Silicon Valley has traditionally been the epicentre for startups in the world, but the rest of the globe has been catching up. The 3-4 ecosystems which have been breeding startup after startup have now been joined by other centres around the world which are proving to be fertile ground for entrepreneurs. Many of these hubs weren’t even on the global startup map 5 years ago, which speaks volumes for the way the global economy, headed by the new information economy, is growing. Here are 10 of the hottest cities worldwide for startups, after Silicon Valley.
Coming in at no. 10, Paris is one of the two European locations to make it to the top 10, apart from London. While it is one of the tourist capitals of the world, Paris still has a long way to go in attracting international talent. France’s stringent education system has resulted in about 96% of Parisian entrepreneurs holding at least a Masters degree before venturing into the world of business. However, due to the lack of venture capital and super angels, entrepreneurs are far more likely to be dependent on incubators, friends and family for investment. Unlike Silicon Valley entrepreneurs, Parisian entrepreneurs are three times more motivated to create clones of successful startups for their own local environment. Technology adoption is also lower, with Parisian startups more likely to use PHP, C++ and .Net. However, compared to Silicon Valley, they are more likely to tackle niche markets. Paris still has a long way to go: according to The Economist, “Europe’s culture is deeply inhospitable to entrepreneurs; wanting to grow a startup into a behemoth is quite as countercultural as piercings and performance arts.”
Groupon is probably the most well known startup to emerge out of Chicago, but the Windy City is an emerging player in the entrepreneurial scene in the Midwest. The average age of entrepreneurs in Chicago is 37, making them one of the oldest on the list. One fifth of these entrepreneurs once worked in Silicon Valley, so Chicago is well connected to it. The lower cost of living there makes it an attractive proposition for founding a startup. According to Builtinchicago.org, a new startup is founded in Chicago every 48 hours.
The second largest startup ecosystem in Canada, Vancouver has traditionally been home to gaming studios (Douglas Coupland’s pop-culture novel about the gaming industry, JPod is set there) but has now expanded to a flourishing economy for tech startups despite the insufficient funding climate. Startups in Vancouver typically receive 80% less funding than their Silicon Valley counterparts and late stage funding is non existent. As a result, they employ less people per startup than in Silicon Valley. Vancouver acts as a magnet for local Canadian talent but after a successful launch, entrepreneurs might want to consider moving elsewhere.
Canada’s second entrant in the list, Toronto is the largest startup ecosystem in Canada and one of the largest in the world, even though it creates 85% less startups than Silicon Valley. Toronto entrepreneurs are motivated by creating a great product and changing the world with it and are as ambitious as their Silicon Valley peers. Their focus is on new, rather than niche markets. Outsourcing is rampant though, with Toronto entrepreneurs outsourcing almost twice as much as Silicon Valley in terms of product development. On an average they work an hour less every day than SIlicon Valley entrepreneurs. According to Mark Zimmerman, an advisor at MaRS, “Toronto attracts an incredible array of people from all over the globe. This gives us an edge in the war for talent and in taking products to a global market.”
The most successful startup ecosystem in Europe, London ranks in at no. 7 and produces the highest number of startups in Europe. However, entrepreneurs in London are more cautious and risk averse than their Silicon Valley counterparts. They typically target much smaller markets, being 6% less likely to tackle markets ranging from $1 billion to $10 billion and 32% less likely to tackle markets bigger than $10 billion. London has also been slow in embracing mobile technology. However growth continues, and London is now emerging as the primary choice of US entrepreneurs for establishing their European presence. According to Rahul Ahuja, CEO of Taskhub.co.uk, “Setting up a business in the UK is probably the easiest in the world.” This is one of the reasons for London’s growing presence as a preferred startup ecosystem.
Alongwith Silicon Valley, Boston has been one of the traditional hubs for startups and continues to grow, even though it has lost out to NYC as the preferred startup destination on the East Coast in recent times. Despite this, it has a healthy funnel of startups throughout the startup lifecycle. This is due to no major funding gaps in its funding ecosystem. Boston entrepreneurs are also more likely to be better educated than Silicon Valley entrepreneurs and 3 times more likely to have a Phd. There is a higher probability of them being serial entrepreneurs, especially in markets where they have prior experience. Boston’s ecosystem is balanced and its strength lies in areas like e-commerce, SaaS, gaming, hard innovation and particularly biotech. According to Simeon Simeonov, Founder & CTO at Swoop, “Boston’s key strength as an ecosystem is its diversity. There is no other place on Earth that comes close (…) My outlook for the Boston ecosystem is very positive. Over the past couple of years, I’ve seen a level of innovation, growth and excitement that reminds me of the late 90s without the unsustainable cash burns.”
East Coast’s frontrunner, New York has emerged as a serious alternative to Silicon Valley when it comes to consumer focused startups and those concentrating on advertising, media, e-commerce and fashion. It is the global capital for women tech entrepreneurs, with 18% of them being female. NYC differs from Silicon Valley in that the focus there is on consumer startups – 35% more startups focus on consumers as their primary source of revenue and are less focused on SMEs. According to Fabian Pfortmueller, Founder of Holstee, “I believe NYC is the most diverse ecosystem of all the three leaders – Silicon Valley, NYC and London. It has a quickly growing startup community, access to capital and a talent pool, but at the same time it is also the home of big media, of style, and of finance(…) [I]t makes more sense to be in NYC. Plus, we just love it here.”
Seattle is best known for being the headquarters of Microsoft, thereby positing itself as Silicon Valley’s chief competitor – a fact that was only exacerbated by Steve Jobs’ return to Apple in 1997. Seattle has a strong history of tech and links to Silicon Valley, with 41% of Seattle entrepreneurs once having worked there. Many startups in Seattle eventually end up being acquired by the tech giants which the founders of the startups had left to found their own.
2. Los Angeles
Traditionally dominated by the film industry, LA has been a difficult place for startups to grow. However, in recent years, the startup ecosystem has flourished considerably and has a healthy funnel of startups moving through the startup lifecycle. LA is beginning to realise its potential to be an alternative to Silicon Valley. LA startups are as data oriented as their Silicon Valley counterparts, and more receptive to new technology. Python and Ruby are the preferred coding languages there. However, it has more web startups than mobile startups. According to Chris Grey, Founder and CEO of Caplinked, “I would say that Los Angeles is extremely different from Silicon Valley in the mindset of people. Silicon Valley attracts the top young people in the world who want to do a tech startup. LA is an entertainment mecca that also has a lot of tech start ups because it’s a big city on the west coast of the US.”
1. Tel Aviv
Torn apart by political strife and unrest, Israel, however, has come around strongly to be home to the highest density of tech startups in the world, which have mushroomed up in Tel Aviv. In 2009, 63 Israeli companies were listed on the tech oriented NASDAQ – more than Europe, India, China, Korea and Japan taken together. Today, almost every major multinational has an Israeli presence, among them Microsoft, Google, Cisco and Intel. With a long tradition of entrepreneurship, a highly developed funding ecosystem, vibrant entrepreneurial culture, a strong support system and a broad talent base, Tel Aviv has a healthy funnel of startups across the developmental lifecycle. However, Israel’s technology adoption rate lags far behind Silicon Valley. Israeli startups are 27% less likely to use Python and 87% less likely to use Ruby. According to Dan Senor and Saul Singer, authors of The Startup Nation, “The great irony of the Start-Up Nation story is that Israel has transformed the challenges it has faced into assets that form the cornerstones of its culture of innovation. Adversity of all kinds, such as being under attack, small, isolated, and lacking resources, have forced Israelis to be resourceful, to do more with less, to innovate, and to be global from day one. The fact that Israel specializes in adversity is most dramatically seen in downturns.”
Startup success stories: Babylon, Mirabilis
Wildcard entrant: Berlin
There is a significant amount of hype surrounding Berlin as a startup hub right now. It has attracted investors and entrepreneurs from all over the world, such as The Netherlands’ Edial Dekker and Sweden’s Alexander Ljung. Since the reunification of Germany in 1990, Berlin has emerged as a primary cultural centre of Western Europe, and now the constantly evolving city is the darling of entrepreneurs with its determined drive to move forward. Berlin entrepreneurs are typically less educated than their Silicon Valley counterparts, but startups are evenly distributed across the startup lifecycle. As Matthew Brimer, co-founder, General Assembly says, “Berlin is an up and coming community. If you look at where New York was a couple of years ago, you can see a parallel to where Berlin is now”.
Startup success stories: Soundcloud, Gidsy, EyeEm