How technology and the internet are changing the face of the startup ecosystem
The long-term financial potential and social effect of upcoming technology are among the little inevitability in the years to come. Technology firms continue to rise to a more significant percentage of the global economy. They have surpassed gas and oil organizations to become the most prominent public firms in the universe, the private industry is overflowing with billion dollar unicorn estimations never seen before in the past, and numerous non-technological businesses are either perishing in the hands of technology or merging with them.
The first five information technology waves of the internet, defense, social media, personal computer, and integrated circuits have significantly transformed society. However, the waves which are coming in the next two decades will make the current situation look like child`s play.
Artificial intelligence, virtual reality, artificial intelligence, is to mention a few of the swiftly approaching social transformative technologies yet to come. Each of these technologies indicates a future with an abundant increase in productivity and prosperity.
A startup ecosystem is an economical procedure for a region, city or country. Fresh startups are developed every year, and they receive funds from investors to grow, and many of them fail. However, in these cases, investors, as well as entrepreneurs, start again. If there is a success, the effort is monetized through the exits, and a considerable part of the funds from these exits goes back to the system.
Evolution of technology
Economic theories reflect an evolutionary point of view of changes in technology and economic growth. Considering the vision of change as well as the progression of technology, let us see its significant characteristics:
Technology means insecurity and uncertainty
Technology is dynamic. It adjusts and consistently improves. New option and varieties appear regularly. Changes in technology are systemic. Technology does not appear without modifications in the environment. Fresh technology appears at once with the infrastructure to create and distribute them. A vehicle needed highways and petrol pumps. The internet has advanced with the fiber infrastructure. That technology interdependence, on the other hand, means that significant changes are slow and costly.
Based on the idea of an evolutionary technology change, evolutional technology offers better products, and they are used to develop the next generation of products. One can probably expect a runaway technological growth in the future, leading to incomprehensive changes to human civilization.
Technology`s percentage of the GDP of the world is increasing
The global Information Technology (IT) market, incorporating hardware, services, software as well as telecommunications, is expected to arrive at more than $ 3.8 trillion this year, up from a little over $ 3.7 trillion in 2018. Additional calculations exclude sections which are deflationary like services and create $ 1.6 trillion per year or 2% of global GDP.
This digit was 1% of the Global GDP in the year 2004 and approximately 0.5% of global GDP in 1992. Therefore technology maintains its exponential pace, and at this pace, it will reach 4% of the global GDP by 2026 and 8% by 2038.
The world economy is expected to rise to 3% per year and double by 2038 to $150 trillion each year. If technology maintains this pace, reaching the 8% digit, then deflationary technology sections will be doing $12 trillion in revenue in the year 2038, $10.4 trillion being net new revenue presently.
Adoption of fresh technologies results in a rise in startups
Currently, the adoption line of specific new technologies is practically vertical. Technology and innovation are swiftly introduced into the market and accepted by people. The duration takes for new technology to arrive at mainstream adoption is accelerating exponentially that at one time in the future where new technology can have more than 50 % market penetration in a few years whereas previously it would take decades.
This is a very significant amount of future growth for technology which signifies a bright future for technology ventures, and specifically, technology startups as well as startup ecosystems. This can as well be seen from a different perspective – the valuation of the firms responsible for the disruption.
Currently, we are facing an increased rate of technology adoption and disruption. Apart from this, the rise of new technologies is growing over time. Presently, new disruptive proposals emerge regularly. A considerable part of the technology products which will make up the $ 12 trillion in the world annual GDP 2 decades in the future probably does not exist yet.
Role of startups in the evolution of technology
Startups offer disruption based on the consistent search of opportunities and needs which have not been met. Some of this technological future will as well come from large firms, but by and big, these huge firms still have not figured out how to continually create disruptive innovation.
A reliable indication that we are at the center of the passing of the baton between the modern times and the information era in the current milestone arrived at in July 2016, where the world`s five most significant public firms by market capitalization were all technology firms.
The role of the huge traditional organizations in the innovation landscape is mainly as acquirers; where they develop acquire products applying their ability for efficiency and sale. However, traditional firms also see startups as a way of innovation. Currently, corporate venturing has been systemized and extended. Reputable firms define difficulties for young entrepreneurs and startups, and they attempt to purchase them.
Startups are better at new disruptive innovation than the huge firms. Both factors introduce huge difficulties in customary firms. The introduction of new technology means the disappearing of organizations and at times of entire sectors.
Big tech organizations have created a more symbiotic relationship with startups. Organizations like Microsoft, Apple, and Amazon, have shown strong competency in the last 5 to 10 years in creating reciprocal relationships with startups by offering platforms and infrastructure for them to build on. Cycles of disruption are accelerating.
New startups are developed every year, and they receive funds from investors to grow. Most of the startups fail. Although these situations entrepreneurs, as well as investors, try again. It is critical to see investing in the developing of startup ecosystems as not merely as a generator of economic prosperity and creation of jobs but also as a hedge towards the societal security in the future.