Ecosystem Support Organizations Portfolio Management

Are We Prepared for the Future?
Stephan Kuester
on November 22, 2023

Tech ecosystems have shown sustained growth at a speed faster than in any traditional industry sector. With tech ecosystems maturing all over the globe and with many more cities and regions developing highly functional tech entrepreneur communities, support requirements are changing at pace. As such, it is imperative for ecosystem leaders and policymakers to adapt their development strategies and the support mechanisms that they make available to budding entrepreneurs accordingly. Ecosystem Support Organizations (ESOs) have made great contributions to ecosystem development; however, considering the pace of change, it is critical to ask whether an existing ESO portfolio reflects entrepreneurs’ support needs.

Largely Focused on Early-Stage Support

Research conducted as part of Startup Genome's ecosystem assessment services has shown that current ESO programs are focused primarily on startups in the earliest stages — a staggering 95% of all public funding spending on ESOs is aimed at pre-seed and seed-stage support. However, with many ecosystems now showing significant growth globally, it is essential to understand development trajectory and the respective implications for founder support needs.

Only very few ecosystems provide the support needed for entrepreneurs to navigate critical growth and global expansion phases. These ecosystems reap the benefits of having targeted, globally-oriented ESO programs that propel their local startups into global scaleups, while other ecosystems fall behind. Our research shows an increasingly strong differentiation between effective and less effective ESOs, particularly regarding acceleration programs. Here we increasingly see that specialized programs that are focused on specific industrial sub-sectors such as Fintech, Advanced Manufacturing & Robotics, or Life Sciences create significantly better outcomes than more generic acceleration and mentorship support programs commonly found in less-mature ecosystems.

It is essential to identify key resource and success factor gaps in order to address them. Ecosystem leaders need to clearly understand what support systems exist and what specific resource gaps remain, be they in funding, access to talent, or a lack of collaboration and Local Connectedness. ESO portfolios need to address these gaps, and planning needs to be informed by a deep, data-driven assessment of the existing entrepreneurial ecosystem.

Adapting to the Needs of Deep Tech

Deep Tech has become the major driver of ecosystem growth, generating more funding deals and higher exit deal value than non-Deep Tech over the last five years according to Startup Genome research. Founders working in this area also have significantly different requirements from previous generations. Support programs in these new sectors require higher levels of technical depth and expertise, and development and investment cycles tend to be significantly longer. It is crucial that leaders appreciate the opportunities in Deep Tech and adjust support programs accordingly, in terms of both programmatic design as well as recognition of longer-term funding requirements.

With the rise of Deep Tech, we also see specialist ESO programs demonstrating higher participant attraction, satisfaction, and outcomes. This includes specialist programs aimed at individual sectors such as Agriculture or Bioscience helping to build bridges and effective collaboration between university researchers and a dynamic entrepreneurship community. Startup community leaders need to provide specializations from incubation to later-stage scaling to more effectively support the complex technical, regulatory, and business model-related requirements of these new ventures.

Communitech, based in Ontario, Canada, is an example of an ESO that tailors support to the unique strengths and roadblocks of local startups, namely its relatively small domestic market, which limits access to customers and talent. To address these challenges, Communitech launched the Future of X program to help startups acquire national and international corporate customers. Additionally, the Communitech Outposts scheme allows Canadian startups to quickly hire international talent without the typical administrative and legal hurdles. Communitech also recognizes the overall ecosystem benefits of growing local startups into billion-dollar scaleups, and in 2022 inaugurated the True North Fund to support innovative Canadian startups that have the highest probability of reaching $1 billion in revenue.

Similarly, DutchBaseCamp helps high potential regional startups break into international markets through a 12-week “Globaliser” accelerator. Startups based in the Netherlands often quickly run into the limits of gaining domestic customers and must expand overseas to remain viable. Participants in the accelerator compare several potential markets and validate their strategies with help from mentors experienced in overseas sales. The program offers several different sessions based on industry, including the Agtech stream, which has launched 35 companies. Success stories include In Ovo and foamplant, which have raised substantial funding rounds and received strong valuations.

Creating New ESO Funding Models

In today's economic climate, financial sustainability is critical for ESO programs and the overall program portfolio. Slower economies and reduced tax revenues put pressure on public funding. Furthermore, political leadership and budgets are subject to periodic change, resulting in disruption to ESO funding and performance. Traditional sources of program income, particularly those related to traditional real estate models, have become less attractive since the pandemic. ESOs need to be prepared to pivot accordingly and to develop different and more diversified income streams.

Therefore, rather than launching more broad-based ESOs that primarily help early-stage founders regardless of subsector, stakeholders should instead assess the particular strengths and challenges of their ecosystem to determine how their ESOs can best maximize opportunities.

In our opinion, it is a critical task for ecosystem leaders and policymakers involved in ecosystem development to review and to develop ESO portfolios regularly, to track individual program performance, and to drive ESO strategy and change management. Doing so will ensure that we are prepared for the future and can continue to support the ecosystem and our entrepreneurs as they continue to grow and to evolve.

A version of this article was published in the Global Startup Ecosystem Report 2023. Read the report to learn more.

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