Israel becomes world’s best startup ecosystems per capita – But a word of caution on startup rankings

Tel Aviv is not only the scene of amazing sunsets most days of the year, it has also reached the 6th position in the city ranking of the Startup Ecosystem Rankings Report 2019 by Startupblink. At the same time, Israel keeps its rank as the 4th country for best startup ecosystem. Even more remarkable, Tel Aviv and Israel are the highest ranking non-anglo-saxon ecosystems in their respective city and country tables. Israel is right on the the tail of the US, the UK and Canada, while Tel Aviv is only behind 4 US cities and London. Among the many comparisons one can make, a compelling one consists of adjusting country score to population size. After this “score per capita” adjustment which we added to the top 10 country table, Israel takes pole position. Here is the country table to illustrate this. For better legibility, the “per capita score” is set to 100 for the US:

Startupblink Country Ranking

Country global ranking score population score per capita score score per capita ranking
USA 1 44.09 327,167,434 100 10
UK 2 16.719 67,545,757 184 8
Canada 3 15.867 37,602,103 313 6
Israel 4 14.626 9,119,400 1190 1
Australia 5 12.953 25,529,600 376 5
The Netherlands 6 12.907 17,336,891 552 4
Sweden 7 12.774 10,302,984 920 3
Switzerland 8 12.774 8,570,146 1106 2
Germany 9 12.461 83,019,200 111 9
Spain 10 12.396 46,733,038 197 7

Israel: world’s best startup ecosystem per capita

Therefore, if you take the Startupblink score adjusted to the population size of the country to get a score per capita, Israel comes first, ahead of Switzerland and Sweden. Interestingly, the US falls to the bottom of the top 10 table in terms of score per capita.

The computation of the Startupblink score has been greatly improved compared to the previous years, and combines quantity, quality and business environment. More detail on the methodology is available on the Startup Ecosystem Rankings Report 2019 website.

A word of caution on startup rankings

However sophisticated the methodology is, there seems to be a strong bias towards the western world in this report, and to some extent the anglo-saxon countries and cities. Maybe it stems from the fact that more accurate information comes from the world we know best. This ranking does not totally add up with other ratings tracking similar trends, in particular the Bloomberg innovation index. In fact, innovation and startup ecosystem have a strong positive correlation. And yet, South Korea comes 1st in the Bloomberg innovation index and only 19th in the Startupblink ranking. To make matter worse, no Asian city is the top 10 and the first Asian country to appear is India ranked 17.

Above all, the most puzzling ranking is the 27th position of China in the Startupblink report, a country that counts 206 unicorns, higher than the US with 203 (source: Hurun Global Unicorn List 2019). How can China, with such second-rate ecosystem, produce more unicorns than any other country in the world? Bloomberg ranks China #16 on the innovation index. This is more understandable, with such a closed and massive home market, Chinese startups do not need to innovate that much to become Unicorns. In a winner-takes-all environment, they just need to be better than their national competitors.

Israel shows consistency across the board

On the bright side, the only two countries in the top 10 where the Bloomberg index and the Startupblink rating seem to agree are Israel and Sweden. Israel ranks 5th with Bloomberg and 4th with Startupblink. Sweden ranks 7th in both. Finally, Israel ranks 5th in the Hurun Global Unicorn List 2019.

In conclusion, out of the huge disparity of scores between countries on criteria such as innovation, startup environment and number of unicorns generated, Israel is the only country that shows consistency and strength by being in the top 5 on all accounts. For such a small nation, it is a great achievement that catapults its innovation capital Tel Aviv in the top league, alongside the leading US startup ecosystems.

Philippe Gelin

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