SUMMARY
The Startup20 initiative is gaining momentum as India takes the G20 presidency, aiming to capitalise on post-pandemic global startup opportunities
However, challenges like falling startup funding, sector-specific disparities, and the need for streamlined global supply chains persist
To connect the Indian startup ecosystem with the G20 and other global corridors, startup growth must be aligned with the UN’s SDGs
The Startup20 initiative has recently gained traction as India assumes the presidency of the G20 nations, a group comprised of 19 countries and the European Union, representing both the Global South and the Global North. Member countries are actively working on formulating and modifying their own national startup policies to capitalise on emerging global startup opportunities in the post-pandemic scenario.
It is worth noting that no common definition of a startup exists across the member countries, and efforts are being made to develop one that includes parameters such as size, revenue, and innovation, among others. Currently, the global startup economy is worth nearly $3 Tn, accounting for a sizable portion of the world’s total economy, which is worth $90 Tn.
The expansion of the startup ecosystem is producing mixed results, highlighting the critical need for capital, technology, resources, capacity building, and streamlined global supply chains to address the various challenges confronting the G20 countries. As part of Startup20, ongoing discussions are underway to establish a common policy framework or communiqué for governing startups across member countries with a $1 Tn commitment.
Walking On Thin Ice
During 2022, global startup funding fell by about 30%. This decrease may or may not be related to the pandemic’s aftermath, which may have resulted in increased funding for startups by various nations.
The software and data industry captured the largest share of startups (31.95%), followed by the healthcare sector (12.83%) and the fintech sector (10.43%). When it comes to unicorns, there has been a slowdown of approximately 8.49% compared to the previous year. More than half of the world’s unicorns are at risk of losing their status. Unicorns primarily operate in the software, data, and fintech sectors at the global level.
Considering these trends, it becomes crucial to seek solutions to support the global startup ecosystem, and the emerging Startup20 initiative can potentially contribute as one of them.
A Shot In The Dark
Each member country has its own policy initiatives to foster the growth of startups, including startup visas, venture capital investments, and technological advancements, among others.
While every country is actively developing its startup ecosystem, countries such as Russia, Turkey, South Africa, Saudi Arabia, and Brazil are still in the process of expanding their policy frameworks in order for their startups to have a greater global impact. Other member countries like Argentina, Canada, and Germany are on the verge of accelerating their startup growth but face the challenge of identifying additional financial opportunities to sustain startups amidst global geo-political turmoil.
The representation of the G20 member countries in regard to the sector-specific priorities indicates that China, Argentina, Russia, and South Africa have a strong focus on promoting startups in the edtech industry, while countries like the UK and Brazil prioritise the fintech sector. Interestingly, Australia, Germany, Italy, and the European Union prioritise the growth of the energy and environmental sectors. Japan, South Korea, and to some extent, Australia, are notable for their emphasis on digital and hardware growth through their policy landscapes. Mexico, the USA, and Italy place a greater focus on the ecommerce and retail sectors.
Based on these observations, it is evident that the major focus areas for startup growth among the G20 countries revolve around certain priority themes, which can serve as indicators of core strengths for each country, guiding their path to globalisation based on existing trade relations and geopolitical networks. Furthermore, it is crucial to establish effective and unique channels for the cross-border scaling of startups, especially among the G20 member countries, while establishing special trade buffers.
Sweet Spot
When suggesting a roadmap for the startup ecosystem connecting the G20 and other global corridors, it is important to recognise the connection between startups, the economy, and ultimately the achievement of the UN’s Sustainable Development Goals (SDGs).
There is empirical evidence that supports this connection. With this in mind, it is suggested that global sustainable priorities be aligned with economic development, thereby fostering the growth of the startup ecosystem. Each country can have its own local customisation while working towards the SDGs.
For instance, the Indian city of Bhopal has emerged as an example of solving the challenge of SDG achievement through the implementation of the Voluntary Local Review (VLR) approach. This is just one example that can be extended to other regions in their pursuit of achieving the SDGs.
Secondly, connecting startups with the SDGs may require a common framework where G20 member countries can collaborate by sharing policy insights and establishing specific grants, dedicated green budgets, awards, and recognition standings. The development of carbon trading can play a significant role in this context, allowing donors to allocate their carbon credits within this forum, thereby promoting climate-smart developments.
In addition to facilitating financial transactions, this common platform should also emphasise the development of a knowledge management platform to foster the evolution of good startup practices. This approach would establish a common benchmark for evaluating the startup ecosystem across countries and link it with the SDGs.
Thirdly, the suggestions put forth by the International Monetary Fund (IMF) regarding the adoption of the Organisation for Economic Cooperation and Development (OECD) framework for regulating labour and product markets across borders should also be taken into consideration for G20 members.
On the labour front, several countries from the Asian and European continents have positively emphasised reducing costs, leading to improved employment prospects. Notably, G20 economies such as Australia, Canada, Indonesia, Italy, Korea, Mexico, Russia, and South Africa have formulated plans for product market reforms that align with the OECD guidelines.
In addition to fostering the growth of unicorns and globally recognised startups, there should also be a focus on facilitating cross-border trade reforms, particularly within the G20 framework. This would enable member countries to benefit from cross-border trade advantages while addressing bureaucratic barriers.
Moreover, this initiative should extend beyond the current presidency of India and continue through Brazil and South Africa, at least to reflect later on its impact evaluation, providing further impetus and achieving sustainable outcomes within the context of the present global narrative.
