On Jul 27, 2015
US-based Compass, formerly known as Startup Genome, has rated the world’s top tech hubs on five counts: funding, market reach, talent, experience, and performance of startup. Overall, Bangalore came 15th in its latest ranking of ecosystems up four places from Startup Genome’s last global ecosystem ranking in 2012.
With US$2.25 billion in funding last year, Bangalore now ranks 6th among startup ecosystems for access to venture capital. Only four US tech hubs – Silicon Valley, NewYork, Boston, Los Angeles and Tel Aviv in Israel are ahead of Bangalore in terms of VC investment and time to raise capital. This is one of the findings in the Compass report released today on the top 20 startup ecosystems in the world.
Delhi, which has seen a surge of startup activity over the last couple of years, hasn’t made the cut yet. Nor has Mumbai, which is the other main startup hub in India. Compass data shows that Delhi and Mumbai are still lagging in early stage investment, which involves high risk capital.
Bangalore scored high not only in funding but also in performance, which is determined by the number of startups, their valuations, and growth rates. It came 10th in this column, one spot above Singapore.
Low in exits, high on seed rounds
Not everything was rosyfor Bangalore, which is still an immature ecosystem. It got only a 0.2 percent slice of the exit pie in the last two years, with Silicon Valley taking the lion’s share, followed by London, Los Angeles, and Tel Aviv. Exits are important to keep investors interested, but rising valuations made up for low exit volume in Bangalore.
As Bjoern Lasse Herrmann, founder and CEO of Compass, explains to Tech in Asia:
For a relatively young, fast-growing ecosystem, the sum of valuations is larger than the sum of exit valuations, because the latter is by definition a lagging indicator.
The large number of startups and their performance helped Bangalore rank higher.
The Compass report notes that Bangalore used to be mostly an outsourcing center, “hardly characterized for the innovative culture required for creating new technology startups.” So it surprised many to see its explosive growth as a startup hub in the last few years.
But there’s no stopping it now. In the last quarter, US$740 million of VC funding came in.
The ecosystems with the most growth in funding in the last three years were Berlin (12x), Bangalore (4x), and Boston (3.7x).
But of all the ecosystems, Bangalore had the highest rise in seed rounds a clear indicator of future growth potential.
Boston, in contrast to Bangalore, had more exits and stronger late stage funding, but a steady fall in seed rounds each year, suggesting a future decline.
“Bangalore also boasts an incredibly youthful startup ecosystem, with the youngest average founders’ age of all the top 20 ecosystems,” says the Compass report.
A study by the National Association of Software and Service Companies (Nasscom) last year found the average age of startup founders in India to be 32, with three-quarters of them being 35 or below.
Access to customers, local and global Where Bangalore scored the lowest among the top 20 hubs was in market reach, which looks at access to both local and global customers.
India does well in market ‘Size and English proficiency, but compared to the other top startup ecosystems, B2B startups in Bangalore have fewer local corporations with deep pockets to target as clients.
Compass surveys also showed Bangalore startups did not fare as well as their counterparts elsewhere on global reach.
“The potential is very large, but the execution is not yet as good as in other ecosystems,” says Herrmann. Bangalore also comes in at a lowly number 17 in the quality, availability, and cost of tech talent, which might come
The Chinese are coming Not surprisingly, startup hubs in the developed countries of North America and Europe dominate the Compass list, taking 16 of the top 20 spots.
Bangalore, Tel Aviv, Singapore, and Sao Paulo are the only ones from other continents. Notable absentees from the list are startup hubs from China, Taiwan, Japan, and South Korea.
“The language barrier slowed our ability to get enough of some components of data to include them in the ranking.
We expect to have these ecosystems included in our index later this year,” says the Compass report.
The entry of the likes of Shanghai, Hong Kong, Seoul, and Tokyo are sure to make the ranking even more competitive, reflecting the inexorable shift of the world tech order to the east. “Innovation now comes from everywhere on earth,” writes Steve Blank, Silicon Valley serial entrepreneur and author, in a foreword to the report.
“Most of the innovation and disruption are coming from new entrants young, fearless, and not afraid to take on the status quo.”
Two or three decades ago, most tech startups were created in Silicon Valley or Boston.
Today tech entrepreneurship is a global phenomenon with startup hubs emerging in one country’ after another.
It is to benchmark these ecosystems and help entrepreneurs, investors, and policymakers that the Startup Genome project was conceived by three entrepreneurBjoern Herrmann, Max Marmer, and Ertan Dogrultan.
Their 2012 Startup Ecosystem Report generated a lot of debate.
It later re-branded to Compass, which also provides automated benchmarking software to startups.
The 2015 Startup Ecosystem Ranking report is its latest attempt to analyze how the world’s tech hubs stack up.
REF : TECHINASIA
Source : The traveller Vol 3, No.8 From August3 To August 9, 2015