Amid a ‘VC Winter’, Smaller Ecosystems are Thriving

Fresh data now confirms what the startup ecosystem has been telling us for months: the ‘VC Winter’ is real and not simply a reversion to the mean post-Covid. The Global Startup Ecosystem Report, published by the Global Entrepreneurship Network and Startup Genome, shows that both Series A and later-stage funding dropped simultaneously, indicating a significant drop in investor sentiment. We also see this reflected in the dramatic fall in the number of unicorns, 58% fewer than 2022 and a staggering 87% lower than the unicorn peak of 2021.

Smart investors know that challenging times like these can be precisely the moment to invest. Indeed, it is well established that economic downturns can push startups and their ecosystems to enhance efficiency and tap into previously untapped reserves of ingenuity. This process consistently leads to the creation of historically significant companies and presents remarkable opportunities for astute investors. It is no coincidence that tech giants like Uber and WhatsApp emerged from the global financial crash.

To fully seize these investment opportunities, it is crucial to have high-quality data, and insights into the current conditions for entrepreneurs worldwide, as well as the measures being tested to address gaps and challenges. This is why GEN and Startup Genome released the 2024 Global Startup Ecosystem Report this week. Now in its 12th edition, the report is based on data from 3.5 million startups across more than 290 global ecosystems. It offers fresh insights and in-depth analysis of the current landscape of startup ecosystems across the globe.

Underneath the narrative of the ‘VC Winter’ there is a more positive story that emerges from this year’s data: smaller ecosystems are on the rise. When I founded the Global Entrepreneurship Network 15 years ago to spread entrepreneurial culture to communities in every corner of the planet, I did so with a core belief that remains unchanged: no single culture or ecosystem holds a monopoly on good ideas. Our work is driven by the knowledge that every individual excluded from entrepreneurship represents a loss to the global economy following that old saying all boats rise on an incoming tide.

While major ecosystems still dominate funding and access to resources, an increasing share of funding is now being directed to emerging ecosystems away from the established players. The data supports this with the share of the top 40 ecosystem’s global Series A funding amount dropping to 65%, a 14% drop since 2019. This coincides with the share of Series A funding for the top 100 emerging ecosystems rising to 19%, up from 13%.

The performance of several emerging ecosystems are worth highlighting, having made significant strides and demonstrating their potential to become major players on the global stage. Copenhagen, for instance, has emerged as a top global fintech hub, securing the third most VC funding per capital amongst the top 10 European ecosystems. The city has experienced significant growth in early-stage funding and the number of exits over $50 million in recent years, which has been reflected by their entry into the global top 40 this year.

Madrid has also shown impressive growth, moving up 12 positions to claim first place in the Emerging Ecosystem ranking. At the other end of the rankings, Malta has entered the list with a 39% increase in ecosystem value, powered by several recent exit’s worth over $50 million.

Elsewhere, Jakarta has continued the trend of over performance amongst Asian ecosystems, rising nine places to break the top 10. Mexico City has also demonstrated remarkable progress, advancing from the 41-50 range last year to the 21-30 range. With seven unicorns created in the last 10 years and an ecosystem value of $30 billion it is now clearly established as the leading emerging ecosystem in Latin America.

This year’s report is also significant for the fact it includes an expanded set of regional rankings that delves deeper than ever before into the relative performance of ecosystems in regions such as MENA, Latin America, and Sub-Saharan. Our ability to rank smaller ecosystems is the product of more than a decade’s collaboration with governments, academics and other experts. It also reflects year-round work to build the capacity of these ecosystems and improve approaches to data collection to the point they are being recognized and indexed.

Nurturing more entrepreneurs is the most crucial action we can take as a global ecosystem of enablers and policymakers. Entrepreneurs are inherently drawn to the most pressing challenges of our time and strive to apply the best ideas and technologies to find solutions. Their experimentation drives job creation, economic growth, and independent thinking. The advancements we achieve on these issues in the coming decade will shape the success of the next century and beyond. This is why we remain steadfast, working tirelessly to cultivate an environment where ordinary citizens are empowered to become entrepreneurs and thrive within healthy, evolving ecosystems.