The report by Startup Genome provides an insightful overview into the startup ecosystem around the world in 2017. In partnership with GEN, Crunchbase and Orb Intelligence, Startup Genome has used an overall assessment framework that enables ranking based on key concepts that are deemed relevant to startup ecosystems in 2017.
Startup Genome’s comprehensive Global Startup Ecosystem Report 2017 is aimed at providing an overview of the ‘global start-up revolution’ and its benefits across cities. These benefits include job growth, economic activity, and innovation, but also emphasise the need to bring more cities into the ecosystem’s fold. Through surveys and secondary research from partners and stakeholders such as 40 city members, entrepreneurs, investors, Startup Genome mapped 10,000 founders across over 100 cities for its research.
Startup Genome provides a way for entrepreneurs to spread information about their journeys and ecosystems. In particular, its partnership with Global Entrepreneurship Network (GEN) has enabled an understanding of the capital and global connections that help drive growth in smaller ecosystems rather than innovation hubs such as London and Silicon Valley.
Key findings
• , Although there is no recipe for building an innovation hub like Silicon Valley, original ideas come from unexpected places but also take strategic investment in a vision for an innovation-driven economy. The report provides ideas and tools to use this space, as well as lessons driven by useful insights developed overtime and rigorous data analysis from such ecosystems. Thus, the model codifies how ecosystems function, quantifies factors that shape their performance and identifies public policies for growth.
• , While capital and people are important for the development lifecycle of the startup ecosystem, competition for resources is fierce and timing is as well.
• , A sense of urgency is required in smaller economies in order to develop new and young businesses for economic growth. At the current rates, the tech sector is growing twice as fast as the global economy but even those numbers are considered understated as trillions of dollars in hidden economic value is being created by technology. Nevertheless, technology’s payoffs are not considered uniform as there is divergence in regions with respect to productivity and support systems.
Furthermore, the concentration of start-up ecosystem value also differs in areas depending on competitors and networks. Technological inequality also exists among workers as different countries struggle with unrest, uncertainty and demographic changes that affect the sturdiness of ecosystems. Therefore, while global economic value from technological change is accelerating, aggressive investments are needed in start-ups as the report projects a 20 year period for ecosystems to begin thriving.
• , The report finds that start-up ecosystems are multi-dimensional and through work with research partners in GEN, the analysis can be extended for innovative data collection that helps start-ups. The research began in 2011 and has focused on quantifying the impact of internal success and failure factors under start-ups’ founders, and external success factors that qualify their ability to succeed.
The research follows two steps. First, it uses a Lifecycle Model of metrics to identify phases of development in ecosystems. Second, the report quantifies the ecosystem’s performance across eight categories that are considered essential for ecosystem success, where the rankings are driven primarily by which ecosystems early start-ups have a high chance of succeeding globally. However, the report also acknowledges that these indicators only capture part of the overall ecosystem framework.
Lifecycle model
Measuring an Ecosystem’s Lifecycle based on the fact that city leaders often struggle to build ecosystems around tech start-ups, because they are characterised by dynamic life cycles of companies rapidly changing software technology, and difficulty in capturing the evolution of start-ups.
The report therefore builds a Lifecycle Model based on quantifying the phases of start-up ecosystems and what shapes their evolution. It is meant to capture factors that drive the success of start-ups and discern challenges through making ranking-based comparisons of ecosystems.
The ranking is primarily driven by which early stage start-ups have a chance at being successful globally and considers scores along metrics such as performance, funding, market reach, talent, start-up experience, and resource attraction.The following four phases of an ecosystem’s development are considered in the model:
1) Activation • Generally characterised by low output, 1000 or fewer start-ups, limited experience and resource gaps, with an objective to grow and build a network of local talent and investors.
2) Globalisation • Characterised by local recognition through large exits (over $100 million), around 2000 start-ups, with an objective to foster global ecosystems and connections.
3) Expansion • Characterised by several multi-million dollar exits that have elevated the ecosystem to the global stage, over 2000 start-ups but gaps remain in funding. Objective to increase global connectedness and fill resource gaps.
4) Integration • Characterised by more than 2000 start-ups, balanced resources, and an objective to integrate ecosystems across countries, optimise laws and policies, and spread benefits to other sectors of the economy.
The report is also clear in identifying key indicators that enable valuation and output capturing within each phase. Amongst these are size, start-up experience, resources, and triggers. The findings suggest that size is useful as a measure that precedes growth of other resources and in areas of high density (e.g. Silicon Valley), suggests a relationship between growth, access to resources and city size. Start-up experience refers to the time over which a labor force accumulates know-how and is generally captured in exits.
Resources are also considered an indication of ecosystem performance as exits drive up resource attraction (e.g. human capital and customers through increased global connectedness) within different phases of growth. With reference to resource attractiveness, triggers are considered externally impressive exist that spark high increases in resource attraction and drive the growth of ecosystems to the next phase of their lifecycle. Often, the number and size of exits needed to trigger this varies with factors such as immigration barriers, IPOs, geography, the rhythm of flow on exits, and the attractiveness of sub sectors (e.g. Artificial Intelligence versus eCommerce).
Global connectedness
Startup Genome’s findings also emphasise the need for global connectedness for faster growth and better performance, however limited data makes it difficult to quantify global connectedness. The report finds that Silicon Valley, London and New York City are three ecosystems that cast the widest net of Global Connectedness as places where start-ups everywhere are aiming to connect for ideas and money. Other cities like Tel Aviv and Singapore also stand out in terms of ‘outbound connectedness’, which is defined as those ecosystems that are most connected to top performing ecosystems like Silicon Valley, London and New York City.
Another indicator in this area is the average percentage of users based outside an ecosystem’s immediate region. Some top performers here are Tel Aviv, Jerusalem, Silicon Valley, and Berlin, where less successful ecosystems are Los Angeles, Chicago, and Seoul. Furthermore, within this hierarchy, global connectedness is seen as a way to foster innovation, and to bring in new ideas, more customers, stronger networks, and faster growth.
Startup Genome’s Top Ten Start-up Ecosystems in 2017
- Silicon Valley
- New York City
- London
- Beijing
- Boston
- Tel Aviv
- Berlin
- Shanghai
- Los Angeles
- Seattle
For access to the full Global Startup Ecosystem Report 2017 by Startup Genome, click here.
