These past two years have seen an unprecedented amount of growth in agencies that focus on Digital Innovation, the obvious reason is the Pandemic and the restrictions it brought along with it. Recently, startups have been blessed with more alternatives in agencies available to them, providing every kind of startup-related service imaginable. Now that the restrictions are reducing and things are almost back to the pre-Pandemic levels, there are a few trends that everyone involved should seek to understand in the Miami Startup Ecosystem.
1. Focusing more on Scale-ups than startups
One salient aspect over the past few years is the number of companies offering to develop a Minimum Viable Product (MVP) and provide early-stage business services. While the scenario is pretty much the case, digital agencies are starting to realize that it is more profitable to allocate their resources to startups that have already proven themselves in the MVP stage.
Obviously, such companies have proven that their product (MVP) works, but they’re short of resources to effectively scale up their business and revenue model. Digital agencies that can assist in this scaling process are compensated by the revenues that likely follow. The reasons responsible for this trend are numerous, but not farfetched.
With scale-ups, digital agencies know that they are dealing with products that have been tested and made fit for the market. This way, they understand that the likelihood of their invested resources yielding impressive revenue becomes higher than if the same resources were dedicated to the growth of startups.
Also, there is a different level of funding needed at the scale-up level. For most startups, investors have to provide the seed fund or Series A funding as startups usually have zero funding at the start. However, with regards to scale-ups, they are usually concerned with the second round of funding which is easier to provide. This is because, at this stage, recipients of such second-round funding needs to show more validation than an MVP. They also need to provide a trustworthy team and a case for expanding market opportunities. The provision of all of these metrics reassures the investors that their investments are in safe hands and the estimated revenue is not only realistic but also easy to achieve
Lastly, the focus on scale-ups rather than startups is made popular by the division of roles in most scale-ups. Unlike the obtainable in startups, where the roles are muddled and usually not well-designated, roles in scale-ups are well established and this drives productivity which is very important to investors.
2. A wider range of services are in demand
If a client wants a service that an innovation firm cannot provide, that client will likely turn to a competitor. Hence, to avoid losing out on such business opportunities, there is peer pressure on innovation firms to provide every service a digital start-up will need. As Innovation agencies grow and work with a diverse clientele, they are able to accommodate a wider range of services and offer better insights.
As a result of this trend, innovative companies in the Miami startup ecosystem are transitioning fast from offering a single service to providing numerous and diverse sets of solutions for digital startups. This changes the dynamics of the ecosystem as it ensures that startups don’t only have a wide range of options with regards to business insights and other needs, it also makes the service provision aspect of the ecosystem more competitive. It means that innovative companies that cannot offer a wide range of solutions to startups, while ensuring that each of these solutions is up to standard may not find its footing in the Miami startup ecosystem.
3. New Partnerships forming between agencies
In order to accommodate supplying more services to the clientele, it is often easier to collaborate with another firm that supplies this, than to lose out on the business opportunity. The fact that as many as 36% of businesses in 2018 report working with double or multiple partners than they were a few years ago emphasizes this. As the industry progresses and matures, stronger relationships are formed between service companies, and co-venturing becomes even more prominent.
The trend explained above showed that due to the demands of the ecosystem, many service providers, especially those that work with startups, have begun the process of scaling up their offerings and services to meet up the demand. However, reality showed that many innovation firms cannot afford to scale up. This inability to scale up could be due to the lack of funds or expertise to effectively offer increased services. The solution for firms in this situation is to collaborate with other service providers. These service providers should be able to offer the services found wanting in their collaborators offering. Through this partnership, service providers will be able to merge and leverage each other’s competence rather than lose out on business opportunities.
The effect of this trend on the ecosystem is that startups get access to almost all of the services needed without an influx of new services providers. It also means that the ecosystem can look forward to more co-venturing on the part of service providers and not necessarily startups alone. Finally, the trend looks good for all of the parties involved as it benefits both startups and the innovative companies providing services and solutions for these startups.
4. Corporates are stepping up
Till as late as 2019, large corporations were slow to tap into the innovation due to comparatively large, burdensome Research & Development departments following tedious bureaucratic processes and hence, new ideas were rarely tested before. Recently, especially during the pandemic, we have seen the emergence of what is known as Corporate Accelerators; corporate branches supporting early-stage startup companies through mentorship and often capital and office space. Some of the biggest names include Accenture Digital and Microsoft Ventures.
With the introduction of these corporate accelerators, more startups within the Miami ecosystem can begin to focus on fine-tuning their products to attract these large corporations. This means that the ecosystem will start seeing more and more quality products from startups. This assumption is supported by the fact that there is a huge number of startups in Miami, and the number of corporations stepping up is considerably low. As a result, there is a huge likelihood that the competition to catch the eye of these large corporations will be based on product, and this would eventually result in the ecosystem delivering quality products and services.
With the increase in the number of quality products, the ecosystem may attract the entry of new large corporations who would be willing to provide resources such as capital, office space and mentorship to more early-stage startups. This trend would help many startups scale up their operations within the ecosystem.
5. The Increasing number of new accelerators and incubators is slowing down
With the demand becoming more and more stagnant, the number of new Digital Innovation Agencies are unable to keep growing at the same speed. New agencies will find it increasingly difficult to compete with the resources of huge corporates or established innovators.
With a huge playing field of quick and responsive competitors, service agencies with a narrower selection of services to offer will struggle to sustain. This trend is an effect of the second trend explained above. The failure of the many service providers in the startup ecosystem to increase the range of services provided or collaborate with their counterparts to do so will cost these service providers their sustainability and continued relevance in the startup ecosystem.
This threat becomes more obvious due to the introduction of large corporations to the startup ecosystem and their ability to not only support startups with needed resources but provide the same services and solutions rendered by the digital agencies in a better and more efficient manner. With the competition provided by these large corporations, many digital agencies and innovation firms are at crossroads, as their sustainability and continued relevance in the startup ecosystem becomes threatened on a daily basis.
The tech community or startup ecosystem in Miami is a relatively young one. However, with the effort of local government and other stakeholders, the ecosystem is developing fast and effectively. One of the signs of its development is the five trends espoused in this article.
These trends do not only speak to the rate of development of the ecosystem but also signify that the tech community in Miami is evolving. More than this, it reassures entities and stakeholders watching from the sidelines that these startups are well-poised for the development of quality products, despite the relatively young age of the ecosystem and the tech community in Miami.