Most startups that fail after launch do not fail because the product stops working; they fail because the organization and the ecosystem around it cannot absorb growth. City governments cannot fix a founder's org chart, but they can act on the external barriers — fragmented networks, weak collaboration infrastructure, and regulatory friction — that make scaling harder. The cities doing this well, from Cambridge, Massachusetts to Melbourne and Hamburg, combine physical clustering, stakeholder convening, and policy streamlining rather than relying on any single lever.
Introduction: The Imperative of Scale-Up for Global Cities
For city economies, the distinction between a startup and a scale-up matters enormously. A startup is an organization designed for experimentation; a scale-up is one designed for sustainable growth. As the OECD-focused platform ONE explains in its guidance on scaling business models, achieving product–market fit is only the beginning of the journey, not the end. The real challenge is transforming an organization built for search into a company capable of growing without breaking.
This is why the question has moved onto municipal agendas worldwide. A Vietnam Investment Review report on a global cities gathering in Ho Chi Minh City shows mayors and innovation officials comparing notes on how to help local firms expand — evidence that scale-up support is now treated as an urban economic development task, not just a national one.
The Scale-Up Challenge: Beyond Startup Success
The internal transition is the first barrier. King Abdulaziz City for Science and Technology's publication on the scale-up challenge frames the core insight plainly: growth is not scale. Scaling means increasing output and value faster than costs, risk and complexity — and the informality that drives early success, such as founder-led decisions, loose processes and tolerance of exceptions, becomes a constraint at scale.
Organizationally, this shows up in predictable ways. ONE's analysis notes that a lack of clearly defined responsibilities, excessive dependence on the founders, or the absence of coordination mechanisms can block growth even when the product is working and sales are increasing. The hiring question sharpens the shift: "New hires should answer one very specific question: will this person help us scale, or will they simply alleviate a temporary need?" Scale-ups begin replacing generalist profiles with specialists — heads of sales, marketing, operations, HR and finance — who build processes and systems that let the organization grow without continually depending on its founders.
External conditions matter just as much. Beyond demonstrating genuine demand, ONE argues that startups must find sustainable acquisition channels, a profitable financial model, and a market large enough to support growth — a combination it calls the "Four Fits." Product–market fit alone does not explain which firms scale.
City Strategies: Fostering Innovation Districts and Physical Infrastructure
The first municipal lever is physical. Because innovation is built on connections between people, it tends to cluster in particular places — which is why many cities support the development of innovation districts, neighborhoods characterized by a density of research institutions, companies and startups. The World Economic Forum's analysis of city-led tech-sector growth points to Kendall Square in Cambridge, Massachusetts as the most famous example of this model.
Hamburg offers a variant reported at the Ho Chi Minh City gathering: an industry cluster approach that uses established networks as platforms and incubators, helping smaller companies develop commercial relationships and expand their operations. According to a Hamburg representative cited by the Vietnam Investment Review, such networks can help emerging businesses navigate unfamiliar markets — including Vietnam, China and Europe — by connecting them with relevant partners and resources.
City Strategies: Convening Stakeholders and Building Networks
The second lever is relational, and it exploits a structural advantage unique to municipal government. Municipal governments possess a unique understanding of their cities and residents, enabling them to effectively convene relevant stakeholders in the startup sector. This allows local authorities to provide valuable opportunities such as networking, platforms for sharing best practices and insights, or workshops addressing common challenges.
Convening also works in the other direction. Early-stage startups often have great technical expertise but lack insight into the real-world problems faced by potential customers — while cities have many problems that need solving. Matching the two turns municipal challenges into innovation opportunities, giving young firms the customer insight that scaling later requires.
City Strategies: Regulatory and Policy Support
The third lever is administrative. Research by Paola Belingheri and Christian Lechner, published by Springer Nature in 2025, finds that government initiatives addressing systemic barriers to growth play a pivotal role in fostering entrepreneurial ecosystems and scale-ups. Policies that reduce bureaucratic hurdles, provide tax incentives, and offer grants or subsidies are instrumental in creating a conducive environment for scaling, and streamlined regulatory processes can significantly reduce the administrative burden on startups, allowing them to focus on growth.
Ho Chi Minh City illustrates the applied version of this. Its proposed approach, as reported by the Vietnam Investment Review, involves supporting enterprises throughout their development — from idea formation, incubation and technology testing to commercialization and market expansion. Tran Trong Tuyen, deputy director of Ho Chi Minh City's Department of Science and Technology, indicated that the city must develop its policy framework and human resources, alongside establishing suitable conditions for international partners to engage in local innovation initiatives.
City Strategies for Scaling Startups: A Framework
The strategies above address different barriers, so the practical question for a city — or a founder assessing a city — is which lever matches which problem. The framework below maps each documented strategy type to the scale-up challenge it primarily targets, distinguishing interventions that build physical infrastructure, foster networks, or provide direct policy support.
| Strategy Type | Description | Targeted Challenge | Documented Example |
|---|---|---|---|
| Precinct Development | Develop innovation districts or industry clusters that concentrate research institutions, companies and startups to foster collaboration and commercial relationships. | Weak R&D collaboration and density of connections; difficulty expanding operations into new markets. | Kendall Square, Cambridge, Massachusetts; Hamburg's industry cluster approach. |
| Network Convening | Bring together startups, universities, government and other stakeholders for networking, best-practice sharing and workshops on common challenges. | Startups' lack of insight into real-world customer problems; fragmented local ecosystem. | City-led stakeholder roundtables, as described by the World Economic Forum. |
| Regulatory & Policy Support | Streamline regulatory processes, reduce bureaucratic hurdles, and prepare policy frameworks supporting firms from incubation to market expansion. | Administrative burden that diverts scaling firms from growth; unsupportive framework conditions. | Ho Chi Minh City's proposed end-to-end enterprise support approach. |
| Internal Organizational Shifts | Not a city lever, but the firm-side challenge these policies must accommodate: replacing generalists with specialists and formalizing processes. | Founder dependence, undefined responsibilities, missing coordination mechanisms. | Documented in ONE's scaling guidance and KBS's scale-up analysis. |
| External Ecosystem Barriers | Conditions beyond any single firm: sustainable acquisition channels, profitable financial models, and markets large enough for growth. | Early-stage success that cannot convert into sustained expansion. | The "Four Fits" framework described by ONE. |
Read as a diagnostic tool, the table shows why no single policy suffices: precinct development builds the physical density that supports collaboration and talent depth, convening supplies the customer insight and knowledge transfer that academic research identifies as indispensable, and regulatory streamlining removes the friction that consumes a scaling firm's scarce specialist capacity.
Empowering Scale-Ups: A City's Strategic Imperative
City governments should adopt a multi-faceted strategy, combining physical infrastructure development, stakeholder convening, and regulatory streamlining, tailored to their local ecosystem's specific scale-up challenges. The evidence base here is illustrative rather than exhaustive — a few documented examples, not a global survey — and drawn from public reports and academic literature rather than primary interviews with officials or founders.
For cities implementing such a strategy, the measurable indicator is documentation of new specialist hires and sustained revenue growth among local startups previously identified as high-potential. Those two signals capture both halves of the scale-up problem: whether firms are actually making the internal shift from generalist to specialist structures, and whether the surrounding ecosystem is converting that structural change into durable growth.
Sources
- How city governments can foster tech-sector growth — World Economic Forum
- How to move from startup to scaleup: key strategies for scaling a business model — ONE
- Global cities seek solutions to startup scale-up challenge — Vietnam Investment Review - VIR
- The Startup Scale-up Challenge; why growth is harder than launch – KBS
