Software Startup Ecosystems Maturity Model - Technical Report
Software Startup Ecosystems Maturity Model - Technical Report
Software Startup Ecosystems Maturity Model - Technical Report
Technical Report
Daniel Cukier1 , Fabio Kon1 , and Norris Krueger2
1
University of S
ao Paulo - Department of Computer Science, S
ao Paulo, SP, Brazil
2
Entrepreneurship Northwest, Boise, ID, USA
Introduction
In the last two decades, we observed the rising and maturation of many software
startup ecosystems around the world. Society evolves driven by the technological
revolution, started with the broader access to the Internet and the popularization
of mobile devices, and technologies evolve driven by societys progress, in a coembedded evolution phenomena. The Global Entrepreneurship Monitor shows
that human capital and social capital co-evolve [31, 34]. Given the existence of
hundreds of technological clusters in different countries, it is difficult to identify what is the level of development of each ecosystem. This paper proposes a
methodology to measure each Ecosystems level of maturity with respect to multiple factors. By determining the maturity level for each ecosystem, it is possible
not only to compare different realities, but mainly propose practical actions that
can lead to real improvements in the existing ecosystems.
As our previous research has identified [23, 24], software startup ecosystems
are a complex social structure where entrepreneurs and their tech ventures are
the main actors. Some of these high tech ventures will evolve to high-growth
firms, which make a disproportionate impact to economic growth [28]. By identifying opportunities in the market, an entrepreneur creates a startup. Startups
face multiple challenges to discover its market fit [16] and be successful. For that,
the entrepreneur gets support from family, friends, and other personal connections, who are part of a society and culture that influence the entrepreneurs behavior. Demographics characteristics such as language, race, religion, and gender
influence the culture and creates opportunities and barriers to the entrepreneur.
The geopolitical status also influences the culture and creates opportunities and
barriers for the startup. Universities and research centers provide knowledge in
technologies that enable the startup, by preparing the entrepreneur and providing networking possibilities. Universities and research centers also guide entrepreneurs on the technology transfer process [5]. Successful, experienced entrepreneurs serve as mentors to novices. Universities and established companies run incubators and accelerators that train and instrument the startup with
methodologies such as agile methods [1], lean startup [32], customer development
[7], and disciplined entrepreneurship [3]. Eventually, established companies buy,
compete, or collaborate with the startup. Private funding bodies like angels and
venture capitalists mentor and invest on startups, which can also get financial
resources from governmental programs through R&D funding agencies or tax
incentives. The existing legal frame (labor laws, tax laws, IP, patents, and its
associated bureaucracy) influences costs and frames the startup business model.
Daniel Isenberg argues, Theres no exact formula for creating an entrepreneurial economy; there are only practical, if imperfect, road maps. Instead
of trying to imitate successful ecosystems, each region should identify its own
qualities and develop them [22]. He also proposes a conceptual model for entrepreneurship ecosystems. The model maps different agents in the ecosystem
and proposes that these agents must work together. The entrepreneurship ecosystem can be viewed as a new paradigm for economic policies [21]. Isenbergs model
is based on the OECD indicators of entrepreneurial determinants that proposes
indicators for measuring the ecosystem performance in 6 areas: regulatory framework, market conditions, access to finance, creation and diffusion of knowledge,
entrepreneurial capabilities, and entrepreneurship culture. A limitation of this
model is that it misses the dynamics and the interconnectivity aspects of ecosystems.
Related Work
Methodology
framework [29] of the software startup scene that may help in analyzing the current status of ecosystems as well as finding opportunities for their improvement.
A second qualitative technique that complements the first was based on a
systematic workshop / focus group that we executed in Sao Paulo [11]. Figure 1
depicts the resulting conceptual framework. In a first look, the figure may seem
too complex and difficult to digest. So, we suggest that one should examine
this figure in the same way a traveler looks at a map, navigating through it,
without the obligation to understand every small detail at the first time. It may
take some time to understand the whole topology. Nevertheless, it shows clearly
that the elements that play a role in a startup ecosystem are numerous and the
relationships among them are various.
The conceptual framework contains core elements that relate with each other.
We can analyze the level of development of each core element, as well as the quality of the relationship between them to measure some degree of maturity in each
aspect. For example, there is the funding bodies core element. The development
level of the funding structure inside the ecosystem is a measurement of maturity.
The presence of technical talent, provided by high quality educational institutions, or access to educational resources are other examples of factors to measure
the ecosystem maturity. Thus, we propose, for each core element, a scale to evaluate its state. The scale contains three levels of development: L1, L2, and L3.
We then propose a metric to classify ecosystems for each core element maturity,
described in Table 1. This table was generated after a series of iterations with
specialists and confirmation of what they considered the right measurement of
L1, L2 and L3 in each aspect.
Exit strategies - Entrepreneurs and investments are considered successful
when one of these things happen: (a) profitable growth to global market, (b)
acquisition by a big company, (c) merge with other company, or (d) IPO.
Specially for investors, the existence of exit options in the local ecosystem
is an attractive factor. While mature ecosystems present all three strategies,
there is a lack of exit options in new ecosystems. Zero option is considered
low, one option is medium and two or more options is high. Related framework elements: startup, funding bodies, established companies.
Global market - Percentage of startups that targeted global market. A
startup is considered to target the global market if it is acting in markets
outside its country, with existing customers or at least an official representation office. Related framework element: market.
Military influence on technologies Related framework element: research
center.
Entrepreneurship in universities - Percentage of alumni that founded a
startup within 5 years of graduation. Related framework elements: universities and research centers, education.
Number of startups - Quantity of Startups founded by year according
to a trusted database. Related framework elements: startup, market, entrepreneur.
influences
Geopolitical
status
influenc
es
imitates
Media
support
Events
Society
Language
ies
tunit
ppor
enable
rs
nto
e
m
creates
Public
invests
Funding bodies
Private
expects
ROI
Startup
instruments
Methodologies
provides
knowledge
in
Education
Technologies
mentors
prepares / networking
Entrepreneur
influences
the
behavior
of
Culture
influences
creates
opportunities
and
barriers
o
and
raints
const
Demographics
National
origin
Race,
religion,
gender
Family
is
part
of
s
rate
h
wit
runs
Established
Company
promotes
Legal frame
IP
Patents
Tax
Laws
Bureaucracy
Labor Laws
Market
underlying
platform
or
same
level
influences
costs
frames
business
models
provides opportunities
abo
coll
ys
bu
ith
Training
on
requirements
and
constraints
m
co
w
tes
pe
runs
Incubator / Accelerator
University
/
Research
Center
Tech
Parks
spin-off
L1
L2
L3
Exit strategies
Global market
Military influence on technologies
Entrepreneurship in universities
Number of startups
Access to funding in USD / year
Access to funding in # of deals / year
Mentoring quality
Bureaucracy
Tax burden
Incubators / tech parks
Accelerators quality
High-tech companies presence
Established companies influence
Human capital quality
Culture values for entrepreneurship
Technology transfer processes
Methodologies knowledge
Specialized media players
Ecosystem data and research
Ecosystem generations
0
< 10%
< 10%
< 2%
< 500k
200M
200
< 10%
> 40%
> 50%
2
< 10%
< 10
< 20
> 20th
< 0.5
< 4.0
< 20%
<3
not available
0
1
10 50%
10 50%
2 10%
500 3k
200M-1B
200-1000
10-%50%
10 40%
30 50%
2 10
10 50% success
10 50
20 80
15 20th
0.5 0.75
4.0 5.0 > 5.0 ?
20 60%
3-5
partially available
1
>= 2
> 50%
>= 50%
> 10%
> 3k
> 1B
1000
> 50%
< 10%
< 30%
> 10
> 50% success
> 50
> 80
< 15th
> 0.75
> 60%
>5
fully available
2
Results
Some factors in the ecosystem comparison table are crucial to be considered when
an ecosystem has reached a certain level of maturity. Not achieving a specific
3
This was a factor we found difficult to measure, since there is no data about methodology adoption in ecosystems. Another proposal for classifying this would be the
amount of local conferences about Agile, Lean Startup or other methodologies.
grade in any of these factors keeps the ecosystem on a lower level of maturity.
Thus, we divided the factors in two categories: essential and summing. The
summing factors are important to upgrade the ecosystem to the next level.
Our proposal of maturity model is divided into four levels as described below:
Nascent (M1): usually when the ecosystem is already recognized as a
startup hub, with some already existing startups, a few investment deals
and maybe government initiatives to stimulate or accelerate the ecosystem
development, but no great output in terms of jobs generation or worldwide
penetration.
Evolving (M2): ecosystems with a few successful companies, some regional
impact, job generation and small local economic impact. To be in this level,
the ecosystem must have all essential factors classified at least at L2, and
30% of summing factors also on L2.
Mature (M3): ecosystems with hundreds of startups, where there is a considerable amount of investing deals, existing successful startups with worldwide impact, a first generation of successful entrepreneurs who started to
help the ecosystem to grow and be self-sustainable. To be in this level, the
ecosystem must have all essential factors classified at least at L2, 50% of
summing factors also on L2, and at least 30% of all factors on L3.
Self-sustainable (M4): ecosystems with thousand of startups and financing deals, at least a 2nd generation of entrepreneur mentors, specially angel
investors, a strong network of successful entrepreneurs compromised with the
long term maintenance of the ecosystem, an inclusive environment with many
startups events and presence of high quality technical talent (as proposed
in the Boulder Thesis by Brad Feld [13]). To be in this level, the ecosystem
must have all essential factors classified as L3, and 80% of summing factors
also on L3.
After generating the classification table for each factor, we filled the table
with data about the ecosystems we analyzed, also using the help of two specialists
in each ecosystem. The resulting Table 2 shows data collected from both the Tel
Aviv and S
ao Paulo Ecosystems.
As a secondary metric, we can use the ecosystem progress within a certain
level to understand how far it is from being upgraded to the next level. For
example, Tel Aviv has all essential factors in L3 and 54% of the summing factors
in L3, which suggests the ecosystem is almost reaching the M4 maturity level. On
the other hand, S
ao Paulo has no essential or summing factor on L3, suggesting
that the ecosystem just entered the M2 level and needs more effort to reach the
next level.
This paper proposes a novel maturity model for software startup ecosystems
based on an extensive literature study as well as a multiple case study of two
existing ecosystems. A conceptual framework of software startup ecosystems was
Tel Aviv
S
ao Paulo
L3
L3
L3
L2
L3
L3
L3
L2
L2
L3
L3
L3
L3
L3
L3
L3
L2
L2
L3
L3
L3 (9)
L2 (5), L3 (6)
Mature (M3)
L2
L2
L1
L1
L2
L2
L1
L1
L1
L1
L1
L2
L2
L2
L2
L1
L2
L2
L2
L2
L2 (9)
L1 (8), L2 (3)
Evolving (M2)
created from these studies and the maturity model was validated with specialists
from these ecosystems. The findings show that Tel Aviv is considered a Mature
(M3) ecosystem, while S
ao Paulo is Evolving (M2).
The maturity model can be used to identify gaps in each ecosystem, showing a
direction on which the local community should concentrate, promoting initiatives
to take the ecosystem to the next level.
A missing element in the current version of the maturity model is the measurement of interconnectivity between agents within the ecosystem. Literature
shows that this is a very important aspect [30] to analyze the ecosystem maturity and, thus, should be included in the evaluation criteria. Future work should
investigate how to measure the quality of the entrepreneurship network and how
to fit it into the whole maturity model.
As a next step in this research, we will carry out a new round of interviews in
the New York ecosystem, classifying it according to the maturity model. These
new findings will then be used to further adapt the model towards a refined
version. We will then invite specialists from different ecosystems around the
world to perform the exercise of classifying their ecosystem using this model,
criticizing the criterion we proposed and helping to improve it collaboratively.
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