Slicon Valley remains the global leader in startups but the landscape is changing in an era of "placelessness," according to a new report.
Startup Genome has ranked the region which includes most of the Bay Area at No. 1 since it began doing its annual "State of the Global Startup Economy" report in 2012. But the report says the region's share of early-stage investments declined from 25% in 2012 to 13% in 2021.
The pandemic accelerated the shift to new hubs, according to Startup Genome.
"By rendering talent and capital more fluid, technology has paradoxically made geography more important than ever," the report says. "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."
The biggest change in the Startup Genome's rankings this year is with Beijing. It dropped from No. 4 to No. 5, with Boston rising to take its place. New York and London tied for No. 2, where they have ranked since 2020.
Startup Genome blames China's drop on "the relative decline in early-stage funding in comparison to other ecosystems."
Los Angeles is No. 6, followed by Tel Aviv No. 7 and Israel at No.8. Seattle moved up to No. 9, replacing Tokyo which dropped all the way to No. 12.
Other key findings in the Startup Genome report include:
- Covid-19 boosted the startup sector by accelerating digitization. "Since the pandemic, tech companies grew 2.3 times more than their non-tech counterparts."
- Success vs. failure: "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 U.S. startup ecosystems."
- Tech vs. non-tech: Tech companies around the world grew by 2.3 times more than non-tech companies during the pandemic.
- Spector of down rounds: Rising interest rates and the war in Ukraine has put a stop to 2021’s exuberance, Startup Genome writes. "In this context, startups will benefit from adopting adjusting their growth strategy by reducing their burn in order to lengthen their runway and delay their need for capital, and do so rapidly and assertively," it advises.
