies, universities, support services, physical infrastructure, and open local markets). Stam distinguishes between framework conditions of ecosystems (formal institutions, culture, physical infrastructure, and market demand) with systematic conditions of networks, leadership, finance, talent, knowledge, and support services.

Startup ecosystems in similar environments but located in different parts of the world can end up doing things differently simply because they have a different entrepreneurial culture and resource pool. The introduction of non-native peoples’ knowledge and skills can also cause substantial shifts in the ecosystem’s functions.

Internal factors act as feedback loops inside any particular startup ecosystem. They not only control ecosystem processes, but are also controlled by them. While some of the resource inputs are generally controlled by external processes like financial climate and market disruptions, the availability of resources within the ecosystem are controlled by every organization’s ability to contribute towards the ecosystem. Although people exist and operate within ecosystems, their cumulative effects are large enough to influence external factors like financial climate.

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