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)
In the last few years fintech has taken a prime spot in R&D, investment and market value, and is increasingly crucial to the progress of financial services and the growth of businesses worldwide. Here to tell us why, and offer particular insight into the development of this key sector is Gary Turner, Co-founder and UK Managing Director of globally leading accounting software programme, Xero.
Fintech, despite being amongst the newest global industries, is already one of the most vital in terms of supporting the growth of businesses across the world. At the time of publication, there are 1,362 fintech companies across 54 countries with the US, UK and China holding strong as innovators and market leaders in financial innovation. Globally, businesses are working to become entirely digital, and early disruptors saw the opportunity to create a financial digital platform to perfectly compliment the modern way of working - the timing and execution of fintech allowed it to become the biggest industry in the world. But for the less initiated, this raises questions around how fintech has had such an influence in macro and micro economics.
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The key is simple – it creates a level playing field for businesses who aren’t restricted by software. SMB growth can often be restricted by the online tools available within budget, the data they have access to, and how quickly they can access it – all of these shortcomings have been recognised and seen as potential by the fintech industry. By using cloud-based software, business owners can interact with a real-time system of record, something that was previously only available to enterprise companies. This has helped create a central platform for small businesses and owners to share information with other businesses and partners, as industry relationships can be improved and built upon through open data.
Numbers in real time
Another relationship that has evolved is the one between a business owner and their finances. Originally, owners would have a recurring meeting with their accountant to get a briefing on their business’ performance, but cloud software has changed the routine. Now, with improvements to financial technology, owners can now log-in anytime to check in on the numbers that keep the business running. The advantages for an owner to oversee trends on a daily basis are paramount to their success, with charts and graphs making it simple to understand where you are over or under servicing. Quick data allows for quick action. Having data readily available in one place gives a business understanding of what their customers need.
Public vs private
This brings to light what fintech means for the private sector, and the public sector is looking to learn just how it can improve the way they work too. In the UK we have being trying to streamline the HMRC and other departments’ services by shifting to a digital services model – this is an example of institutions recognising how critical real-time financial data is for business success. In early 2017 the HMRC announced new concessions to the policy to support small businesses who were struggling with some of the technicalities of the roll-out - while most businesses will have access to a personalised digital tax account by the end of the roll out, free software will be available to the majority of small businesses, while those that cannot go digital will not be required to. Despite the recent changes, the overarching vision of the Making Tax Digital policy will ultimately be of benefit for the UK’s business infrastructure, as the appetite for digital services is growing and traditional paper-based processes gradually becomes obsolete.
A global change
The UK private and public sector have felt it necessary to make these seismic changes, and it’s interesting to see how it translates across the world. Unsurprisingly the US, UK, Europe and China have had the largest fintech investment in the past five years, but India is one country that has expanded its offering, with a $2.2 billion investment – the money being pumped into the global industry is phenomenal. Beyond the usual suspects, Luxembourg has experienced huge growth in its digital economy in the past 10 years and has invested substantially into its world-class IT infrastructure, all of which is provided to entrepreneurs looking to innovate in the fintech sector. Similarly, Hong Kong has earmarked $250 million for an innovation and technology fund designed to match funding from venture capital outlays in local tech startups.
It’s these reasons and more that has allowed fintech to evolve, but the growth isn’t forecasted to slow down. In the past 12 months, there has been more than $1 trillion worth of transactions processed, with more money comes potential for more learnings, the potential for more learnings must derive from intelligent software – this thirst for insight will only see the financial web grow more powerful.
With monumental funding and innovative initiative schemes, the next 12 months will only see the industry go from strength to strength as the rollout becomes commonplace for all businesses across the globe.
According to the Pulse of FinTech, the quarterly global report on FinTech VC trends published jointly by KPMG International and CB Insights, Asia’s FinTech funding has risen to US$2.6b in the first quarter of 2016. Following a significant pullback in funding in Q4’15, mega-rounds lifted quarterly investment into VC-backed FinTech companies by over 150%.
Global investment in private FinTech companies is said to have totalled US$5.7 billion in Q1’16, with US$4.9 billion specifically invested in VC-backed FinTech companies across 218 deals, a 96% jump in comparison to the same quarter last year. The fact that three mega-rounds accounted for 54% of VC FinTech investment in Q1’16 has resulted in the increase in funding. On a quarter-over-quarter basis, VC-backed FinTech deal activity rose 22% in Q1’16.
Warren Mead, Global Co-Leader of FinTech, KPMG International said: “Global VC investment into the technology sector may be experiencing a bit of a pause, however FinTech, propelled by some very large mega-rounds, has proven to be an exception to the rule. Investors are putting money into FinTech companies all over the world – from the traditional strongholds of China, the US and the UK – to up and coming FinTech hubs like Singapore, Australia and Ireland.”
“While FinTech startups continue to attract large investment both in the US and abroad, and investors gravitate to areas yet untouched by much tech innovation including insurance, recent events and public market performance suggest that growth-stage FinTech fundraising will be harder to come by moving forward in 2016.” commented Anand Sanwal, CEO at CB Insights.
Lyon Poh, Head of Digital + Innovation, KPMG in Singapore, added: “In Singapore, we have seen a flurry of activities in line with the government’s push for financial institutions to adopt innovative technology. For example, many insurers are building innovation centres and programmes to rapidly identify and adopt FinTech solutions to bring innovation back into their core businesses. This has in turn encouraged more FinTech startups to come to Singapore and use it as a base for developing their propositions, and for fund raising.”
