STARTUP BOOSTING

IN AN INDUSTRY 4.0
CONTEXT

by Alison Partridge
Ceri Batchelder

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July 2022
 1. INTRODUCTION
We hear a lot of hype about startups, and are familiar with many of the big names of ‘unicorns’
(private companies with a valuation of over $1 billion). As of June 2022, there were 1,100 unicorns
across the world. Well known former unicorns include Airbnb, Facebook, Google, Skyscanner and
Spotify, and you may have heard of more recent examples like the design tool Canva and online
events platform Hopin. These are fast growing, highly funded, technology-enabled businesses. But
why does this world of tech startups apply to our cities and how can they create the conditions for
nurturing their own?

Like many cities across Europe, Bilbao has an industrial heritage and, in the process of reinventing
its economy, has focused on how startups can play a role. Through AS-FABRIK, an Urban Innovative
Actions (UIA) project, the city received funding to develop a smart specialisation strategy for its
advanced services or KIBS (Knowledge Intensive Business Services) companies - with the aim of
increasing digital transformation across the manufacturing base. AS-FABRIK was successful in
enabling Bilbao’s Industry 4.0 ambitions, accelerating the digital convergence between industry
and technology for ‘connected manufacturing’. This led to Bilbao partnering with a network of
cities through the URBACT Transfer Mechanism, which aims to share the learnings from UIA
projects with other cities facing similar challenges. Through this network - AS TRANSFER - Bilbao is
sharing many valuable lessons on talent ecosystems, partnership brokerage and startup boosting,
as they relate to Industry 4.0. This report is the third of three which explore each of these topics in
turn. It reflects upon:

● Why startups matter to cities

● What makes up a startup ecosystem
● How to boost startup communities in your city
● Lessons from AS-FABRIK on startup boosting
● Learnings from a network meeting in Timișoara, Romania

The three cities exploring and applying aspects of the Bilbao AS-FABRIK Good Practice are Bielsko-
Biala (Poland), Tartu (Estonia) and Timișoara (Romania). In May 2022, representatives from all the
cities gathered in Timișoara to focus on the startup boosting theme.

The AS TRANSFER network meets in Timișoara - at Cowork and in the city

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 2. WHY DO STARTUPS MATTER TO CITIES?
In the global economic recession of 2008-9, many firms were hit hard and had to downsize their
workforces. Research by the OECD* (Organisation for Economic Co-operation and Development)
from 18 countries showed that in response to the crisis, job creation occurred in ‘young’ businesses
that were founded in the previous 5 years, rather than in ‘old’ firms, established 6 or more years
ago (see Figure below). This provided evidence to policymakers that supporting entrepreneurs and
startups is a way to stimulate employment, helping to restore economic stability and growth.

Figure: OECD Research on the origin of job creation post the global economic recession of 2008-9

In the lead up to the World Economic Forum (WEF) in Davos, Switzerland in May 2022, startups
were on the agenda. Writing in advance, the WEF’s Managing Director stated that “Startups are a
catalyst for economic growth both globally and locally. The value that startups create is nearly on par
with the GDP of a G7 economy and the amount of startup funding in 2021 surpassed $600 billion,
shattering funding records.”

Interestingly, the article also emphasises the role of startups in driving responsible economic
growth, through operating fairly and sustainability. Ariel Katz, Chief Executive Officer and Co-
Founder of H1, a healthcare information system, observed “In this new world post-Covid, startups
don't need to be based in San Francisco anymore and I think you will find wildly successful companies
in new cities that will create this hope, community and ecosystem around it that will build the future.”

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 3.WHAT MAKES UP A STARTUP ECOSYSTEM?
There is a substantial body of research around what policy factors give rise to the right conditions
for a successful startup environment. Daniel Isenberg, Professor of Entrepreneurship Practice at
Babson College, Massachusetts, USA, has been a key contributor and developed an evolving model
of an entrepreneurship ecosystem strategy for economic development (see Figure below, ‘Actors
of the Entrepreneurship Ecosystem’).

This quote from Mason & Brown (2014) captures the approach well, “An entrepreneurial ecosystem
is a set of interconnected entrepreneurial actors, entrepreneurial organisations, institutions and
entrepreneurial processes which formally and informally coalesce to connect, mediate, and govern the
performance within the local entrepreneurial environment.”

Figure: Daniel Isenberg’s Actors of the Entrepreneurship Ecosystem

Two important aspects to pull out are startups’ need for funding and trained staff. Fast-growing
tech startups often require significant equity investment, from pre-seed to larger venture capital
raises. This means that people and organisations with the necessary understanding and money
(‘risk finance’) must be part of the ecosystem. Similarly, there is a global demand for tech talent,
and a corresponding shortage of supply, so companies are having to spend a lot of time recruiting
and developing their staff, and pay increasingly high salaries.

Alison Partridge has written about this recently for URBACT, “Entrepreneurship Ecosystems – a few
pieces do not a jigsaw make….”, including our colleague Laura Bennett’s expert input, so we refer
you here for more information.

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 4. HOW TO BOOST STARTUP
COMMUNITIES IN YOUR CITY?
Denislav Ivanov, a startup community champion, joined the meeting in Timișoara. Denis talked
about the importance of building a startup community around the entrepreneur and their needs -
placing them at the centre. He said a good way to make rapid progress was to follow best practice
from elsewhere, such as from Singapore, Copenhagen and Tartu, and apply it locally.

Denis shared how he was supporting a startup community on the ground in Sheffield, UK. He
identified 4 key areas of development.

Denis Ivanov’s talk on important elements for startup boosting

a) Learning entrepreneurship

People enter the startup world from diverse backgrounds, culturally, educationally and technically.
They don’t know how to build a startup, so they need to be taught skills, like a problem-solving
mindset and how to run a business. Reflecting this, is the fact that the average age of a successful
startup founder is 45. Entrepreneurial training can happen in a number of ways, for example
through entrepreneurship courses at colleges and universities, such as Enactus, the Techstars
Startup Weekend programme or local business support initiatives. Denis also helps connect new
founders with an expert pool of mentors with startup experience. For workplaces, a greater focus
on enabling intrapreneurship (entrepreneurship within an established organisation) could bring
innovation and productivity benefits.

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 b) Increasing Connectedness

In the startup world, everything happens between people, so it's important to create opportunities
for people to connect and collaborate - such as through meetups and social media channels. Cities
can support the existing startup communities and activities, they don’t need to re-invent them, or
lead them even, but they can enable them, e.g. by offering small amounts of funding for pilot
actions or venues for meetups. In parallel, an ecosystem map can increase visibility and help people
find the right support and contacts. These approaches can facilitate identifying co-founders and
early adopters to work together on shared problems and develop common solutions. Crucially,
engineering serendipity is key - many life changing events come from chance interactions!

c) Giving a platform

How do we learn about startup communities? Ensuring that startups have a voice in the local
community can greatly enhance the profile of individual businesses and the community. Denis ran
a successful podcast series in which he interviewed founders to hear their stories and ask what they
needed to grow, and listeners responded.

For example, Four Jaw Manufacturing Analytics, a new Industry 4.0 startup bringing data capture
and analysis to manufacturers, mentioned they were looking for some new members of staff, and
after the prodcast, they received some job applications. Extending the reach through local media
(newspapers and social media) can also help, as well as a regular ecosystem newsletter. Lastly,
raising the profile of entrepreneurship by appointing experienced entrepreneurs as mentors in
residence in universities, incubators and accelerators, can help new founders to see role models.

d) Accelerating growth

Denis is Marketing & Community Manager at Entrepreneurial Spark, an open accelerator for
entrepreneurs. He is currently delivering an accelerator programme called Transform SY across
South Yorkshire, UK, which focuses on developing entrepreneurial mindset and behaviours over 6
month cohorts. The programme has recently supported 18 entrepreneurs who have made great
strides and are raising funding, creating jobs and winning contracts. Transform SY is one of 15
acceleration and investment readiness programmes on the ERDF funded TEAM SY project. Through
these structured programmes, run by experienced staff, the intent is to raise the bar for
entrepreneurship support, giving rise to more robust companies, thereby strengthening the
startup ecosystem. Importantly, support needs to be provided at every stage of development -
from very early to scaling businesses - to help sustain and retain them in the region.

5. LESSONS FROM AS-FABRIK ON

STARTUP BOOSTING
Strategically, Bilbao wanted its manufacturing sector to become more productive and competitive
and to have a place on the international stage for Industry 4.0 capability. As a result, AS-FABRIK’s
approach to startup boosting was focused on stimulating Industry 4.0 take-up in the traditional
manufacturing base. It concentrated less on young people starting businesses from scratch, as you
might find in Silicon Valley, and more on ‘intrapreneurship’ through accelerating the development
of existing small tech and knowledge-based businesses (5-6 people). These KIBS companies
contained the right expertise and ideas, but needed help to scale. The AS-FABRIK team set out to
create a programme to help them grow, so they in turn were better positioned to influence the
manufacturing firms.

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Eduardo Castellano, Executive Director of the
Business School Management Research Centre
at Mondragon University, joined the
transnational meeting to share the startup
boosting learnings from AS-FABRIK. Eduardo
described the 5 stage process, starting with a
discovery phase carried out by the Bilbao AS-
FABRIK Observatory, which identified the
needs of manufacturers. The projects selected
were those that had the most opportunity to
be exploited. Although this was resource
intensive, it allowed the KIBS businesses to
realise where they needed to direct their
efforts, and produce robust value propositions
to capture their understanding. Eduardo Castellano’s talk on the stages
for startup boosting in AS-FABRIK
Bespoke training from AS-FABRIK experts
enabled the KIBS companies to develop early
(low fidelity) and later (high fidelity) stage
prototype products and services. Following
work to validate the market fit of the
prototypes, the next steps involved piloting,
assessing the potential scalability and business
incubation. The partnership brokering support
connected them to the wider Industry 4.0
community, increasing the access to the market
for their products and services. Eduardo
emphasised that if not all the elements are
present, there are a lot of difficulties.
Improving mutual understanding and
connectivity through ‘filling gaps’, ‘connecting
How startup boosting inter-connected dots’ and linking the AS-FABRIK activities were
with other themes in AS-FABRIK found to be really important. Here, the startup
boosting theme of AS TRANSFER connects with
the partnership brokering theme.

So what results did the AS-FABRIK team see? They started with 36 venture projects, 90% of which
were examples of intrapreneurship in KIBS firms. From these, they saw a 33% startup success rate,
a significant increase on the normal 7-10% rate. The sense is that the higher rate was due to the
nature of the process, the positive outputs coming from starting with clearly defined needs (from
the Observatory support) and linking with the other processes. Another good outcome is that the
university is now completely aligned with the needs of industry.

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 6. STARTUP BOOSTING: NETWORK
MEETING IN TIMISOARA
Startup boosting was the thematic focus of AS TRANSFER’s transnational meeting in Timișoara,
Romania in May 2022. This section of the report showcases some of the initiatives and activities
discussed at this meeting.

6.1 A Timișoara based startup’s perspective

Paul Druta is Co-founder and Managing Partner at

Lineo, an engineering services company for
electronic products. Trained as a mechanical
engineer, Paul previously worked for Continental
as a Technical Project Manager, with large global
clients.

In his spare time, he would work with friends and

colleagues to try and solve engineering problems
together. Their activities gained visibility online, so
Paul was able to leave his job, initially freelancing
and then running Lineo as a startup.
Paul Druta, Co-founder and Managing Partner
at Lineo Engineering

Almost all Lineo’s projects have an electronics integration component. They build prototypes and
produce designs for injection moulding. Their services span the entire product life-cycle. Examples
include a wireless disinfectant dispenser, an electrical mug, an IoT device for a drone, and the
thermal expansion control for a bread oven, where the client is based in California!

As a startup with a technical background, Lineo has needed to acquire business understanding and
skills, and is now focused on widening their international client base. Asked how local partners
could help, Paul said they were keen to form links with advanced Research & Development
collaborators for validation, prototyping and testing, and for introductions to trusted professional
services firms who appreciate startups and their journey.

6.2 University InoHub

Dr Silviu Vert, Politehnica University Timișoara, gave a flavour of his work in his talk ‘From student
to startup’. He is instrumental in running the entrepreneurship offer, InoHub, which has trained
over 300 students. It is an active service and students can subscribe to an app to start getting
involved. They have two physical spaces and run events and ‘pretotyping’ workshops, making mock-
ups to test market appetite.

Silviu and colleagues run startup bootcamps in collaboration with other universities. They offer
ideation workshops, hackathons to build products, pitching competitions (with excellence awards
for the most promising startup) and help forge links with experienced mentors and industry. For
commercial challenge setters, it’s important to make decision-makers aware of the project from an
early stage to ensure buy-in (not just on an operational level). They are starting to see startups

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emerge, such as two AI startups in healthcare, a form-builder company that gathers and processes
data and a number of mobile app development projects.

Since there are more jobs than students in Timișoara, there is a lot of competition for graduate tech
talent. They need to have incentives to attract students to the route of entrepreneurship and
generate more startups. Prizes come in the form of internships and funding. An important project
is a financing programme for engineering students, where £40-50k is available to those who want
to create their own startup. One method they’ve seen in the US is that sometimes students with
entrepreneurial potential are offered a discount on tuition fees. Another issue holding back the
number of potential startups is lack of staff time, as the staff’s teaching time takes priority, plus
staff can also be attracted away from the university by bigger commercial salaries, creating staff
shortages.

Dr Silviu Vert’s talk ‘From student to startup’

6.3 Cowork - space for startups

Andrei Cosmin Munteanu, Co-Founder & Community, realised they needed a physical space to
support startups in Timișoara, so they set up Cowork in 2013. The space has a building and garden
with a relaxed and creative feel where entrepreneurs can work, meet and connect with other
people.

The main activities of the team of 7 are:

- Running the coworking facilities

- Delivering events, on average an event every 3 days - about 130 per year with 5000 people
attending
- Supporting anyone who wants to run a tech-enabled business
- Helping businesses to both start and scale (Andrei talked about the challenges of scaling)
- Facilitating a coach-driven approach to grow the entrepreneurs themselves

Romania is good at tech, and Timișoara has lots of technically capable people, but becoming
experienced in business is harder, as founders don’t have much entrepreneurial training. The types
of companies emerging in Industry 4.0 include those focused on prototyping, 3D printing and
software, and they are now gaining international clients.

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In terms of startup champions, Andrei is a prime example. From leaving a well-paying job in a scaling
tech company to help set up the Timișoara startup community, he is now working with established
names like TechStars and Startup Grind and several accelerators. Being highly connected, he wants
to bring his large network of entrepreneurs, universities and businesses to work together with the
public sector to endorse and fund Cowork’s activities. All actors need to take part to create the
right conditions and start telling the story of a thriving Timișoara ecosystem.

Andrei thinks the future is bright for entrepreneurship. He’s seeing a shift to startups with a more
mission-driven/sustainable focus, and thinks this will make young people more open to exploring
different career paths.

What is Andrei looking for from all this hard work? Well of course his goal is “5 Unicorns from
Timisoara”!

Cowork, Timisoara

6.4 INCUBOXX, regional business incubator

We also made a visit to INCUBOXX which is the largest business incubator in Romania for
information and communications technology startups. Owned by Timişoara City Hall, it was funded
by the ERDF and completed in 2017. The building has 54 offices at rental prices that are staged as
the businesses grow. We met companies in IT consulting, web design and development, smart
home devices and 3D printing.

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 7. LESSONS FOR STARTUP BOOSTING
AND NEXT STEPS
At the end of the network meeting in Timişoara, the AS TRANSFER cities came together to capture
their learnings.

Lessons for startup boosting

● Find your startup champions who can help you amplify your activities
● Make sure the champions are visible and direct people to them
● Start with the entrepreneur in the centre – build resources around their needs
● Build an evidence base to help explain to other actors why startups are important
● Ensure that you involve the main stakeholder groups: entrepreneurs, local government
universities, larger businesses and funders (MIT REAP)
● Establish selection criteria for who receives support
● Connect with people at an operational level in larger businesses who understand the
ecosystem
● Importance of peer mentoring from experienced people
● Prioritise connectedness, perhaps through a relatively low cost initial approach. Where are
the gaps?
● Run more specific meetups, both technical and business related
● Get incubators and accelerators talking together
● Make sure you’re sufficiently involved to take the ‘pulse’ of the community

As we’ve seen above, startups and startup support activities need the power of our municipalities
behind them, to help create the conditions to enable their growth, add value to the traditional
business community and build thriving startup ecosystems. Get it right and cities will see their
startup communities generate economic growth and jobs, and support the drive to net zero.

In Timișoara, Raluca Cibu-Buza and Mariana

Nagy from consultancy Luminspino are
supporting the City Hall team to develop the
plans for startup boosting in the city. Working
closely with stakeholders in the URBACT Local
Group, they are using URBACT methodologies
and tools such as a Strategy Chessboard to
collectively inform the next steps.

All the planning will be collated in an

Investment Plan for Timișoara, and similarly for
Bielsko-Biała, and Tartu, to ensure that the
Good Practice from Bilbao is well applied and
underpins future Industry 4.0 adoption across
our European cities. Potentially creating a few
unicorns in the process! Raluca Cibu-Buzac explaining how to apply the
Strategy Chessboard tool

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Authors:
Ceri Batchelder and Alison Partridge
Ad Hoc Experts, AS TRANSFER

Footnote:
In April 2022, the UK’s Coalition for a Digital Economy (Coadec), an organisation dedicated to policy
on tech startups and scaleups, published “An introductory guide to how local policymakers can
create the right climatic conditions for tech start-ups”, for further reference.

Reference:
*See p.46. of Criscuolo, C., P. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New
Evidence from 18 Countries”, OECD Science, Technology and Industry Policy Papers, No. 14, OECD
Publishing, Paris.
As referenced in “Differentiating Small Enterprises in the Innovation Economy: Start-ups, new SMEs
& other Growth Ventures” - Dr. Phil Budden, Prof. Fiona Murray and Ogbogu Ukuku, MIT Sloan
School of Management Working Paper, January 2021.

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