The Foundations of an Innovation Flywheel: How emerging startup ecosystems are building from scratch

Silicon Valley as an engine for innovation, wealth creation, and economic development is the envy of the world. For decades, cities, states, and other countries have been trying to replicate the success of Silicon Valley in their own backyard, hoping that the convening of private investment, government funding and resources, a robust talent pipeline, and smart startup-friendly policy can jumpstart the innovation flywheel to create a thriving startup ecosystem.

Once the flywheel is in motion, startups are able to launch, fundraise, exit either through acquisition or IPO, and then recycle talent and capital back into the local startup ecosystem. Success breeds success as startups grow and attract more talent to the area, more individuals become knowledgeable and experienced, investors come off the sidelines when they start to see returns, exited founders and employees become funders or founders, and the cycle continues.

But, as every emerging startup ecosystem can attest, it takes more than just the convergence of government resources, private funding, a talent pipeline and people building companies to generate enough momentum for a true, sustainable startup ecosystem. The innovation flywheel requires several dynamics that are much harder to quantify and even harder to legislate.

This report is based on a series of semi-structured qualitative interviews with founders, investors, innovation support organizations and ecosystem builders across emerging startup ecosystems. Interview transcripts were analyzed for recurring themes and compared against the historical development of Silicon Valley as well as battens observed in other innovation hubs. The resulting findings were organized into four dimensions—Connective Tissue, Ecosystem Alignment, Timing, and Center of Gravity—which emerged as the most consistent dynamics shaping ecosystem development.

Read the report here.