The Global Startup Ecosystem Report 2022

The State of the Global Startup Economy

When Startup Genome published its first Global Startup Ecosystem Report in 2012, the entrepreneurial universe was a much smaller place. Six of the top 10 hubs were in the United States, and just one Asian city — Bangalore-Karnataka — broke the top-20 ranking. Four ecosystems accounted for the year’s whopping nine unicorns (a term that would not even be coined until 2013). Almost two-thirds of early-stage funding was concentrated in North America.

That year, Statista valued the entire global software market at around $350 billion. Only one tech business appeared on Fortune’s list of top-50 largest global companies.

Ten years, $1.65 trillion in funding, 1,227 unicorns, a global pandemic, and massive revolutions in everything from AI and social media to autonomous vehicles and precision medicine later, and the situation is very different. Today, the digital economy is the economy — or at least the economy’s future.

The World Economic Forum estimates that 70% of new value created globally over the next 10 years will be based on digital business models. In 2023, for the first time, more than half of GDP will be driven by “digitally transformed” enterprises, according to Statista. PWC projects that gains from AI alone will contribute $15.7 trillion to the global economy by 2030.

Despite the early shadow it cast on startups, COVID-19 ultimately boosted the sector by accelerating digitization. Since the pandemic, tech companies grew 2.3 times more than their non-tech counterparts. 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.

Since 2012, global average Series A rounds have tripled to more than $18 million. Post-money valuations are up, on average, by 239% over 10 years, with the biggest growth in later rounds. Just since 2019, post-money valuations have risen by 125% (Series B) and 159% (Series C). In 2022, high inflation, rising interest rates, and global conflict have led to volatile markets and a financial market correction.

However, inflation has not been a global phenomenon. Overall, deal inflation in 2021 was dramatic in both late-stage rounds (Series B+) and exits, with the ratio of pre-money valuation to revenue increasing by about 50% for both. However, these ratios show little to no inflation in Asia and, for late-stage rounds, a drop in the “Rest of the World.”

While inflation in funding valuations fuel an acceleration in the growth of entrepreneurial ecosystems and innovation in general — with larger checks essentially meaning more money is invested in startups for the same percentage dilution — it is not without risks for startup ecosystems. It often spells lower returns for investors for the affected vintage investments. For startups (and for investors) this raises the specter of down rounds as the market goes back to near-historical valuations before their next round. We have seen this before — in 2000–2001 and in 2008–2009. Raising interest rates in response to global inflation combined with the war in Ukraine seem to have already put a stop to 2021’s exuberance. In this context, startups will benefit from 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.      

The Continued Rise of Deep Tech

As for major innovation trends, the rising digits tell the story: Web3, Industry 5.0, Supply Chain 4.0. And, of course, 5G. Innovations in — among many other sectors — digital finance, AI-discovered molecules, and climate-change mitigation are remaking not just business, but also the social and physical worlds.

In 2018, Startup Genome was first to report the accelerated rise of Deep Tech sub-sectors. Over the last four years, when including AI in Deep Tech, the growth of Global Startup Ecosystems has been almost completely driven by Deep Tech.


And just as two decades ago Silicon Valley reinvented the culture of place with open offices and spaces optimized for collaboration, so today’s startups are leading our new culture of placeless-ness. In the COVID-19 pandemic, tech companies both facilitated and pioneered new ways of working, including the virtual-first model, popularized by companies including Dropbox, which makes remote the default. Investment is also no longer tied to location, with some venture capitalists using Zoom to perform due diligence on far-flung investments, geographically expanding their reach.

However, by rendering talent and capital more fluid, technology has paradoxically made geography more important than ever. 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.

Here are some overarching themes that affected established and emerging ecosystems in recent months.

India Rising

The startup landscape has shifted substantially, with India surging close behind the United States and China. The country has seen a rapid rise in the number of large exits and early-stage rounds, and a substantial increase in Ecosystem Value. India minted 44 unicorns in 2021, raised a total of $72 billion in exits (up from $1.8 billion in 2020). The nation’s total dollar exit amount has multiplied 38x from 2020 to 2021.

As with Silicon Valley in the U.S., Bangalore-Karnataka is no longer the only game in town. Six of seven Indian ecosystems tracked by GSER — including Chennai, Pune, Telangana, and Kerala — climbed the rankings, benefitting from a dispersion of the tech economy. Delhi and Mumbai re-joined Bangalore-Karnataka in the top 40. Overall Bengaluru, Mumbai, and Delhi went up almost 10 ranks each.

India has a vast domestic market that has recently grown even more dependent on technology, fueling gains. But the country’s rise is not just a local phenomenon. Writing in Medium, Dev Khare, a partner at Lightspeed India, estimated that 30% of the country’s unicorns already were or are poised to go global — and not just those in the usual-suspect SaaS space. In India, the conversation is shifting from whether the country’s entrepreneurs can build unicorns to whether they can build global category leaders.

The virtuous cycle of ecosystems is also on display in India, as successful businesses feed new entrants. For example, Zomato, a food-delivery service whose July 2021 IPO was oversubscribed by a factor 35, pledged to invest $1 billion in startups over two years. In March 2022, CEOs and executives of unicorns that include Rivigo, Cars24, and Lead School announced they were joining forces to support early-stage companies with the new Bharat Founders Fund.

India’s government, meanwhile, has invested in ecosystem-creation initiatives and other startup-friendly policies. Its most ambitious project is India Stack, a nationwide technology infrastructure for authentication and digital payments that is ushering in a cashless economy. That creates a base of more than 1 billion users, potentially galvanizing Fintech, digital commerce, and other startups in the process. Such companies are emerging as the “backbone” of new India, said Prime Minister Narendra Modi when he proclaimed January 16 National Startup Day.

China Slowing

India’s embrace of the tech sector stands in contrast to China. In 2021, Beijing cracked down on companies such as Didi, Tencent, and Meituan over issues including anti-competitiveness and data privacy. Jack Ma retreated into near invisibility following regulators’ actions against Alibaba and the suspension of Ant Group’s IPO. Global investors were among those who suffered when Beijing went after its Edtech industry in July 2021. In December 2021, the Chinese government raised constraints on overseas IPOs.

Such developments, as well as China’s strict COVID-19 policies and tensions with the United States and Europe, are affecting its young startups. In 2021, China saw growth in early-stage funding, and smaller exits ($50 to $100 million) slowed down significantly, growing at a rate about 10% lower than global average. As for foreign investments, GSER numbers show that most major Chinese ecosystems have a significantly lower ratio of non-local to local investors in deals over the last 10 years than their counterparts, for example in comparison to India. That said, China saw large exits over $1 billion and large and late-stage funding rounds grow very fast in 2021, with inflation playing an important role, as in the U.S. China has seen a 22% increase in the dollar amount of late-stage funding investment from 2020 to 2021 and a 21% increase in the number of exits over $1 billion from 2020 to 2021.

Overall, the performance of Chinese startup hubs is declining for the first time since GSER has tracked them. Eight of the 13 cities studied fell one or more spots in this year’s rankings, and two (Wuxi and Xiaman) are down 21 positions. But the same hands that are smacking down Goliaths are raising up some Davids. China’s government announced in July 2021 that by 2025 it intends to develop 10,000 “Little Giants” — innovative startups intended to fill gaps in strategic industries rather than to scale globally. In addition to financial and regulatory incentives, Little Giants benefit from the government’s seal of approval, which has attracted some venture capital.

Undoubtedly, China remains a startup powerhouse. Technology companies in China raised $39 billion in total VC rounds in 2021, 25% more than in 2020.

China has also seen a 22% increase in dollar amount of late-stage funding investment from 2020 to 2021, and a 21% increase in the number of exits over $1 billion.

Hot Spots Everywhere

India and China may be the big stories of 2021, but dozens of other intriguing narratives proliferated around the globe. Continuing a trend of declining funding share that began in 2016, North America accounted for less than half of early-stage funding in 2021, with Europe and Asia both taking a bite of the total. VC activity in Latin America nearly doubled from the previous year.

Record amounts of tech venture funding were raised in Asia ($87.4 billion), North America ($219.6 billion) and Latin America (the world’s fastest growing region at $12.9 billion). Australian startup funding tripled to $10 billion, and African startups raised $4.8 billion — a 96% increase from 2020 to 2021.

A record 540 companies achieved unicorn status in 2021, with 113 ecosystems producing at least one $1 billion+ behemoth. Twenty-two ecosystems — including Brisbane, Luxembourg, Santiago-Valparaiso, and Ho Chi Minh City — achieved their first unicorns in the period examined for the GSER 2022.

More governments are enacting policies to make themselves alluring to entrepreneurs. Brazil’s new Legal Framework for Startups, for example, is an ambitious plan that includes provisions for a “regulatory sandbox” that frees companies from some constraints as they experiment with innovative technologies and business models. Spain has plans to pass a “startup law” by the end of 2022 that includes several tax incentives and hacks through red tape impeding founders and investors. The U.S. Innovation and Competition Act, working its way through Congress, includes $10 billion for new technology hubs.

A growing number of countries also are introducing digital nomad visas to attract newly footloose tech talent to their hubs. Latvia, Romania, and Cape Verde are among the most recent to do so, and in 2021, the Portuguese island of Madeira opened a digital nomad village. And with crypto-companies luring talent from traditional tech, Bitcoin-friendly places including El Salvador — which has declared the digital currency legal tender — may appeal to founders and workers excited by Web3 projects.

The Age of Geopolitics

The importance and dispersal of tech startups has amplified the influence — for both good and ill — of geopolitics. Where once the sector was sufficiently small to avoid the kind of pressures experienced by large industries such as energy and travel, those garage-spawned entrepreneurs have grown into a major economic force. Keeping their heads down is no longer an option.

U.S.-China tensions over everything from 5G to social media loom especially large, reflecting those nations’ widely divergent views on markets and the flow of information. The rise of India may reflect, in part, investors’ appreciation of India’s digital economy as an unaligned alternative to that of China or the United States. European leaders also worry about China’s investment in and acquisition of their countries’ tech companies, its protected market, and its threats to privacy and security.

In Russia, the war has spotlighted cryptocurrencies’ ability to help oligarchs avoid sanctions. Meanwhile, Russia’s own tech sector is suffering because of its actions in Ukraine. By March 2022, between 50,000 and 70,000 tech workers and entrepreneurs had left Russia, according to a report cited in the New York Times, with another 70,000 to 100,000 expected to follow. Much of that fleeing talent initially landed in countries that take Russians without visas, including Georgia, Turkey, and the United Arab Emirates.

Increasingly, tech companies risk moral hazard by accepting work associated with the military or immigration. Three years after employee protests compelled Google to walk away from a valuable Pentagon contract to develop AI for drones, the company is once more pursuing military work. Conversely, Cleantech surged in 2021, with a 176% rise in post-money valuations. The potential for an innovation created in one ecosystem to virtuously affect every nation on the planet is not lost on investors or the public.

Recently, pundits have been predicting the end of globalization. The proliferation and dispersion of startups points to a different future. More regions with more companies that are funded from everywhere, staffed from everywhere, and attract customers from everywhere will reduce inequality and create opportunities that almost all will find irresistible. Ten years ago, just a few places strove to put a startup in every garage. Someday we’ll see a unicorn in every stable.