The $3 Trillion Global Start-up Economy: How Ecosystems Drive Growth
The global startup economy is worth nearly $3 trillion, a rise of 20% in two years. That’s the size of a not-so-small economy, larger than the GDP of the UK, France, or Brazil. Technology-driven startups aren’t just contributing to economic growth, in many ways, they are economic growth.
The Global Startup Ecosystem Ranking
The 2019 Global Startup Ecosystem Report (GSER) has just been published by Startup Genome in partnership with the Global Entrepreneurship Network. It is the world’s most comprehensive and widely-read research on startups. The report ranks the top 30 startup ecosystems around the world, noting that:
- The top 5 are: Silicon Valley, New York City, London, Beijing, and Boston.
- Paris cracked the top 10, moving up two spots from 2017 to #9 overall.
- TNW’s host ecosystem, Amsterdam-StartupDelta, had the biggest jump in the top 30, climbing four spots to #15 globally.
- 9 European startup ecosystems are ranked in the top 30: London, Paris, Berlin, Stockholm, Amsterdam-StartupDelta, Lausanne-Bern-Geneva, Munich, and Barcelona.
- Miami, long known for a vibrant entrepreneurship scene, broke into the top 30 overall ranking for the first time.
Analysis of Startup Sub-Sectors
The report explores how startups are revitalising traditional industry sectors through the application of technology. Based on the data, investors should look into the following sectors:
| Market Dynamic | Startup Sub-Sectors |
|---|---|
| Fastest-growing (funding and exits) | Advanced Manufacturing & Robotics, Blockchain, Agtech & New Food, and Artificial Intelligence. |
| Falling levels of investment | Edtech, Digital Media, Gaming, and Adtech. |
In fast-growing sub-sectors like AI and Blockchain, small but vibrant ecosystems are rapidly emerging as hotspots. In AI, ecosystems to watch include Edmonton, Houston, Greater Helsinki, and Taipei City. In Blockchain, up-and-comers include Belgrade and Novi Sad (Serbia) and Vancouver.
Regional Case Study: Japan’s Pivot Point
Japan’s startup ecosystem has arrived at a pivot point: for the first time, it is able to draw top-tier talent to high-growth startups at a scale that was not possible just 15 years ago. It is now easier than at any point since the 1950s to attract people to startups from prestigious Japanese firms, elite government ministries, the burgeoning information technology (IT) sector, and foreign financial and IT firms. Japan’s startup ecosystem is critical to the country’s future, as it injects much-needed flexibility and dynamism into Japan’s rigid postwar social structures and an economy dominated by large firms.
Key Human Capital Trends in Japan:
- Japan’s startup ecosystem is now able to attract human capital in ways that were not possible fifteen years ago.
- Employment flexibility is critical to a maturing startup ecosystem, and Japan’s startup ecosystem is now enjoying positive feedback loops.
- Japan’s startup ecosystem now draws from top universities; large, prestigious companies; government ministries; and global, foreign multinational corporations.
The Silicon Valley Economic Model
The Silicon Valley model offers lessons for regions around the world as they look to grow their own startup ecosystems. The Silicon Valley economic ecosystem is characterized by the following primary components:
- Venture capital
- Human capital
- University-industry ties
- Direct and indirect government support
- Industrial structure
- Support ecosystem of professional service firms
Each component is interdependent on the others. Each component develops virtuous spirals—favorable developments reinforcing and accelerating subsequent developments—over time to achieve self-sustained growth. Across the world, there are 25 startup ecosystems with an Ecosystem Value above $10 billion each, adding up to nearly $1 trillion in economic value. Additionally, 57 startup ecosystems boast an Ecosystem Value between $1 billion and $10 billion, creating thousands of jobs and billions in economic productivity.
