Startups on the rise

Growth capital is surging into top startup ecosystems, despite the tumult of a pandemic year, and new innovation hotspots are emerging, according to Startup Genome 2021 global research.

There are 79 startup ecosystems globally that generate more than US$4b in value, more than double the 2017 figure, according to the Startup Genome Global Startup Ecosystem Report 2021. The report compared ecosystems based on where early-stage startups will most likely build globally successful companies, and analysed more than three million companies in its annual round-up. The report found that the global startup economy is worth more than US$3.8 trillion in “ecosystem value” — more than the individual GDP of most G7 economies (not including the value of exits prior to 2018). Some 91 ecosystems created unicorns in 2020.

However, swift government support and surging venture capital in pandemic-driven new opportunities has boosted the sector even further.

“As startups helped doctors treat homebound patients, teachers reached students, and small businesses continued to operate, it became glaringly obvious that founders would be critical to global resilience and recovery,” says Startup Genome founder and angel investor JF Gauthier.

While the pandemic increased stress on many communities, industries and value chains, it also put the spotlight on entrepreneurs as powerful economic drivers comfortable with uncertainty, writes Jonathan Ortmans, founder and president of the Global Entrepreneurship Network. This “democratisation of entrepreneurship” means startups are launching and thriving, and ecosystems are maturing across every continent.

Pandemic turbulence hasn’t rattled the dominance of top-five global startup ecosystems Silicon Valley, New York City and London (tied for second place), Beijing and Boston. North America continues to dominate the global rankings, with 50 per cent of the Top 30 ecosystems coming from this region, followed by Asia with 27 per cent and Europe with 17 per cent.

Down under, Sydney and Melbourne are in the top 25 ecosystems globally for “connectedness” and “talent”. “Proximity to Asia, ease of doing business, talent and a global mindset imposed by a relatively small domestic market are behind an increasing prominence for startup ecosystems in Oceania,” says non-executive director of SEEK and Buildxact Leigh Jasper.

Gaultier noted that one consequence of the pandemic was to loosen Silicon Valley’s grip on startup energy. The ecosystem experienced a net outward migration of technology and managerial talent driven by an “astronomically priced real estate market”.

During the pandemic the number of people leaving Silicon Valley overall rose 30 percent, the report says, citing a study by the California Policy Lab. “Some, but not all, of those people are coming back; and the exodus from most other tech hubs proved temporary. Still, the forced adoption of remote work during the pandemic spotlighted the potential for companies everywhere to access a global workforce.”

It led to a diaspora effect, the report says. “Once the constraints of living near the office were removed, experienced talent from the Valley dispersed around the globe. Those resources are turning up in cities and countries on six continents, where they are joined by record infusions of venture capital and a tech industry that is growing at its fastest rate since 1999 — but with much stronger fundamentals.”

Tokyo is the sole new entrant to the report’s Top 10, moving to ninth, primarily driven by an increase in successful exits contributing to a growth in “ecosystem value”. In China, investments rose steadily, reaching more than US$37b in the first five months of 2021, according to GlobalData. China was also the most prolific filer, for the second consecutive year, in worldwide patent applications, up four per cent over 2019, according to the World Intellectual Property Organization. Indian startups raised US$12.1b in the first half of 2021 and as of August, India had spawned 24 unicorns in 2021.

COP26 goals

The UK will host the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow from 31 October–12 November. COP stated goals are:

1 Secure global net zero by mid- century.

Countries are being asked to come forward with ambitious 2030 emissions reductions targets that align with reaching net zero by the middle of the century.

To deliver on these stretch targets, countries must:

• Accelerate the phase-out of coal
• Curtail deforestation
• Speed up switch to electric vehicles
• Encourage investment in renewables.

2 Adapt to protect communities and natural habitats.

The climate will continue to change even as we reduce emissions, with devastating effects. At COP26 we need to work together to enable and encourage countries affected by climate change to:

3 Mobilise finance.

To deliver on our first two goals, developed countries must make good on their promise to mobilise at least US$100b in climate finance per year by 2020. International financial institutions must play their part and we need to work towards unleashing the trillions in private and public sector finance required to secure global net zero.

4 Work together to deliver.

Organisers emphasise that we can only rise to the challenges of the climate crisis by working together. At COP26 we must:

Director IDs on the way

From November 2021, directors will be able to apply for their director Identification number through Director ID, the first service to be delivered by the new Australian Business Registry Services (ABRS).

All directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation will need a director identification number (director ID). Directors will need to apply for their director ID themselves to verify their identity. It is a free service available at the Australian Business Registry Services. 

Next...

Make a diary note for the AICD Australian Governance Summit #AGS 2022, 2–3 March, Melbourne.

Key Oceania findings

• Oceania startup ecosystems are collectively worth over $30b in value, with 90 per cent concentrated in Sydney, Melbourne and New Zealand.
• Early-stage funding in Oceania 2018–20 totalled more than $2b, a 35 per cent increase from the previous 2.5-year period. 

Ready for change

Transition-ready businesses show more resilience and have better governance, according to survey findings by the Grant Thornton Australia Family Business Survey 2021.

50% more likely to have a documented strategic business plan

>2x more likely to have a formal process for incorporating family values into formal planning process

>2x more likely to have a family constitution or charter

>2x more likely to hold stakeholder meetings or forums

>2x more likely to have a formal board of directors

6x more likely to have a formal conflict-resolution mechanism

27% of transition-ready firms reported decreased revenue in the past year

58% of transition-ready firms reported increased revenue in the past year