China continues to grow stronger in the deep tech sector as the US experiences a slowing down in its dominance in the sector, The Global Startup Ecosystem Report revealed in the latest edition of its annual report.
Based on data covering over one million companies, nearly 100 startup ecosystems, and contents in the Voice of Entrepreneurs, the report dubbed China as “the primary growth driver in the global startup revolution.”
In 2014, only 14 per cent of current unicorns are originated from the country, but in 2017 and 2018 so far, the percentage has grown to 35 per cent. Meanwhile, the number of unicorns originating from the US has fallen down from 61 per cent to 41 per cent.
In addition to having more billion dollar companies, China also saw an increase in knowledge production as measured by patents, especially in the artificial intelligence (AI) and blockchain sectors. While the US still has more startup activities in the sectors (as measured by the venture capital investment in it), China has surpassed the country in patent applications, with four times as many AI-related patents and three times as many blockchain and crypto-related patents as of 2017.
“We are entering a New Era of Tech, where more startups tackle specific verticals (i.e. Third Wave —think Uber for mobility or Airbnb for hospitality) or focus on Deep Tech (i.e. based on tangible and defensible innovation), for example in AI, Blockchain or Robotics,” the report explained.
“We see this clearly in the data for sub-sector growth. The fastest growing sub-sectors all fit these categories, while declining sub-sectors are mostly associated with the first and second wave of tech startups,” it added.
Based on the report, the top four fastest-growing sub-sectors are:
1. Adv. Manufacturing & Robotics (189.4 per cent)
2. Agritech & New Food (171 per cent)
3. Blockchain (162 per cent)
4. AI, Big Data & Analytics (77.5 per cent)
All of these sectors are experiencing five-year increase, particularly for early stage funding deals in Adv. Manufacturing & Robotics.
The top three declining sub-sectors are:
1. Adtech (34.6 per cent)
2. Gaming (27.2 per cent)
3. Digital Media (27.1 per cent)
The sub-sectors are experiencing five-year decline in early stage funding deals.
Generally, the report concluded that the global startup ecosystem still experiences rapid growth in terms of VC investment and exit value.
Global venture capital investment in startups hit a decade high in 2017 with over US$140 billion invested in startups.
Total value creation of the global startup economy from 2015 to 2017 is at US$2.3 trillion, a 25.6 per cent increase from the period between 2014 and 2016.
Women and immigrant
Apart from funding deals and patent application, the report also highlighted the challenges and opportunities faced by women and immigrants in the tech communities.
To understand the challenges that women and immigrants are dealing with, the report explained the importance of ‘local connectedness’ for success in the tech startup communities.
Local connectedness is seen through the relationships between startup founders in a local tech community. The report believed that when founders help other founders, overall ecosystem performance is stronger.
In terms of women and immigrants, the report said that women founders are less connected to investors than men, and immigrant founders create disproportionate value.
“Women founders build more local relationships with other founders than male founders —a higher level of this local connectedness is associated with better startup and ecosystem performance,” it said.
“Immigrant and non-immigrant founders have similar levels of local connection to peer founders, but immigrant founders are more likely to be less-connected to local investors. Founders who immigrated as children are more connected locally, while those who immigrated as adults tend to have higher levels of education,” it added.
The report concluded that immigrant founders receive less help locally from founders and investors than non-immigrant founders; this is a concerning issue considering the fact that immigrants build up about 20 per cent of founders in ecosystems across the world.
The report also named Greater Helsinki as the number one startup ecosystem in the world for local connectedness. In the US, the category is won by Silicon Valley, followed by Houston. Meanwhile in Asia Pacific, the title is won by Sydney.
Another interesting finding revealed in the report is the different ways women and men founders are motivated to build their startups.
“Fifty-six per cent of women say they’re trying to ‘change the world’ through their startups, compared to 41 per cent of male
founders. A larger share (39 per cent) of men say they want to build a ‘great product’ compared to 30 per cent of women founders,” it said.
Produced in partnership between Startup Genome and the Global Entrepreneurship Network, The Global Startup Ecosystem Report aims to inforn public and private decision makers around the world about the actions they need to take to build a vibrant startup ecosystem.
The report was published in Istanbul at the Global Entrepreneurship Congress.