How to nurture tech startups

California may be the world’s largest and best-known technology hub, but it is not alone in fostering innovative startups. In fact, such firms are emerging – almost unnoticed – everywhere, from Asian megalopolises like Singapore and Shanghai to small European cities like Espoo in Finland and Dwingeloo in the Netherlands. Many international startups – including Sweden’s Spotify, Estonia’s Skype, Israel’s Waze – and, most recently, China’s Alibaba – have gained billion-dollar valuations.

Clearly, the key features of Silicon Valley that foster innovation and entrepreneurship – a dense concentration of human talent, a competitive spirit, easy access to capital, and a supportive regulatory environment – can be replicated in and adapted to a wide variety of contexts. Indeed, these pillars of creativity and progress have been erected even in countries whose economies, politics and cultures diverge sharply from those of the United States.

Of course, not every country approaches innovation in the same way. Finland, for example, owes its dynamic computer-games cluster largely to a student-driven movement in higher education. Though Rovio Entertainment’s release in 2009 of the popular video game Angry Birds catalyzed an innovation boom in Espoo, it is Aalto University – Finland’s equivalent of Stanford in California – that continues to fuel innovation in the area, by nurturing programmers, designers and others with the necessary talents. Aalto students also have launched Europe’s most dynamic startup conference, which will bring together more than 10,000 entrepreneurs and financiers this November.

Moreover, the university’s Startup Sauna seed-accelerator program helps promising early-stage startups take their first steps toward success. Located on campus, the program’s facilities resemble colourful Google offices, but with a Finnish twist: video conference rooms have been built into sauna-like structures. Since its establishment in 2010, 126 companies have graduated from Startup Sauna, having raised more than $37 million in funding.

Today, Finland boasts more than 200 gaming startups, which export 90% of their products. According to Aalto, Finland’s gaming sector experienced 260% revenue growth in 2012-2013, adding 1,000 jobs and $1.5 billion in total value to the Finnish economy just last year.

In the Netherlands, the government has taken the lead in promoting innovative activities. Two and a half years ago, the Dutch government teamed up with IBM and a group of small and medium-size local businesses to jumpstart a big-data hub in the far-northern village of Dwingeloo, home to the Netherlands Institute for Radio Astronomy.

Like Silicon Valley-based initiatives, the project unites academia, talent-rich local companies and multinationals behind a common goal – in this case, to build the world’s largest radio telescope. The device will process and analyze radioactive waves collected from two million individual antennae, enabling researchers to map the shape of the universe by (they hope) 2020. IBM provides the processing power for the data, while local Dutch companies are building all of the components.

Beyond its own specific objectives, the initiative can help to catalyze a broader transformation of the Dutch tech culture. Jan de Jeu, Vice President of the University of Groningen, anticipates experts in Dwingeloo and the northern Netherlands training more scientists and IT specialists in the fundamental challenges related to the storage, transfer, and analysis of enormous data sets, thereby creating what de Jeu calls “The Data Industry Valley.”

In Southeast Asia, Hong Kong benefits, first and foremost, from a business culture that is unencumbered by either red tape or corruption. It takes about two days to set up a new business; taxes are low; and ample co-working spaces are available.

Furthermore, the government-funded Cyberport Incubation Program supports the development of Hong Kong’s information and communications technology industry by providing companies with start-up capital, access to advanced facilities, and training in entrepreneurship, technology and business development. As a result, the number of entrepreneurs has grown by 300% in the last three years.

For its part, Singapore is increasingly seeing the effects of a decade of regulatory reforms, including government grants and tax incentives to encourage foreign investment in the technology sector. In 2002-2009, more than 11,000 startups were established.

Singapore’s social media startup Bubble Motion (recently rebranded as Bubbly) generated more than 20 million users in its first two years – nearly double the number that Facebook or Twitter accrued in the same period in their history. It counts influential Silicon Valley firms such as Sequoia Capital, Northgate Capital and Comcast Ventures as investors.

On mainland China, Alibaba recently made history by raising $25 billion in the world’s largest initial public offering to date. Company founder Jack Ma said that his ambition is to create a thriving “ecosystem” around the corporate headquarters in Hangzhou. Alibaba employees, ex-employees, and stockholders already injected more than $6 billion in the local economy in 2013, with Zhejiang University and the Fudi Startup Incubator Centers (founded by a former Alibaba employee) encouraging frenetic startup activity.

California’s enclave of tech companies remains the crown jewel of entrepreneurial ecosystems. But international innovators are increasingly recognizing that, as valuations in Silicon Valley soar, the real bargains for tech-savvy investors may be found outside of the US.

Published in collaboration with Project Syndicate

Author: Ross Buchanan is an author at UP Global.

Image: An illustration picture shows a projection of binary code around the shadow of a man holding a laptop computer in an office in Warsaw June 24, 2013. REUTERS/Kacper Pempel