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 results show that Silicon Valley is the world’s leading startup ecosystem, followed by New York and London tied for second.

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

The GSER is the world’s most comprehensive data-driven research on startups with over 280 entrepreneurial innovation ecosystems and 3 million startups analyzed. The report includes a ranking of the top 140 ecosystems and is published by innovation policy research and consultancy 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 authors said.

The World Economic Forum estimates that 70% of the new value created in the world 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 driven by “digitally transformed” businesses, according to Statista.

PWC projects that take advantage of AI alone will bring $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 digitalization, Startup Genome said. Since the pandemic, tech companies have grown 2.3 times faster than their non-tech counterparts.

While around 90% of startups fail completely, Startup Genome research demonstrates that only 1.5% of startups – or around 15% of those that survive – produce a successful exit of $50 million or more across the top eight ecosystems. of American startups.

Since 2012, the global average for Series A rounds has tripled to over $18 million. Post-money valuations are up, on average, 239% over 10 years, with the strongest growth in later cycles.

deep technology

As for the major innovation trends, the rising numbers tell the story: Web3, Industry 5.0, Supply Chain 4.0. And, of course, 5G. Innovations in – among many other sectors – digital finance, AI-discovered molecules, and climate change mitigation are reshaping not only business, but also the social and physical worlds.

Talent

And just as two decades ago, Silicon Valley reinvented the culture of place with open offices and spaces optimized for collaboration, so today’s startups are leading our new culture of lack of location, said Startup Genome.

“During the Covid-19 pandemic, tech companies have both facilitated and pioneered new ways of working, including the first virtual model, popularized by companies such as Dropbox, which makes distance the default. . Investing is also no longer tied to location, with some venture capitalists using Zoom to perform due diligence on distant investments, expanding their reach geographically.

However, 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, stars like Silicon Valley, London and Beijing must compete with hundreds of expanding constellations, each with their own legal, economic and style advantages. life.”

Rise of India

The startup landscape has changed significantly, with India moving closer to the United States and China, according to the report. The country has seen a rapid increase in the number of large releases and early cycles, as well as a substantial increase in the value of the ecosystem. India minted 44 unicorns in 2021, raised a total of $72 billion in releases (up from $1.8 billion in 2020).

Hotspots everywhere

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

VC activity in Latin America almost doubled compared to the previous year.

A record 540 companies achieved unicorn status in 2021, with 113 ecosystems producing at least one billion-dollar-plus monster. Twenty-two ecosystems – including Brisbane, Luxembourg, Santiago-Valparaiso and Ho Chi Minh City – reached their first unicorns during the period under review for 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

According to Startup Genome, Cape Town’s startup scene is worth $2.8 billion.

Cape Town’s 450 tech companies, including both giants like Takealot and Amazon and start-ups, collectively employ more than 40,000 people. And more and more companies are turning to 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 in Africa and internationally.
  • Swiss investment firm Crypto Valley Venture Capital (CV VC) has opened 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 know-how and experience from the Swiss Crypto Valley to the Cape Town ecosystem.
  • The SuperReturn Africa 2022 private equity and venture capital conference is set to take place in Cape Town in December.
  • Notable recent funding deals include startup Adtech’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 claims Joburg’s startup scene is worth $962 million.

Over 70% of South African businesses are located in Johannesburg, as is Africa’s largest stock exchange, and the city generates 15% of South Africa’s wealth. Johannesburg is leveraging its position as the country’s financial capital to create a startup ecosystem capable of competing with Cape Town’s better-known scene, the

  • Ericsson South Africa, the local branch of the Swedish telecommunications company, has opened an office in the booming Waterfall development in Johannesburg, as the region is attracting increasing interest from technology companies.
  • Vantage Data Centers, a US-based data center specialist, announced in 2021 that it plans to build what it claims is Africa’s largest data center campus in Johannesburg.
  • A host of startup support organizations nurture the emerging startup community, including the WDB Growth Fund’s Seed Academy and Accelerator for women, J&B Hive Accelerator for creative entrepreneurs, and a range of coworking and business spaces. creative 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, the People’s Fund and Kalon Venture Partners.

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


Read: Joburg wants to introduce a 24-hour working day to boost jobs and economic growth

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