The global startup economy remains large, creating nearly $3 trillion in value, a figure on par with the GDP of a G7 economy.1 Seven out of the top 10 largest com- panies in the world are in technology — the highest concentration of any industry sector among the top global companies — and 2019 saw close to $300 billion in venture capital investments around the world.2
Nonetheless, even at the end of 2019, not all was well. Inclusion remained a fundamental challenge for tech ecosystems, with only 14.1% of founders globally being female, as our Startup Genome research shows.3 Value creation by ecosystems remains concentrated, with about 74% of all value produced being concentrated in the top 10 performing cities globally. Tech giants like WeWork and the stable of unicorns funded by Softbank began to falter — ranging from major crises, as in the case of WeWork; to a capital crunch for others.4
But despite these challenges, we did not expect the major threat of the COVID-19 crisis to global ecosys- tems. Since the crisis hit:
Layoffs among startups are rampant, with just over a third of startups globally not laying off staff nor cutting hours, and with the typical startup with full- time layoffs letting go an average 33% of the staff; and
- Startups are facing a double whammy with a drop in consumer demand at the same time VC investments are dropping, leading to a crunch for capital. In fact, four out of every 10 startups have 3 months or fewer of capital runway, meaning they will die if they do not raise additional money and their revenue and expenses remain the same.
While we see early signs of a rebound in Asian ecosys- tems — nothing like a return to normal, but a slowdown of the drop — the startup economy is going through a major transition.
In 2020, the State of the Global Startup Economy can be seen through two main angles: the calm before the storm, up to Dec. 2019, and the consequences of the COVID-19-triggered crisis.
The Calm Before the Storm
In the lead up to the crisis, the dominating trend for ecosystems globally has been the growing democrati- zation of tech across geographies.
Democratizing the Tech Economy
Despite the concentration of value in tech ecosystems, access to the tech economy is increasingly democra- tized.
In 2013, tech unicorns became a phenomenon, with the term popularized by Aileen Lee from CowboyVC.5 6 The name alludes to the rare and nearly mythical quality
of these companies. But
while still powerful they are not so rare anymore.
When we analyzed com- panies in the billion-dol- lar club — exits or private companies in technology with over $1 billion in val- uation — in 2013-2019 we see that in 2013 only four ecosystems produced unicorns or billion-dollar exits. Today, a cumula- tive 80+ ecosystems have done so, astoundingly.