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Seattle falls to No. 20 in global ranking of startup ecosystems

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(The Center Square) – Seattle remains in the top 20 in Startup Genome’s annual “Global Startup Ecosystems Report” – but just barely.

The Emerald City fell 10 spots to No. 20 in this year’s report by the San Francisco-based research firm. The study, which has been around a dozen years now, ranks the top 40 tech startup hubs across more than 300 ecosystems worldwide, collating data on 4.5 million startups. Per Startup Genome’s model, a higher ranking of the startup ecosystem translates into a better shot for an early-stage startup to become a global success.

A startup ecosystem is a network of people, organizations and resources that work together to create an environment for startups to thrive.

Silicon Valley ranked No. 1 in Startup Genome’s report. Tied for second place were the cities of London, New York, Tel Aviv and Los Angeles.

Seattle’s fall was the largest among the top 40 ecosystems, according to the report.

“Its ten large exits in the 30 months leading to the end of 2023 were 26th globally,” the report reads. “It only had two in 2023.”

A startup exit occurs when a startup owner and investors sell their ownership or stock in the company to another entity, such as a larger company, for profit or loss.

“The ecosystem is on a downcycle overall as its Series A deals have also slowed,” the report goes on to say. “In 2022, Seattle startups secured 53 Series A deals, 6th among U.S. ecosystems, but in 2023, this has fallen to 25, 10th among U.S. ecosystems.”

Series A financing refers to an investment in a privately held startup company after it has shown progress in building its business model and demonstrated the potential to grow and generate revenue. It often refers to the first round of venture money a firm raises after seed and angel investors.

The report acknowledges that Seattle’s late-stage startups have been more successful: “In 2023, Seattle startups secured 49 late-stage deals (Series B+), 5th among U.S. ecosystems. With startups like Avalyn Pharma (inhalation therapy), Pivotal Commware (network connectivity), and Stoke Space (aerospace) all receiving $100 million late-stage rounds in 2023, Seattle has shown that it can still produce scalable Deep Tech startups.”

The Center Square contacted Patrick Connor, Washington state director for the National Federation of Independent Business, for comment on Startup Genome’s report.

Connor referred to an April NFIB web article on a report by Eton Venture Services that ranked Washington state last for business startups based on June 2022 data from the U.S. Bureau of Labor Statistics.

That same web article noted that Forbes.com put out a report ranking Washington No. 48 in the nation in terms of best places to start a business.

In the article, Connor noted Washington’s tax and regulatory burdens, including the highest state minimum wage in the nation; a business and occupation tax that equates to a more than 15% corporate income tax, the highest in the nation; workers’ compensation taxes 33% higher than the national average; unemployment insurance maximum weekly benefits and tax rates that are among the highest in the U.S.; and mandated paid sick leave.

It wasn’t all bad news for Seattle in Startup Genome’s report.

While acknowledging Seattle’s slide compared to previous years, Startup Genome said Washington’s largest city is still a “top-tier hub for innovation” with an “incredible depth of talent” and an “ideal breeding ground for future unicorns.”

“Unicorn” is a term used in the venture capital industry to describe a startup company with a value of more than $1 billion.