This article is one founder’s response to the recent publication of the Startup Genome, the ranking of the world’s top tech hubs. This report compares the global entrepreneurial ecosystems (mainly cities or geographic regions) through a number of absolute and relative figures and ends with a ranking that basically reads as which are the best startup places in the world.
Personally, I’m a big fan of Startup Genome and share their vision of “accelerating the pace of innovation around the world by turning entrepreneurship into a science.”
On to the report itself. The largest part is filled with pretty valuable and somewhat complex information. Unfortunately, most of us much rather look at an obvious winner list over reading and understanding a lot of data.
So I quickly scanned through the important part and focused on the ranking at the end. After my expectation of seeing the valley at the top of the list was confirmed, I immediately scrolled down to find Berlin. I had to go way down until finally seeing it coming in at a lame #17.
I couldn’t believe what I was reading.
Because you know, that whole startup hype here in Berlin. Not only that startups are huge now in Berlin, but that the whole startup world is crazy about Berlin. At least that’s somewhat our sentiment here in the tech community. And I can personally confirm that there’s something to it, a creative energy and this great feeling of being part of something really big. Bigger than individuals and bigger than individual companies. And even Om Malik was writing about it back in December.
Or was it all just smoke and mirrors? A false hype
- Drummed up by ourselves to create a good PR narrative (journalists seem to prefer to write about startup revolutions over product launches)
- We’re all victims of the endowment effect (once something is mine, I think it’s better than before)
- We’re failing to consider the worldwide rise in startup activity, which is also thanks to…
A billion Dollar$
I think it’s probably a mix of several things going on simultaneously:
- There is something special happening in Berlin
- Everyone drinks a little bit of their own Kool-Aid
- Some of the increase in startup activity in Berlin might simply be because activity is picking up everywhere else as well
- Just looking at numbers can fail to forecast new markets, because there is not enough data available yet
Nevertheless, a natural human reaction to finding out something we don’t like or disagree with is to discredit the source. And that was exactly my first instinct after seeing the ranking and simply continuing with my busy day running a startup. But I had a hard time doing that in this case because I had always liked the scientific, data based approach of the SG guys.
So that’s why I poked around a bit, and it turns out that the methodology is indeed somewhat flawed:
A global ranking based on average throughput only of companies participating in Startup Genome surveys is indeed not the ideal one, for three reasons:
- Exposure to and knowledge of SG in a city might be limited due to a variety of reason (didn’t get any local press coverage, no SG evangelists in that tech community, etc.). Now, you could argue that the adaptation rate of SG’s tools can be an indicator of innovation and hence success, but that doesn’t make it an accurate benchmark.
- Making participation in your own surveys the basis for determining the global ranking of entrepreneurial ecosystems is not a very objective, scientific approach.
- The language barrier. SG surveys are (understandably) in English only.
And then buried deep in the comment section I found this:
The composition and source of the data seem to make it a more appropriate foundation for a simple, easy to digest top 20 list. Assuming that a startup founded = angel funding = VC funding, etc. = 1 point. One minor flaw is that the data also originates from only one source, but I think that CrunchBase is probably the better single source we could choose.
But even if Berlin was ranked #12, we can do better than that:
- Considering that Berlin has a culture that attracts innovators, plenty of affordable infrastructure, a community that has hit the tipping point, a sensible immigration policy that allows the import of talent on top of an existing pool of skilled labour, I do see the possibility of Berlin becoming one of the world’s major tech hubs.
- Let’s keep building products that people love and create amazing companies.
- Loving what we have is great, but sometimes it’s good to remember that we tend to assign a higher value to our own things (and in this case our city) than other people do.
- We should use what SG has to offer. Their reports and tools are useful (some might say as much as the Lean Methodology). Plus, next year our ranking will be higher ;)