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Can Silicon Valley still dominate or are global innovators redrawing the map?

The Economist | Apr 13, 2022

openness to new idea - Can Silicon Valley still dominate or are global innovators redrawing the map?Silicon Valley is still home to 136 unicorns, more than any other place in the world. But as Bengaluru shows, such clustering is no longer confined to a narrow strip of land in northern California (see chart 1). Unicorns can be found in 45 countries. Of the more than 1,000 that trot the globe, nearly half reside outside America. The share of all VC flowing into American startups has declined from 84% two decades ago to less than half.

3 Critical Ingredients for Startup Success

1. Deep talent pool: 

A deep talent pool is the most obvious ingredient of a successful cluster. Famously, Silicon Valley benefits from proximity to brain trusts such as Stanford or the University of California, Berkeley. Tel Aviv has both universities and recruiters from the Israeli Intelligence Corps, which like elite universities enlists the best and brightest. Participation in such elite units is an immediate signal for a venture capitalist looking for a startup founder to back, or a startup seeking to hire young technologists. Bengaluru has nearly 70 engineering colleges.

2. Openness to people and ideas: 

Migrants are a disproportionately enterprising bunch: you need a bold streak to move somewhere new.

Around 60% of America’s most valuable tech companies were started by immigrants or their children. European hubs such as Berlin, London and Paris, each of which is home to ten or more unicorns, have large immigrant populations. China lacks foreign founders but its startup hubs like Shanghai and Shenzhen draw plenty of “sea turtles”, returnees who had studied or worked abroad.

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3. Presence of local risk capital: 

For enterprise to thrive, it needs backers who understand the ecosystem and are willing to feed it. This can be founders and employees of earlier startups, who become angel investors for the next generation, notes Rana Yared of Balderton Capital, a VC firm.

A local capital base also encourages another important type of risk-taking. Employees must be able to leave existing firms and join or even start competing ones.

Startup unicorn cities ranked - Can Silicon Valley still dominate or are global innovators redrawing the map?

Redrawing the map - many new clusters look different than Silicon Valley

Of the places that have burst onto the startup scene, some are mature, such as Beijing, London or Tel Aviv, and often global in their ambition. Others, including Bengaluru, Singapore or São Paulo, are in earlier stages of hub-dom. All enjoy a broad pool of technical talent, deep links to other parts of the world and local risk capital. Together, they are redrawing the map of global innovation—creating one that is more dispersed, diverse and competitive.

Read:  Startup Genome: Canada Ranks 14th in The Global Startup Ecosystem Report 2021

Many of the new clusters look different to the original one in Silicon Valley—although some share its pleasant climate. They also differ from each other. The more mature hubs tend to spawn more “deep tech” firms working in complex areas like artificial intelligence and other sophisticated software aimed chiefly at corporate customers rather than consumers. But whereas Israeli and British startups often look across their countries borders, Beijing’s are focused almost entirely on the domestic market.

Younger innovation hubs, including Bengaluru, São Paulo and Singapore, look a bit more alike in that their focus is regional rather than global. Instead of breaking new ground they often adapt existing business models to local market conditions. As disposable incomes rise in new regions, consumers become willing to pay for similar “technification of services”, says Peng Ong of Monk’s Hill Ventures, a Singaporean VC firm.

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NCFA Jan 2018 resize - Can Silicon Valley still dominate or are global innovators redrawing the map?The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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