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The New Geography of Super-Charged Startup Cities

The Bay Area clearly dominates in software companies that have been valued at a billion dollars or more, but China is coming on strong.

Facebooking in Shanghai. Three billion dollar companies call the city home. (Reuters/Carlos Barria)

The location of startup companies is a key indicator of innovation, entrepreneurship and economic growth. But not all startups are created equal. What distinguishes leading-edge startup clusters is not just a large volume of companies, but a series of really successful startups like Apple, Google, Facebook or Twitter. These big successes, which go public and are worth billions of dollars, set a powerful example for other entrepreneurs and also create a pool of business people-turned-venture capitalists who can in turn use their money to invest in fledgling startups.

I've tracked the geography of startups in my series here at CityLab on Startup Cities, but a new study by the international investment firm Atomico provides detailed data on an intriguing subset of these uber-successful startups. It identifies the location of software companies founded in the past decade (since 2003) that have reached billion dollar valuations, 137 companies in total worldwide.

The map charts the location of these billion dollar startups across the globe.

(Zara Matheson, MPI)

The United States is the undisputed world leader, with nearly six in ten of the world’s uber-successful startups, approximately 58 percent. Canada is home to 1.5 percent, Sweden 3.7 percent, China 19 percent and India 2.9 percent.

As the map shows, the San Francisco Bay area is the world’s leading center for billion dollar startups, with 38.7 percent of the world's total (53). Interestingly, San Francisco is home to more companies than nearby Silicon Valley: with 35 mega-startups (25.6 percent of the entire total), the metro has almost double the number found in Silicon Valley (18, or 13.1 percent).

Beijing follows with 17 (12.4 percent) billion-dollar startups. New York is fourth with seven (5.1 percent), followed by Stockholm with five (3.7 percent) and L.A. with four (2.9 percent). There are seven metros with three billion-dollar software startups: Austin, Seattle, London, Berlin, Tel Aviv, Shanghai and Guangzhou. And seven more are home to two billion dollar companies: Washington, D.C., Chicago, Paris, Bangalore, Moscow, Seoul and Tokyo. Finally, there are 16 metros with one billion-dollar startup each: Atlanta, Boston, Copenhagen, Dallas, Fuzhou, Hangzhou, Helsinki, Mumbai, New Delhi, Ottawa, Phoenix, Salt Lake City, Shenzhen, St. Petersburg, Vancouver and Wellington.

Atomico also looked at the valuations of these top 137 companies and found that the gap between the number of highly successful Silicon Valley companies and those outside the California tech hub is substantial and appears to be growing, as the graph below shows:

(Atomico)

The big takeaways: The Bay Area remains the world’s undisputed leader for uber-successful startups, but the center of the action does appear to have moved from Silicon Valley to urban areas in and closer to San Francisco. This urban shift is evident not just there but in the rise of great urban centers like New York, London, Paris, Berlin, Beijing, Shanghai and Tokyo as important startup hubs.

China is also evolving into something much more than world’s factory, with 26 billion-dollar startups along its East Coast, running from Beijing to Shanghai to Guangzhou.

Most of all, the location of uber-successful startups is incredibly concentrated and clustered in a small number of the world’s largest and most advanced cities in North America, Western Europe and Eastern Asia. There is only one billion dollar software startup in the Middle East (Tel Aviv’s Mobli, a visual media platform), and not a single one in Latin America or Africa. The world of innovation and startups remains incredibly spiky, as the disparity between the “peaks and valleys” of the global economy continues to widen.

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