Contrary to popular belief, startups are not only small teams striving to implement their idea as quickly as possible at a minimal cost. This is one type. Often, such startups (for example, in the mobile sector) begin with the process of React Native MVP development. The framework is chosen because of its efficiency and multi-platform coverage. While the MVP is the most suitable model for starting a business of this type.
However, there is another type of startups. They are created with a focus on large-scale development in the future. Recall companies such as Apple and Google. They were also startups once. Such startups do not strive for quick earnings with minimal effort. Instead, they are looking for large investments that are immediately committed to the development and expansion of the business. These startups, eventually, have a significant impact on the economies of countries.
But what about small businesses? In one way or another, they support the middle class and create jobs, although not so many. Statistics show that in 2019, startups created more than 3 million jobs in the U.S.
The startups’ impact on the economy is undeniable. Let’s discuss in more detail how this effect is manifested.
Development of new technologies
More resilient companies tend to invest in proven technologies and practices. Startups have a completely different attitude. Most often, startup owners seek to carve out a niche through the development of new technology or solution. This is because small enterprises are simply not able to compete with large players in the market.
Thus, startups have no choice but to make bold moves. Risking smaller resources, they contribute to the emergence of new technologies.
We have already mentioned Apple and Google, which are good examples in this context. Computer equipment had been produced before Steve Jobs and Steve Wozniak established their company. Search engines had existed before Sergey Brin and Larry Page came up with their brainchild. However, they were able to introduce new solutions that propelled not only the industry but the whole world forward.
The emergence of new jobs
Since the late 1970s startups have been creating jobs for Americans. At the same time, large enterprises tended to reduce their costs, automate every process possible, and, as a result, fire more people. For a rough comparison, let’s consider the following figures.
On average, large companies in the USA lay off about a million people every year, while startups and new enterprises create more than 3 million jobs. These are exactly the numbers given in the Kauffman Foundation report, published in July 2010. Still, there is no indication that the situation has changed dramatically over the next 10 years. Quite the contrary, recent technological advancements have significantly accelerated automation processes within large enterprises.
As a bottom line, we admit that startups directly affect the job market, creating new opportunities for work.
New segments in the markets
In addition to developing technology and creating jobs, startups often introduce seemingly insane ideas. If a startup succeeds in surviving, such an idea evolves into a new segment in the market (or even a new market). This pushes the economy forward and gives other players the opportunity to occupy a newly emerged niche.
A good example of such an influence caused by a new product would be the emergence of cultivated meat. The idea is to stop killing animals and synthesize meat from cells. In the future, this solution can both stop the massacre of animals and solve the problem of hunger worldwide. This issue was first raised in the early 2000s by Jason Matheny. In 2004, he founded a research institute, New Harvest. After almost 10 years, in 2013, Mark Post introduced the first working prototype of cultivated meat, which is completely made of cells.
Since then, the industry has gained an influx of new enthusiasts. Although the production of meat has not yet been commercialized, companies like Supermeat and Memphis Meats claim that in a couple of years they will be able to engage in large-scale production. Here’s how one good idea and one good startup can impact the global economy.
Startups excite the minds of young people and attract the most talented specialists. Look at what happened to Silicon Valley over the past 30 years. Startups like Google and Microsoft have managed to grow into the largest companies and change the territories where they are located.
The successful example of Silicon Valley has inspired other countries to create their own technology clusters — individual settlements or even cities — and invest in them.
Any economist will tell you that one of the basic rules that the government must follow in order for their country to grow is to support small businesses. The importance of this process is again appreciated in 2020, during the coronavirus pandemic. Although not all small businesses are startups, almost any startup is a small business.
Startups directly affect many economic factors, so they need the support of authorities, both at the legislative and at the local levels. Even though startups rarely make it to the Forbes and Fortune lists, and rarely get wide publicity in the press, their contribution to the state’s economy is undisputable.