Data from the latest Global Startup Ecosystem Report 2022 shows what it takes for cities to compete in the race to the top as destinations for startup talent and investment.
The findings show that Silicon Valley is the top global startup ecosystem, followed by New York City and London tied at second.
North America continues to dominate the Global Rankings, with 47% of the top 30 ecosystems in this region.
The GSER is the world’s most comprehensive, data-driven research on startups with 280+ entrepreneurial innovation ecosystems and 3 million startups analyzed. The report includes a ranking of the leading 140 ecosystems, and is published by innovation policy advisory and research firm Startup Genome, and the Global Entrepreneurship Network (GEN)
“Today, the digital economy is the economy — or at least the economy’s future,” the report’s authors said.
The World Economic Forum estimates that 70% of new value created globally over the next 10 years will be based on digital business models. In 2023, for the first time, more than half of GDP will be driven by “digitally transformed” enterprises, according to Statista.
PWC projects that gain from AI alone will contribute $15.7 trillion to the global economy by 2030.
Despite the early shadow it cast on startups, Covid-19 ultimately boosted the sector by accelerating digitization, said Startup Genome. Since the pandemic, tech companies grew 2.3 times more than their non-tech counterparts.
While about 90% of startups completely fail, Startup Genome research demonstrates that only 1.5% of startups — or about 15% of those that survive — produce a successful exit of $50 million or more across the top eight US startup ecosystems.
Since 2012, global average Series A rounds have tripled to more than $18 million. Post-money valuations are up, on average, by 239% over 10 years, with the biggest growth in later rounds.
Deep Tech
As for major innovation trends, the rising digits tell the story: Web3, Industry 5.0, Supply Chain 4.0. And, of course, 5G. Innovations in — among many other sectors — digital finance, AI-discovered molecules, and climate-change mitigation are remaking not just business, but also the social and physical worlds.
Talent
And just as two decades ago Silicon Valley reinvented the culture of place with open offices and spaces optimized for collaboration, so today’s startups are leading our new culture of placeless-ness, said Startup Genome.
“In the Covid-19 pandemic, tech companies both facilitated and pioneered new ways of working, including the virtual-first model, popularized by companies including Dropbox, which makes remote the default. Investment is also no longer tied to location, with some venture capitalists using Zoom to perform due diligence on far-flung investments, geographically expanding their reach.”
However, by rendering talent and capital more fluid, the report’s authors said that technology has paradoxically made geography more important than ever. “Now that founders, talent, and investors can be anywhere, polestars like Silicon Valley, London, and Beijing must compete with hundreds of expanding constellations, each with its own legal, economic, and lifestyle advantages.”
India Rising
The startup landscape has shifted substantially, with India surging close behind the United States and China, the report showed. The country has seen a rapid rise in the number of large exits and early-stage rounds, and a substantial increase in Ecosystem Value. India minted 44 unicorns in 2021, raised a total of $72 billion in exits (up from $1.8 billion in 2020).
Hot Spots Everywhere
India and China may be the big stories of 2021, but dozens of other intriguing narratives proliferated around the globe, said Startup Genome. Continuing a trend of declining funding share that began in 2016, North America accounted for less than half of early-stage funding in 2021, with Europe and Asia both taking a bite of the total.
VC activity in Latin America nearly doubled from the previous year.
A record 540 companies achieved unicorn status in 2021, with 113 ecosystems producing at least one billion-dollar-plus behemoth. Twenty-two ecosystems — including Brisbane, Luxembourg, Santiago-Valparaiso, and Ho Chi Minh City — achieved their first unicorns in the period examined for the GSER.
The GSER 2022 ranks startup ecosystems on seven success factors, including performance and talent, and for South Africa, the report highlighted Cape Town and Johannesburg.
Cape Town Highlights
Startup Genome says Cape Town’s startup scene is worth $2.8 billion.
Cape Town’s 450 tech firms, including both giants like Takealot and Amazon and early-stage companies, collectively employ more than 40,000 people. And more businesses are moving to the South African ecosystem. Cape Town is one of the world’s fastest-growing regions in terms of foreign investment, according to a report from fDi Intelligence.
- Knife Fund III is a new fund managed by Cape Town-based VC firm Knife Capital. The fund invests in high-growth sectors in South Africa with strong potential for expansion within Africa and internationally.
- Swiss investment company Crypto Valley Venture Capital (CV VC) set up its first African office in Cape Town to invest in Blockchain-focused African startups. CV VC and its partners are looking to invest in 100 startups over the next four years. The new office will also serve as a hub for transferring know-how and experience from Swiss Crypto Valley to the Cape Town ecosystem.
- Private equity and venture capital conference SuperReturn Africa 2022 is scheduled to take place in Cape Town in December.
- Notable recent funding deals include Adtech startup Adbot’s R7 million ($500, 000) raise in November 2021, and games publisher Carry1st’s $20 million Series A in January 2022.
Johannesburg Highlights
Startup Genome says Joburg’s startup scene is worth $962 million.
More than 70% of South African companies are located in Johannesburg, as is the largest stock exchange in Africa, and the city generates 15% of South Africa’s wealth. Johannesburg is leveraging its position as the country’s financial capital to build a startup ecosystem to rival the better-known scene in Cape Town, the
- Ericsson South Africa, the local arm of the Swedish telecommunications company, set up an office in Johannesburg’s fast-growing Waterfall development, as the area increasingly attracts growing interest from technology firms.
- Vantage Data Centers, a US-headquartered data centre specialist, announced in 2021 that it plans to build what it claims will be the largest data centre campus in Africa in Johannesburg.
- A host of startup support organisations are nurturing the emerging startup community, including the Seed Academy and the WDB Growth Fund’s accelerator for women, J&B Hive Accelerator for creative entrepreneurs, and a range of co-working spaces and maker spaces such as Workshop17 West Street and JoziHub. 22 ON SLOANE is the largest startup campus in Africa.
- Johannesburg is also home to many active investors, including Dazzle Angels, Edge Growth, Grovest, SA SME Fund, the People’s Fund, and Kalon Venture Partners.
Online payments solution provider Ozow raised $48 million at Series B in November 2021.
Read: Joburg wants to introduce a 24-hour work day to boost jobs and economic growth
Artmotion S.Africa
