In this second article in a series called “The Big Small,” Bryan Ritchie and Nick Swisher discuss how and why startups are the main drivers of innovation and new technology in the world.
Opening New Markets. Changing Others.
The upstart startup Tesla has out-innovated decades-old automaker behemoths GM, Ford, and Toyota in the field of electric cars. Airbnb has surpassed Marriott and trails only Hilton in lodging industry revenue. Uber and Lyft have completely disrupted long standing ground transportation companies. And SpaceX created the first reusable rocket, moving innovation from NASA to the private sector and challenging the stalwards Boeing and Lockheed Martin.
Startups not only drive the bulk of job growth in the U.S. economy, as explained in our first article, they also create new markets, or completely overhaul old markets, by innovating products previously unknown that transform the world. Companies such as Apple, Microsoft, Facebook, Reddit, Yahoo, and Google, while giants today, were once small startups founded by ambitious college students. The products they created unquestionably changed the way business is done and, more importantly, how we live our lives. Very few of us can go an hour, let alone a day, without using one of their products.
Research has shown that small, young, agile startups are more likely to achieve technological leaps and bounds than those more established companies that are focused on gradual improvements and protecting entrenched business models. Entrepreneurs who dream big for the future and push high-growth companies, like Jeff Bezos of Amazon, Elon Musk of Tesla and SpaceX (compared to startups whose founders are happy to make a steady, comfortable living), account for about half of job growth even though they’re just 15 percent of overall firms, according to a 2016 report in MIT Technology Review. They also invest a bigger share of their returns in research and development, which, in turn, further drives innovation in a virtuous cycle.