The global startup phenomenon: Short-lived trend or here to stay?

KLAUS JURGENS
Published

The glamorous world of startup entrepreneurs promoting their trendy business models to fashionable potential investors live on prime time television is for sure part of the pitching reality across the globe. Yet there are many more realities out there so to speak: anyone who ever tried to arrange for an overdraft – not even mentioning the words serious loan – from her or his high street bank branch because they want to set up shop would in all likelihood tell us a completely different story. But the sector is booming both in Turkey and elsewhere and merits much closer attention.

Planning for a company formation is of course nothing new – every business as we know it today had someone somewhere who one day in the past and perhaps generations ago decided to jump, to dare it, to risk it. Needless to say that someone hailing from a wealthy family would much more easily build – or inherit – a factory or other type of company.

Today, there are many new and encouraging developments: Would-be entrepreneurs are much younger, including many women, and it has become possible to market ones ideas to potential investors instead of the above mentioned, mostly unsuccessful, "let's talk with my high street bank manager" approach. This is even more relevant if you don't hail from a well-to-do family background, which we would assume holds true for the vast majority of applicants. One could perhaps go so far as to say that becoming an entrepreneur is a democratic right; we still need seed financing and startup capital but at least there are ways for us to get hold of it should all go well.

Besides, more and more startups plan to enter the services sector, which is of course a logical development in all knowledge-based economies including in Turkey; few would go into large-scale manufacturing as this of course requires tens of millions in venture capital per business and let us be honest, most things we can manufacture are already manufactured someplace else. But things can still be innovated, new product ideas may eventually hit the shelves; it all depends on what you plan to make and in what numbers. Later on we will hear about a few such startups.

The fact is, as the startup market booms more and more capital becomes available yet as the saying goes that there is no such thing as a free lunch – if often comes at a hefty price. Venture capital by definition is in for the short haul and seldom comparable to a 25-year mortgage; venture capital wants to see a fast return on investments, naturally with a profit. But there is more at stake – in particular when startups are run by very young people investors often want to become part of the day-to-day management of that new company, or at least nominate someone on their behalf who should make certain that funds invested are not lost due to inexperience in how to manage a business. Not always, but ever more often Thus said the exit strategy for a venture capitalist is more or less decided upon before the first cent flows. So in a nutshell, going into business at a rather young age has become a viable alternative to working for someone else.

As startup pitching events by definition attract people who either need funding or are able to provide for funding there is a commercial dimension attached. Hence I prefer to refrain from writing about individual business models and stay in the wider picture. In case you wish to read more about individual companies or the hosts as such please consult the webpages of Startup Istanbul and Startup Turkey.

This wider picture reflects trends both in Turkey and on a global scale. Key topic for the sixth edition of Startup Istanbul which just ended on Oct. 22, 2018, attracting not just the 1,000 entrepreneurs and investors but over 2,000 further guests, was to look out for startups (or existing companies looking for extra funds to expand their business). One would refer to this as "the new economy" and investors were looking for so-called "game changers."

Figures announced before the event were impressive indeed: over 94,000 applications from 140 countries. Eventually these numbers were of course reduced to 500 startups being invited to attend originating from 80 countries. A matching 500 potential investors had been invited, too. Finally 100 out of the 500 total business models were supposed to be presented as the most promising ones.The four winners who emerged victorious are a new chat side for teenagers who are ready to meet online based on cultural awareness and cultural globalization, education, inclusion and safety; there was affordable technology for farmers to handle crops problems; then there was the project engaged in making transparent solar windows and last not least, a device which pumps blood like a normal pacemaker yet without the need for an open chest surgery. The winners come from Asia and the Middle East and Europe, quite a global spread.

What amazed me first when hearing about who won was that yes indeed, all winners (and many of their fellow contestants), rely on technology to get their message or product off the ground. You use existing technology to merge it with your new approach but it is nevertheless based on technology. Second, it shows that startups are no longer a phenomenon visible in the few leading market economies such as North America but in all four corners of the world. Third, it seems that many startup entrepreneurs want to do good for society and not only make a quick dollar. And finally, all will use the internet for the promotion of whatever they want to sell. This is of course by definition true for the internet chat forum, perhaps aiming at one day replacing the likes of Facebook, but valid for all other winners, too. The way to learn about new things, and the way how we obtain them; and probably even the way how we use many aspects of them (think the farmer's project) is based on a wireless or fixed cable internet connection.

What's next in the world of startups?

To sum up, www.entrepreneur.com lists trends in the world of startups and tells us that the highest number of startups can currently be found in the United States, India, Canada, Japan and then in Spain. Find, buy, organize – these are the related keywords when it comes to what those successful entrepreneurs actually offer.

Another helpful website, www.startupranking.com, allows us to search deeper and find individual country data by numbers; for example the site lists over 45,000 startups for the United States and just over 4,800 for the United Kingdom.

Coming back to the television pitching show comment made in my introductory lines these programs although they show us only one form of startup reality nevertheless help to "mainstream" the startup phenomenon and for sure help to attract more investors as well as more people who would risk it. As long as young people who are about to go in business realize that there is this free lunch we hinted at above and that running a successful business even if we have obtained financing is anything but 35 hours week and that failure happens as well as success, it is a global trend which is here to stay and most definitely very aspiring, inspiring and welcome indeed.

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