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I. The Increasing Socioeconomic Impact of Startup Ecosystems
- Beijing to rank in the top 5
- Shanghai to rank in the top 15
The following ecosystems all scored highly and were contenders for a spot among the top 20:
- Atlanta, Delhi, Denver-Boulder, Dublin, Hong Kong, Mumbai, Stockholm, and Waterloo.
III. Five Key Findings
1. Ecosystems have become more interconnected and startup teams have become more international:
North America this is 41%.- 27% of all funding rounds have at least one investor from abroad. (North America 20%, Europe 38%, Asia-Pacific 29%)b) Globally distributed startup teamsIn the top 20 ecosystems, the number of offices that are 2nd offices from startups outside the ecosystem or headquarters of startups that were founded elsewhere and moved to the ecosystem, rose by 8.4x from 2012 to 2014.c) International Teams:The number of foreign employees within a startup is 29% on average for the top 20 ecosystems (Silicon Valley 45%)
2. Exit Values:
IPOs of Rocket Internet and Zalando).Full Exit Growth Table: (2013-2014 2-year moving average)
|New York City||1.4x|
Europe vs. U.S.Exit value grew much faster in the top European ecosystems than the top ecosystems in the U.S.: 4.1x Europe versus 1.5x U.S. (2012-2014), yet in 2014 the volume of exits was still on average 82% higher in American startup ecosystems than in European ecosystems.Analysis:Over the coming years we expect Silicon Valley to stay in the lead, even while other ecosystems temporarily grow at a faster pace, with the expectation of ultimate convergence towards an equilibrium that looks a fairly conventional 80/20 power law; i.e. Silicon Valley capturing 30-50% of the total exit pie, the next three startup ecosystems capturing an additional 30-50% of the pie and the following top 16 startup ecosystems capturing the remaining 20% of the total exit pie.
3. VC Investment Trends in Startup Ecosystems:
Total venture capital investment across the top 20 ecosystems rose 95% from 2013 to 2014.a) VC Growth:The ecosystems
with the most growth in VC investments were Bangalore (4x), Boston (3.7x), Amsterdam (2x), and Seattle (2x). Meanwhile, Silicon Valley almost doubled up with 93% growth from 2013 to 2014, with indications from Crunchbase that almost all of the increase in Silicon Valley funding was in late stage Series B and Series C+ capital rather than early stage capital, which was relatively stagnant.b) Seed Stage Capital Growth:The startup ecosystems with the fastest annual growth in the number of seed rounds over the last two years were Bangalore (53%), Sydney 33%), and Austin (30%).
4. Ecosystem Ranking Changes since 2012 : Winners and Losers
The startup ecosystems which made the biggest leaps are New York, Austin, Bangalore, Singapore, Berlin and Chicago. New York City made a significant leap among the established
players, moving from position #5 to #2 to take the silver medal. Austin, Texas, meanwhile leapt all the way into #14th place, whereas three years ago they didn’t even crack the top 20. Bangalore moved from #19 to #15, Singapore from #17 to #10, Berlin from #15 to #9, and Chicago from #10 to #7.The startup ecosystems
which made the biggest falls are Vancouver, Toronto, Sydney, and Seattle. Vancouver slipped out of the top 10 from position #9 to #18, Toronto slid from #8 down to #17, Sydney dropped from #12 to #16, and Seattle fell from #4 to #8. Again, all of these ecosystems did grow in the past three years, but not as fast as other environments, which puts them at risk of eventually being left behind.Three ecosystems fell out of the top 20 completely since 2012: Santiago, Melbourne, and Waterloo. Santiago experienced fast “catch up” growth for several years but is now just a bit above average with a growth index of 2.6 (average = 2.4). The growth of Melbourne likely took a hit due to its close proximity to the larger startup ecosystem of Sydney. Smaller ecosystems with close proximity to larger ecosystems often have a hard time continuing to grow due to new and existing talent and capital migrating to the larger nearby ecosystem.Regarding Waterloo, our methodological change of removing Startup Output per capita as a performance metric is the main reason for its lower ranking. It has a Growth index of 2.45, which, while only slightly above average, is significantly higher than most of the lower ranked ecosystems in the top 20.
5. Gender Equality amongst Startup Founders
The lack of gender equality is common across all startup ecosystems. No ecosystem comes close to an equal share of male and female founders, although psychologists and sociologists continue to debate whether 50/50 is the target to strive for [see this article on gender differences by Florida State Psychology professor Roy Baumeister]. Overall, the trend for female entrepreneurs is significantly up—the number of female founders in the global startup ecosystem has grown by 80% over the last three years. In 2012, 10% of startups had a female founder, as compared to the 18% global average among the top 20 in 2015. Chicago, with 30% female founders, has the greatest percentage of women entrepreneurs out of the top 20 startup ecosystems.
IV. How it differs from the 2012 study and why
Having access to a larger volume of data combined with the development of a mathematical model with a high degree of fit drove a few changes in this year’s ranking methodology. The most significant change was the removal of the metric “Startup Density” (number of startups per capita, a measure of density) from the Performance Index. This changes the scoring formula away from density to overall value and size of the ecosystem.In interviews with many stakeholders (investors, entrepreneurs and others) we concluded that there is an interest for larger ecosystems supported by the availability of more resources. The question was how to compare the performance of different ecosystems. Is an ecosystem with $10 billion in value and 1,000 startups in a city with a metropolitan population of 5 million (Startup Density of 0.2 startup per thousand people) better than one with $15 billion in value and 1,500 startups in a city of 10 million people (0.15 startup per thousand people)? Our intuition, validated by interviews, modeling and correlation between different factors, showed that both higher absolute value and higher number of startups are better, so we scored them separately. Startup Density was neither correlated with other performance variables nor drove the decisions of entrepreneurs and investors. Therefore we chose to focus the Performance Index on the value and size of the ecosystem. We are conducting more research to allow for more nuanced relationship in future versions.This change is one reason why Tel Aviv—despite its continuous and well above-average growth rate—and the Waterloo Region in Canada—with its very small population (slightly above half a million)—are ranked lower in our 2015 ranking than in our 2012 one.
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