How the Geography of Startups and Innovation Is Changing

We’re used to thinking of high-tech innovation and startups as generated and clustered predominantly in fertile U.S. ecosystems, such as Silicon Valley, Seattle, and New York. But as with so many aspects of American economic ingenuity, high-tech startups have now truly gone global. The past decade or so has seen the dramatic growth of startup ecosystems around the world, from Shanghai and Beijing, to Mumbai and Bangalore, to London, Berlin, Stockholm, Toronto and Tel Aviv. A number of U.S. cities continue to dominate the global landscape, including the San Francisco Bay Area, New York, Boston, and Los Angeles, but the rest of the world is gaining ground rapidly. That was the main takeaway from our recent report, Rise of the Global Startup City, which documents the global state of startups and venture capital. When we  analyzed more than 100,000 venture deals across 300-plus global metro areas spanning 60 countries and covering the years 2005 to 2017, we discovered four transformative shifts in startups and venture capital: a Great Expansion (a large increase in the volume of venture deals and capital invested), Globalization (growth in startups and venture capital across the world, especially outside the U.S.), Urbanization (the concentration of startups and venture capital investment in cities—predominantly large, globally connected ones), and a Winner-Take-All Pattern (with the leading cities pulling away from the rest). These major transformations pose significant implications for entrepreneurs, venture capitalists, workers, and managers, as well as policymakers for nations and cities across the globe. This has several implications for managers. First, many of the key resources found in Silicon Valley are increasingly available in other places. And globalization of high-tech entrepreneurship and venture capital mean greater competition across the board.