With the rise of technology and the internet, the emergence of new types of companies has had an impact on the blue chip companies of the old economy. Nowadays, startups are able to grow at a much faster pace than before. Think AirBnB, which startled the hotel industry within months, Uber which shook up the taxi industry and LinkedIn which has given the recruitment industry a run for its money.
According to a study in the 2015 Global Startup Ecosystem Report, there are 4 main reasons for the explosion of startups all over the world:
1 – Startups can now be built for thousands, rather than millions of Euros. Developing a new product nowadays is 10 times cheaper than in the past due to the free availability of coding knowledge, freelancers with specific plug & play tools and pay-as-you-go-services instead of the old model where you pay a high set fee in advance.
2 – The ability for venture capitalists to make smaller investments. Due to the fact that less money is needed to develop a new product / service, venture capitalists can make smaller high-risk investments into startups, meaning they have more money left to invest into other startups as well.
3 – Entrepreneurship is developing its own management science. The Lean Startup philosophy formally recognizes that startups are not shrunken down versions of large corporations, but in need of a much leaner organizational structure due to the rapidly evolving uncertain markets surrounding them. Entrepreneurs who follow the Lean Startup method understand that incorrect assumptions are no longer disasters, they are opportunities to pivot. Unfinished products shouldn’t be hidden behind closed doors, they’re called public betas. Development doesn’t proceed from a binder full of requirements, but from a flexible list of incremental improvements that are re-prioritized every few weeks based on customer feedback.
4 – Speed of the consumer adoption of new technologies. The ease of having global access to users and customers all around world and the increasing speed of technological adoption by consumers and businesses has enabled startups to grow at a significantly faster rate.
Compass recently renewed its report on the world’s best startup ecosystems, producing a ranking of 20 cities worldwide, based on their performance on 5 major components: Performance, Funding, Talent, Market Reach, and Startup Experience. Our honorable mention here is that Amsterdam ranks 18th, making the top 20 for the first time. Note that Amsterdam also made the top 20 (ranking 17th) of top ranking startup cities most suitable for female entrepreneurs.