Startups are fast arising, and sometimes fast disappearing, business that are able to quickly scale to become multi-million or even billion pound companies. Startups require different resources however to be successful, with cities and regions offering the kinds of skills and resources needed for them to grow. When it comes to providing an optimal startup ecosystem, Silicon Valley still is the undisputed number one.
In a recent report from Compass, titled ‘Global Startup Ecosystem Ranking’, the global software provider for startups and tech companies develops an index of the best places in the world for startups and innovative small businesses. The index is produced by ranking ecosystems along five major components: Performance, Funding, Talent, Market Reach, and Startup Experience. The report is based on a survey of 11,000 startups collected over a period of 5 months, supplemented with information from more than 200 interviews with entrepreneurs from 25 countries. Further insights were gathered from content partners, including Deloitte, Crunchbase, Global Entrepreneurship Week, Orb Intelligence, Dealroom, and many other incubators, accelerators, VCs, policy makers, and academics.
One of the key findings from the report is that the startup landscape has changed radically in the past 20 years. In 1995 much of the startup activity was limited to Silicon Valley and Boston, while today it has become a worldwide phenomenon, with cities like New York, Tel Aviv and London becoming bastions of technological becoming.
Silicon Valley remains the #1 place in the world to begin a startup, with the best access to talent, funding, startup experience and performance, with market reach the only lagging category. New York has come to take over Tel Aviv’s previous spot, at #2, showing strong performance in every category but talent. Boston now sits in the #4 spot, in comparison to the leaders lacking a large pool of top-class talent – at #12 – and market reach.
While the top four locations are in the US, Tel Aviv comes in at #5 with strong talent and startup experience, as well as significant funding. The first European city shows itself at the number six spot, which is taken by London. London has strong market reach and performance, although UK’s capital lacks funding sources and startup experience. Berlin has jumped six spots to come in at #9, with an underdeveloped market reach holding it back from a higher position. Amsterdam for the first time makes the list, coming in at number 19, with good market reach, performance and startup experience. São Paulo is the only Latin American ecosystem in the top 20.
In terms of exists, where startups go public or are taken over through an M&A, Silicon Valley by far leads the pack with an astounding 50% of the value of all startup exits within the top 20 startup ecosystems over the past two years, as much as every other ecosystem combined. While the value of the pie going to Silicon Valley has remained relatively stable, with 55% in 2012 and 41% in 2014, the size of the pie itself has grown considerably.
In terms of the relative growth rate of exit value, Silicon Valley has grown by 45%, however, places like London are growing three times in value, Amsterdam four times, while Berlin has grown twenty times in the same period (due primarily to the two big IPOs of Rocket Internet and Zalando). Over the coming years the authors expect Silicon Valley to stay in the lead, even while other ecosystems grow at a faster pace.
Last month Consultancy.uk featured a similar analysis from Accenture, Nesta and Catapult. In their view New York, London, Helsinki, Barcelona and Amsterdam are the top five performing cities when it comes to supporting innovation and entrepreneurship.