The automated reporting and benchmarking software provider Compass has released its Global Startup Ecosystem Ranking 2015 report with insights on the world’s top startup territories. To compile the report, Compass used data from startup hubs all around the world. A wealth of research went into this ranking, including 11,000 surveys by entrepreneurs and experts in the past five months, 200 interviews in 25 countries, and research by Deloitte, CrunchBase, Orb Intelligence, Global Entrepreneurship Network, and other local partners.
The goal is to weigh the world’s startup ecosystems and find the best places for budding entrepreneurs to set up shop. Compass says it approached the project from the point of view of “an entrepreneur seeking a location for his or her startup.” The company considered factors such as funding, availability of talent, startup experience, and so on, in order to determine the ranking for each city.
Ecosystems have become more international from almost their outset. According to the report, 37 percent of all funding rounds in the top 20 ecosystems in 2013 and 2014 had at least one investor from another region. (In North America, the number is slightly higher at 41 percent.)
The number of startups that either opened second offices elsewhere or moved their headquarters from one ecosystem to another region rose 8.4 times between 2012 and 2014. Singapore, for example, is a “very good place to be,” notes Compass CEO Bjoern Herrmann. “Many companies that start in Kuala Lumpur or Jakarta move over because the [investor] money is there, it’s easy to open bank accounts, and you have a good regulatory framework, among other things.”
Another component of more international teams: The number of foreign employees employed by startups. On average, foreign employees working at startups within the top 20 ecosystems represent 29 percent of those companies’ workforces. In Silicon Valley, the average is 45 percent.
Exit values are on the rise, says Compass, whose findings show that, across the top 20 startup cities, exit value soared 78 percent annually between 2012 and 2014. (M&A exits accounted for 60 percent of those exits; IPOs accounted for 40 percent.)
Growth is relative, Herrmann notes. Most notably, he tells us, “We see Silicon Valley growing at a 47 percent rate over the last two years [but] many other ecosystems are growing at a much faster pace.”
The exit value of startups based in London, for example, has quadrupled since 2012, while Berlin has grown by a factor of 20, primarily owing to the two big IPOs of Rocket Internet and Zalando. Bangalore has meanwhile seen five times more exit value last year than it did in 2012. (If it’s any consolation to Silicon Valley denizens, Compass expects growth to even out a bit over time.)
Venture capitalists are pouring tons of money into startups everywhere. Across the top 20 ecosystems, VC dollars rose 95 percent between 2013 and 2014.
Those ecosystems with the most growth in venture dollars were Berlin, which saw a 12x increase between 2013 and 2014; Bangalore, which saw a 4x increase; Boston, which saw a 3.7x increase; and Amsterdam and Seattle, which both saw a 2x increase in the number of venture dollars invested in local startups during that same period.
In addition to an overall ranking, each city is ranked for Performance, Funding, Talent, Market Reach, and Startup Experience. Here are the top 20 startup ecosystems (graphic by Compass):