State of the Global Startup Economy
The global startup landscape is undergoing its most dramatic shake-up in years, with Asia and Africa surging ahead while much of Europe falters. Within the 2025 Top 40 Global Startup Ecosystem ranking, 16 ecosystems have moved up in rank while 18 have declined.
Global Ecosystem Value Shake-Up: Asia Rises as Europe and North America Stumble
In large part, this movement is driven by changes in Ecosystem Value (EV). As Startup Genome defines the term, Ecosystem Value is the sum of valuations of funded startups, including unicorns, plus the post-money valuation of exits in the past two and a half years.
(Note: in previous editions, we included the value of unicorns only if there had been a funding round in the previous 2.5 years. We have updated our methodology to include all unicorns that we believe to be active, whether or not they had a funding round in the time period. This change in methodology has created some slight changes to ecosystem value. In comparing ecosystems’ change in EV from 2025 to 2024, we recalculated the 2024 values using the updated methodology.)
First, 2025 has seen a sharp decrease in EV across most of the globe, down 31% in aggregate. The median change in EV across last year’s Top 20 was a savage decrease of 24%. In fact, looking at last year’s Top 20 ecosystems, only three saw positive growth in EV: Beijing, Los Angeles, and Tokyo. Paris was flat, and the remainder were all negative.
This trend started at the end of 2022 with funding and exits plummeting. In particular, early-stage funding (Seed and Series A) contracted sharply in both deal count and total amount. As per the chart below, early-stage funding has trended downwards since the peak in 2021.
This trend started at the end of 2022 with funding and exits plummeting. In particular, early-stage funding (seed and series A) contracted sharply in both deal count and total amount. As per the chart below, early-stage funding has trended downwards since the peak in 2021.
Late-stage funding has fared slightly better, and is a more significant contributor to Ecosystem Value (since the total value is higher). Here, the data for 2024 suggests a slight reversal of the post-pandemic drop.
The most significant contributor to Ecosystem Value, however, is the value of exits in the previous two and a half years. For the period considered in the GSER 2025 (H2 2022 to end 2024), this value was substantially less than in the previous period (H2 2021 to end 2023, which included part of the 2021 exit peak). Thus, in part, the changing Ecosystem Value is still reflecting the post-pandemic drop in exits and the fact that this activity still has not returned to pre-pandemic levels. Latin America had a stellar year for large exits in 2021, some of which were included in the last edition of the GSER, but now fall outside the timeframe for our methodology. This explains the majority of the decrease in EV in the region.
That said, the drop from 2021 to 2022 is not the full story. Globally, the total value of exits still decreased by 4% and the number of exits decreased by 9%, compared with 2023. Moreover, there has been a particular decline in large exits – which we define as over $50 million valuation. In the majority of ecosystems, such large exits have been both fewer in number and smaller in median size compared with previous periods. Across last year’s Top 40 ecosystems, the total count of large exits decreased by a troubling 31% – and for the aggregate of all ecosystems in our database, the decline was 40%. Those bucking this trend were primarily Asian ecosystems – Shenzhen, Tokyo, Seoul, and Shanghai – together with Paris and Philadelphia.
In our opinion, large exits in 2024 were still being handicapped by the inflationary valuations of 2021. As we’ve discussed previously, that period saw record levels of unicorn-production – four times higher than the rate of the preceding two years (682 in 2021, compared with 165 in 2020 and 153 in 2019) – and record exit values (an average of $233 million in 2021, compared with $99 million in 2020 and just $38 million in the period from 2022-2024). The same period also saw many startups raise at exaggerated estimates, with late-stage funding rounds increasing significantly (from an average $42 million in 2020 to $64 million in 2021). This has made it more difficult for startups to create subsequent value-uplift – and illustrates the danger to entrepreneurs who assume that higher valuations are necessarily a good thing. That said, there are encouraging signs that large exits are recovering in 2025 and could be back at pre-pandemic frequency by year-end
Countries are investing heavily in market resiliency innovations, semiconductors and supply chain-related companies eading this charge. Policy Leaders should focus on embracing the new innovations and deep technologies that offer tremendous impact on societal issues and maximize limited resources or constraints.
If venture funding continues to grow, and stock markets rebound fully after their tariff-induced shock (making for a more positive exit environment), we anticipate that next year’s EV will show positive growth, or at least less of a dramatic change. Certainly, we very much hope to see an upturn in exits – and high-value exits in particular – since these are a key part of startup ecosystem resource recycling: returning capital to investors, which they can then invest in other startups, and potentially also (especially if the exit is an acquisition) freeing some of the founding team to form their next ventures, become investors, or mentor other entrepreneurs.
How Smart Policy Fuels Startup Ecosystem Success
More than two years after the end of COVID-19, it is very interesting to examine how ecosystems have fared and, specifically, which ones are in a better position in 2025 than in at the beginning of 2020.
Even more insightful is to apply a policy lens to those ecosystem changes, considering that it is one of the main drivers of above-average (or higher than organic) ecosystem growth and gains in GSER rankings. Economic development and innovation ministries and agencies that have worked with us, adapting and applying the best-practice policies that Startup Genome codified from 2016, have seen their Ecosystem Value grow 46% faster than their peers, on average adding $1.4 billion more per year.
"Despite a globally challenging macroeconomic environment for startups in early 2025, innovation, entrepreneurship, and startup ecosystems will remain central to economic development strategies across both developed and emerging markets. Within the European Union, policies supporting innovation and startups - particularly in emerging technologies like Artificial Intelligence - will be key."
Among the Top 40 ecosystems, Startup Genome members Seoul Metropolitan Government and Enterprise Singapore have been policy leaders, both entering the Top 10, with the former investing $1.4 billion in startup policies and initiatives over four years (from 2019) and gaining 12 ranks, while Singapore went up eight ranks through their continued – since the mid 1990s – commitment to often world-leading startup policies.
Similarly, Startup Genome client Tokyo Metropolitan Government has invested aggressively for the last five years – recently announcing billions in startup policy and initiative investments – which have resulted in a gain of four ranks since 2020, despite a small one-rank setback this year.
The other startup policy trailblazer, Israel, remarkably managed to push Tel Aviv up two ranks from 2020-2025 to reach #4 globally this year, competing against cities two to ten times its size.
"Recent shifts in AI democratization and lower entry barriers are enabling smaller countries like Armenia to empower founders to scale smarter and faster. Armenia is rapidly emerging as a regional AI hub, with global AI players and local startups active on the ground, while the government shapes policies for AI education and innovation. FAST’s national ‘Generation AI’ program builds future AI talent at scale. In this global race and with a small domestic market, Armenia’s niche is venture-building AI companies solving global challenges — rooted in deep STEM traditions."
During the same period, Melbourne went up an impressive eight ranks considering its limited budget, working with Startup Genome to rigorously apply world-class startup policies while developing innovative and impactful techniques and strategies of its own.
Finally, Philadelphia gained a remarkable 35 ranks – making it the top riser in GSER 2025 as well as the top riser over the past five years – driven mainly by the concerted actions of leaders of private organizations such as Ben Franklin Technology Partners, Drexel University, and University City Science Center. Zurich went up 10 ranks driven by public and private actions, with digitalswitzerland being a key actor
"The ecosystems that will shape global innovation are those that align long-term vision with the ability to execute. Abu Dhabi is distinguishing itself through a deliberate approach that brings together infrastructure, capital, regulation, and talent to support founders from day one. As emerging technologies reshape industries, from AI and Climatetech to Digital Assets and beyond, startups in the UAE are scaling with speed and purpose. Enabled by forward-looking national strategies and a platform built for global ambition, Abu Dhabi is becoming a launchpad where innovation translates into real-world impact."
The AI Shift: Redefining the Future of Startup Ecosystems
Continuing on entrepreneurial policy, the race to transition startup ecosystems to AI is on. Within five years, AI will become both the foundation and a ubiquitous component of every tech startup. As Microsoft CEO Staya Nadella and others have said, SAAS is dead, just like package software died rapidly from the launch of Netscape in 1992.
In that way, we are in 1994 again and as our recent ranking of AI ecosystem transitions shows – for instance with London below the Top 10 – startup policies, communities, and assets built for the web era are far from enough to succeed in the AI era. This means every startup ecosystem that does not race to define and implement entrepreneurial AI policy stands to see a large portion of its Ecosystem Value destroyed within five years.
"We’re witnessing an AI multiplier effect across the global startup economy, with accelerated R&D cycles and significantly lower capital requirements to build world-class ventures. At the same time, innovation is becoming truly global. While the LLM wave began in Silicon Valley, we’re now seeing high-quality AI applications emerge from diverse regions including France, China, Korea, and India. These rising AI hubs are not just diversifying where innovation happens, they’re reshaping the competitive landscape and setting new standards for what’s possible."
On the other hand, while AI will displace and eliminate millions of jobs according to the best research, it will also create a lot of jobs in tech and AI startups. Unfortunately, tech job creation is closely correlated with, and slightly lags, Ecosystem Value, which is highly concentrated. The U.S. and China account for 56% of global EV, and, worse, 90% of current AI funding is concentrated in the U.S. and China.
A new set of entrepreneurial AI policies urgently needs to be defined and implemented, and that excludes the great majority of recent government AI policies and investments advised by global AI leaders. Those are targeted at infrastructure, corporations, and research, while allocating very little to entrepreneurial AI policies – noting that startups are the #1 engine of job creation and economic growth.
In response, Startup Genome is bringing policy leaders and other members from top ecosystems together to form a policy action coalition to rapidly invest in understanding which entrepreneurial AI policies actually work and which ones do not in this new era.
Entrepreneurial AI policies are urgent because AI has already emerged as the undisputed engine of startup growth in 2024, leaving other sectors in its wake: VC funding into AI and Big Data (AI&BD) startups grew 33% in the past year, the fastest-growing sector in our classification. The sector was also the greatest overall recipient of VC funding, receiving 40% of all VC investment (up from just 26% in 2021). In addition, Startup Genome’s data shows that AI startups are also being funded more quickly, compared with other tech startups, and are typically receiving larger rounds: on average, Series A rounds for AI startups are almost double the size of those in other sectors.
In terms of total numbers of new AI startups, Silicon Valley currently remains the undisputed global leader, followed by New York and London. If one examines the global share of funding for new AI-Native startups – that is, startups which have AI at their core – the vast majority is currently flowing into Silicon Valley firms, with over $30 billion invested in 2023 and 2024.
Large language models are ushering in a cognitive revolution. Meanwhile, breakthroughs in brain-computer interfaces are coming faster than expected. In a world playing 3D chess, success depends on fast learning, keen observation, and asymmetric bets.
However, other ecosystems are preparing to challenge Silicon Valley’s dominance. Beijing, for one, is positioning itself for global leadership of AI: in the past two years, Beijing saw the second-highest investment of VC into AI startups, at a little under $5 billion. While this remains substantially less than Silicon Valley in absolute terms, it is a higher percentage relative to both Beijing’s Ecosystem Value and its total startup funding, demonstrating that Beijing is succeeding at rapidly transitioning its web-era ecosystem to the AI-Native era.
AI is also enjoying a boom in many other ecosystems: Paris, Delhi, Istanbul, and San Diego all saw their numbers of AI Native startups more than double between 2021 and 2024, while multiple ecosystems – including Toronto-Waterloo, Shenzhen, Shanghai, and Mumbai – saw AI-related funding increase more than 10-fold in the two years between 2022 and 2024, albeit from a fairly low base in some cases.
AI is already eclipsing the pace of the late 1990s dotcom era and will become a true General Purpose Technology that will power the next wave of national economic growth for those transitioning their startup ecosystems rapidly. As we saw with previous waves of technology, those ecosystems which strongly pivot their economies to take advantage of the innovation will reap huge benefits, and often entrench their advantages. For example, Tel Aviv is now one of the most successful startup ecosystems in the world, as a consequence of a deliberate and focused effort by the Israeli government in the early 1990s, which included initiatives such as the public venture capital fund Yozma, to transform its economy in order to take advantage of the new wave of technology. Similar transformational efforts are now needed by policymakers to harness the new wave of AI. Those ecosystems that act sooner will reap greater rewards, while those that are late to the AI-party will find that they are left behind.
"AI presents a generational opportunity for emerging innovation ecosystems to leapfrog traditional tech hubs. By investing in AI across the board - from foundational research and skills development to startup acceleration and venture funding - regions can build agile, inclusive, and globally-competitive economies. It’s not about replicating Silicon Valley; it’s about crafting a distinctive, purpose-driven approach that leverages local strengths and addresses global challenges."
To do this, ecosystem leaders must develop AI-specific strategies and policies. This in turn means developing a deeper understanding of how AI startups are different from other startups and other waves of tech. For example, much of the driving force behind AI comes from individual startup founders who spot opportunities for its application, and create valuable consumer and business products for niches in which they have expertise; ecosystems like Tel Aviv and Boston which acknowledge and promote this, rather than focusing on infrastructure or large platform development, will significantly outperform in the coming decade.
The AI race is on, and to capture the transition to AI startup ecosystems, we have introduced a new factor into the GSER – described in the Methodology section – and are also publishing a separate AI ranking: AI Startup Cities - Who is Winning the AI Transition Race. In addition, we are launching dedicated research to focus on key AI policy topics. If you are interested in exploring these with us, get in touch with our Director of Business Development, Marina Krizman, at [email protected].
Beyond AI: Sector Winners, Losers, and What’s Next
Aside from AI, Life Sciences and Cybersecurity remained two other growth sectors for the past year, with total deal amounts increasing by 17% and 4%, respectively (although the numbers of deals still decreased in these sectors). Blockchain remained flat (0% funding growth) in 2024 – although on a five-year timeframe, funding growth into this sector still marginally exceeds AI&BD (12.9% CAGR over the past five years, versus 12.4%). Advanced Manufacturing and Robotics (AMR) saw a slight decrease in funding in 2024, but remains another sector that has seen growth on a five year basis, at an average CAGR of 6.3%.
In Deep Tech - and especially in quantum - clarity on user needs, product requirements, and what success means in the real world is not a constraint, it’s a catalyst. Grounding innovation in application accelerates commercial readiness and builds market trust. That’s how we have taken quantum from the lab to the field.
In contrast, funding into two of the hot sectors of recent years – Cleantech and Edtech – shrank by 40% and 57%, respectively; investment into Cleantech startups in 2024 was less than half of what was received in 2022 ($13 billion vs. $28 billion). Another two sectors which fared very poorly were AdTech and Digital Media; these showed substantial falls in deal counts, deal amounts, and exits. With new funding into these sectors falling, and very limited opportunities to recycle existing investments through exits, the prognosis for these sectors is rather gloomy.
What’s been surprising - and encouraging - is the strength emerging in creative tech and culturally-rooted innovation. We’re seeing founders build scalable solutions that are deeply grounded in local context, whether through Fintech tailored to informal economies or digital platforms amplifying African storytelling. These aren’t just niche plays - they’re unlocking real commercial value and global relevance.
For the year ahead, we wait to see whether the impact of U.S. budget cuts and policy shifts – such as reduction in the spending on the National Institute of Health and withdrawal from the Paris Agreement on climate change mitigation – will impact startup formation in these sectors. However, we predict that AI will remain the major growth sector, and will draw increasing proportions of venture capital. Moreover, it seems inevitable that AI will increasingly be integrated into other sectors, especially Life Sciences and AMR, such that the sectoral boundaries may need to be revisited.
Global Gaps Widen: Regional Performance in Ecosystem Value Diverges Sharply
On a continental level, the global disparity in EV change is stark: Asian and sub-Saharan African ecosystems saw a decrease of 17% – the least-worst performing regions globally – while Latin America as a region fared most poorly, with an aggregate drop of 45%. Europe saw an aggregate decrease in Ecosystem Value of 24%, while North American ecosystems dropped by 18% in aggregate, Oceanic ecosystems fell 19%, and MENA fell 22%
"Nigeria’s young population is our greatest asset. NITDA’s ‘Digital Literacy for All - DL4ALL’ initiative is foundational - aiming to equip over 95% of Nigerians with basic digital skills by 2030. Alongside this, we are building a robust pipeline of tech professionals through partnerships with global and local training providers, innovation hubs, and universities. These programs span software development, data science, AI, and entrepreneurship — tailored to meet the demands of a rapidly evolving startup landscape."
Within Asia, Beijing has now taken the lead from Singapore as the leading ecosystem. Wuhan and Pune are two of the top climbers. In Europe, London retains the top spot for now, with Paris climbing above Amsterdam-Delta to take second place. Istanbul is the top regional climber.
For Latin America, there has been no change in the top four ecosystems, with São Paulo remaining as the highest-ranked regional ecosystem – and the only one to feature in our Top 40 Global Startup Ecosystems ranking. In the MENA region, Tel Aviv remains the outright leading ecosystem, and the only one in our Top 40. This is followed by Dubai and Riyadh, which has climbed above Abu Dhabi into third place for the region.
For North America, Silicon Valley unsurprisingly remains the regional leader as well as the global one, followed by New York. Boston has now crept above Los Angeles, driven by a strong Life Sciences sector. As discussed above, Philadelphia is the strongest regional climber, with Seattle also showing strong growth – up four places in the region.
Within Oceania, the only two ecosystems in our Top 40 are Sydney and Melbourne; their relative rank remains unchanged – although Melbourne is slowly closing the gap in ecosystem value with its larger neighbour. Within sub-Saharan Africa, there are still no ecosystems in our Top 40, but Lagos has now taken over the top spot from Nairobi as the regional leader, thanks in large part to three unicorns (Andela, Flutterwave, and Moniepoint) which are increasing its EV and strengthening its ecosystem.
A Pivotal Moment for Startup Ecosystems
Some investors no longer want to talk to companies unless they are making $1 million in revenue within the first six months. There was a time when being a founder was trendy and you could experiment and figure things out. Now you need to execute and move incredibly fast.
The global startup landscape is undergoing a profound shift. As Ecosystem Value declines and AI accelerates its dominance, traditional approaches are no longer enough. Policy-led ecosystems like Seoul, Singapore, and Tel Aviv show that strategic intervention can drive outsized gains. Now, a new generation of entrepreneurial AI policies is urgently needed. Those who act swiftly will lead the next era of innovation—those who don’t risk being left behind.