What is a Startup Ecosystem?
Across the globe, startup ecosystems bring together entrepreneurs, academics, governments, investors, talent, and support organizations to inspire innovation in groundbreaking technology. As hotspots of economic development, startup ecosystems influence their communities, creating a downstream effect that produces tremendous value for economies, generating nearly $3 trillion in value globally – comparable to the GDP of a non-U.S. G7 country.
“Startup ecosystems are responsible for most net new job creation, particularly in economies where traditional industries shed more jobs than they create,” says Forrest Wright, Research Assessment Lead at Startup Genome. “They also spur innovation by attracting new human and intellectual capital to regions, directing these resources to new and more efficient enterprises. As startup ecosystems develop, their impact is amplified by network effects as experience suffuses the broader community.”
But what exactly is a startup ecosystem?
Shared Resources With a People Focus
A startup ecosystem is a shared pool of resources, generally located within a 60-mile (100-kilometer) radius around a center point in a given region, with a few exceptions based on local reality. It is typically concentrated around a major city and incorporates what would be considered the metropolitan statistical area. This definition encompasses a set proximity of ecosystem players, reflecting the distance one could easily travel within a normal day and on a consistent basis for a region’s concentrated resources including meetings, events, and other opportunities.
Our approach to a startup ecosystem definition is rooted in Michael Porter’s Cluster Theory, which explains how geographic concentrations of interconnected companies, suppliers, and institutions in a specific industry or field can drive economic growth, innovation, and competitiveness. Learn more about the theory here.
Resources within a startup ecosystem that may attract a founder typically include policymakers, accelerators, incubators, coworking spaces, educational institutions, funding groups, and firms. These multidimensional resources are built over time to create a community with a shared passion for solving problems through technology. This call to action brings together people from different backgrounds to make positive change.
Startup Genome has completed extensive research and analysis of data from 4.5 million startups across 300 global ecosystems and has conducted over a decade of independent research, providing policy advice to more than 160 economic and innovation ministries and public/private agencies in over 55 countries.
Throughout our work, one element of startup ecosystems stands out: the people. “Startup ecosystems rely on many factors, but people are by far the most important,” Wright says. “Startup Genome research shows that founders have unique skills and knowledge that can have outsized impact on the local economy when their talent is supported by key local stakeholders.”
He continues, “Investors and experts also play a critical role. It is no surprise that the most successful ecosystems are the ones with the most experienced investors, researchers, and mentors all participating in their local startups’ lifecycle. The expertise needed to scale startups and maximize economic impact can only be acquired through generations of lived experience, amplifying the importance for human capital even as startups push the limits of technological innovation.”
Globally-Leading Startup Ecosystems
Examples of these globally-leading startup ecosystems include New York City, London, and Tel Aviv, with Silicon Valley remaining the most recognized name in startup tech innovation. Startup Genome annually ranks the Top 40 Global Ecosystems and Top 100 Emerging Ecosystems in the Global Startup Ecosystem Report (GSER), measuring each ecosystem through metrics including ecosystem value, number of unicorns, funding, and ecosystem value growth. Now in its 12th year, the GSER provides insights into the world’s leading startup ecosystems, emerging trends, and key challenges facing entrepreneurs.
Key ecosystems around the world are also evaluated for key factors including access to funding and talent, education initiatives, governmental policies, recent tech activity, events, inclusivity programs, quality of life, and more. Our Ecosystem Comparison Tool allows users to explore highlighted metrics such as Ecosystem Value, Early-Stage Funding, and Exit Value among more than 100 global ecosystems.
These efforts reflect Startup Genome’s mission to accelerate startup success and ecosystem performance everywhere, working together with global thought leaders and practitioners to define and execute robust policies and programs that drive lasting change. Curious about how we can work together to grow your ecosystem? Reach out to us.
To learn more about the factors impacting startup ecosystems, read Why Supporting IP Protection Matters for Your Startup Ecosystem.