With the APEXE Nations Report, Startup Genome and Global Entrepreneurship Network give economic development and innovation ministries of national governments around the world a unique toolkit. As we have built on the city level over 12 years for the Global Startup Ecosystem Report (GSER), the APEXE framework pilots a set of practical benchmarks along with in-depth metrics and assessment tools for national economic development and innovation ministries and agencies.

Over time, the GSER became the #1 barometer used by governments and agencies to measure the effectiveness of their policies and investments into startup ecosystems. The APEXE Nations Report will play the same role at the country level. It pilots the first-ever balanced scorecard of the effectiveness of a country’s policy actions and gaps at translating its innovation potential – normalized to produce fair benchmarks – into a tech entrepreneurship engine for their societies, plus a compass for policy action.

Startup ecosystems have become the number one engine of job creation and economic growth all over the world. They are city-based, self-regenerating economic powerhouses that have created five of the world’s 10 largest corporations. Tech companies now account for nearly 50% of the U.S. stock market and that proportion is growing across stock markets globally.

Startup success increasingly drives growth (see Methodology for our definition of startups). Not only do the startup ecosystems of Startup Genome’s clients grow faster, but, inevitably, their economies do as well. Economies that invested in startup policies in the mid-1990s, and those that followed their most impactful policies since, are thriving, benefiting from the transition to digital economies — and they will benefit for decades to come. Others are increasingly struggling as they have delayed inevitable investments in startup ecosystems.

Tech startup ecosystems have grown faster over the last three decades than any other sector — even faster than the automotive sector 100 years ago, semiconductors, and telecom. Corporate and university R&D has diminished in relative importance, in terms of its power to drive a city or country’s economic prosperity. Many corporations have understood that fact and now spend more resources on engaging with startups in various open innovation activities than they do on internal R&D.

Yet, too few governments have dedicated proportionate budgets to invest in their increasingly important startup ecosystems. Through this status quo, governments continue to bet their future economies on the diminishing return of traditional economic development plans, or hope that their edge in traditional R&D will help fuel their economies for a few more years. Unfortunately, university talent and IP are mobile and their value is increasingly captured by global corporations in other countries or continents. Corporate R&D is fraught with the same mobility problem, while efficiency gains reduce employment and value is eroded by the relentless and growing tech competition.

The Economic Potential of Startups in the G20

Startup ecosystems produce tremendous value, creating novel products and business models that create jobs, increase corporate competitiveness, drive economic growth, and often address social challenges. For a city, a portion of this value can be quantified by its tech startup’s Ecosystem Value (EV), a measure that has become the standard way to benchmark local startup ecosystems globally.  

Ecosystem Value is the sum of all startup exits and funding valuations of the past 2.5 years. In the United States, for example, the national Ecosystem Value (the sum of all of its cities’ startup ecosystems) at the end of 2023 was $3.9 trillion. This means that the current value of U.S. startup ecosystems is equivalent to 14% of GDP. Note that while we realize GDP is a measure of production rather than asset value, the ratio of Ecosystem Value to GDP (EV/GDP) is a useful gauge of value created. Note also that Ecosystem Value is focused on tech startups and recent exits and therefore it does not count the valuation of the large tech companies produced over time.

The G20 Startup Ecosystem Opportunity: Unlocking Trillions in Economic Value

The APEXE Report - G20 Pilot found that there is huge variation across the G20 countries: Japan currently has a national Ecosystem Value equivalent to only 1.7% of GDP, while Italy’s ratio is just 0.8% – far below the average EV/GDP ratio of 8%. These gaps between the leading and lower-performing countries represent significant opportunities for additional value creation if these countries can grow their startup ecosystems to become closer to the G20 average.

To quantify the size of the opportunity: if it were possible for the lower-performing G20 countries to all reach the average Ecosystem Value to GDP ratio, this would add a staggering additional $2.2 trillion in Ecosystem Value to the global startup economy.

But is increasing a country’s Ecosystem Value to GDP ratio remotely possible – or do some G20 countries simply lack the necessary ingredients to grow their startup ecosystems? How do we know if countries are already maximizing their startup potential?

Ecosystem Value to GDP, while offering a snapshot, is a relatively crude measure which does not tell us if a country is converting its potential into startup ecosystem success. Instead, we need a range of factors – principally, how much innovation has occurred and whether this has been effectively channeled into startups – to determine if their potential has been maximized.

APEXE Report’s Innovative Framework

This is where the APEXE Report ranking offers a sophisticated new framework and set of factors that reveal the following:

1. What is a country’s innovation potential?
2. What is a country’s startup ecosystem performance?. 
3. To what degree has a country translated its innovation potential into startup ecosystem performance?