Startups and small businesses are key drivers of economic growth and innovation on islands. With the right combination of people, organizations, governments and capital, the development of innovative technologies and solutions to the world’s problems can be accelerated. In honor of start-up ecosystems being featured as one of the six unique content tracks at this year’s Island Finance Forum, this article will highlight five ways start-up ecosystems can innovate economic growth and sustainable development on islands!
What are Start-up Ecosystems?
Before we delve into the many benefits of start-up ecosystems, we must first understand what a start-up ecosystem is and what are its key components for success.
Start-up ecosystems are made up of groups of people, startup companies, and related organizations (physical or virtual) from a variety of different sectors that work as a system to create and scale new startups. For example, universities can be hubs for talent-building and connecting entrepreneurs with experts in subject matters outside their expertise, while government entities can support the ecosystem by implementing policies which help destinations become more attractive for start-up ecosystems to form and thrive. Such support can include easing of visa and entry requirements for remote workers, investing in broadband infrastructures, and ensuring availability of accommodation options.
Source: Startup Commons
Start-up Ecosystems and Islands: Five ways they facilitate economic growth and innovation
Island economies are particularly vulnerable to external economic shocks in comparison to their mainland counterparts. This is because many island economies, especially those in Small Island Developing States (SIDS), rely on a single or handful of industries and nature-based livelihoods as principal sources of revenue and employment for the local population. With the paralyzing effects of the global pandemic on tourism and the enduring impacts of climate change on resources, ecosystems, and ways of life, islands must find alternative sources to diversify their economies so that they can grow sustainably and develop resilience to future economic challenges. Start-up ecosystems present an alternative to accomplish this, with many island communities already taking advantage of ecosystem benefits.
1. Generates Employment Opportunities
One of the most commonly cited benefits of start-up ecosystems is its potential to generate jobs. Startups create as many as 3 million jobs per year. In fact, a thriving start-up ecosystem can actually create a variety of jobs indirectly – including coworking spaces, investment firms, and general service providers who all cater and support the startups and their employees. The lean and agile nature of startups makes them better poised to navigate rapidly changing tides in the economy compared to their larger and more established counterparts. This is especially important for islands whose economies are already more fragile due to their size, dependency on tourism and nature-based livelihoods, and limited export capabilities.
2. Attracts a Talent Pool
Start-up ecosystems not only have the capacity to create jobs, but they can attract a variety of highly skilled workers from abroad and retain local talent – meaning more jobs and money being invested back into the local economy. Islands have a unique advantage when it comes to developing an attractive start-up ecosystem – that is, they generally have a landscape and lifestyle that is sought after by millions of tourists, digital nomads, and expats. With the number of remote workers and companies continuing to grow, islands can leverage their destination’s assets to attract aspiring entrepreneurs and workers looking to combine a relaxed and waterside lifestyle with a culture of innovation.
Reversal of the Brain Drain in islands
Start-up ecosystems have the potential to reverse the phenomenon of “Brain Drain” – the significant increase in migration of highly skilled and higher educated people in developing countries to more developed countries. The brain drain is a pressing issue in many islands, with researchers finding that on average, 50% of the high-skilled labor force in SIDS has left their country, and the brain drain exceeds 75% in a few cases. By developing and investing in start-up ecosystems, islands can potentially retain highly skilled workers and local talent – helping build a more sustainable and diversified economy.
3. Creates Investment and Networking Opportunities
Start-up ecosystems enable like-minded people to easily interact and exchange ideas in the areas of networking, creativity, innovation, mentoring and investing. This symbiotic relationship between sectors can potentially attract investors, as there is already an established community of startups for them to flock to. The Canary Islands is an excellent example of an island community with thriving start-up ecosystems – thanks to its impressive talent pool, the support from local, regional, and national governments for funding and community development, and deep network of stakeholders in the public and private sector.
Canary Islands, Source: Startup Blink
4. Fosters Innovation
Startups embrace failure and risk taking, which is a core requirement for innovation. This, combined with an environment that encourages regular collaboration between sectors, inspires new innovations and allows startups to access the relevant resources and knowledge to bring their idea into fruition. This innovation can help tackle some of the most pressing challenges on islands, such as the increasing threats of the climate crisis. For instance, the AIS Blue Startup Hub, is a thriving digital start-up ecosystem where businesses and marine related industries can collaborate and gain new investment opportunities to support sustainable growth of the blue economy.
5. Promotes Sustainable Development
As an engine for innovation, start-up ecosystems can help achieve the Sustainable Development Goals (SDGs). When real partnerships are formed by people and organizations with aligned visions but different methods of executing them, networks are created that are resourceful, inclusive, and better equipped to solve some of society’s most complex challenges. Start-up ecosystems can help achieve several, if not every, SDG in one way or another with the advancement and implementation of innovative technologies and solutions in virtually all sectors of society. These include increasing access to finance for households and small businesses, boosting microeconomic and climate resilience with digital technologies, and fostering global partnerships.
Source: Market Works Global
Start-up ecosystems can benefit islands by diversifying their economies through job creation, attracting a global talent pool, increased investment opportunities, and driving innovation to solve the most critical challenges. The Island Finance Forum facilitated discussions among industry experts and businesses to share experiences and best practices in developing start-up ecosystems and how they can benefit island communities worldwide.
Thaiz Maciel is the Marketing Director at Island Innovation and works towards promoting and facilitating sustainable development in islands around the world. For over ten years, she has been helping entrepreneurs and associations to pursue their dreams through digital strategies and humanized communications. She loves collaborating with people from many nationalities and learning every day from those who are leading the transition to a more sustainable future. She believes in the power of communication and connections to build a better world. When she has some free time, she likes surfing small waves and painting with watercolors.