Ranking the top startup ecosystems around the globe

Silicon Valley, London, and New York City are the world’s top three startup ecosystems, according to a large study by Startup Genome, the world's leading innovation policy advisory and research firm.

For founders considering a move to a city with high-performing startups and a well-connected community, the annual Global Startup Ecosystem Report (GSER) is the most comprehensive study of its kind.

Top 5: The report ranked Silicon Valley as the No. 1 startup ecosystem (no surprise there) followed by New York City and London, which tied for No. 2. Beijing and Boston followed at No. 4 and 5, respectively.

The study: Produced by Startup Genome and the Global Entrepreneurship Network, the 290-page report analyzes 280 innovation ecosystems and more than 3 million companies. I’ll dive into the methodology below but the report ranks communities based on where early-stage startups will most likely build globally successful companies - not just regional powerhouses in their localities.

Concepts: According to startup guru Steve Blank, startups are defined as a “temporary organization designed to search for a repeatable and scalable business model,” per the study. Ecosystems are a cluster of startups that draw from a shared pool of resources within a 100-kilometer radius.

Startup impact: Collectively, startups are economic behemoths. The global startup economy created over $3.8 trillion between January 2018 and June 2020 — more than the individual GDP of most G7 countries. 79 startup ecosystems are now generating over $4 billion each year, which is more than double the number identified in 2017.

Why it matters: While these rankings might excite PR teams, the GSER’s real value is in curating important data for founders, investors, and policymakers on what it takes to build ecosystems that support startups and innovation. Understanding why some ecosystems grow while others lag and how they can improve themselves increases access and odds of success for entrepreneurs around the world.

COVID fallout: The pandemic hit Main Street businesses hard but lit the fuse on tech startups. As more people flocked to remote work, Internet capacity grew 35 percent in 2020, according to market-research firm Telegeography. Global e-commerce hit $26.7 trillion in 2020 — up 19 percent, according to the United Nations. People buying food and household items online grew by an average 30 percent worldwide.

VC insanity: One driver of tech startups' COVID boom is the deluge of VC investment. In the first half of 2021, VC deals hit $288 billion — up 95 percent from $148 billion during the same period in 2020. The volume of VC dollars now makes the mythical “unicorn” relatively common. There are now more than 800 companies with valuations of more than $1 billion, according to CrunchBase.

IH nation: This ecosystem study makes me think about the value of virtual communities like Indie Hackers — given our community is already making $60 million in Stripe-verified ARR. While the GSER is intended to inform policymakers in creating more supportive physical communities, its definition of an ecosystem would exclude Indie Hackers. Perhaps someday we’ll see a virtual startup ecosystem ranking.

Study methodology: The weighted ranking criteria look at the performance of startups in an ecosystem (exits and valuations), their funding access, market reach, connectedness, talent, and patent activity. Check out its full methodology here.

Power of community: Researchers say that not only do communities with high levels of local connectivity support more startups, but startup founders "grow revenue twice as fast as those with lower levels [of connectivity].” Interestingly, the organization notes that physical proximity isn’t as important as the depth of relationships that are built.

Top 10 Startup Ecosystems:

1. Silicon Valley
2. New York City
3. London
4. Beijing
5. Boston
6. Los Angeles
7. Tel Aviv
8. Shanghai
9. Tokyo
10. Seattle

Top 10 Emerging Ecosystems:

1. Mumbai, India
2. Copenhagen, Denmark
3. Jakarta, Indonesia
4. Guangzhou, China
5. Barcelona, Spain
6. Estonia
7. Wuxi, China
8. Madrid, Spain
9. Zurich, Switzerland
10. Miami, United States

What are your thoughts on the rankings? Check out where your city ranked here.