How Startups Drive Economy
Five Roles of Startups in Driving the Economy
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“Startups are the engine room of our economy. Startups revive our culture, promote growth and innovation, and rise from tough times with renewed vigor. Whatever the startup does, it does big.” - Trisha Paras, Business Analyst at BlackStorm Consulting
Startups, from the word itself, start it all. The businesses we look up to today were also once a vision. And suppose they have stayed a vision with their founders letting it rot in a corner. We probably won't reap the benefits and convenience they're giving us today.
Canva started as a garage business with little to no expectations that it would go as big as today. Anthony Tan, CEO of Grab and Tan Hooi Ling, COO of Grab, were also only eager to reinvent transportation. Through perseverance and confidence became the leading super app in Southeast Asia with over USD 140 million in earnings in 2021.
And who knows that Kiichiro Toyoda, founder of the Toyota Motor Corporation, who was then in his early 40s, would be included in the Automotive Hall of Fame and create several world-class, legendary car models? Toyota now secures its name as one of the safest, most reliable, and advanced cars globally.
Startups don't just build their own. They spark each other and motivate fellow business-minded to aim for more. While it's true that big ventures hold enormous powers in society, they owe it all to their humble beginning– the startup business.
And from thousands of startup businesses opening every year, who knows which of them can be the leading companies tomorrow, inspiring and encouraging everyone else to aim for more considerable success, too?
📈 Role #1: Creating Jobs
Of course, when opening a business, you need to hire people. And whenever startup entrepreneurs mobilise people, it creates a domino effect in sharpening the economy—over 70 million small and medium enterprises in Southeast Asia, employing more than 140 million people. Imagine how much more hungry mouths have been fed because of this! And think of the other economic activities because of more productive citizens.
📈 Role #2: Technological Developments
New ideas also surface, with more people inspired by successful business stories. Of course, with a constantly changing market, people in business need to get ahead of the people, requiring a more innovative mindset. Startup businesses are one of the biggest reasons our journey to technological advancement gets faster. If internet browsers had been very convenient before, would Google have been founded in the first place?
📈 Role #3: Promoting Public Funds and Economic Growth
It may also be an obvious fact, but startups share a significant portion of our public funds. New business founders spend 13 to 23 per cent of their earnings– both personal and business– on taxes. Say yours is only a tiny enterprise; it can still reach at least USD 1,000 paid to the government every year! How much more can it get if your venture continues to thrive?
📈 Role #4: Creating New Ventures
In addition to that, startups also fuel each other. While a new business opening can mean another competitor for you, it often means something to help you. A great example of this is NUMMI, an automobile company that resulted in a joint venture between giants Toyota Motor Sales and General Motors Corporation. And guess what? NUMMI was able to generate over USD 70 million in earnings! The said companies may not be startups, but the only point is that businesses hold a torch that, when combined, can get brighter and offer something more.
📈 Role #5: Modifying Tight Policies
Not just that! Startup businesses also keep the policies ever-changing to make running businesses an easier task. A study from the University of Postdam in Germany reveals that the more innovative we are, the lighter the regulations of firms become. And where does innovation bloom out? From startups, of course. Therefore, as long as innovative- and business-inclined minds are up and running, we– as an economy– will never remain stagnant.
🤝 SMEs and Startups
Among the primary challenges of SMEs is keeping up to date with the latest trends in technology. They also tend to become “slow to respond” to such changes happening around the market. And even if they learn to adapt, it usually requires a lot of resources and time, which small businesses like them can’t afford. On the other hand, although startups are highly adaptable, they have a small scope and knowledge of influence. They tend to struggle to identify which industries in their business can thrive.
Startups and SMEs have the potential to fill in the gaps and weaknesses each of them has. Since startups are the “tech geeks” and internal solution providers, SMEs can have so much to learn to innovate and improve their products and services. Meanwhile, startups can effectively use this “sleeping potential” as their customers grow from the opportunities that SMEs can open up to them. In other words, while SMEs can be the market and channel of influence for startups, startups can be the best tech guide for many SMEs.
Wrap Up
Microsoft, Apple, Google, Meta, and everything we see at the top of stock exchange boards has one past– startups. They may be far from being average now, but they all came from there. And the fantastic thing is that they are now the present. We use them, need them, look up to them– they are the moment!
With over 62 million startups in Indonesia alone, only a few turn out successful. Indeed, it's quite an environment to survive in. But you see, we cannot help but dream, start and test our luck. Society's future depends on the creative people who try. More than the job they create, startups feed mouths, pay taxes, build bridges, and mobilise other investors to spend more, making the economy increasingly active.
Startup businesses are far from being mere outliers in the business charts. They are the game-changers of the past, the investors of the present, and the future leaders.
About Why Startups Fail Newsletter
Why Startups Fail is a bi-weekly newsletter where curated insights on startup failures and what you can learn from them are delivered straight from Southeast Asia's boutique Business Scalers to your inbox.
Completely agree. The idea that startups only generate ROI misses the bigger picture. I’d add “soft power” to your list. Silicon Valley in an incredible driver of American global soft power.