Startups are an important means by which new ideas are brought to life. They are crucial for generating new jobs and exert competitive pressure on prevailing businesses, which drives improvements in productivity and prosperity. In short, the starting – and scaling – of new ventures is vital for innovation and economic growth.
However, growth in every economy, including Scotland’s, is very inhomogeneous. If we don’t understand where and how that growth occurs, we are poorly equipped to generate more of it. But if we know what conditions matter, we may be able to produce more ‘unicorns’ like Skyscanner and FanDuel.
Unfortunately, much policy activity seems to be misdirected. Startups are sometimes conflated with SMEs for instance, though they are usually a particular subset with specific needs which require dedicated policy tools. Whilst the UK as a whole compares favourably in terms of early-stage entrepreneurial activity, many good startups fail to thrive and grow to scale, suggesting that support should be better targeted.
Moreover, as startups increasingly disrupt regulated industries - as with digital health or fintech - interaction with other parts of government also becomes inevitable; it is neither possible nor desirable for entrepreneurs and government to inhabit entirely separate domains.
For these reasons, Nesta is interested in better identifying the contribution of startups towards innovation and society; researching the factors which affect their success; and understanding what kinds of support work for what types of firm. Our research is aimed at improving the understanding of startups in a way that will benefit intermediaries, funders, support programmes, policymakers and startups themselves.