While Silicon Valley remains widely regarded as the world's top startup environment, new research from Startup Genome and Telefonica shows that other areas are gaining ground. Here are the 20 top startup breeding grounds in the world.
Silicon Valley, Calif.
Silicon Valley remains the gold standard for startup ecosystems. The area’s support network and funding potential (capital raised in SV is 32% higher across all stages of a startup’s development) make it the ideal location to start a new business. The greatest challenge may be living up to the region’s all-star lineup of founders, which includes Mark Zuckerberg (Facebook FB ), Jack Dorsey (Twitter and Square), and the late Steve Jobs (Apple AAPL ).
Tel Aviv, Israel
Tel Aviv is the only non-U.S. ecosystem in the top six, but boasts the highest density of tech startups in the world. Startups in Tel Aviv rely more heavily on advertising for revenue than startups in Silicon Valley. They also tend to focus on smaller, tech-driven markets instead of “big market winners.”
Los Angeles, Calif.
The enormous shadow of Hollywood and the entertainment industry has made it challenging for L.A. startups to gain traction, but that is quickly falling by the wayside. L.A. ranked third on Startup Genome’s list in terms of entrepreneurial talent, and the city’s high visibility on the West Coast certainly doesn’t hurt. A hefty portion of L.A. startup founders (29%) once contributed to its neighboring startup scene to the north.
For years, Microsoft was considered Seattle’s crown jewel, a position that was only amplified by the return of Steve Jobs to Apple in 1997, upping the competitive ante between the two tech giants. A strong tech history and close proximity to Silicon Valley make Seattle a great place to network and establish roots. Seattle and the Valley share quite a bit in common, including people: 41% of Seattle entrepreneurs once worked in Silicon Valley, the most overlap out of any region in Startup Genome’s study.
New York City
As the top startup breeding ground on the East Coast, New York has launched a number of impressive and nationally recognized enterprises in recent years. Entrepreneurs interested in tackling the world of ecommerce may find New York more fruitful than Silicon Valley, and many female tech entrepreneurs have also settled in NYC; women account for one-fifth of startup entrepreneurs in the area.
In Boston, startup money is plentiful. The area ranked first in the study’s funding index. Boston-area entrepreneurs are certainly an educated lot as well, as they are three times more likely to have a PhD than those in Silicon Valley. However, there are 79% fewer startups than in the Valley. According to Startup Genome’s research, entrepreneurs in Boston are less driven to build a company that they can quickly sell off and are more interested in creating a great product.
London can claim the title of Europe’s best startup locale and is the most likely destination for U.S. startups to set up shop abroad. Significantly fewer startups are located in London than in Silicon Valley (63% fewer, to be exact), but the two regions have similar support systems. London-based entrepreneurs lean heavily on like-minded colleagues in their area and each startup, on average, consults more than three mentors.
Regionally, Toronto has to compete against other startup magnet cities like NYC and Boston, but the Canadian locale holds its own even though it has 85% fewer startups than Silicon Valley. Despite claiming the top spot in Canada, though, Toronto suffers from insufficient capital sources; many entrepreneurs are forced to rely on self-funding or rounds from family and friends. Some fear that entrepreneurs from Toronto may head to other regions unless better funding options become available.
Vancouver ranks in the bottom half in almost every major category in Startup Genome’s study — except talent. The second largest Canadian startup scene ranked fourth in overall entrepreneurial chops, a strength that can make up for inadequacies in other areas. Similar to Toronto, Vancouver startups suffer from a lack of funding sources. The photo-sharing company Flickr is arguably the most successful startup from the area. An average of more than 1.5 million photos were uploaded to the site every day in 2011.
Chicago’s startup scene may be best known because of Groupon GRPN , but the Windy City is quietly emerging as the top entrepreneurial region in the Midwest. At an average age above 37 years old, entrepreneurs operating in Chicago are among the oldest in Startup Genome’s list of top cities for startups. A sizable portion of these entrepreneurs have connections to Silicon Valley. One-fifth of the region’s startup founders once lived or worked in the Valley.
Unlike the Valley, which was built with the help of foreign entrepreneurs and investors, Paris has had trouble attracting the world’s most talented business minds. Startups often run into funding issues in the late stages of their development and only 7% of entrepreneurs in Paris are female.
Startups in Sydney do well, but the rest of the world may not know much about them. Entrepreneurs from Sydney face significant challenges influencing markets outside of Australia. Most startups go after smaller markets (possibly because they have fewer employees, on average) and raise 59% less capital than their Silicon Valley counterparts.
Sao Paulo, Brazil
The Brazilian economy was booming prior to the European fiscal crisis (7.5% GDP growth in 2010) and entrepreneurs and investors alike hope the trend picks up once again. Sao Paulo entrepreneurs mainly focus on smaller markets and have yet to adopt the global shift toward mobile; only 3% of startups are likely to build mobile products. But as Sao Paulo continues to grow, so will its startup culture.
Entrepreneurs working in Moscow are the youngest among Startup Genome’s list of top startup ecosystems. They are, on average, more than six years younger than those working in Silicon Valley. To move up on the global startup food chain, Moscow-based founders will need to adopt emergent technology and concentrate more readily on mobile growth.
Berlin is on the verge of blossoming into a European entrepreneurial hub. Some entrepreneurs see Berlin as an earlier version of NYC. Entrepreneurs in Berlin are different than those in Silicon Valley in almost every way: fewer PhDs, smaller target markets, and more than twice as likely to pick up consulting work on the side. But Startup Genome’s researchers found that the intangible qualities within the two regions — work ethic and motivation — were very similar.
Waterloo has one of the strongest (unofficial) connections to Silicon Valley out of all the cities on Startup Genome’s list — 35% of Waterloo entrepreneurs once worked in the Valley. As with other Canadian startup hotspots, Waterloo also suffers from funding challenges. One positive: 28% of Waterloo startups focus on mobile, a market that continues to expand rapidly all over the world.
Location, location, location. Singapore startups benefit from much larger nearby markets in China and India, an encouraging fact for entrepreneurs who hope to expand globally. Funding isn’t as much of an issue as it is in other parts of the world and, similar to Waterloo, Singapore has a strong connection to Silicon Valley. Entrepreneurs in Singapore certainly do not lack work ethic. They clock in an average of 11 hours per day, longer than entrepreneurs in any other ecosystem on this list.
Melbourne is getting attention for its startup potential, but it will need to distinguish itself from Sydney to truly shine. Melbourne’s most notable challenge: funding. Startups receive 86% less funding than Silicon Valley startups and have difficulty acquiring capital when they want to grow.
Bangalore takes a spot on the list of top startup regions for several reasons, including its talented and highly educated workforce. But government support is needed to help startups develop in a country already crowded with established tech companies. At an average age of 37, entrepreneurs from Bangalore are among the oldest working in startup regions recognized by Startup Genome.
Government initiatives, like Startup Chile, have helped Santiago startups thrive. (Similar initiatives have proven successful in Israel — See No. 2 Tel Aviv.) Santiago still needs to attract more entrepreneurs and investors from the global community, but Startup Chile has brought in over 480 startups since the program’s founding in 2010. Santiago is also the global capital for women entrepreneurs — females make up 20% of the area’s startup workforce.