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Business activity tends to "follow the money". On one hand, companies need customers, capital, and resources. On the other hand, employees want opportunities for professional growth, financial stability, and enriched personal life in their environment.
In the old days, a consumer-facing company would set up shop where the customers were, secure a loan from a bank down the street, hire employees living nearby, and sell to the local area. Depending on their place in the supply chain, most businesses were located either close to the customers or close to the resources (raw materials). Employees would go wherever the companies were.
Digital technologies and the internet fundamentally shifted things. Intangible digital products and services made it possible to "manufacture" on white-collar infrastructure (personal computers) and sell to anyone with an internet connection. This reality detached companies from the need to be close to customers or resources and increased the importance of employees in the equation.
Companies were able to go wherever talent was or would like to go, such as close to Universities. Ecosystems of the 00s were developed around desirable locations like the San Francisco Bay Area and many cities looked to replicate the model in the 10s by promoting a combination of business (ie tax breaks) and employee (ie lifestyle) advantages. The assumption was that businesses and employees go together, and the key to creating an ecosystem was to attract these two important parts of the equation, with the remaining parts being pursued online.
When the COVID pandemic forced employees in whole business sectors to work from home, the connection between businesses and employees at the physical workplace was severed. Remote work wasn't new but it used to be an occasional or periodic occurrence; the majority of employees were tethered to the office. Prior to the pandemic, the number of US workers working from home was around 17%. This wasn’t the case any more and the numbers rose to 44% of employees engaged in telework.
The same way that companies didn't need to physically go where the customers were, talent didn't need to go where the employers were. In that sense the virtualization of numerous jobs, completed the divorce between physical location and economic opportunity that started with the internet 2-3 decades ago.
A shift of great magnitude creates a ripple effect with far-reaching changes. Remote work allows companies to pick from a global talent pool. At the same time, good jobs become available to talent all over the world. People who are unable or unwilling to relocate, are now presented with job opportunities that were previously unavailable to them. People who are able/willing to relocate, are now free to go anywhere in the world (digital nomads), and the decision can be driven by personal or lifestyle criteria.
This new reality fundamentally alters the game for startup ecosystems. It is no longer necessary to attract the big companies; instead, aspiring players can go after and entice the talent directly. This has significantly lowered the bar for ecosystem entrants and numerous locales have launched or boosted their "remote work" initiatives. Empowered by the increased importance of lifestyle in workers' decision-making process, traditional (semi-)retirement spots like Bali and Mexico, up-and-coming expat cities like Lisbon, and newcomers like Greece, are all vying not only to be a home for digital nomads but to become booming hubs of entrepreneurial activity.
The rise in the number of locales that want to attract digital nomads and build startup ecosystems, creates an inevitable, and slightly unexpected, side-effect: competition! New players in the ecosystem game compete with established players and with each other.
The incumbents are big cities offering excitement and variety in overpriced dense environments. Per se, new entrants promote their corresponding advantages: better weather, lower prices, larger apartments, proximity to nature, relaxed lifestyle. Most importantly, telework environments promote the ability of people to choose their community versus accepting whichever one would come with a traditional office.
Competition tends to start simple and basic and gets more nuanced as things evolve. Comparing weather and lifestyle between Berlin and Athens is straightforward, but between Athens and Barcelona a bit trickier. When there are numerous choices offering good weather, low prices, and great lifestyle, the deciding factor will shift to fine print and the nuances of belonging. Per se ecosystems of the near future will emphasize community and leverage specialization to attract people, leading to the creation of micro-tribe niches revolving around technology (ie AI, blockchain, etc), industry (ie healthtech, fintech, traveltech etc), or lifestyle (ie sports, culture, wellness etc) characteristics.
Fast forward a few years. Numerous cities have launched entrepreneurial initiatives and startup ecosystems. They leveraged their natural strengths to get started and eventually found additional ways to differentiate from competition. Certain locales established an early reputation for a certain technology or industry that created a snowball effect turning them into "the place to be" for those niches.
In this near-future reality, ecosystems offer something unique: collocated talent in focused niches. If a company anywhere in the world wants access to talent with specialized skill sets, the best place to find it will be in a corresponding "digital nomad" environment. In that sense ecosystems become curators and brokers of talent. The ones that are first to establish the right kind of reputation in the right niches will be the ones to prosper the most.
The premise that businesses, employees, and customers are bound together by location has been shattered in recent years. Telework has significantly increased and helped untie the physical bond between companies and their workers. Along with the prior physical detachment of businesses from their customers, this has created the conditions for the rapid development of new startup ecosystems.
Aspiring forward-looking ecosystem creators will benefit by moving beyond the "weather and lifestyle" storyline and proactively pursuing a micro-tribe differentiating niche.
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