The Startup Movement is Globalizing: New Report Proves It

By Alex Lazarow.

Seemingly every day, we hear of the growth of the global startup movement.

It is certainly easier than ever to become a technology entrepreneur everywhere. Cloud computing has brought down the cost of starting companies, allowing anyone to rent Google GOOGL +0.9%’s enormous computing power by the hour rather than having to purchase and maintain dedicated servers. The plunging cost of telecommunications infrastructure, combined with the advent of collaboration software, has given rise to frictionless remote work. In fi ntech, one of the sectors where I invest, a range of ecosystem infrastructure is being built. Global markets themselves are looking more attractive for startups. The proliferation of mobile phones

provides a way to reach more than fi ve billion

users worldwide. More than two billion people have online identities and interconnect and establish digital footprints through social media. Today, there are over 480 innovation hubs globally and over 1.3 million venture backed companies.

An excellent annual barometer of the state of the global innovation movement is Startup

Genome’s Global Startup Ecosystem Report

(https://startupgenome.com/reports/gser2020). The 2020 edition oႇ ers exciting news for the rise of innovation ecosystems globally. I share three particularly relevant conclusions below.

1. Not only has innovation gone global, so has innovation success

Globally, there are over 400 unicorns – companies valued at over a billion dollars around the world. A decade ago this was highly concentrated in Silicon Valley. No longer. Today, 84 separate startup ecosystems have produced a billion-dollar startup, up from 4 in 2013. Fintech continues to be a core component of global innovation success stories.

Harkening back to Roger Bannister breaking the psychological 4-minute barrier, the report authors talk about the $4b ecosystem barrier – the amount of startup ecosystems that reach that level of generated ecosystem value. In the last 2 years, between 2017 and 2019, 48% more ecosystems have broken through, reaching 70 today.

2. The capital of technology is being challenged

The report states “There Will Be No ‘Next Silicon Valley’. There Will Be 30.” This is certainly playing out in the numbers. See below the ranking of top hubs around the world, and how much stronger challengers are becoming.

These emerging centers represent a mix of regional winners (e.g. Singapore for South East

Asia) or specialist ecosystems. The authors note the rise of Asia Pacifi c particularly. Today, 30% of the leading ecosystems are from the region, a share that increased 50% in 2012. These shifts are happening faster than expected (Startup Genome had predicted 100 by 2029 so they're on track to beat this estimate potentially this year).

The types of startups being built are also shifting. Importantly, global ecosystem players are becoming global leaders. The largest (credit-led) digital bank is in Brazil (Nubank) which has scaled regionally, the largest robotic process

automation company was born in Romania

(UiPath), the largest VR success was born in Prague (Beat Saber), and the largest superapp is in China (Tencent). Deeptech startups are now nearly 50% of all startups.

3. The road ahead will not be easy.

Building a startup is already challenging. Covid-19 unsurprisingly has challenged startups everywhere, but perhaps most aႇ ected are those scaling in the tougher, less resource-rich ecosystems around the world.

Venture capital is down 20% globally, and that pain is concentrated in more emerging ecosystems. Nearly 20% of global startup founders saw a term sheet rescinded and nearly 50% saw their processes slow down materially. Over 72% of startups saw their revenues drop (40% by 40% or more). This is going to have downstream eႇ ects as well: 60% of startups have laid oႇ some employees,

on average 33% of their FTE pool.

What this means

The innovation economy is accelerating globally, and startup hubs are becoming ecosystems, with growing capital bases, thriving employee pools, and a network of mentors.

Yet, to succeed, it will require resilience, particularly through recent headwinds.

Importantly, it will also require a new playbook. As I explore in my just-released book: Out-Innovate:

How Global Entrepreneurs - from Delhi to Detroit - Are Rewriting the Rules of Silicon

Valley (HBR Press), building a startup in more nascent ecosystems looks diႇ erent. We cannot just copy-paste the Silicon Valley playbook.

Getting this right is more important than ever. Entrepreneurship is the largest force of job growth globally, and in the US is responsible for all netnew job creation since 1977. In the US, according to Stanford research, 40% of all publicly traded companies were once startups and they represent 80% of R&D budgets.

I look forward to Startup Genome’s update next year but also the regular sub-sector reports they will start publishing throughout the year, starting in September. www.forbes.com/sites/alexlazarow/2020/07/08/thestartup-movement-is-globalizing-new-report-provesit/#538a6c8f3d58

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Silicon, habeshelink.com, BBC, techtrends.co.zm