There are 214 companies in the world that are considered unicorns, private companies that are valued at more than 1 billion dollars. Unicorns are not the only way to measure the maturity of the startup ecosystem but it does paint a telling picture. Only 75 of the unicorns are from emerging countries: Argentina (1); China (59); Colombia (1); India (9); Indonesia (2); Nigeria (1); and South Africa (2). If you take India and China out of the picture, there are only 7 unicorns from the developing world: 2 from South America, 3 from Africa, and 2 from Asia. I see a huge opportunity here to enhance the startup ecosystem. Startups are a catalyst for jobs and innovation and a necessary driver for economic growth. Many of them spawn into multimillion dollar companies.
To enhance the startup ecosystem, the private and public sectors need to work together. While big corporations can sometimes be slow to innovate and tend to avoid risk, they shouldn’t be counted out of the picture. Corporations have the know-how and the resources that can be beneficial for a startup to overcome the various hurdles in getting off the ground. For example, Microsoft Accelerator partners with startups by “providing unprecedented access to top Microsoft partners and customers, powerful business connections, and technical knowledge.” We need more corporations like this to help startups with mentoring, incubations, and building networks.
At the same time, governments need to create a favorable environment for entrepreneurs by simplifying regulations, providing tax incentives, and making it easier for doing business in the country. If you look at the World Bank’s Doing Business report, very few emerging economies are at the top (figure below). India is ranked 134 and China at 96. Although we have 68 unicorns from India and China, think of how difficult it must have been for them to grow the business. I can say firsthand that while working on the startup, Mealtango, in India, my partners and I faced numerous barriers at every stage.
Interestingly, while developing countries as a whole might not have the proper environment susceptible for opening a business, many cities in emerging countries are doing better. The Global Startup Ecosystem Report places both Shanghai and Bangalore in the top 20 of the Startup Ecosystem Ranking. We can hope that, over time, the policies in these cities can spread to other cities and the national government level.
Finally, government and industry, along with development partners, can be champions for improving human capital – the third piece of the pie for improving the startup ecosystem. Organizations like the World Bank and the Gates Foundation have been doing a lot of work in emerging markets to raise the bar on human potential through their various programs on education, health, and information and communication technology to name a few. This investment in human capital combined with public and private sector efforts noted above will make it easier for startups to be successful. In the coming years, we will see more countries in the emerging markets able to create innovative startups that bring benefits to their home economies. And I predict that in the coming years the distribution of successful startups will look a whole lot different.