Silicon Valley at the Top of the Global Startup Ecosystem in 2023

The 2024 Global Startup Ecosystem Report (GSER) by Startup Genome and the Global Entrepreneurship Network was released at London Tech Week, in collaboration with the Founders Forum, Informa Tech and London & Partners. Presented by Stephan Kuester, Managing Partner at Startup Genome, the GSER analyzes data from over 4.5 million companies across 300+ entrepreneurial innovation ecosystems and features rankings that indicate which ecosystems are currently driving innovation and deep knowledge about startup trends around the world.

Global key findings from the the 2024 GSER include:

• Top three global ecosystems: Silicon Valley remains at the top, followed by New York City and London tied for #2.
• The number of new unicorns in 2023 was down 58% from 2022 and 87% from the 2021 peak. With 15 unicorns, Silicon Valley again led all ecosystems for the most new unicorns in 2023, though this was down 80% from 2022. The Tashkent, Lyon, and Rhineland startup ecosystems welcomed their first unicorns in 2023.
• Series A funding amount in 2023 was down 46% from 2022, and the value of large exits ($50M+) fell 47% over the same period.
• In 2023, the Series A funding amount share for Top 40 ranked GSER 2024 ecosystems was 65%, down from 79% for these ecosystems in 2019. The share of Series A funding amount for the Top 100 Emerging Ecosystems reached 19% in 2023 vs. 13% in 2019.
• Q1 2024 has projected higher Series A funding amount and deal count than Q4 2023.
• Generative AI saw a surge in funding, with nearly 20% of all VC funding in 2023 going to GenAI-focused startups. GenAI VC funding increased 3x in 2023 compared to 2022. Deal counts nearly doubled.
• In 2023, more than half of new unicorns were in the GenAI and Deep Tech sub-sectors, a higher rate than in 2021.
• Late-stage Cleantech startups raised 2.5x more funding in H2 2023 than in H1 2020. Europe has outperformed the U.S. and China in terms of Cleantech Series A funding growth from 2021 to 2023.
• Seoul moved up three spots, now ranked #9, entering the Top 10 ecosystems this year.
• Tokyo has entered the global Top 10 for the first time, marking the most significant improvement among the Top 10 ecosystems.
• The top two Chinese ecosystems Beijing and Shanghai, have dropped in the overall rankings to #8 and #11. Shenzhen has shown impressive growth, moving up seven spots to rank #28.
• Europe is the most represented region in the Emerging Ecosystems Ranking, with a 42% share in the Top 100 Emerging Ecosystems, followed by North America with 27%.
• Madrid moved up 12 ranks, claiming to #1 in the Emerging Ecosystems Ranking.
• Barcelona moved up two positions in the Emerging Ecosystems Ranking, reaching #2.
• Athens has entered the Top 100 Emerging Ecosystems Ranking, reaching the 51-60 range in 2024.
  
• Greater Lausanne Region moved up 16 positions, reaching #11 in the Emerging Ecosystems Ranking.
• Jakarta (#6) and Metro Rhein-Ruhr (#9) both entered the Top 10 Emerging Ecosystems Ranking.
• Melbourne is ranking as the #32 Global Startup Ecosystem, moving up one spot from GSER 2023.
• Mexico City has shown impressive growth, reaching the 21-30 range in the Emerging Ecosystems Ranking from the 41-50 range in 2023.
• The top five ranking sub-Saharan African Ecosystems are Nairobi, Lagos, Cape Town, Johannesburg, Accra.
• Tel Aviv is the only MENA ecosystem ranking in the Top 40, globally moving up one place to #4 (tied with Los Angeles).

Now in its 12th year, the GSER provides insights into the world's leading startup ecosystems, emerging trends, and key challenges facing entrepreneurs. As explained in Startup Genome's press release, "The 2024 edition ranks the top 40 global ecosystems, a ranking of emerging ecosystems, and expanded regional rankings. The report, driven by a consortium of representatives from 40+ countries, looks at the current state of startup activity and related investment. It also highlights startup communities from a regional perspective, separately ranking ecosystems in Asia, Europe, Latin America, MENA, North America, Oceania, and sub-Saharan Africa. Contributions from thought leaders further enrich the report's extensive, evidence-based findings, which are the product of over a decade of Startup Genome's independent research and policy work."

I appreciate how the GSER is designed to provide valuable perspective on the global startup landscape and actionable recommendations for entrepreneurs, investors, policymakers, and other stakeholders looking to drive innovation and economic growth even in these challenging times.

What are your thoughts about GSER's key findings?

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.

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.

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.