August 7th, 2015 Update:
We’re excited to see this post has been one of our most popular since being published last Monday, July 27th, and is even generating discussion of its own in local media and with national organizations such as Consider Canada. We know the original 2012 Startup Genome ranking sparked conversation years after its publication and welcome ongoing discussion and debate about this new Global Startup Ecosystem Report from Compass. We believe Vancouver has much to be proud of in being considered one of the world’s top startup ecosystems, but we are far from resting on our laurels. The VEC works actively to strengthen access to the space, talent and capital required to help our ecosystem and our entrepreneurs reach their full potential.
By Matt Jacques
Vancouver has once again been named one of the world’s best places to launch a startup. Our local ecosystem is ranked Top 20 (18th ) in the newly-released 2015 Global Startup Ecosystem Report from Compass, a San Francisco-based startup consulting and benchmarking firm.
Their report raises some important questions, chief among them: What does it actually mean to be a startup, and what makes for fertile ground to grow and support startups?
At the VEC, we agree with Steve Blank’s broad, sector-agnostic view of startups as being any “organization formed to search for a repeatable and scalable business model.” It might come as some surprise then, that while Mr. Blank has penned the foreword to the Compass report, their working definition is much more narrow and focuses on technology companies “whose products are mostly software based.”
While we are strong in the software and web space that Compass examines – with Plenty of Fish recently selling to Match.com for $575M and Coastal.com’s 2014 $430M exit – we also consider Vancouver’s standout high-growth companies in other industries, such as cleantech (dPoint Technologies, Solegear Bioplastics), hardware (Recon, Avigilon) or Digital Entertainment & Interactive (Roadhouse Interactive, Image Engine) – to be equally important. High-value exits falling outside the bounds of the Compass framework, such as the recent sale of nutrition and food ‘startup’ Vega to White Wave Foods for $550M, are just as vital to our local ecosystem and can go on to fuel a new generation of startups as founders look for their next opportunity.
Also of note, several important indices that were in the last report on this topic, released in 2012, were dropped this time around, including their Startup Output, Support, Trendsetter and Startup Mindset measures. On the Mindset metric that assessed local entrepreneurs for their vision, resiliency, work ethic, risk tolerance and ability to overcome adversity, Vancouver was second only to Silicon Valley in 2012. This was clearly validated again recently when Global Entrepreneurship Week selected Vancouver as the most entrepreneurial city in Canada in 2014.
The 2015 Compass report does still factor in criteria that we agree are important such as local Market Reach, Talent and Startup Experience, yet the composite ranking seems to over-emphasize others, such as the overall valuations and growth rates of startups in a given ecosystem (we ranked 18th on this Performance Index). They also place significant weight on overall access and volume of venture capital transactions (we scored 19th on this Funding Index). This boosted some of the top ranking ecosystems whose venture financing and resultant valuations have entered the stratosphere. While we have more than our share of high-flying local ‘unicorns’ (Hootsuite, Avigilon and Slack) staking out their respective pieces of that financing frenzy, it’s the effect these superstars can have on local startup mentorship and mindset that will ultimately deliver long-term value to our ecosystem.
Given the extent of methodological changes, the 2015 report should more accurately be considered a separate assessment, rather than an update, to the 2012 ranking. However, understanding how we performed in both 2012 and 2015 gives us reason to celebrate and build upon the tremendous assets we have here.
In Compass’ final recommendations, entrepreneurs are encouraged to launch their companies away from the ecosystems that top their list, and in this regard, Vancouver has much to offer: entrepreneurial orientation, top-tier talent, R&D incentives, investment tax credits and time zone proximity to major West Coast VCs. Compass also encourages investors to seek out undervalued ecosystems, outside of the glaring Valley hype. This allows hidden gems to be discovered by prudent financiers. Finally, Compass encourages ecosystems to play to their unique strengths. From this, Vancouver can definitely take action to attract additional capital into our ecosystem – leveraging our green economy brand, top visual effects hub status, and proximity to the rapidly growing Asia-Pacific markets.
Independent rankings must always be examined closely to weigh their ultimate merits. In this case, despite shifting metrics and a differing view on what a startup is, we can remain confident that we are still one of the leading startup ecosystems in the world, and that our unique startup brand is clearly well-positioned to continue thriving, in no small part to our sustainable and resilient economy.
Matt Jacques, Manager of Research & Evaluation has a doctoral degree in the social sciences and over 15 years of applied research and program evaluation experience. He brings the necessary rigour for the VEC to leverage research as an engine for innovative, creative and sustainable economic development.