SINGAPORE and Bangalore, once the only two representatives of Asia on StartUp Genome’s Global Startup Ecosystem 2017 Report, have seen their rankings plummet as Beijing and Shanghai rise to compete with established ecosystems such as London and Silicon Valley.
The report aims to provide independent and accurate analyses of the startup ecosystems from all over the world.
Global Entrepreneurship Network (GEN) president Jonathan Ortmans said: “Such research increases the global exposure of smaller ecosystems and the innovative new recipes that can now be invented anywhere.
“It puts third-party objective analysis and credible input into hands of many more entrepreneurship champions in a mission to capture their cities’ fair share and standing in this new economy.”
— MinisterieEZ (@MinisterieEZ) March 15, 2017
The report tracks 55 startup ecosystems across 28 countries and ranked the top 20 according to four variables – startup performance, funding, talent, market reach and experience.
The five cities in Asia Pacific ranked are Beijing, Shanghai, Sydney, Singapore and Bangalore. The report notes there has been “considerable movement” in the last year.
The two representatives from China – Beijing and Shanghai – made strong debuts in the report, coming in fourth and eighth respectively.
The report noted the two countries ranked well in terms of funding – in both ease of access and quality – reflecting China’s high levels of liquidity.
Shanghai places third among the 20 cities for ease of access to funds, but is hampered by the lack of quality VCs who will be able to lend their experience and expertise to founders.
Beijing benefited from its position as an education hub and the administrative center of China. Seventy universities and colleges populate the city, giving it access to a young, highly-educated pool of talent to draw from, as well as the constant influx of foreigners seeking to do business in China’s powerhouse capital.
The ever-glamorous and cosmopolitan Shanghai maintains a staggering population of 24.1 million people, and relatively affordable cost of living.
In comparison, Singapore fell two spots from 10th place to 12th, while Bangalore saw a more drastic change, from 15th place to last place.
The report stressed although both countries saw their places deteriorate, they would continue to do well in terms of startup growth, with Singapore at the heart of the Asean tech ecosystem.
Singapore performed well in terms of its access to a large talent pool, ranking well in terms of access and cost, but only achieving a middling quality ranking. In comparison, Bangalore was lauded for its abundance of young Indian talent, but noted the talent was immature and lacking experience.
Yet, talent pools in both countries more than made up for it with their low cost, with Bangalore coming out on top – the average engineer in Bangalore costs US$8,900 a year, a number 13 times cheaper than an engineer in Silicon Valley.
Government support played a huge role in boosting the rankings of Beijing, Shanghai and Singapore.
In 2015, China committed US$231 billion in investment for startups in Beijing while Shanghai provides free or heavily subsidised rent to investors and startups.
The Singapore government recently launched a US$13.2 billion initiative in R&D, as well as a one-to-one matching scheme of VC funds for early stage startups.
There are also government bodies such as GovTech and the SGInnovate agencies that aim to connect key components of an ecosystem, such as investors, engineers and resources.
Overall, the report noted Silicon Valley would continue to exert dominance over the startup market long into the future.
However, the report did also note the Valley is beginning to fall behind in some aspects such as exit value, mostly reflecting its heavy reliance on the private industry – compared to other countries which have high levels of government involvement – and maturity.
In the future, Silicon Valley will face stiffer competition from cities such as New York City and London, who will eat into their share of exit value.
“Technology is generating wealth and innovation at an exponential pace, but only a handful of places in the world are capturing most of that value creation,” the report stressed.
“Without immediate and aggressive actions to develop stronger startup ecosystems, this divergence will continue and more places will miss out on technological growth and dynamism.”
Aside from the listed countries, the report makes note of several runners-up in Asia Pacific, including players such as Kuala Lumpur, Melbourne, Seoul and Sri Lanka.