State Of The Global Startup Economy

Then everything changed. Covid-19, which made rapid adopters of us all, slashed a bright line between how we once lived and how we will live. It is a line across which entrepreneurs are uniquely positioned to ferry us. That is why, for many economies, startups are leading the way back to economic vitality. 

The pandemic—dire for humans—has been fuel to technology’s fire. Last year Internet capacity rose 35%, reports market-research firm Telegeography. Global broadband traffic in the fourth quarter increased more than 51% over the previous year: a combination of more subscribers using more data during Covid-19, according to OpenVault, which tracks broadband consumption. Global e-commerce shot up to $26.7 trillion, according to the United Nations, with countries like the Republic of Korea, the United Kingdom, and China experiencing especially dramatic spikes. The number of people buying food and household items online grew an average 30% worldwide. 

Businesses, meanwhile, pivoted to remote work, with a corresponding bump in productivity of 3.1%, according to Goldman Sachs. Companies also sped up digitization of customer and supply-chain operations by three to four years, reports McKinsey & Company. 

Investors surged into these and other opportunities. In the first half of 2020 venture funding worldwide was $148 billion. In the first half of 2021 it had soared 95% to $288 billion, with increases at every stage, according to Crunchbase. Startups also are benefiting from new investment channels, including democratizing startups like Robinhood; crowdfunding; and special purchase acquisition companies. (Although some increasingly are skeptical of SPACs.) 

The term “unicorn”—an indicator of extreme rarity—is becoming a misnomer. As of August there were more than 800 startups around the world with valuations above $1billion, for a cumulative valuation in excess of $2.6 trillion, according to CB Insights. Just between October 2020 and June 2021 their number rose 43%. Although U.S. companies dominated, China, Canada, India, Germany, Israel, the United Kingdom, and France produced between 7 and 10 unicorns in the first half of 2021, according to Crunchbase. Meanwhile, VC-backed exits are smoking hot. Startup Genome’s data show a 20% year-over-year growth in the dollar value of exits in startups globally. 

For entrepreneurial ecosystems, 2021 is turning out to be a year of remarkable growth and productivity. And the dispersal of success—already underway before the pandemic—has only accelerated.

Hot Spots Everywhere

As far back as 1982 cities around the world—from Hong Kong to Bangalore-Karnataka to Xenia, Ohio—clamored for the mantel of “next Silicon Valley.” While the Bay Area remains the pole star for tech entrepreneurs—attracting more than a third of U.S.-based VC money in the first quarter, according to Pitchbook—a constellation of global cities and regions competes in brightness.

Increasingly, the rise of the rest is a global phenomenon. The amount of venture capital flowing into U.S. companies in 2020 was down to 51% from 84% in 2004, according to the National Venture Capital Association. The rest of that money went globetrotting. Asia, in particular, has been strong. In China, which began its pandemic recovery relatively quickly, investments rose steadily, reaching more than $37 billion in the first five months of 2021, according to GlobalData. Indian startups raised $12.1 billion in the first half of this year, Venture Intelligence reports. As of August, India had spawned 24 unicorns in 2021—including six in just four days in April.

Funding for Latin American and African startups also is at record highs. Led by Fintech, Latin American companies raised around $6 billion in the first half of 2021, a 51% increase over the total in 2020, reports the Association for Private Capital Investment in Latin America. African startups, meanwhile, are projected to raise as much as $2.8 billion this year, with Nigeria and Kenya the epicenters, according to tech ecosystem accelerator AfricArena. Projections put African investment at more than $10 billion by 2025.

While funding around the world rose, the share received by women-led companies fell: down 27% in 2020 over 2019, according to Crunchbase. In better news, funding for Black founders in the United States—while still small—quadrupled in the first half of 2021, driven by an energized racial-justice movement.


More broadly, between 2018 and 2020 the democratization of technology funding created more than $540 billion in value in the 100 emerging ecosystems identified by Startup Genome. That’s a 55% increase over the 2017 to 2019 period. Total early-stage funding in those regions was nearly $28 billion, compared to around $17 billion the year before. Among Startup Genome’s 100 top ecosystems, 91 boasted a unicorn in 2020.

The following charts show the amount of total funding and exits in the top 100 global ecosystems over the last three years. While total funding and exit values have increased globally, the composition of the top performers is slowly changing. North America retains the largest share overall. But Asia and MENA are experiencing increases in their share of global funding and exits year-over-year.



Money is not the only resource flowing into global ecosystems. Silicon Valley experienced a net outward migration of technology and managerial talent, driven by both Covid-19 and an astronomically priced real-estate market. During the pandemic the number of people leaving overall rose 30%, according to a study by the California Policy Lab. Some—but not all—of those people are coming back; and the exodus from most other tech hubs proved temporary. Still, the forced adoption of remote work during the pandemic spotlighted the potential for companies everywhere to access a global workforce.

And, yes, despite the boom for startups and growth companies, the Big Five got even bigger. With an assist from the pandemic, Alphabet, Amazon, Apple, Facebook, and Google achieved a collective market cap exceeding $8 trillion. Entrepreneurs hoping to mine personal gold from those spectacularly rich hills may be out of luck. As of August, Crunchbase had reported just 12 acquisitions of entrepreneurial companies by the behemoths.

All Industries Are Tech Industries

In most industries digitalization has been accelerating for decades. Covid floored it.

Some activities—ordering food with an app, facing off in online games, taking remote classes—people simply did more often. But other applications—among them, remote health monitoring, online fitness programs, and virtual events—attracted large audiences for the first time. In the B-to-B world, manufacturers and other companies with vulnerable workforces and supply chains sought to inoculate themselves with technology against further disruption.

Life Sciences—particularly telemedicine--emerged as one of the sweetest spots, with utilization 38 times higher than pre-Covid-19 and soaring investment, according to McKinsey. Startups whose products let patients draw their own blood or enable doctors to conduct remote ear exams are among those reinventing the house call. With more work performed and lives lived online, Cybersecurity startups prospered. Edtech and Gaming—both in decline as recently as 2019—experienced significant increases in Series A funding.

And Covid isn’t the only crisis spurring innovation and behavioral change. Cleantech is on the rise as individuals and governments absorb the dire message of August’s U.N. climate report. The United States, Canada, the United Kingdom, and South Korea are among those countries that have committed to make dramatic inroads against global warming. With relatively few Cleantech unicorns, opportunities for startups abound. Around 35% of cumulative emission reduction by 2070 will emerge from technologies currently in prototype or demonstration phases, according to the International Energy Agency. Technologies not yet commercially deployed at scale will account for another 40%.

Deep Tech—the innovation-rich, science-and-engineering-based sector with the greatest world-changing potential—remains the fastest riser, accounting for about 30% of capital invested in tech globally since 2015. That’s good news for the thousands of startups that will leverage revolutions in things like AI & Big Data and Advanced Manufacturing & Robotics to build their own offerings. Startup ecosystems often cluster around universities, hospitals, and other research organizations that spin off intellectual property. Even with the pandemic, such institutions—as well as private companies—were in overdrive last year, with worldwide patent applications up 4% over 2019: the highest number ever, according to the World Intellectual Property Organization. For the second consecutive year, China was the most prolific filer.

Critical Policies For Global Startup Ecosystems

Governments increasingly have been paving the bumpy terrain for entrepreneurs. Those efforts accelerated during the pandemic, as countries sought to protect not only small businesses—vulnerable because of their size—but also startups, which are vulnerable because of their youth.

The European Union, with anxious eyes on the United States and China, recently proposed a set of rules to encourage tech startups across its member countries. The rules deal with issues like stock options and immigration as well as more prosaic concerns, such as streamlining the legal process for creating a business to just one day. In February, Spain unveiled a 10-year plan covering around 50 measures that range from reducing regulations to retaining talent. A month later, Germany launched the $12 billion Future Fund, an equity fund to support innovative tech companies as they scale.

African countries have been rolling out their own Startup Acts for several years, with tax breaks, grants, and policies that—for example—provide founders with financial support during their startups’ infancies. In December, Kenya introduced a bill that, among other things, establishes a National Innovation Agency to foster partnerships among startups, incubators, and investors. Ethiopia’s proposed version covers everything from streamlining processes to increasing foreign investment to covering fees for registering intellectual property.

Such policy changes are everywhere. Brazil recently passed a law to shore up the legal framework for starting a business. India is partnering with accelerators to provide as many as 300 early-stage tech startups with funding, mentorship, and other resources. Last year Victoria, Australia launched a $2 billion fund to drive a decade’s worth of investment in Life Sciences, Advanced Manufacturing, Cleantech and other sector startups.

Rarely in living memory have individuals, societies, and governments been so aware of startups’ importance to our personal lives and economic well-being. Around the world conditions for entrepreneurship are getting better and better. As digital infrastructures improve, capital flows surge, and skilled virtual workforces rise, founders someday will be able to start and funders to invest almost anywhere. Even now, the choices are legion.