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Where is the Perfect Location for Startups to Grow?

Posted: 23rd March 2017 by
Finance Monthly
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Startup Genome, in partnership with the Global Entrepreneurship Network, recently released The Global Startup Ecosystem Report 2017 (GSER), a comprehensive look at how regions foster and sustain vibrant startup ecosystems. It reveals how successful tech innovation is being led by young entrepreneurs all over the world. The top five regions in this year's ranking are Silicon Valley, New York City, London, Beijing and Boston. All 55 cities participating in this year's research were rigorously analyzed based on their performance and eight factors driving startup success: funding, market reach, global connectedness, technical talent, startup experience, resource attraction, corporate involvement, founder ambition and strategy.

The latest report, which is Startup Genome's third and most comprehensive effort to date, draws upon the voice of entrepreneurs -- with more than 10,000 startup leaders participating - gathered through the efforts of 300 partner organizations. At a time when many regions feel left behind by a startup and innovation economy that has concentrated in super-regions globally, GSER's data and analysis is intended as a guidepost for helping founders, employers, policymakers and regional leaders to accelerate the growth of their local startup ecosystems.

Major report findings include:

  • London is now a top 3 startup ecosystem globally, moving from its prior ranking position of #6
  • Assessed for the first time, Beijing and Shanghai came in at #4 and #8, respectively
  • Of the top 20 cities, Los Angeles and Chicago saw the biggest drop in this year's rankings mainly due to their lower global connectedness
  • Montreal, Moscow and Sao Paulo all departed the top 20
  • Silicon Valley lost its first place in the 'Talent' category due to high salaries and challenges for early-stage startups to attract experienced talent
  • Beijing was ranked 2 in the 'startup experience' category, beating out New York City, London and Boston
  • Due to its impressive performance for its relatively small size, Stockholm ranked #14

Major insights revealed by this year's report include:

  • Concentration remains a major concern: a handful of geographic markets today are capitalizing on the economic benefits of global startup innovation, with four clusters capturing most of the global activity. In 2015 and 2016, the top 10 ecosystems by sum of exit value (not the top 10 according to our multi-variable ranking) captured about 85 percent of the global exit value of tech startups. These 10 cities are all located in only four countries. It's important that the tech industry diversifies geographically in order for more cities to participate in the job creation and economic growth created by the tech sector and for it to become more evenly distributed.
  • Global connectedness can be measured and is a predictor of success: it is now demonstrably possible to quantify the networks that are created by entrepreneurs and to prove that global connectedness leads to faster growth and greater odds of creating globally leading startups. The impact of global connectedness comes when a company can understand the global market need, sell to customers in other markets and "go global," all of which are critical for startups to grow beyond local ambitions toward high-value outcomes. Global connectedness is ultimately a key ingredient towards leveling the playing field and distributing startup ecosystems more evenly
  • The time to invest is now, but the investment required is substantial: it's generally accepted that it requires at least 10 years if not 20 for a vibrant entrepreneurial ecosystem to develop in a city or region. In New York City, where a vibrant startup ecosystem has only coalesced in the last few years, the seeds were planted at least two decades ago. Building on prior efforts, Israel and Singapore implemented innovative and aggressive policies in the 1990s to spur the growth of their startup ecosystems. Singapore appeared in the top 10 ranking for the first time in 2015.

The importance of tech is increasing exponentially and cities and civic leaders must invest aggressively now in order to create a conducive environment for tech founders to build global companies from the ground up and to attract the most advanced thinking and intellectual input from potential partners, customers and investors.

"We're seeing a lot of demand for insight into what makes the world's most successful innovation ecosystems tick, and how this knowledge can be replicated and scaled in different regions around the world," said JF Gauthier, CEO, Startup Genome. "Civic leaders want to invest in innovation, entrepreneurship and job creation, but they often lack the know-how to quantify what development stage their local ecosystem is at and what tangible policies and activities to focus on in order to accelerate through the ecosystem lifecycle. This report offers a concrete starting point."

"Startup Genome has a track record of producing strong analysis of what drives innovation at the local and regional level. That's one of the reasons we partnered with them for this year's report," said Jonathan Ortmans, President, Global Entrepreneurship Network. "Our mission is to connect entrepreneurs, investors, researchers, policymakers and other startup champions around the world and to begin defining concrete metrics around what drives innovation. This year's report and data provide the perfect backdrop for discussions at the Global Entrepreneurship Congress and we are excited that it is being released here with thousands of delegates from 170 countries."

(Source: Startup Genome)

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