The Global Startup Ecosystem Report 2023

Global Startup Sub-Sector Analysis

"Understand the existing policy and regulatory context of the sector, industry, and value chain your business operates in. Founders operating within the Edtech, Fintech, Agtech, Climatetech, or other tech sectors need to have an appreciable knowledge of existing and proposed Acts, policies, and regulatory bodies at the national and subnational levels that can (in)directly or indirectly impact their business models. With technology changing faster than regulators can sometimes keep up with, there are increasing risks and opportunities for startups, which do not want to be caught on the wrong side of the regulatory environment."

Adenike Adeyemi undefined
Executive Director, FATE Foundation

Key Findings

  • Despite the overall economic downturn, three sub-sectors increased in the overall number of VC deals from 2021 to 2022: Gaming (+13%), Blockchain (+8%), and Fintech (+4%).
  • Reflecting AI’s increasing use and intersection with other sub-sectors, AI & Big Data is the sub-sector with the highest count of total VC deals, making up 28% of the global share in 2022. It also has the highest growth in number of exits, at 74%, from 2017–2018 to 2021–2022, and experienced a 34% increase in Series A count for the same period.
  • As Deep Tech innovations become more integrated into the startup world, Deep Tech’s exit amount has grown faster than non-Deep Tech technologies from 2017–2018 to 2021–2022, at 326% vs. 225%.
  • Advanced Manufacturing & Robotics is the fastest-growing sub-sector in terms of Series A amount, up 168% from 2017–2018 to 2021–2022.
  • Fintech has grown significantly in sub-Saharan Africa and Latin America, making up 41% and 37% of global Series A deal count respectively from 2017–2018 to 2021–2022.
  • Although Edtech was widely expected to thrive during and post-pandemic, its Series A funding amount decreased 44% from 2017–2018 to 2021–2022.

Global Sub-Sector Lifecycle

The rise and fall of technology sub-sectors can be classified into three phases: Growth, Mature, and Decline. Classification is based on an analysis of deal count and amount of Series A investments and exits from 2017–2018 to 2021–2022. An increase in Series A activity shows the dynamics of the sub-sector at the early stage, indicating new businesses being formed and funded, while an increase in exits indicates the value realized to founders and investors. The sub-sectors with the highest increase are included in the Growth phase. The sub-sectors in the Mature phase display a lower rate of growth, though it is still very strong compared to many non-tech, non-VC sectors. Sub-sectors showing negative values in either Series A or exits, or both, are in the Decline phase.

The following lifecycle charts combine changes in Series A count and amount and in exit count and amount to provide a long-term view of sub-sector health. The further right and higher in the chart a sub-sector is shown, the higher the rise in exit and Series A activity, positioning the sub-sector in the Growth phase. Mature phase sub-sectors are in the middle of the chart, as they continue to grow but at a slower rate as they become larger. For example, Fintech had twice the Series A rounds in 2021 (627) than it had in 2016 (303), so when it grew to 723 in 2022, the percentage increment wasn’t as impressive as what the sectors in the Growth phase were experiencing. Sub-sectors in the bottom left of the charts are in the Decline phase. For example, Adtech is here because it had a lower count of Series A deals and exits in the period 2021–2022 compared to 2017–2018.

The four sub-sectors in the Growth phase (Advanced Manufacturing & Robotics, AI & Big Data, Cleantech, and Blockchain) show an average increase of 101% in Series A deal amount from 2017–2018 to 2021–2022 and an average 788% rise in exit value for the same period.

The six sub-sectors in the Mature phase (Agtech & New Food, Cybersecurity, Fintech, Gaming, Life Sciences, and the Blue Economy) show an average 81% increase in Series A deal amount from 2017–2018 to 2021–2022 and an average 196% rise in exit value for the same period.

The three sub-sectors in the Decline phase (Digital Media, Edtech, and Adtech) experienced an average 18% decrease in Series A deal amount from 2017–2018 to 2021–2022 and an average 129% rise in exit value for the same period.

For reference, the Global Startup Ecosystem Report 2022 (GSER 2022) showed a number of sub-sectors reaching up to a 100% increase from the previous report’s timeframe in both Series A count and exit count [GSER 2021 (​​2015–2016 vs. 2019–2020) and GSER 2022 (2016–2017 vs. 2020–2021)]. However, we are now seeing lower growth rates in reflection of the general economic downturn.

This year’s notable movements include Blockchain boasting the highest growth rate in Series A count, increasing 51% from 2017–2018 to 2021–2022. The exit of Coinbase at $85.8 billion contributed to a massive 1,477% increase in exit value from 2017–2018 to 2021–2022. Excluding it, the sub-sector’s exit value growth rate would be similar to that of AI & Big Data at 400%, which would still mean it was one of the sub-sectors with the highest exit value growth rate.

After record highs in 2021, AI & Big Data has seen a significant correction in 2022 with a 84% decrease in exit amount and 24% decline in Series A deal amount. However, the recent attention around generative AI is likely to bring new energy to this sub-sector. AI is now firmly embedded in the tech stack of many startups — AI alone shows an intersection with other tech sectors above 20% — and it continues to attract investor attention and funding. AI & BD shows substantial growth when taking a longer view: the sub-sector increased 462% in exit value from 2017–2018 to 2021–2022.


Forrest Wright undefined
Research Assessment Lead, Startup Genome

How AI Has Changed The Startup Landscape, And How Policymakers Can Help

In the span of just a couple years, AI startups have driven revolutionary changes across multiple industries. For example, in healthcare, startups such as Babylon Health and Path AI are using AI to detect diseases and improve patient care. While in finance, AI-enabled financial planning platforms such as Trim or N26 are scaling consumer financial solutions at levels never thought possible. In transportation, startups such as ArgoAI and Waymo are leveraging AI for autonomous vehicle deployment, with significant financial backing from large corporations.

Other startups have taken a more cross-sector approach, providing services that leverage AI technology across multiple industries. The most prominent example so far is ChatGPT, the AI-enabled chatbot platform developed by Open AI launched at the end of 2022. Within just a few months, the natural-language-processing model has been used by millions, an unprecedented scaleup in the history of startups.

The State of AI Legislation

The speed and impact of AI adoption has led to urgent consideration of AI-related legislation. At the G7 summit in May 2023, leaders called for the development and adoption of technical standards to keep AI "trustworthy," saying that governance has not kept pace with growth of the technology.

The E.U. is leading the charge in drafting regulatory framework with its AI Act, which is making its way through the European Parliament. The Act sets out a number of requirements for AI developers, such as providing users with clear information about how their algorithms work and explanations of how decisions are reached. This has raised concern from European startups that the regulations might make them less competitive. A December 2022 survey of 113 E.U.-based AI startups found that 50% of those surveyed thought the AI Act would slow down innovation in Europe, while 16% were considering stopping operations or moving outside the E.U.

In the U.S. there is currently no federal law governing the use of AI, although voluntary guidance for federal agencies was issued in the Blueprint for an AI Bill of Rights. Several states have begun taking their own steps. In 2022, New York passed the AI Bias Law, which prohibits employers from using AI tools to screen potential candidates unless they can demonstrate they are not using biasing factors in their model. California is considering a bill that requires companies to disclose to individuals how their AI algorithms arrived at “consequential decisions.” It is noteworthy that the E.U.'s approach to regulating AI is as a horizontal technology while the U.S. appears to be moving toward a more sub-sector-specific approach.

China has enacted several regulatory regimes around AI, starting in 2017 with its New Generation AI Development Plan, which laid out the government's broad priorities for AI development by 2030. In 2022, it banned AI-generated media that does not contain watermarks, and more recently banned ChatGPT and any proxy servers hosting its services. The Cyberspace Administration of China (CAC) has also proposed more sweeping legislation, with key provisions ensuring that generative AI adheres to China’s social morality.

Towards a Better AI Policy Framework

Collectively, these attempts at AI regulation demonstrate a warranted concern over the technology’s real potential for swift, and perhaps socially disruptive capabilities. Approaches vary, but one common theme emerges: transparency. In their rush to develop cutting-edge AI technology in a hyper-competitive sector, many startups have seemingly avoided this critical component of public trust. This is unfortunate, as the speed and potential material consequence of AI technologies make transparency that much more essential.

The goal of policymakers should be to strike a balance between the need for transparency while maintaining a competitive and fair AI startup ecosystem. A difficult task, but one that could be achieved if governments a) incorporate a diverse set of AI startup founders in the process, and b) strive for clarity and simplicity in their legislation.

Making compliance too cumbersome will extinguish the hopes of many innovative startups, as well as benefit larger firms with the resources to comply. It will be difficult to get this right, but the societies that do so have much to gain. Startups that emerge from jurisdictions with clear transparency guidelines will have stronger levels of trust when scaling their operations to new countries. Customers will also feel more confident in their products and services, expanding the potential market.

Global Trends in Startup Sub-Sectors

The bubble in 2021 and subsequent global downturn from H2 2022 have affected all sectors — obfuscating individual trends and investor opportunities. As such, the short-term decline in funding amounts, valuations, and exits that we are now seeing is not particularly related to individual sub-sectors but largely driven by overall investor sentiment and scarcity of capital. Some expected “darlings” of the pandemic such as Edtech are losing momentum, while others, including Life Sciences, are seeing extended growth. In particular, sectors related to Deep Tech are increasingly becoming a major part of the startup economy and showing signs of maturation.

Deep Tech involves the use of advanced technologies to attempt to solve critical, large-scale problems. It includes sub-sectors that are based in complex combinations of hardware and software, including Advanced Manufacturing & Robotics, Agtech & New Food, AI & Big Data, Blockchain, and Life Sciences. While affected by the market correction, Deep Tech continues to be the main driver of ecosystem growth the world over. In fact, Deep Tech will likely persist as a major economic engine with implications for ecosystem developers and policymakers at the intersection of academia and community.

Both Deep Tech sub-sectors and non-Deep Tech sub-sectors have experienced growth in exit amount but Deep Tech sub-sectors grew 326% whereas non-Deep Tech sub-sectors grew 225% from 2017–2018 to 2021–2022. Deep Tech sub-sectors also achieved more Series A deals (35% increase for Deep Tech vs. 21% for non-Deep Tech), and a higher exit count (46% growth for Deep Tech vs. 19% for non-Deep Tech).

Gaming, Fintech, and Blockchain are the only three sub-sectors with a higher count of VC funding deals in 2022 than in 2021, at 13%, 4%, and 8% respectively. Fintech and Gaming registered record numbers of VC funding deals in 2022 (above any other year since 2015). Blockchain startups experienced near-record levels of deal activity in 2022, second only to activity observed in 2018. The Gaming industry is benefitting from advancements in graphics, processing power, and network capabilities that all enable more immersive and engaging experiences. Additionally, increased access to high-speed internet and broader mobile penetration have expanded the global Gaming market.

Blockchain deal count grew 57% from 2017–2022, 31% from 2020–2021, and 8% from 2021–2022. Cryptocurrency had a challenging year in 2022, but Blockchain is being adopted in many other industries, such as banking, government, agriculture, and healthcare. This broader use is helping the sub-sector to hold its own.

Fintech continues to grow overall, and was the second best performing sub-sector in terms of both overall deal amount and count in 2022. Fintech startups in sub-Saharan Africa and Latin America continue to thrive as payment solutions are still growing to support the trend toward Ecommerce and digital payments. In mature markets we see different dynamics, with Fintech solutions growing in the B2B environment and increasingly addressing historically underserved markets such as SME lending, pensions, and back-office applications.

Industry 4.0 and Advanced Manufacturing continue to be relevant as automation and production efficiency are key to addressing rising costs and increasing workforce shortages. A reduction in the use of intermediaries in global supply chains also creates additional demand for hyper-efficient local production and supply-chain solutions.

In the context of climate change, Cleantech is likely to see more investment despite the current economic downturn. Subsidies and easing of regulation have helped energize the sector, particularly in Europe and the U.S., but also in China. Europe and the U.S. have both introduced policies to encourage the development of technologies that address the climate crisis, including elements of the U.S. Inflation Reduction Act and the E.U.’s proposed Net Zero Industry Act. Agtech & New Food is following a similar path. The sub-sector is still small, but it is gaining in relevance as the world grows increasingly aware of the need to ensure sustainable food supply chains. As such, we will likely see more investor activity in Agtech & New Food in coming years.

Finally, although Edtech was widely expected to thrive during and post-pandemic, enthusiasm seems to have waned. Factors affecting Edtech startups include privacy concerns, regulation such as China’s 2021 ​​ban on companies that teach school curricula from making profits, raising capital, or going public, and an ideological gap between the academic and startup worlds. On the whole, educational systems remain slow-moving and have yet to fully embrace technology.

“Major transitions in healthcare, energy, food and agriculture, high-tech industries, and manufacturing are driving underlying mid- to long-term trends that will trigger more startup activity. Deep Tech companies that anticipate these trends and provide real value-added solutions are likely to continue to attract serious capital.”

Constantijn van Oranje undefined
Special Envoy,

The bar chart compares total VC deals from the period 2018–2022 (sub-sector share of total count of deals for the period) to Series A share in 2022 (sub-sector share of new startups securing funding in 2022). This allows us to see which sub-sectors are changing in early-stage activity relative to the longer-term trend.

Fintech and Blockchain have a higher share of Series A deals in 2022 than share of total deals from 2018–2022, implying growth. Cleantech, Edtech, Adtech, and Digital Media show a smaller proportion of new startups securing funding in 2022.

Regional Share of Sub-Sectors

Fintech has experienced a significant surge in sub-Saharan Africa, where it accounted for 41% of Series A deals in 2018–2022, and Latin America, where it made up 37% of Series A deal count in the same period. The COVID-19 pandemic and associated lockdowns accelerated growth in online business in these regions. This is also a sign of increased technology deployment, somewhat following patterns seen in more developed markets in that individuals start to engage with technology and first-time real transactions in payments and Ecommerce.

North America leads in the regional share of Life Sciences startups, at 20%. Advanced Manufacturing & Robotics made up 14% of Asia’s Series A deals. Cybersecurity made up 14% of MENA’s, while in other regions it didn’t surpass 5% of the total share of startups.

Sub-Sectors by Phase

Sub-Sectors in Growth Phase

Advanced Manufacturing & Robotics, AI & Big Data, Blockchain, Cleantech

The Growth phase includes sub-sectors with the highest growth rate from 2017–2018 to 2021–2022 in both Series A and exit deal count and amount.

The four sub-sectors in the Growth phase (Advanced Manufacturing & Robotics, AI & Big Data, Blockchain, and Cleantech) show an average 101% rise in Series A deal amount from 2017–2018 to 2021–2022 and an average 788% growth in exit value. Together, the four Growth phase sub-sectors make up 62% share of the reported total startup creation over the period 2013–2022.

Blockchain is the only sub-sector showing an increase in the overall number of VC deals — it grew 57% from 2017 to 2022, and was up 8% from 2021 to 2022. Blockchain also experienced the highest growth rate in Series A deal count in the period 2018–2022, at 51%. Blockchain holds the highest growth in exit value in the period 2018–2022, at 1,477%. This is much higher than the exit value rate of Advanced Manufacturing & Robotics (593%) and AI & Big Data (462%) over the same period.

AI & Big Data decreased by 25% in overall VC deal count from 2018 to 2022, but continued to be the sub-sector with the highest overall share of VC deals, at 28%. Additionally, AI & Big Data experienced the highest growth in exit count (74%) in the period 2018–2022.

Cleantech grew 620% in exit value and 99% in Series A amount from 2017–2018 to 2021–2022. Cleantech is performing more modestly in Series A deal count — increasing 29% from 2017–2018 to 2021–2022 — and in the number of exits, which are up 11% in the same period.

Sub-Sectors in Mature Phase

Agtech & New Food, Cybersecurity, Fintech, Gaming, Life Sciences, and the Blue Economy

The Mature phase includes sub-sectors that have grown in both Series A and exit deal count and amount from 2017–2018 to 2021–2022, but not as vigorously as the ones in the Growth phase.

The six sub-sectors in the Mature phase (Agtech & New Food, Cybersecurity, Fintech, Gaming, Life Sciences, and the Blue Economy) show noteworthy growth, with an average 81% rise in Series A amount from 2017–2018 to 2021–2022 and an average 196% growth in exit value. Together, the six Mature phase sub-sectors represent 41% of reported tech startups funded over the period 2013–2022.

Although total deal count in Cybersecurity has decreased from 2018 to 2022, it is the fastest growing Mature sub-sector in Series A deal amount, growing 135% from 2017–2018 to 2021–2022.

Gaming, Agtech & New Food, and Fintech all show exit value growth reaching almost 300% from 2017–2018 to 2021–2022, above the Mature phase average of 196%. Life Sciences is close to the 31% phase average growth in Series A count at 24% and the 22% phase average exit count at 18%, but is behind in Series A deal amount at only 29% (the average is 81%), and in exit value at 116% (the average is 196%).

Fintech attracted 2,677 VC deals in 2022, more than any other sub-sector in the Mature phase. Fintech grew 76% in total VC funding deal count over the 2015–2022 period, 23% from 2020 to 2021, and 3.7% from 2021 to 2022.

After years of stagnation, the Gaming sector is showing new signs of life, increasing its exit count by 16% and exit amount by 134% from 2020 to 2021. The sub-sector’s Series A deal amount almost tripled from 2020 to 2021, and Series A deal count grew 19%. Gaming experienced the highest growth rate in total VC deal count from 2021 to 2022, at 13.4%. For context, Life Sciences saw a decline of 42% over the same period.

The Blue Economy, Agtech & New Food, and Cybersecurity have all experienced a decrease in total VC funding deal count since 2021. The Blue Economy is the smallest sub-sector in terms of deal count, so small increments in absolute numbers show as bigger movements proportionally. The Blue Economy attracted 72 deals in 2022, less than 3% of Fintech, but from 2017–2018 to 2021–2022 the Blue Economy has grown 48% in Series A deal count, more than any other sector in the Mature phase. For context, Fintech grew 38% in the same period.

Sub-Sectors in Decline Phase

Digital Media, Edtech, and Adtech

The sub-sectors with a negative growth rate from 2017–2018 to 2021–2022 in either or both Series A and exit count and amount, are considered to be in the Decline phase.

The three sub-sectors in the Decline Phase (Digital Media, Edtech, and Adtech) show an average 18% decrease in Series A amount from 2017–2018 to 2021–2022 and an average 129% growth in exit value. The three sectors combined represent 18% of reported tech startups funded over the period 2013–2022.

Digital Media saw negative growth in Series A count (-40%) from 2017–2018 to 2021–2022. It also experienced a 53% drop in VC deal count from 2021 to 2022.

When it comes to total deal count, Edtech has experienced a slight yet continued decline since 2018 despite the short-lived pandemic-related buzz around online learning platforms. Edtech declined 44% in Series A amount but exit value grew 24% from 2017–2018 to 2021–2022.

Adtech also experienced a 54% decline in total VC deal count from 2018 to 2022 and a 23% drop in total deal count from 2021 to 2022. Adtech also experienced the strongest decline of any sub-sector in Series A count (-36%), Series A amount (-15%), and exit count (-13%) from 2017–2018 to 2021–2022, but saw an increase of 101% in exit value in the same period.