Global trends and other key findings from the 2018 Global Startup Ecosystem Report

The Global Startup Ecosystem Report (GSER) 2018: Key Findings

Startup Genome works to increase the success rate of startups and improve the performance of startup ecosystems across more than 30 countries. We advise leaders of innovation ministries, agencies and organizations supporting startups.  

The Global Startup Ecosystem Report 2018 is the world’s most comprehensive startup ecosystem report. It is based on data covering over 1 million companies, nearly 100 ecosystems, and the world’s largest primary research with tech founders: the Voice of Entrepreneurs. Thanks to 10,000 participating founders and 300 partners, we we were able to dive deep into the key trends that are shaping the startup scene today, and society tomorrow.

Key Findings of this year’s report include:

 

The Global Startup Ecosystem still growing rapidly in terms of VC investment and Exit Value

  • Global venture capital investment in startups hit a decade high in 2017, with over $140 billion invested in startups.
  • Total value creation of the global startup economy from 2015 to 2017 is at $2.3 trillion—a 25.6% increase from the period between 2014 and 2016.

China rising and U.S. dominance waning—especially in Deep Tech—as seen on unicorn growth and early indicators like patent creation

  • China is a primary growth driver in the global startup revolution. In 2014, only 14% of current unicorns were from China. In 2017 and 2018 so far, that number has grown to 35%—while for the U.S. it has gone down from 61% to 41%.
  • China is rapidly increasing its knowledge production, as measured by patents, especially in AI and Blockchain. While the U.S. still has more startup activity in these sub-sectors, as measured by VC dollars, China has surpassed the US in patent applications—with 4 times as many AI-related patents and 3 times as many Blockchain and Crypto-related patents as of 2017.

 

Entering a New Era of Tech with Industry-Focused (Third Wave) and Deep Tech Startups

  • We are entering a New Era of Tech, where more startups tackle specific verticals (i.e. Third Wave—think Uber for mobility or Airbnb for hospitality) or focus on Deep Tech (i.e. based on tangible and defensible innovation), for example in AI, Blockchain or Robotics.
  • We see this clearly in the data for Sub-Sector growth. The fastest growing Sub-sectors all fit these categories, while declining sub-sectors are mostly associated with the first and second wave of tech startups.

 

Top 4 Fastest Growing Sub-Sectors

#1 Adv. Manufacturing & Robotics (189.4% 5-year increase in early stage funding deals)

#2 Agtech & New Food (171% 5-year increase)

#3 Blockchain (162% 5-year increase)

#4 Artificial Intelligence, Big Data & Analytics (77.5% 5-year increase)

 

Sub-Sector Early Stage Deals 5-Year Growth Exits 5-Year Growth Share of Global Startups Startup Formations Growth
Advanced Manufacturing & Robotics 189% 230% 1.3% 15%
Agtech & New Food 171% 114% 0.6% 14%
Blockchain 163% 223% 1.5% 18%
AI, Big Data & Analytics 78% 188% 5.0% 13%


Top 3 Declining Sub-Sectors

#1 Adtech (34.6% 5-year decline in early stage funding deals)

#2 Gaming (27.2% 5-year decline in early stage funding deals)

#3 Digital Media (27.1% 5-year decline in early stage funding deals)

 

Sub-Sector Early Stage Deals 5-Year Growth Exits 5-Year Growth Share of Global Startups Startup Formations Growth
Adtech -35% 86% 3.3% -6.9%
Gaming -27% 109% 4.8% -4.2%
Digital Media -27% 79% 20% -2.3%

 

Variable Definitions

 

  • Startup Formations Growth
      • Annualized growth in startup formations from 2008-2016
  • Early Stage Deals 5-Year Growth
      • Count of all early stage funding deals, growth from 2012-2013 to 2016-2017
  • Exits 5-Year Growth
      • Count of all exits, growth from 2012-2013 to 2016-2017
  • Share of Global Startups
    • As of 2017-2018

Diversity and Local Connectedness: Women founders are less connected to investors than men, and immigrant founders create disproportionate value. Founder connections correlate highly with startup performance.

 

Women Founders

  • Women founders build more local relationships with other founders than male founders—a higher level of this Local Connectedness is associated with better startup and ecosystem performance.
  • There is a gender gap in investor connections: men are slightly better connected to local investors than women, and women are more likely to be among the least connected to local investors.
  • Women and male founders are motivated differently: 56 percent of women say they’re trying to “change the world” through their startups, compared to 41 percent of male founders.  A larger share (39 percent) of men, say they want to build a “great product” compared to 30 percent of women founders.

 

Immigrant Founders

  • Immigrants comprise roughly 4 percent of total world population but, on average, about 20 percent of tech founders in ecosystems across the world.
  • Immigrant and non-immigrant founders have similar levels of local connection to peer founders, but immigrant founders are more likely to be less-connected to local investors.
  • Immigrant founders receive less help locally from founders and investors than non-immigrant founders.
  • Founders who immigrated as children are more connected locally, while those who immigrated as adults tend to have higher levels of education.

 

Local Connectedness

  • Local Connectedness—especially relationships with other founders—is strongly associated with higher startup performance.
  • Just as importantly, not being locally connected is strongly associated with lower startup performance.
  • When founders help other founders, overall ecosystem performance is stronger
  • Top Ecosystems in the world for Local Connectedness
    • #1 ecosystem in the world for Local Connectedness is Greater Helsinki.
      • Top in US: Silicon Valley, followed by Houston.
      • Asia-Pacific: Sydney
      • Canada: Toronto

 

Other Insights for Ecosystem Builders and Startup Founders

Insights for Ecosystem Leaders

  • The quality of local relationships matters as much as their quantity. Networking is important, but a strong culture of founders helping founders matters most.
  • Startup Density is less important than relationships that lead to exchanges of assistance and knowledge transfer (Sense of Community).

 

Insights for Startup Founders

  • Get connected, and get connected early on. Building local relationships, especially with other founders, will redound to your benefit.
  • Build relationships with investors and experts, too. These relationships function as conduits for knowledge transfer, giving you the ability to learn from the failures and successes in your product category or vertical.

 

2018-04-17T13:32:07+00:00 April 17th, 2018|Categories: General|Tags: , , , , , , |

About the Author:

Hugo
Hugo is the Marketing manager at TechQuartier. Originally from Montreal, he relocated to Germany in January 2018 and is now working to build up the Frankfurt startup ecosystem, tell the stories of its amazing community and make it shine on the global stage.