Does Location Really Matter for Startups?

The importance of starting locally.

One of the main questions and top concerns for startup founders when embarking on their entrepreneurial journey is whether or not they are in a startup-friendly country.

Followed by “How important is it to start the entrepreneurial journey in their local environment?” and “Does geographical location really matter when starting your startup journey?”

Having said that, these questions and concerns have lost their weight mainly due to the rise of remote working and more counties looking overseas to attract talent and startups.

In all fairness, the importance or not of starting local is a more complex issue, hard evidence has demonstrated that founders starting their entrepreneurial journey in their home country are more likely to be successful.

There is also hard evidence that those founders who experienced friction in their home country and as a consequence started their journey abroad have in some degree experienced great success or brought back to their home country valuable insights that helped them gain competitive advantage.

The Role of Geographic Location in Startup Success

What we can surely see from both cases is that the success of a startup can be driven by a variety of factors and location is certainly one of them.

With this in mind, let’s break down the main reasons why location can play a role in being that sort of trampoline to set startups to success.

Location as DNA – Founders home location can almost act as an ID for the startup towards customers and investors. It can also say a lot about the founder’s solution and add additional substance to the value proposition.

Startup Growth Ecosystem – Being in a location that has experienced the benefits of successful startup, easily creates resources, initiatives and opportunities that help startups grow. Take the example of an ecosystem that offers business opportunities within local businesses and government bodies.

Nourishing Business Environment –  Founders that find themselves in a business environment that can positively influence their startup journey.

Take the example of startups in a legally and regulatory entrepreneur-friendly environment. These startups have a massive head start in relation to those startups in a bureaucratically and highly regulated business environment.

Main reasons to start abroad

We can pick up from startups in a bureaucratically and highly legally regulated business environment to address the main reason founders see themselves forced to start their startup journey abroad.

With governments starting to realise the importance and the need to attract foreign talent, there have been lots of options such as  e-residency and digital nomad visa for startup founders to easily enter, integrate and foreign startup jurisdictions.

Entrepreneurship is in its all time high and the startup ecosystem is becoming ever more favourable with governments are sending a bold and important signal that foreign talents are more than welcome in their countries.

Geopolitics has always played a key role in a country’s economy and with small businesses and startups being the backbone of a country’s economy, startups are beginning to pay even more attention to important unexpected global events and these events are in many cases a use case for startups.

The Role of Governments in fostering a startup friendly ecosystem

Government are increasing investment in key industries and also becoming an active stakeholder for new businesses, and this new interest is vital especially in times where the private sector is becoming risk averse, this government led initiatives can make or break a startup.

The manner in which governments are fostering a startup friendly ecosystem is by firstly being more supportive not only monetarily but also by creating a nurturing and protective environment for startups to start and grow their businesses.

This can be done by drafting regulations that incentivises and promotes innovation and entrepreneurship. This usually comes in the shape of a regulatory sandbox for startups.

Streamlining the process for obtaining regulatory approval will go a long way in fostering a startup friendly ecosystem. In other words, the government should reduce the obstacles in getting this approval. The process should be transparent, streamlined and efficient to enable startups to quickly bring their solutions to market.

The centralisation of information and key resources allows startups to spend less time in bureaucratic endeavours and use that time to invest on their solutions.

Last but definitely not least governments should work hand in hand with startups in the creation or improvements of regulations with the view of enabling innovation.

Build Local Think Global.

Rankings state that the top 10 most startup-friendly countries in the world are: United States, United Kingdom, Israel, Canada, Sweden, Singapore, Germany, France, Australia and The Netherlands.

The top 5 countries (United States, United Kingdom, Israel, Canada, Sweden) have kept a strong hold in their positions with the remainder alternating in their positions.

If we are looking by regions then Europe is leading the way, followed by North America, Asia Pacific, Latin America & Caribbean and Middle East and Africa coming last.

Don’t be deceived by the position of Africa and the Middle East. The growth potential is huge and attracting more and more founders and startups to their ecosystems.

In conclusion, location does matter at some level to the success of a startup however, location should not be where founders’ concerns should lay.

Founders should focus on building locally with a global mindset.