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Toronto and the Startup Ecosystem Report

November 28, 2012

Last week the Startup Genome team released Part 1 of their “Startup Ecosystem Report,” an update to a preliminary report released over the summer.

In the preliminary report, Toronto came fourth in a ranking of the world’s top 20 startup ecosystems, behind only Silicon Valley, New York City and London. In the updated version, however, we rank eighth, with Tel Aviv, Boston, Los Angeles and Seattle joining the list ahead of us.

Robert Scholes once said of Kurt Vonnegut that he “put bitter coatings on very sweet pills.” This is how I feel about the Startup Genome report. On the surface I’m unhappy that we’ve “slipped” from fourth to eighth in their global league table, but the core message of the report is still a sweet one.

First some background: The “Startup Ecosystem Report” is an offshoot of the great work the Startup Genome team has done trying to quantify leading indicators of startup success with their Startup Compass product. The new report is an impressive document that aims to rank cities around the globe on eight factors, ranging from the availability of capital to the ambitiousness of founders and the supportiveness of the ecosystem.

Here is the Toronto scorecard (with rankings shown according to Toronto’s place among the top 20 startup ecosystems included in the study):

  • Overall ranking: 8
  • Startup output index: 6
  • Funding index: 9
  • Performance index: 3
  • Talent index: 10
  • Support index: 3
  • Mindset index: 15
  • Trendsetter index: 12
  • Differentiation index: 5

Here’s why I’m happy with our score.

The good

We do well on ambition:

“Toronto entrepreneurs are as ambitious as their counterparts in [Silicon Valley] SV. They consider building a great product and trying to change the world as their key motivations in similar proportions. They are similarly committed to work full time before product market fit, and focus similarly on ‘new’ vs ‘niche’ markets.”

We also score well on the number of startups we create, the performance of those startups relative to their stage of development and the availability of mentors and other support for those startups.

The average

We are middle of the pack in funding. I think few local entrepreneurs would disagree with the report’s conclusion that “the increasingly vibrant startup activity of Toronto combined with its lack of capital presents a large opportunity for investors.”

We are also middling on the talent index. At first glance this one struck me as odd given the relative abundance and quality of our engineers. However, the measure also includes percentage of serial entrepreneurs and people with previous startup experience, which is what pulls our grade down.

The bad

We do poorly on two factors: the mindset index and the trendsetter index. The mindset index measures vision, appetite for risk and work ethic, while the trendsetter index measures the adoption of new technologies, management techniques and business models. I’m going to reserve comment on these until further details emerge in Part 2 of the report.

Overall

I’ve got lots of questions and a few early quibbles about the methodology of the “Startup Ecosystem Report” – including the question raised by Jesse Rodgers about why San Francisco and Palo Alto are considered a single ecosystem, but Toronto and Waterloo are not. Broadly though, I think the report makes a fair assessment of where we are in the development of Toronto as a world-leading startup city. We are doing the right things, but we need time and continued attention to build the depth we need to be Number 1.

Most importantly, I’m interested in hearing from entrepreneurs and other supporters of the local ecosystem about two things: First, does the ranking ring true to you? And second, what do you think we can do to improve our performance?

Let me know.

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