Beijing and Shanghai have secured 3rd and 8th place respectively in a recent ranking of global startup ecosystems.
Published by Startup Genome and the Global Entrepreneurship Network, the 2019 Global Startup Ecosystem Ranking (GSER) evaluates 150 tech ecosystems based on factors related to startup success such as performance, funding, market reach, and talent. It also examines the growth and decline of startup sub-sectors, with advanced manufacturing and robotics, blockchain, agtech, and artificial intelligence among the fastest growing. Yes, it’s one of those reports that’s full of buzzwords.
“The Global Startup Ecosystem Report shows how to create environments in which entrepreneurs can start and scale new firms beyond a handful of startup meccas,” says Jonathan Ortmans, founder and president of the Global Entrepreneurship Network. “This report provides a guide for ecosystem leaders as they aim to empower entrepreneurs everywhere.”
Unsurprisingly, the US dominates the lists, housing 12 of the top 30 startup economies. Silicon Valley snags first place, followed by New York City in second, but Beijing ties with London for third.
Where will be the next Silicon Valley? According to the report, no one. Instead of one place overtaking the Bay Area, Startup Genome suggests there will be at least “30 new hubs generating startups and scaleups and producing massive amounts of economic value,” with Beijing and Shanghai leading the pack.
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Looking at Beijing, AI, big data, and analytics put it ahead of the game. Falling just behind Silicon Valley in this category at #2, the country’s capital houses 1,070 AI companies — over a quarter of the country’s total. This includes the world’s largest privately backed startup, Bytedance, which closed 3 billion USD of funding in 2018 at a valuation of 75 billion USD.
Beijing also features a tech hub, called Zhongguancun 中关村, that is home to 10 AI labs and around 9,000 tech companies, including big names like Baidu, Sina Corp, and Lenovo. There’s even a 2.1 billion USD AI technology park in the works, which is predicted to have an annual output of 7 billion USD.
Jordan Zhu, a senior manager at government-backed incubator Innoway, says in the report that Beijing’s greatest asset is its educational resources:
“Among Beijing’s yearly 200,000 college graduates, many enter the startup scene one way or another, making this city a leading innovation highland.”
When it comes to Shanghai, it’s the gaming industry that deserves attention, ranking #2 globally. Boasting more than 130 startups and serving as a satellite for industry heavyweights such as EA, Ubisoft, and Virtuos, the city’s gaming sector is expected to break 15 billion USD by 2020. Shanghai is also the host of ChinaJoy, Asia’s largest gaming expo.
The tier-one city stands out in more ways than one: along with New York City and Los Angeles, Shanghai is one of only three ecosystems to crack top 10 in both female entrepreneurship and global performance, with 22-24% of its startup founders being female. This number might not seem impressive, but as a comparison, only 17.2% of tech founders in the world are female. None of the tech hubs analyzed by the report came remotely close to reaching the 50% mark.
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In addition to gender balance, there are a few other areas that could be improved. The report points out that Beijing, unlike the other top ecosystems, shows low levels of global market reach; while many startups scale because of the massive domestic market, few manage to expand beyond national borders. Moreover, almost every top ecosystem has a strong national regulatory environment — Beijing and Shanghai are the exceptions, scoring low on IP commercialization.
And despite the optimism expressed in the report, China’s startup ecosystem has hit a number of issues of late, something explored further in our Digitally China podcast here:
Digitally China Podcast: China’s High-Rolling Startup Industry Hits the Brakes
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