MTL & The 2015 Startup Ecosystem Ranking

Compass created a report that ranks the top 20 Global startup ecosystems. MTL is on the list (boo-ya). Prior to the actual ranking, the 150 page report presents the following argument: 
(I) We’re moving from the Industrial Era to the Information Era  
(II) Technology startups are crucial for ushering in said era
(III) Strong ecosystems are necessary for the success of those tech startups
Therefore, we must create strong ecosystems, and one way to begin to do that is to measure them.

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The 2015 Startup Ecosystem Ranking has been making the rounds online. This is especially the case for those of us in Montreal, as our city made the list for the first time. Yet, the ranking is situated within a 150 page report, and thus, there’s much more to the story. We dug in and did the dirty work so that you don’t have to. Read on for our summary, or find the full report here.  

So what exactly is this?
The 2015 Startup Ecosystem Ranking lists the top 20 startup ecosystems around the world. There are 5 major components: Performance, Funding, Talent, Market Reach, and Startup Experience. 

Who created it?
Compass, a provider of automated reporting and benchmarking software for startups and tech companies. The last edition of their ranking was published in 2012 and downloaded 100,000 times. They created the 2015 edition with more data and help from Crunchbase and 60+  more partners. 

Why’d they make it?
The answer is threefold – here we go:
(1) We’ve reached or are near to the switch from the Industrial Era to the Information Era:
“Humanity doesn’t see transitions between major economic eras very often, but when they come, every aspect of society gets reinvented: government, business, finance, education, medicine, energy, technology, art, and science all get upgraded. In fact, most historians would argue there have only been three such transitions before in human history: 1. Foraging to horticulture 2. Horticulture to agriculture 3. Agriculture to industrialization…the necessary tools and infrastructure are in place for the Information Age to burst into full bloom, moving beyond the confines of just the technology world to transform all aspects of society.” 

(2) Technology startups are crucial for making this switch:
While productivity has grown by 800% since 1965, companies are experiencing a 75% decline in ROA.  Why? Competitive intensity (so many more startups) information transparency (think Kayak) and declined consumption (due to the advent of Craigslist, Airbnb, etc). The old school solution is decreasing costs and increasing revenue. This is no longer enough. “The Information Era requires completely new ways of working, new culture, new tools, new economics, new everything. Who is figuring out how to adapt and succeed in this brave new world better than anyone else? Technology startups.” Why tech startups will succeed in making this switch: (1) Products are cheaper than ever to create, (2) multiple types investors now exist (angels, accelerators, micro-VCs, etc); (3) consumers adapt quicker because of an interconnected world and; (4) they’ve smashed what Eric Ries calls the Startup Dollhouse fallacy, the belief that startups are mini corporations and so can be run as such (they cannot).  

(3) Strong Ecosystems are necessary for technology startups to thrive:
It’s in a thriving ecosystem that entrepreneurs can find the perfect and rare combination of other like minded entrepreneurs, investors, engaged mentors, many different types of eager customers and culture, which then serves to perpetuate the whole combination. Thriving local ecosystems have a culture that runs so deep that “even the local gym offers free services in exchange for equity in your startup” (Silicon Valley). 

Montreal’s Spot:
As this is the first time that MTL is on the list, it’s a pretty big deal. It seems fair to say then, that the Montreal startup community is doing something right. We now have so many services available for those in the tech industry: from Startup Fest to District3, HackMcGill, MTL Girl Geeks, Notman House, Real Ventures and so many more. We’re proud to be a part of this community and can’t wait to work hard to bring us closer to the top of lists like this.  Here’s the report’s breakdown of the MTL ecosystem: 

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Other Interesting numbers:
On gender equality:  No ecosystem comes close to an equal share of male and female founders. 
On VC growth: “Total venture capital investment across the 20 ecosystems rose 95% from ’13 to ’14.”
On interconnectedness: 41% of all North American rounds have at least 1 investor from another ecosystem
On foreign employees: # of foreign employees within a startup is 29% on average for the 20 ecosystems
(but Silicon Valley is 45%)
On exit growth: Rose 78% annually from 2012 to 2014 (40% IPOs/60% Acquisitions) across the top 20
On the biggest falls: Vancouver, Toronto, Sydney, and Seattle.
They did all grow, just not as quickly as the others. Waterloo fell completely out of the ranking, “likely due to its proximity to Toronto.”

Potentially Super Important Caveat:
“Our index does not currently include startup ecosystems from China, Taiwan, Japan, and South Korea. The language barrier slowed our ability to gather enough to include them in the ranking.” 

That’s it! Stay tuned for next week’s post on services and spots that MTL has to offer entrepreneurs.

– Ella  

Emma Williams
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