The Genome Group has just released its 2019 edition of the global startup ecosystem performance. The fastest growing startup sectors were listed as:
- Advanced Manufacturing & Robotics, which grew to a five year high of 107.9% and accounts for about 1.8% of the share of global startups.
- Blockchain, which grew to a five year high of 101.5% and accounts for about 2.7% of the share of global startups.
- Agtech & New Food which also saw a five year growth rate of 88.8% and also accounts for 0.8% of the share of global startups
- AI, Big Data, & Analytics, which saw a five year growth of 64.5% and has a highest growing share of global startups of 7.1%.
Below Are Key Insights From The Report
The Fastest Growing Startup Areas
The average growth of Advanced Manufacturing and Robotics,Blockchain, Agtech & New Food, and AI, Big Data & Analytics over the last five years is 90.7% while their average exit success over the same period is 110.5%.
Among Growth-Phase sub-sectors AI, Big Data, & Analytics is the largest one, comprising 7.1% of all global startups. It is also the sub-sector that is growing the slowest among its Growth-Phase peers.
Nonetheless, if we separate AI by itself, excluding Big Data & Analytics startups from the cohort, we see that a standalone AI-sub-sector is growing about twice as fast as the AI, Big Data, & Analytics sub-sector as a whole.
*Genome Startup Ecosystem Report
Startup Areas That Are Fully Mature, Although Their Growth Is Slow
The four startup sub-sectors in the Mature Phase are :
- Cybersecurity — with an 87.3% growth rate over the last five years and 0.9% share of global startups;
- Cleantech — with a 26.2% growth rate over the last five years and 2.9% share of global startups;
- Life Sciences — with a 15.0% growth rate over the last five years and 2.6% share of global startups;
- Fintech — with an 105.8% growth rate over the last five years and 8.7% share of global startups;
Reasons:
These mature startup areas collectively still grew a respectable 15.9% in early-stage funding and 58.6% in exits during the past five years.
While this level of growth is sufficient to make them mature in terms of startup sub-sectors, these are figures most traditional industries would be envious of.
Fintech, an important startup sub-sector, shows two major signs of approaching a successful late Maturity: first, it has grown massively, and now nearly one of every 10 global startups is working in this sub-sector.
Second, it still shows very strong performance and growth in terms of exits. This shows that while not as much money is coming for early-stage startups (later stage and mega rounds are another story), founders and investors are able to still exit in impressive numbers.
Interestingly, Life Sciences and Cybersecurity are the only two startup
sub-sectors in the Mature Phase that have grown in the latest period. This could be a sign of renewed vigor for startups in these spaces.
*Genome Startup Ecosystem Report
Four Startup Areas Are Fast Declining
They are:
- Edtech (educational technology)— with an early stage deal concluded by the startup sector declining by 15.8%, the sector still maintains a share of global startups of 3.1%;
- Digital Media —with an early stage deal concluded by the startup sector declining by 38.9%, the sector still maintains a share of global startups of 20.7% ;
- Gaming — with an early stage deal concluded by the startup sector declining by 40.4%, the sector still maintains a share of global startups of 4.5%;
- Adtech ( advertising technology) — with an early stage deal concluded by the startup sector declining by 47.9%, the sector still maintains a share of global startups of 4.2% ;
Reasons:
Sub-sectors in the Decline Phase are shrinking in terms of early-stage funding deals, although mega rounds and later funding rounds might still be happening. In addition, each one of them is still experiencing growth in exits, although they are under-performing the typical startup sub-sector.
The main change to this group since last year when we published the Global Startup Ecosystem Report in 2018 is in Edtech — a sub-sector that was in Mature Phase that now has edged towards Decline Phase.
While exits Global Startup Ecosystem Report 2019 are still growing, early-stage funding deals — a key indicator of future potential from both founders and investors — are declining. While these sub-sectors are declining overall, they still have meaningful presence and size, and can be renewed by new technologies — for example with the potential for Virtual Reality and Augmented Reality to rejuvenate Gaming.
Why You Should Care About These Startup Areas and Their Performance
According to Startup Genome, these startup areas are the major part of their report for two main reasons:
1. It Will Enable Ecosystems Around The World To Focus on the Most Viable Startup Areas.
Identifying and building on local strengths is one of the main levers that policymakers and ecosystem builders can use to boost ecosystem performance. No small ecosystem can perform well and compete with places like Silicon Valley, London, Beijing, or New York across the board. But what they can do is be a hub of excellence in specific startup sub-sectors and use that advantage to build spillover effects that improve the ecosystem and the economy as a whole.
Take San Diego, the #3 ecosystem in the world for Life Sciences even though it is relatively small with only 1,000 to 1,400 tech startups — less than 10% the size of Silicon Valley and only 14% of the size of New York. That strength spilled over and helped San Diego become a top 30 global startup ecosystem despite its small size.
Frankfurt is a similar case. Although it is small, with only 300 to 500 startups, it is incredibly focused on Fintech. It has many Fintech accelerators and corporate startup innovation initiatives, about half of the VC funding in the ecosystem goes to the sub-sector, and the city is home to a very strong traditional financial industry with five Forbes 2000 companies in finance and the presence of the European Central Bank headquarters. That focus led to the largest German Fintech exit of all time taking place in the city (360T, for nearly $800 million) and high ecosystem performance across many Success Factors.
2.The Findings On These Startup Areas Would Provide Insights for Startup Founders
As a founder, knowing how your startup sub-sector of interest is growing — and which ecosystems have the biggest competitive advantage in them — can help you make better decisions. It tells you the places you should be considering networking or opening operations at (e.g., if you are Life Sciences founder in Europe, you would do well to make connections in London and Lausanne-Bern-Geneva) and it tells you about the funding and exit environment (e.g., if you need capital for a Gaming startup not overlapping with growth startup sub-sectors, be prepared for a tough funding environment and consider more bootstrapping).
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.