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Startup Genome Report 2020

by NICOLE DENHOLDER|6 August 2020

You may have seen last month the release of the Global Startup Ecosystem Report 2020? It gives insight into the work being done by governments and public-private partnerships to accelerate the success of startups worldwide.

Over the past ten years, they’ve collected data on more than a million companies across 150 cities. Now, for the first time, all are facing the challenge of rebuilding in the wake of Covid-19.

To see where Asia sits in the startup world, let’s go through the reports highlights with Nicole Denholder.

Startup Genome Ecosystem Report discussion

Join Nicole Denholder and Diana Dorahy who share the key findings from the recently released Startup Genome Ecosystem Report.

Posted by Next Chapter Raise on Wednesday, August 5, 2020

Nicole, welcome. What’s the underlying drive for this report?

What they wanted to do is answer three key questions founders, investors, and policymakers have been asking all over the globe:

  • Where are the top-performing ecosystems in the world? Put differently, where do early-stage startups have the best shot at building global success?
  • Why are some places on the rise while others are falling behind?
  • How can ecosystems increase their chances of winning in the global startup revolution?

 

Before we talk 2020, how did 2019 finish up?

At the end of 2019, inclusion remained a fundamental challenge with only 14.1% of founders globally being female. In terms of value creation, three quarters of all global value is concentrated in the top 10 performing cities globally.

 

And what about since Covid-19 struck?

The obvious fallout for startups has been layoffs with two thirds of startups laying off staff or cutting hours.

Plus, VC investments are dropping, leading to a crunch for capital. In fact, four out of every 10 startups have 3 months or fewer of capital runway, meaning they will fold if they don’t raise additional money and their revenue and expenses remain the same.

 

How has Asia weathered the Covid storm?

According to the report, we’re seeing early signs of a rebound in Asian ecosystems but nothing like a return to normal.

 

We’re going to go through the report in detail but what are the topline numbers for Asia? 

Asia’s stature continues to rise among global startup ecosystems. At first, it was driven by ecosystems in China but this year there are new entrants; Tokyo, Seoul, Delhi and Melbourne. Overall, the share of Asia-Pacific cities in top global ecosystems has increased from 20% in 2012 to 30% in 2020.

However, despite the uptick, there is still some clear untapped potential for Asia-Pacific as a region. APAC’s contribution to global Ecosystem Value has risen to 33% in this year’s ranking, but it is still less than the region’s contribution to global GDP, which stands at 38%.

 

How has unicorn growth been tracking in Asia?

Asia-Pacific has actually seen the highest growth in billion-dollar club startups worldwide. In 2013-2014 the region’s share sat at 19.5% and today it represents 31.8%.

However, in 2019, the share of Chinese Billion-Dollar Club deals in the Asia-Pacific region fell to about 46% thanks to successful startups in places like Seoul, Tokyo, Singapore, Taipei City, and Melbourne, among others.

 

Going back to the report, how was it structured because this is a huge amount of data to collect and sort?

They looked at five key areas: Funding, Market Reach, Connectedness, Talent and Knowledge as a measure of startup viability and success.

 

Let’s go through them one by one. First up, funding.  

They looked at three things here; investor access, quality and activity. They measured it by looking at early-stage funding volume and funding growth. Plus, investors’ experience, the average years of their experience and exit ratio, as well as the percentage of active and new investors.

Sydney and Hangzhou rank low in terms of quality, highlighting the relatively low number of local, experienced VCs when compared to other cities. Singapore and Bangalore stand out for high access as well as quality and activity. Seoul is among four cities that performed worse in overall funding compared to their rank.

 

Next is market reach.

This measures the number of unicorns (companies valued at over a billion dollars), large exits to funding i.e. exits over $50M to Series A rounds. Plus, the size of the local market as a function of GDP as well as IP commercialisation.

In Asia, Beijing and Shanghai have a poor quality of global reach showing their startups typically do better locally. Shenzhen was another city with more successes focused locally.

 

What about connectedness?

This is measured in terms of the local connectedness such as the number of tech meetups in a location. This is something Shanghai, Tokyo, Seoul and Shenzhen rank quite low on which the report authors say could hurt their long term potential.

The other connectedness measure is infrastructure – the number of accelerators and incubators, research grants and what they call R&D anchors: research hospitals, corporate labs stc. In Asia, Beijing and Hangzhou rank low here.

 

Then there’s talent.

This is measured by a mix of access, quality and experience; specifically, scaling and startup experience. Beijing and Shanghai are the only Asian cities in the top 10. In terms of key findings, Hong and Seoul lag behind in scaling experience particularly in technology.

 

What about knowledge?

This is ranked by research and publication impact as well as patents. Interestingly, Asia scores low on this front.

Thanks Nicole for the report’s insights. We’d love to hear your feedback so feel free to post any comments. We’ll also leave a link to the full report below with all the global statistics and findings.

You’ve been watching a Next Chapter Raise live event. Thanks again to Nicole Denholder and see you again soon.

 

Resources: https://startupgenome.com/report/gser2020?fbclid=IwAR3rJpWXlUiXanyknvvDOYSsJ9r_5qSaALzkPHDEINNHcO7_fP_kq2QdkCM