Measuring your local startup ecosystem: a short guide
The impact of startups on job creation and economic growth has become increasingly clear; entrepreneurs are the prime force in modern economic development. However innovative, fast-growing companies need a healthy environment to grow and flourish. A startup ecosystem requires a variety of stakeholders and supporting programs and just like any other business endeavor, it needs good, clear measurements with which to track its growth over time.
How do you measure your local startup ecosystem?
What should you measure? This obviously depends on the desired outcome. Communities should define their own goals. Some places simply want more: more startups, more entrepreneurs, more jobs. Other communities shape their efforts around specific business sectors or a particular type of talent they wish to attract and keep. But whether the goal is to increase economic prosperity or to improve global competitiveness and reputation, policymakers should be able to prioritize and focus on a few key metrics and aim to improve those metrics year over year.
Moreover, as ecosystems are maturing, innovation is happening everywhere: startups, unicorns, and capital are more distributed than ever. With the rapid spread of efforts to build entrepreneurial ecosystems, it’s more important than ever to know where your local startup ecosystem stands on the global stage.
StartupGenome also publishes a yearly global ranking of startup ecosystems and their performance with Dealroom data. They also offer a unique methodology to measure and weigh the different factors that contribute to tech ecosystems’ success.
However, measuring entrepreneurial vibrancy and the overall performance of your ecosystem is not necessarily just about getting a snapshot, but about the trajectory over time, so all these measures need to be tracked continuously.
Indicators of startup ecosystem strength and dynamism
There are different dimensions that contribute to a startup ecosystem’s performance. It can range from measuring actual startup performance to funding activity, from market reach and scaling opportunities to research and patent activity.
- Density and ecosystem value
A first step to mapping your local community is to look at its actual size, growth, and value. With Dealroom you can easily track the number of new startups founded in your region during a specific period but also the total combined valuation of all these companies over time, and even break them down by funding year to monitor each cohort.
Looking at the number of exits, especially the larger ones are also an interesting indicator of startup success.
- Funding activity
To assess the health of your local startup ecosystem you want to have an eye on the quality, quantity, and ease of access to funding in your region. To evaluate the ease of access to funding, start tracking early-stage funding rounds. Their volume and growth over time will let you know if entrepreneurs are getting the support they need to take their business off the ground. Additionally, the number of local investors and their level of activity will help you better understand the investment trends in your community. The location of the investors will help you to identify foreign VCs already investing in your local startup ecosystem and allow you to build bridges and make your startups more competitive abroad as well.
- Market reach and scaling opportunities
The easiest way to gauge the success of your startups is to watch the unicorns (measured in terms of companies valued at over $1 billion) in your ecosystem. As the Washington Post recently wrote using our data, unicorns might “start to look like ponies” but despite the hype, they remain an interesting indicator of startup success in your region. So keep an eye out also for your pipeline and the possible future unicorns to come.
- Knowledge and innovation
Innovation and entrepreneurship often flourish alongside world-class knowledge institutes and R&D incentives. These institutions often foster high-impact innovation, collaboration, and success across sectors. You can measure the level of innovation and new technology in your local ecosystem through research and patent activity, and by keeping tabs on the number of spinouts your local knowledge institutions produce.
- Connectedness, Talent, Diversity, and more…
A vibrant entrepreneurial ecosystem is not simply a collection of isolated elements—the connections between the elements matter just as much as the elements themselves. The metrics for connectedness and access to quality and diverse talent are a little more complex. You could however look out for the number of accelerators & incubators in your region, on job boards to access the type of talent your startups are looking for the most and on investment heatmaps to understand the breadth of various industries or depth of expertise present in your community.
Unsurprisingly, diversity also plays a major role in the performance and success of your tech ecosystem. Data plays an important part in tackling diversity issues, but collecting data on ethnicity and gender (non-binary) can present some barriers, both legal and social. At Dealroom, we are determined to help tech tackle its diversity issue.
Gather the Network and learn from experts
Building a supporting innovation ecosystem that thrives over time presents many challenges. Just like the fast-growing companies, it caters to, building a sustainable tech ecosystem requires careful iterations, rigorous measuring, and a laser-like focus on the needs of their customers. On February 8th, you can join the discussion with local leaders from Cologne, Helsinki, and Las Vegas as they exchange their experiences and reflect on the uniqueness of their local startup ecosystems.