Global Startup Economy Created Nearly $3 Trillion in Value

"The global startup economy remains large, creating nearly $3 trillion in value, a figure on par with the GDP of a G7 economy," says The Global Startup Ecosystem Report 2020, which was produced by Startup Genome, a policy advisory and research firm based in San Francisco, Calif., and Global Entrepreneurship Network, a Washington, DC-based entrepreneur advocacy organization. "Seven out of the top 10 largest companies in the world are in technology — the highest concentration of any industry sector among the top global companies — and 2019 saw close to $300 billion in venture capital investments around the world."

In her forward, Martina Larkin with the World Economic Forum says "The Global Startup Ecosystem Report (GSER) provides an important barometer of development across 100+ cities globally, which, for the first time, are all facing the common challenge of rebuilding as strict lockdown measures subside. Some of these hubs will see new digital companies coming out on top, with sectors previously in decline, like gaming and online education, resuming unparalleled growth. Others may struggle, and realize they need to take decisive action to avoid being left behind as the whirlwind of change sweeps away antiquated and analog routines."

Ms. Larkin adds: "Above all, it is critical that each hub and its startups, regardless of where they may fall in the ranking, remain connected, vibrant communities that can play a critical role in this reset."

The list ranks cities based on seven "success factors": performance, funding, market reach, talent, connectedness, knowledge, and infrastructure. Below are the report's key findings:

• The top five global startup ecosystems remain the same, although with some movement within them. Silicon Valley maintains its #1 position. New York remains at #2, although now London is up and tied with it. Beijing is at #4 and Boston is at #5. Among the top five global startup ecosystems, only London was not in the top five in the 2015 ranking. Tel Aviv and Los Angeles follow, both tied at #6.
• The 2020 rankings have seen the growth of many R&D powerhouses: those ecosystems growing largely building upon their strengths on research and patent production. Tokyo (#15) and Seoul (#20) are the prime examples of this, with both ecosystems scoring the max in the Knowledge Factor — a measure of R&D activity. Shenzhen (#22) and Hangzhou (#28) also fit this ecosystem archetype.
• The Rise of Asia is more visible this year, with 30% of the top ecosystems coming from the region, compared to 20% in 2012. Of the 11 new ecosystems that made it to the top ecosystems list, six are out of Asia-Pacific.
• There are two new entrants in the top 20 global startup ecosystems: Tokyo (#15) and Seoul (#20). They displace Bangalore (which fell primarily due to low levels of Funding) and San Diego.
• In addition to Tokyo and Seoul, new entrants among the top 30 include Shenzhen (the advanced manufacturing hub, at #22), Hangzhou (home to Alibaba, at #28), and São Paulo (#30, returning to the top ecosystems list after falling off in 2017).
• Six ecosystems debuted in the list of runners-up of top global ecosystems: Salt Lake-Provo and Dallas (tied at #31 with other ecosystems); as well as Copenhagen, Melbourne, Montreal, and Delhi, tied at #36 with Dublin.

The report encouragingly notes that "Startup Genome has nearly doubled the number of ecosystems studied since 2019 — assessing over 270 ecosystems across over 100 countries to rank the top 30 globally and runners-up. Our ranking this year goes beyond the top ecosystems to include 'Emerging Ecosystems' — the next 100 ecosystems after the top ones."

Moreover, "As startup culture and entrepreneurship spreads across the world, different ecosystems are gaining relevance and impacting economies in a meaningful way. The factor weights used to rank these ecosystems are slightly different from those used with top ecosystems (detailed in our methodology section) to reflect their emerging status and emphasize the factors that influence more in ecosystems that are just beginning to grow."

Key findings include:

• The top 10 Emerging Ecosystems are, in order: #1 Mumbai, #2 Jakarta, #3 Zurich, #4 Helsinki, #5 Guangzhou, #6 (tie) Barcelona, #6 (tie) Madrid, #8 Philadelphia, #9 Manchester-Liverpool, and #10 Research Triangle.
• Combined, the Emerging Ecosystems represent 49 countries and $348 billion in Ecosystem Value.
• Europe is the leading continent for Emerging Ecosystems, with 38 cities in the list followed by North America with 32 startup ecosystems and Asia-Pacific is third with 22 ecosystems.

"Since 2010, these ecosystems have combined to generate 115 billion-dollar club startups," the report explains. "Nearly 60 of these startup ecosystems across over 20 countries have seen either a unicorn or a billion-dollar exit. Of these, 27 ecosystems have seen at least two such deals. Startups have become a top growth engine of the economy and policymakers are putting more energy and focus into the development of their startup ecosystems."

While Silicon Valley continues to be the leading global market for startups, other cities worldwide are showing they possess the aforementioned success factors required to support a viable startup ecosystem. In presenting this information, the GSER serves as a useful tool for stakeholders to answer a variety of questions:

For founders and startup executives:

• Where should I create my tech startup to maximize my chances of success?
• Where should I open a second office?
• Where can I get the most bang for buck in terms of cost?

For investors:

• Where do startups have the best odds of raising additional funding?
• Which high-performing ecosystems have a gap in experienced local investors that I might be able to benefit from?

For policymakers:

• How should I change local policies to support our startup ecosystem during the current COVID-19 crisis?
• How should I measure the progress of our startup ecosystem?
• What are the biggest gaps in our startup economy I should focus on addressing first?

Do you find this report useful in answering the questions above?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.