It often seems like the whole world is trying to produce the next Silicon Valley, or at the very least, a globally recognised startup city / accelerator / community, that is in everyone’s ‘Top 10 List’ for startup locations. Every day more and more journalists and bloggers are writing about the ‘Next Silicon Valley’ or why X is the best place to start your FinTech startup etc….
So how should we keep score? Or put another way, how can we really measure and compare how strong or successful a startup eco-system / accelerator really is? Most articles seem to cite the number of companies / accelerators created and how much money was raised. However, for me, there are 2 more important ‘metrics’ (a.k.a. KPI’s) that I think should be considered to really measure the potential of a startup ecosystem. These are Exits and Immigrants.
Exits create huge downstream momentum and are the most obvious measure of an ecosystems health. These liquidity events help recycle precious capital AND talent. Positive exits can turn founders/employees into angel investors, who are the best early mentors to the next generation of founders. Exits also signals to outside investors and acquirers that this ecosystem might deserve more attention (and their cheque books). Finally, exits attract more talent to the ecosystem and encourage more people to enter the startup world as they see how their peers have performed.
This leads into my second KPI – Immigrants – which I believe is a good leading indicator to the future/continued success of an ecosystem. Talent, in either the individual or collective form (i.e. a company like Google), moving to or joining a startup ecosystem is a very strong signal. Immigrants are a large part of the driving energy in most tech ecosystems and this is best reflected in Silicon Valley, when between 1995 and 2005 over 50 percent of the venture-backed technology companies in Silicon Valley were founded by immigrants. [Learn more about how Immigration has helped Ireland foster new startups in this post about Profitero]. If an ecosystem can succeed in attracting quality ‘outside’ talent then I believe the exits will accelerate and compound.
So should we ‘test’ this theory and investigate the data around this? The exit data should be available from the likes of Crunchbase. LinkedIn probably has the data on immigration (but maybe harder to get). I could be totally wrong, but anecdotally this ‘Exits and Immigrants Index’ makes a tonne of sense to me. Let me know if you want to get involved in the ‘proof’ [i.e. hard work] of getting the data to ‘test’ this formula and see how various ecosystems perform :)