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Are There Too Many Startups?

startupsOver the weekend, I read an interesting post by Rick Spence about why Canada needs more startups – and how he believes how entrepreneurship and innovation will allow Canada to remain globally competitive.

Rick’s post got me thinking about the thriving start-up ecosystem in which the barriers to entry have nearly disappeared for anyone who wants to do something online. The question that hit me is: Are there are too many startups?

For someone who makes a living by helping startups with marketing, it is probably a strange question to be asking, particularly when we should be celebrating the startup and entrepreneurial renaissance now happening.

But as much as it’s important to enjoy the great party taking place, it is always a good idea to have some healthy perspective to keep things in balance. While the growing number of startups is great for the economy, does it make a strong and vibrant ecosystem when there is so much competition and noise?

Think about how many startups are battling each other offering the same product and service to the same target audiences. Some of these startups have business models, some of them not so much. Some have financing, some are bootstrapping, and some are running on fumes.

As well, I would suggest incubators are playing a growing role in the startup “noise” by supporting startups that may be little more than ideas but little chance of becoming a viable business. Don’t get me wrong, incubators are doing yeoman’s work but they also may be giving some entrepreneurs false hope and, at the same, creating distractions in the marketplace.

Sure, startups are sexy and everyone seems to be doing one, but is there too much of a good thing happening?

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  • http://startupcfo.ca/ Mark MacLeod

    Until we have too many great exits we are always in need of more startups. Gotta fill the funnel with opportunities that could become great companies!

    • http://www.markevans.ca/ Mark Evans

      I’m a big believer in having more chips in the game. I just wonder whether it makes sense to have low-quality startups playing as well. Perhaps it doesn’t matter based on the idea that the cream will rise to the top. Thanks for the comment. Mark

      • http://startupcfo.ca/ Mark MacLeod

        Odeo became twitter. Instagram started as something else. All great outcomes are founder led. The only way to know is to make seed bets. IMHO

    • http://www.Spidvid.com Jeremy Campbell

      Agreed Mark! Potential startups can’t wait to see exits before diving in, they have to launch, get their funding and lead the way! We need more solid founder leadership. 

  • http://www.getsnappay.com/ Jim Rudnick

    I tend to agree with you here Mark – and with Mark McLeod too….as our own work with startups means that while I see a ton here in the Hamilton/Guelph/Waterloo areas – I want to see more exits! Bigger exits! Lots more….and until I think that becomes the prevalent biz model….like you both, I think we’re “short” in the startup arena! ;-)

  • Davison

    The hope is that the large number of startups will reflect a variety of different customer segments being targeted, or at least more narrowly targeted and relevant.

  • http://twitter.com/janamakar Jana Makar

    Great question and a worthwhile debate as we wouldn’t want a startup sector that is all sizzle and no substance. I’ve been following the Startup Canada tour and yes there are already strong competitive scenes in locations like Toronto, Waterloo, Calgary, Edmonton, etc…..the big centres…. but when you get into places like the Maritimes and small prairie cities, it’s sounding like there is lots of room to grow and so I think we should be encouraging that. Secondly, we shouldn’t underestimate the value of failure. Startups that go through incubators and don’t end up as a viable business are still an important step in the entrepreneurial process because that is where people gain experience, learn lessons, and build contacts for their next idea. I would hope that more exit strategies would enable more startups to take failure in stride and move onto their next venture rather than quit altogether just because one idea didn’t work out.

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  • http://twitter.com/Seniorpreneur Joe Wasylyk

    The quality of Startups in Canada will probably depend on the availability and quality of our new Canadian Mentors & Coaches.  It would also help to have more quality financial education and financial literacy courses available in Canada. Lastly, especially for the 50 Plus Entrepreneur we need to organize micro-credit financial institutions in each community across Canada. 

  • http://abdallahalhakim.tumblr.com/ Abdallah Al-Hakim

    I strongly agree with Mark McLeod comments below. I personally don’t lose sleep about the notion that we have too many startups. The system will self regulate the truly poor quality startups will fizzle out. Through social media and conversations – high quality startups should standout. As others have mentioned, even the lesser quality startups might eventually morph into something much better in the future. 

  • Guest

    There are definitely too many obscure startups providing similar services. People overestimate the viability, uniqueness and potential of their ideas. All those passionate entrepreneurs will most likely become disenchanted and will likely end up in poverty (due to debt, lack of stable employment on their resume, etc).

  • David

    I would tend to agree with the sentiments expressed by ‘Guest’. Startups play an absolutely essential role in the business community but if there are too many the level of innovation drops and the probability of failure rises. Too many startups are started for the wrong reasons. Being unemployed and unable to find a job, for example, is definitely not a good reason in and of itself to do a startup. I’ve been there where ‘Guest’ describes. I defaulted on a lot of personal debt due to trying to do a startup–some of the debt eventually got paid, much got written off. The resulting poor credit–plus as ‘Guest’ says a lack of stable employment–can lead to 7+ years of serious financial problems. I didn’t start to recover financially until I was much older. Also, Canadians who do startups often gravitate to the USA and the larger VC communities there. If you move to/live in the USA without the proper sponsorship, you can find yourself in serious trouble with immigration authorities and that’s NOT a place you want to be in post-9/11. Like I said, the business community definitely needs some people to take on the risks of a startup, but too many people do startups just because they think it is ‘sexy’ and they have no understanding of–and hence aren’t managing–the risks involved.