Silicon Valley is still the major player even though it is losing ground in terms of fast-growing start-ups. Silicon Valley based tech companies brought in a total of 12.000 deals since 2012, more than twice as many as the number two, the New York area. Similar for funding, Silicon Valley companies brought in a total of $140 billions with Beijing being next in line at $75 billions.
„Forget about Silicon Valley, Shanghai is the most creative place in the world!“ [1] – a quote from a participant of a start-up event in China written in Frankfurter Allgemeine Zeitung. Can this statement be sustained when we have a deeper look into the numbers? CBInsights has just recently published an interesting report looking at 25 global metro areas such as Stockholm, London, and Berlin and their tech companies [2]. The top tech hubs were chosen based on a deal share basis of the global total. IPG GROUP looked at key highlights of the report.
China is catching up – especially Beijing and Shanghai
The U.S. tech sector is getting challenged by China for global dominance. According to the report, the difference in funding between 2014-2015 versus 2016-2017 positive on the European and Asian side and rather negative for Silicon Valley. Especially Beijing and Shanghai are poised to be the next leading tech hubs. They lead among high-growth hubs for unicorns (privately held startup company valued at over $1 billion), mega-rounds, and large exits (point at which venture capitalists sells stake in a firm to realize gains). The list of regions having mega-rounds with volumes greater than $100M is clearly led by Beijing (128) and followed by Shanghai (58), with Bengaluru (21) placed a distant third.
One interesting fact the report does not touch on directly, is that China’s government is also playing a huge role in this development. One target of “Made in China 2025” is to increase research and development spending to 1,68 % of operating revenue by 2025 [3], which helps tech start-ups to get easier access to funding from the state bank.
Silicon Valley still number one
Silicon Valley is still the major player even though it is losing ground in terms of fast-growing start-ups. Silicon Valley based tech companies brought in a total of 12.000 deals since 2012, more than twice as many as the number two, the New York area. Similar for funding, Silicon Valley companies brought in a total of $140 billions with Beijing being next in line at $75 billions. However, the gap to China gets smaller: At the moment, Silicon Valley is leading with 57 unicorns, while Beijing has 29 and Shanghai 11, respectively. But when looking into the first quarter of 2018, Shanghai and Beijing jointly hailed the same number of new unicorns (3) as Silicon Valley.
Source: CB Insights
Mega-Exits return money to Silicon Valley
“Large exits are the best indicator of a healthy ecosystem” as the CBInsights states in the report – and Silicon Valley by far remains number one globally. In the period 2012 – 2018 the number of exits with volumes greater than $100 millions Silicon Valley had 251, 4 times more compared to Beijing on the fifth rank with 34, according to the report. These exits bring new capital into an ecosystem: investors do not want to miss out on the next big one, also they fuel more resources and talents.
[1] http://www.faz.net/aktuell/wirtschaft/der-aufstieg-chinas-zur-wirtschaftlichen-weltmacht-15671418.html
[2] https://www.cbinsights.com/research/report/global-tech-hubs/
[3] https://www.forbes.com/sites/sarahsu/2017/03/10/foreign-firms-wary-of-made-in-china-2025-but-it-may-be-chinas-best-chance-at-innovation/#2a041eff24d2