An Analysis of Startup Ecosystems

Startup Genome published their latest 2017 edition of the Global Startup Ecosystem Report and it throws quite useful insights upon the current startup ecosystems of the world. Analyzing around 55 startup ecosystems of the world, they have managed to shortlist the top 20 based on more than 100 plus parameters. Before we delve deeper into the whereabouts of the top 20 ecosystems, here are a few relevant insights for this article.

The technology sector is 4.5% of the global gross domestic product in 2017 as compared to 2% in 1992. With the current growth, this share will be 8% in the next 15-20 years. The technology sector is going twice as fast as the global economy. Ten years ago, technology companies accounted for 17% of the foreign earnings of American multinationals, today this number has increased to 46%. This clearly complies with the argument that the third wave of Internet has begun. Not just the private sector, technology is one of the few sectors worldwide where the return on equity for public companies has also increased.

Startup ecosystem gets increasingly concentrated

The graph clearly shows that despite an exponential technological advancement, the majority of the wealth creation is happening at a handful of places. The concentration of the exit value is fairly concentrated among the top 10 ecosystems for at least 10 years. Within the tech sector, the companies reliant on the network effects have outpaced their competitors. Based on the data compiled by Battery Ventures, these roughly three dozen companies account for around one-fifth of the entire global market value of software companies. Five ecosystems (Silicon Valley, New York City, Beijing, Seattle, and Shanghai) account for 49 percent of the market value of these dominant public companies.