How essential is private funding for a startup ecosystem to succeed? In this episode, the StartupBlink team and Eli David, the CEO of StartupBlink, discuss the importance of private funding while building a global startup ecosystem. Listen to get more insights about this topic.
Top 5 Countries for Private Funding in Startup Ecosystems during 2021
For startups, private funding is a valuable resource. It brings more capital to the startup as well as more knowledge. The two common forms of private investment are angel investors and venture capital firms. These types of investors have expertise in building and growing a business, so the insights they provide can be game-changing for startups. Therefore, private investment helps startups to increase the quality of startups, therefore the success stories in an ecosystem.
The chart below shows the countries with the highest rate of private investment in 2021. The USA is leading the chart, followed by China, the United Kingdom, India, and Germany.
In 2021, the USA had a significant portion of private investment at a rate of 51.6%, and private investments in other countries were below 20%. At a first glance, it seems that the US has dominance over other countries. However, it is actually showing that the US is losing its dominance. The USA is the first mover in building a startup ecosystem. However, now, other ecosystems are growing and getting a share of the global startup ecosystem which decreases the dominance of the USA.
China is the closest contender to the USA in terms of private investment. The Chinese Startup Ecosystem was growing in 2021, however, its disconnection from the rest of the world has become a barrier to growing further.
The UK and Germany are the two other stars of the chart, outperforming based on their population. India seems to have a slightly higher percentage of private investment in contrast to Germany, however, that is not surprising considering India’s higher population.
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The Power Behind the USA’s Success: Global Talent
The USA has long been the global leader in the global startup ecosystems. One of the powerful reasons behind the USA’s success is the global talent the country manages to attract. While the USA attracts more than half of the world’s private funding, the country probably doesn’t have the 50% of the talent. It is quite normal to see foreigners in executive positions at top US companies including Sundar Pichai as the CEO of Google, Shantanu Narayen as the CEO of Adobe, and Satya Nadella as the CEO of Microsoft.
Moreover, in 2021, it is reported that 14 Israeli-founded companies in Manhattan have become unicorns, which brings the total number of Israeli unicorns in New York to 26 according to the same source. This is a great example of how the USA is hosting the global talent to foster its startup ecosystem.
Find out more about startup ecosystem funding in the GSEI22.
Top Countries for Private Investment per 1000 Inhabitants in 2021
When we look at the investments per 1000 inhabitants, it is observed that the USA no longer dominates the chart. In 2021, the startup ecosystem of Singapore received the most private investment, equivalent to $US 1.462,000 per 1000 inhabitants. Israel and USA follow Singapore, with an amount of $US 998,000 and $US 875,000 respectively. When reporting the startup investment amount to the population, we have Estonia, Sweden, and Hong Kong entering the charts at the top.
Public Funding vs. Private Funding
Public funding is the form of financial support provided by governments to startups in an ecosystem. For governments, it is essential to use public funding to ignite private investment. Otherwise, it can create a condition that pushes away private investors. Moreover, excessive public funding can create “Zombie Startups”, startups extrinsically motivated by funding rather than building a disruptive business.
Who would be the next leader?
According to Eli David, the CEO of StartupBlink, empires may fall, because they stack at some point. He predicts that in the near future, the USA might continue to lose more of its private investment, coming to the level of 30% – 40% of the total global funds. Eli David underlines that the next leader of private investments is likely to come from a completely different structure. It might not be a country, but rather a meta association such as blockchain associations that are totally disconnected from countries.
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StartupBlink is the world’s most comprehensive startup ecosystem map and research center, working with over 100 government entities worldwide. StartupBlink’s global startup ecosystem map has tens of thousands of registered startups, coworking spaces, and accelerators, creating a robust sample of innovation globally.