We’re in the midst of a startup revolution. That’s the crux of a new report on the top 20 entrepreneurial hubs in the world, published by the Compass Group. Seattle’s startup ecosystem ranks eighth on the list, just behind Chicago and ahead of Berlin.
The findings are based on five metrics — performance (capital raised, exit valuations), funding (VC investment, duration of fundraising period), talent, market reach (local ecosystem’s GDP, ease of reaching customers), and startup experience (first-party survey data).
While Seattle’s overall ranking fell from fourth to eighth, the report notes that startup activity did grow in the past three years, it just grew at a slower rate than others on the list, “which puts them at risk of eventually being left behind.”
The Emerald City also outstripped several competitors in two key areas — ranking fourth for talent and third for “startup experience.” Seattle’s weak point, however, is funding, according to the report.
“While it is sufficient to fund a major share of promising early stage startups, a lack of big VC funds causes a noticeable gap of later-stage investments — a key reason why the Seattle ecosystem is not among the global elite in 2015,” note researchers in the report.
North America appears to be the strongest entrepreneurial region, with sixteen of the twenties cities listed, however the study does not include cities in China, Taiwan, Japan, or South Korea.
Here are the top 20 cities, according to the Compass Group:
- Silicon Valley
- New York City
- Los Angeles
- Tel Aviv
- Sao Paulo
In addition to the ranking, the study also includes a “Startup Revolution Series” of essays, asserting that the transition from Industrial Era to Information Era laid the groundwork for the startup boom. It notes several Industrial Era companies, like Borders Books, that have been succeeded by Information Era companies, like Amazon.
Researchers attribute this shift to APIs and new software infrastructure, which make it cheaper than ever to enter the startup ecosystem. Those startups then require lower investments to get off the ground, which allows VCs to back larger portfolios of companies. Consumer willingness to adopt new technologies and the rise of sharing economy services are also disruptive forces, according to the report.
“Existing corporate strategy and structures have proven unequal to adapt to this changing economy,” writes entrepreneur Steve Blank in the introduction. “Every existing company will have to deal with this common economic problem: How do you build an effective organization in a time of continuous disruption?”