June 21, 2022

Today's Digital Economy Is the Economy, Says Annual Report on the Global Startup Ecosystem

The entrepreneurial universe was a much smaller place when Startup Genome published its first Global Startup Ecosystem Report (GSER) in 2012. As stated in its latest version of its annual report on the global startup ecosystem, "Six of the top 10 hubs were in the United States, and just one Asian city — Bangalore — broke the top-20 ranking. Four ecosystems accounted for the year's whopping nine unicorns (a term that would not even be coined until 2013). Almost two-thirds of early-stage funding was concentrated in North America."

Ten years later since the publication of its initial report, Startup Genome, a policy advisory and research organization for public and private organizations committed to accelerating the success of their startup ecosystem, says with "$1.65 trillion in funding, 1,227 unicorns, a global pandemic, and massive revolutions in everything from AI and social media to autonomous vehicles and precision medicine later, and the situation is very different. Today, the digital economy is the economy — or at least the economy's future."

Below are the report's key findings:
  • The same five ecosystems remain at the top of the ranking as in 2020 and 2021, but Beijing has dropped one place, with Boston taking its former place at #4. Silicon Valley is #1, followed by New York City and London tied at #2, Boston at #4, and Beijing at #5.
  • Seoul entered the global top 10 ecosystems for the first time, up six places from #16 in 2021 and #20 in 2020.
  • Several Indian ecosystems have risen in the rankings, most notably Delhi, which is 11 places higher than in 2021, entering the top 30 for the first time at #26. Bangalore has moved up one place from last year, to #22.
  • Overall, China's ecosystems have declined in the rankings, a reflection of the relative decline in early-stage funding in comparison to other ecosystems.
  • Helsinki has risen more than 20 places from last year, joining the runners-up category at joint #35.
  • A record 540 companies achieved unicorn status in 2021, up from 150 in 2020.
  • In 2021, Brazil saw 237% growth in the dollar amount of Series B+ rounds compared to 2020. The nation's total exit amount for 2021 was $49 billion, a huge leap from $1 billion in 2020.
  • Asia experienced a 312% increase in the dollar amount of exits over $50 million from 2020 to 2021.
  • In 2021, the dollar amount of exits in London grew 413% from 2020. The ecosystem's Series B+ rounds increased 162% in terms of dollar amount from 2020, and it saw 55% more $50 million+ exits in 2021 versus 2020.

With respect to the top 100 emerging ecosystems, the Startup Genome explains that these "ecosystems are startup communities at earlier stages of growth, and our ranking methodology is adapted to reflect this, to showcase the strengths in these ecosystems that have high potential to be global top performers in the coming years." Key findings from the top 100 emerging ecosystems include:
  • Oslo is in the top 20 Emerging Ecosystems (#19), a huge leap of over 20 places from last year, and a reflection of two unicorns — industrial IoT platform Cognite and online grocery Oda — helping to increase its Market Reach.
  • Minneapolis has moved up 18 places from last year, to #4. Six exits over $50 million and one $1 billion+ exit helped to improve its Performance score.
  • Manchester-Liverpool has moved up eight places from 2021, to #6. A $1 billion+ exit and Matillion — an integration platform for cloud data warehouses — becoming a unicorn add $7.8 billion to its Ecosystem Value.
  • India's recent success is reflected in both Chennai (tied #31–40) and Pune (tied #51–60) moving up in the rankings. The Chennai ecosystem saw a $1 billion exit in business software startup Freshworks, which moved to Silicon Valley after founding in India.
  • Mumbai's has moved out of the Emerging Ecosystems ranking and into the global overall rankings (tied #36). Three exits over $1 billion (including Nykka's $7 billion valuation at IPO) and six unicorns contributed to the move.
  • Pittsburgh moved up 10 spots from last year to #13, aided by Duolingo's $3.6 billion exit.
  • Prague has moved up more than 40 spots, to tied #41-50, thanks to three exits over $50 million and one over $1 billion. These big exits are helping to increase its ranking in Performance and Market Reach.

"The top 100 Emerging Ecosystems are collectively worth over $1 trillion in Ecosystem Value," the report notes, "which is a 96% increase from last year. Europe and North America still boast the majority of emerging ecosystems, and Latin America, MENA, and Africa have held steady in the number of ecosystems in the top 100 from last year, with five, four, and three respectively." What is more, "Asia has 17 entries in the Emerging Ecosystems ranking versus 18 last year. Oceania has the same two entries in the top 100 as last year: New Zealand and Brisbane."

The report also provides an important analysis on the global startup sub-sector, which include the following key findings:
  • Since the GSER 2021, there has been an overall increase in the growth of exits and a general slowing in the growth of Series A rounds. The increase in the growth of exits has helped investors hold dry powder (marketable securities that are highly liquid and considered cash-like), as revealed in the record high VC investment amounts.
  • Cybersecurity has received growing attention, as a side effect of the acceleration in digital transformation. Exit growth in this sub-sector has increased by 14% since the GSER 2021.
  • All sub-sectors have accelerated in growth overall, with the largest growth in artificial intelligence (AI) & big data (BD), Blockchain, Fintech, and Advanced Manufacturing.
  • AI & BD is becoming an overarching vertical that is increasingly overlapping with other industries both in terms of the amount of investment and count. In 2014, the overlap in the investment amount was outperforming the count, showing fewer investments in AI and tech. In 2020, the trend is the opposite, indicating competition among global AI startups to attract funds.
  • Cleantech is the only sub-sector that has seen a considerable increase in count at both Series A (by 35%) and exit (by 12%, both 2016-2017 vs. 2020-2021), indicating increased innovation and investor focus on this topic.
  • Advanced Manufacturing has grown by 70% in early-stage funding (2016-2017 vs. 2020-2021), driven by supply chain needs and a focus on improving efficiency and productivity through automation, monitoring, and failure prediction.

Having been involved with startups for close to 30 years, I concur with JF Gauthier, Startup Genome's founder and chief executive, that "The world of tech startups is changing. More importantly, tech startups are changing the world." The coronavirus pandemic accelerated the development of the digital economy. And as previously stated, today's digital economy is the economy.

What aspects of the report did find of particular interest or relevance?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

June 19, 2022

Is the US Economy Headed for a Recession?

"Is the US economy headed for a recession?" is a question many people, myself included, are asking these days. In a whitepaper titled with the same question, The Economist Intelligence Unit (The EIU) says "Some economic warning signs started to flash in early 2022, raising concerns that the US could be headed for a recession" Furthermore, "The US economy was one of the first to rebound from the negative effects of the covid-19 pandemic, with strong residential investment and consumer spending boosting real GDP by 5.7% in 2021. However, positive economic momentum has started to ebb in recent months. Real GDP contracted at an annualized rate of 1.5% in the first quarter of 2022 as the war in Ukraine sent energy prices soaring and China's zero-covid policy exacerbated existing supply-chain issues."

What is more, The EIU explains "that economic growth in the US will slow sharply over the course of 2022 and 2023, owing to stubbornly high inflation, rising interest rates and stalling growth elsewhere." The UK-based company expects "consumer demand to be resilient enough to avoid an outright recession, thanks in part to the tight labor market and strong household balance sheets. However, this does not mean that a recession is completely off the cards."

The whitepaper explores the three main downside risks to the US economic outlook, and identifies potential triggers for a recession:
    Risk #1: Second wave of inflation

    Risk scenario: Unforeseen factors prompt another spike in inflation—from an already high level—in late 2022 or early 2023, causing household spending to contract.
    Possible triggers: Double-digit increases in the consumer price index for two consecutive months (or more) in the second half of 2022.

    Risk #2: Overly-aggressive Fed

    Risk scenario: The Fed overestimates the strength of consumer spending in the summer and raises interest rates more aggressively than we currently expect, causing consumer spending to crater in the autumn.
    Possible triggers: Combined interest-rate hikes of 150 basis points or more in June and July, coupled with a further decline in consumer confidence measures.

    Risk #3: Asset price collapse

    Risk scenario: A combination of rising interest rates, high inflation, concerns over the economic fallout from the war in Ukraine, and worsening business and consumer sentiment spook US markets and cause asset prices to crash.
    Possible triggers: The US bear market deepens. US stock market indices fall by 40% or more from their recent peak by July as a result of one or more of the factors above, without changes in monetary policy to compensate.

    Additional key points from the report include:
    • Price pressures to wane in the second half of the year as energy prices stabilize and supply chain constraints begin to ease. However, if inflation were to jump later in 2022, after rising interest rates and falling real wages, an outright contraction in consumer spending could occur.
    • The Fed will raise interest rates by a total of 300 basis points. A surge in consumer spending in the summer, coupled with still-high inflation, could potentially push the Fed to tighten more aggressively than The EIU currently expects, which would likely be too much for households to bear.
    • US stock prices are expected to cool in the second half of 2022. The Fed will maintain a gradual approach to tightening, helping to prevent a severe collapse in asset prices that would exacerbate the drop in consumer spending.

    While it is difficult to predict the future direction of the US economy, The EIU's paper provides valuable information on which risks to monitor. What efforts are you taking to mitigate the impact of a possible recession?

    Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

    June 2, 2022

    GSMA Predicts There Will Be 362 Million Mobile Internet Users in the MENA Region by 2025

    "Since the emergence of Covid-19, mobile networks have been instrumental in providing the reliable connectivity needed to sustain social and economic activities," the GSMA says in its annual report on the state of the mobile economy in the Middle East and North Africa (MENA) region. "As countries bring the pandemic under control, a priority for governments" in the region "and elsewhere is to drive economic recovery and promote sustainable development. Digital services and technologies will be crucial to realizing this objective, by stimulating economic growth, mobilizing the workforce and enabling industrial efficiencies."

    The report's key findings include:
    • Mobile internet users surpassed 300 million in the region in 2021
    • There will be 116 million 5G connections in MENA by 2025
    • Mobile operators continue to push ahead with network transformation
    • The mobile industry continues to deliver benefits to the economy and wider society
    • Policy decisions are fundamental to accelerate MENA's digital future

    "The number of mobile internet users in MENA exceeded 300 million in 2021, with penetration due to reach 50% of the population by the end of 2022," the GSMA notes. While the six countries that comprise the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) "are home to the highest concentration of mobile internet users ... low take-up rates elsewhere reflect the work that remains to connect offline populations."

    What is more, "Smartphone adoption is growing well and is set to increase most strongly in MENA's less advanced mobile markets over the period to 2025, underpinned by continued network investment from operators. Increasing user engagement with bandwidth-hungry applications such as video will lead to a surge in data consumption across the region, growing by 430% between 2021 and 2027."

    The GSMA also explains that 4G may be MENA's leading mobile technology with almost 270 connections at the end of 2021 but "4G adoption is projected to peak in 2023 as consumers increasingly migrate to 5G plans." The UK-based organization, which represents the interests of mobile operators worldwide, adds that while "5G remains at a nascent stage" throughout the MENA region, the "current adoption rate of just 1% is expected to grow to 17% by 2025. However, operators in the GCC Arab states are among the global leaders in 5G, with competition and government support triggering launches of some of the world's first and fastest next-generation mobile networks. 5G connections in this part of MENA are set to reach 41 million by 2025 (49% of total connections)."

    Investors and companies looking to capitalize on the growth of 5G in MENA will appreciate that "[w]hile the consumer market has been the focus of early 5G deployments, B2B is the largest incremental opportunity in the 5G era, with a raft of digital transformation projects underway across industries. To fully exploit these opportunities, 5G leaders in MENA are investing in new capabilities, with edge computing a priority."

    As for the mobile industry delivering benefits to MENA's economy and wider society, the GSMA encouragingly notes that mobile technologies and services generated "5.4% of GDP in the region in 2021 – around $255 billion of economic value added. The mobile ecosystem also supported approximately 890,000 jobs (directly and indirectly) in 2021 and made a substantial contribution to the funding of the public sector, with around $20 billion raised through taxation."

    With respect to mobile's contribution to economic growth, in 2021, the report points out that "mobile technologies and services generated 5.4% of GDP in MENA – a contribution that amounted to $255 billion of economic value added. The mobile ecosystem also supported approximately 900,000 jobs (directly and indirectly) and made a substantial contribution to the funding of the public sector, with $20 billion raised through taxation on the sector."

    Looking forward, the report says "mobile's contribution to the regional economy will grow by more than $20 billion (approaching $280 billion)" by 2025 "as countries in the region increasingly benefit from the improvements in productivity and efficiency brought about by the increased take-up of mobile services."

    As for policy decisions being fundamental to accelerate MENA's digital future, the report says:
    In a post-pandemic world, digital connectivity is expected to become even more vital to citizens, firms and institutions alike. Regulatory frameworks that are conducive to investment will be crucial to incentivizing the deployment of telecoms infrastructure. Such infrastructure will be key to economic recovery and future crisis resilience. Seizing the mobile opportunity will require forward-looking spectrum policy, with well-designed assignment spectrum roadmaps, fair prices and technology-neutral licenses needed to support the growth of 5G over the course of this decade and beyond.
    Lastly, I support the GSMA's assertion that "[i]t is also more important than ever before to address the barriers to mobile internet adoption and usage in MENA, while data protection regimes must ensure privacy, safety and security for those engaging in the digital economy."

    Infographic: GSMA

    With the adoption of the mobile internet continue to rise coupled with investments in 5G, companies worldwide that develop software-as-a-service solutions should consider developing solutions localized for smartphone users in the MENA region. Which mobile solutions do you think consumers or enterprises will utilize in the coming years?

    Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

    June 1, 2022

    Five Elements Organizations Should Monitor for Effective External Attack-Surface Management

    According to an infographic produced by Microsoft, "The cybersecurity world continues to become more complex as organizations move to the cloud and shift to decentralized work. Today, the external attack surface spans multiple clouds, complex digital supply chains, and massive third-party ecosystems. Consequently, the sheer scale of now-common global security issues has radically shifted our perception of comprehensive security."

    The infographic highlights "five areas that help better frame the challenges of effective external attack-surface management." The information is provided by RiskIQ, a company Microsoft acquired in 2021 to help organizations assess the security of their entire digital enterprise.

    1. The global attack surface may be bigger than most think

    "In 2020, the amount of data on the internet hit 40 zettabytes, or 40 trillion gigabytes. RiskIQ found that every minute, 117,298 hosts and 613 domains add to the many interwoven threads making up the global attack surface's intricate fabric. Each of these web properties contains a set of elements, such as its underlying operating systems, frameworks, third-party applications, plugins, and tracking code. With each of these rapidly proliferating sites containing these nuts and bolts, the scope of the global attack surface increases exponentially."

    2. Sometimes, threat actors know more about an organization's attack surface than their SOC does

    "The rapid growth of internet-exposed assets has dramatically broadened the spectrum of threats and vulnerabilities affecting the average organization. With the advent of COVID-19, digital growth accelerated once again, with almost every organization expanding its digital footprint to accommodate a remote, highly flexible workforce and business model. The result: attackers now have far more access points to probe or exploit."

    What is more, "With the rise of global-scale attacks orchestrated by multiple threat groups and tailored for digital enterprises, security teams need to mitigate vulnerabilities for themselves, third parties, partners, controlled and uncontrolled apps, and services within and among relationships in the digital supply chain."

    3. Threat actors don't have to compromise assets to attack an organization or its customers

    "Most cyberattacks originate miles away from the network; web applications comprised the vector category most commonly exploited in hacking-related breaches. Unfortunately, most organizations lack a complete view of their internet assets and how those assets connect to the global attack surface. Three significant contributors to this lack of visibility are shadow IT, mergers and acquisitions (M&A), and digital supply chains."

    4. The mobile attack surface goes beyond major mobile app stores

    "Each year, businesses invest more in mobile as the average consumer's lifestyle becomes more mobile-centric. Americans now spend more time on mobile than watching live TV, and social distancing caused them to migrate more of their physical needs to mobile, such as shopping and education."

    However, "These rogue apps appear in official stores on rare occasions, even breaching the major app stores' robust defenses. However, hundreds of less reputable app stores represent a murky mobile underworld outside of the relative safety of reputed stores. Apps in these stores are far less regulated than official app stores, and some are so overrun with malicious apps that they outnumber their safe offerings."

    5. Threat infrastructure is more than what's on the network

    "Today's global internet attack surface has transformed dramatically into a dynamic, all-encompassing, and completely entwined ecosystem that we're all a part of. If you have an internet presence, you interconnect with everyone else, including those that want to do you harm. For this reason, tracking threat infrastructure is just as important as tracking your own infrastructure."

    The infographic also points out that "More than 560,000 new pieces of malware are detected every day, and the number of phishing kits advertised on underground cybercrime marketplaces doubled between 2018 and 2019. In 2020, the number of detected malware variants rose by 74 percent."

    The infographic concludes that:
    Traditionally, the security strategy of most organizations has been a defense-in-depth approach starting at the perimeter and layering back to the assets that should be protected. However, there are disconnects between that kind of strategy and the attack surface, as presented in this report. In today’s world of digital engagement, users sit outside the perimeter—as do an increasing number of exposed corporate digital assets and many of the malicious actors. As such, companies need to adopt security strategies that encompass this change. Applying Zero Trust principles across corporate resources can help secure today's workforce—protecting people, devices, applications, and data no matter their location or the scale of threats faced.
    What recommendations do you have on how organizations can effectively monitor these five elements?

    Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.