Silicon Valley has become synonymous with the tech industry, almost like Hollywood has become shorthand for the film industry. But, like movie studios, technology companies are also finding ways to branch out into different geographic areas, across both the United States and abroad.
A report conducted by research firm Startup Genome, called the Startup Ecosystem Report 2012, released Tuesday shows the other areas that have are beginning to challenge Silicon Valley for startup innovation.
How are the regions ranked?
To rank each region, the report breaks it down into eight important categories:
- Startup Output Index, which represents the total activity of entrepreneurship in the region.
- Funding Index: or how active, and comprehensive, the risk capital is in each ecosystem.
- Company Performance Index: the total performance, as well as the potential, for startups in each region. Revenue, job growth, and potential growth of companies in the startup ecosystem are all taken into account.
- Mindset Index: a measurement of how well the population of founders in each ecosystem "thinks like a great entrepreneur, where a great entrepreneur is visionary, resilient, has a high appetite for risk, strong work ethic and an ability to overcome the typical challenges startups face."
- Trendsetter Index: measures how quickly an ecosystem adopts new technologies and management.
- Support Index: the quality of the startup ecosystem’s support network. Involves the degree of mentorship, service providers and types of funding sources.
- Talent Index: a measurement of the talent of the founders in an ecosystem. Age, education, startup experience, industry domain expertise, ability to mitigate risk and previous startup success rate are all accounted for.
- Differentiation Index: how different a startup ecosystem is to Silicon Valley. Demographics and what types of companies are started there are important in this category.
Of these categories, Startup Genome points to the trendsetter index as “a leading indicator of the future success of a Startup Ecosystem.”
For all of the other cities attempting to unseat Silicon Valley as the place for entrepreneurship, Startup Genome says that the differentiation index will be most important, since “other ecosystems will perform better if they differentiate themselves from Silicon Valley and establish their own strengths.”
The Official Rankings
Not surprisingly, Silicon Valley still comes in first in every single category.
"Silicon Valley is by far the biggest, most important and influential startup ecosystem to which all other ecosystems look up to. Silicon Valley’s total output of startups sets the baseline to which all other ecosystems are compared. Although a staggering number of startup ecosystems have been established around the world, Silicon Valley remains top of list in all dimensions," the report says.
The more unexpected result was which city came in at number two. t was not New York, Los Angeles, or even London. It was Tel Avi, Israel.
Israel, despite its young age and small population, has the highest density of startups in the world, with 63 companies listed on Nasdaq. That is more than Europe, Japan, Korea, India, and China combined.
The rest of the top 20 cities on the list are as follows: Los Angeles, Seattle, New York City, Boston, London, Toronto, Vancouver, Chicago, Paris, Sydney, Sao Paulo, Moscow, Berlin, Waterloo (Canada), Singapore, Melbourne, Bangalore, and Santiago.
While Berlin and Sydney ranked high in trendsetting, Chicago and Tel Aviv ranked low, which Startup Genome aligns with what they had been hearing about each region.
“The trendsetter score for example corroborates with the prevailing excitement expressed about the Berlin and Sydney Startup Ecosystems, while also aligning with the anecdotal evidence we have received about the conservative culture and slow pace of adaptation in the Chicago and Tel Aviv startup ecosystems,” it says in the report.
Tel Aviv ranks low on the Performance Index, coming in at 12 out of 20, and even lower on the Trendsetter and Differentiation Indexes, at 17 and 18 respectively. You have to wonder if coming in low at the last two categories might become a problem for the city down the line.
What the report really indicate, though, is that global entrepreneurship is on the rise, and seems to be heading toward even stronger numbers.
"Overall, the Startup Ecosystem Index paints a glowingly positive picture of the state of entrepreneurship around the world. While Silicon Valley is far and away the strongest ecosystem, just 5 or 10 years ago most of the other ecosystems on this list either barely existed or didn’t exist at all. The global startup revolution is going strong, indeed," says Startup Genome.