The best city for startups: Joburg vs Cape Town

Data from the latest Global Startup Ecosystem Report 2022 shows what it takes for cities to compete in the race to the top as destinations for startup talent and investment.

The findings show that Silicon Valley is the top global startup ecosystem, followed by New York City and London tied for second.

North America continues to dominate the global rankings, with 47% of the top 30 ecosystems in this region.

The GSER is the world’s most comprehensive data-driven research on startups with more than 280 business innovation ecosystems and 3 million startups analyzed. The report includes a ranking of the 140 leading ecosystems and is published by the innovation policy advisory and research firm Startup Genome and the Global Entrepreneurship Network (GEN).

“Today, the digital economy is the economy, or at least the future of the economy,” the report’s authors said.

The World Economic Forum estimates that 70% of the new value created globally over the next 10 years will be based on digital business models. In 2023, for the first time, more than half of GDP will be powered by “digitally transformed” companies, according to Statista.

PWC projects that benefit from AI alone will contribute $15.7 trillion to the global economy by 2030.

Despite the early shadow it cast on startups, Covid-19 ultimately boosted the sector by accelerating digitization, Startup Genome said. Since the pandemic, tech companies have grown 2.3 times faster than their non-tech counterparts.

While about 90% of startups fail outright, Startup Genome research shows that only 1.5% of startups, or about 15% of those that survive, produce a successful $50 million exit or more in the top eight US startup ecosystems

Since 2012, the global average Series A rounds have tripled to more than $18 million. Post-money valuations rose, on average, 239% over 10 years, with the biggest growth coming in later rounds.

deep technology

As for the top innovation trends, the rising digits tell the story: Web3, Industry 5.0, Supply Chain 4.0. And of course 5G. Innovations in, among many other sectors, digital finance, molecules discovered by AI, and climate change mitigation are remaking not just business, but the social and physical worlds as well.

Talent

And just as Silicon Valley reinvented the culture of place two decades ago with open offices and spaces optimized for collaboration, today’s startups are leading our new culture of no place, Startup Genome said.

“In the Covid-19 pandemic, technology companies facilitated and pioneered new ways of working, including the first virtual model, popularized by companies like Dropbox, which makes remote control the default. Investing is no longer tied to location, and some venture capitalists are using Zoom to conduct due diligence on remote investments, geographically expanding their reach.”

Yet by making talent and capital more fluid, the report’s authors said, technology has paradoxically made geography more important than ever. “Now that founders, talent and investors can be anywhere, pole stars like Silicon Valley, London and Beijing must compete with hundreds of sprawling constellations, each with their own legal, economic and lifestyle advantages. ”.

rise of india

The startup landscape has changed substantially, with India catching up with the United States and China, the report showed. The country has seen a rapid increase in the number of large exits and early-stage rounds, and a substantial increase in the value of the ecosystem. India minted 44 unicorns in 2021, grossed a total of $72 billion in outputs (up from $1.8 billion in 2020).

hot spots everywhere

India and China may be the big stories of 2021, but dozens of other intriguing narratives have proliferated around the world, Startup Genome said. Continuing a trend of declining funding share that began in 2016, North America accounted for less than half of the initial funding in 2021, with Europe and Asia taking a share of the total.

Venture capital activity in Latin America almost doubled from the previous year.

A record 540 companies achieved unicorn status in 2021, with 113 ecosystems producing at least one billion-plus behemoth. Twenty-two ecosystems, including Brisbane, Luxembourg, Santiago-Valparaíso and Ho Chi Minh City, achieved their first unicorns in the period examined by the GSER.

The GSER 2022 ranks startup ecosystems on seven success factors, including performance and talent, and for South Africa, the report highlighted Cape Town and Johannesburg.

Cape Town Highlights

Startup Genome says that Cape Town’s startup scene is worth $2.8 billion.

Cape Town’s 450 tech companies, including giants like Takealot and Amazon and early-stage companies, collectively employ more than 40,000 people. And more companies are moving into the South African ecosystem. Cape Town is one of the fastest growing regions in the world in terms of foreign investment, according to a report by fDi Intelligence.

  • Knife Fund III is a new fund managed by Cape Town-based venture capital firm Knife Capital. The fund invests in high growth sectors in South Africa with strong potential for expansion within Africa and internationally.
  • Swiss investment firm Crypto Valley Venture Capital (CV VC) has established its first African office in Cape Town to invest in African Blockchain-focused startups. CV VC and its partners seek to invest in 100 startups over the next four years. The new office will also serve as a hub for transferring knowledge and experience from Swiss Crypto Valley to the Cape Town ecosystem.
  • The SuperReturn Africa 2022 private equity and venture capital conference is scheduled for December in Cape Town.
  • Notable recent funding deals include Adtech startup Adbot’s R7 million ($500,000) raise in November 2021, and game publisher Carry1st’s $20 million Series A in January 2022.

Johannesburg Highlights

Startup Genome says the Joburg startup scene is worth $962 million.

More than 70% of South African companies are located in Johannesburg, as it is the largest stock exchange in Africa, and the city generates 15% of South Africa’s wealth. Johannesburg is leveraging its position as the country’s financial capital to build an ecosystem of startups that rivals Cape Town’s better-known scene, the

  • Ericsson South Africa, the local arm of the Swedish telecommunications company, has set up an office in Johannesburg’s fast-growing Waterfall development, as the area increasingly attracts interest from technology companies.
  • Vantage Data Centers, a US-based data center specialist, announced in 2021 that it plans to build what it says will be Africa’s largest data center campus in Johannesburg.
  • A host of start-up support organizations are nurturing the start-up community, including Seed Academy and the WDB Growth Fund accelerator for women, J&B Hive Accelerator for creative entrepreneurs, and a variety of co-working spaces and maker spaces such as Workshop17 West Street and JoziHub. 22 ON SLOANE is the largest startup campus in Africa.
  • Johannesburg is also home to many active investors including Dazzle Angels, Edge Growth, Grovest, SA SME Fund, People’s Fund and Kalon Venture Partners.

Online payment solutions provider Ozow raised $48 million in Series B in November 2021.


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