Jobs and the Future of Work

Unlocking economic growth: The first global ranking of startup policies

Image: Austin Distel/Unsplash

JF Gauthier
Chief Executive Officer, Startup Genome
Christopher Haley
Head, Research, Startup Genome
  • The APEXE Report introduces the first-ever global framework to evaluate how effectively countries convert their innovation potential into startup ecosystem performance.
  • This data-driven ranking guides governments to identify gaps, adopt best practices and unlock innovative entrepreneurship, accelerating economic growth and competitiveness.
  • South Korea, Germany and Brazil exemplify the report’s Lab-to-Startup Conversion and Policy Action Scorecard metrics.

Startup ecosystems are now the top driver of economic growth. Economies that embraced startup-friendly policies in the mid-1990s and consistently introduced effective measures have thrived, leveraging the transition to digital economies to reap long-term benefits.

In contrast, those who delayed startup ecosystem investments face more challenges. The well-being of economies and future generations depends on making significant and immediate investments in building robust startup ecosystems.

The APEXE Report - G20 Pilot, created by Startup Genome and the Global Entrepreneurship Network, provides a unique toolkit to develop such startup ecosystems for development and innovation ministries and agencies of national governments.

The report introduces the first-ever balanced scorecard to evaluate a country's effectiveness in converting its innovation potential into startup ecosystem performance. This is referred to as Lab-to-Startup Conversion. It also provides a strategic guide to inform future policy action.

The economic potential of startups in the G20

Startup ecosystems produce tremendous value, creating novel products and business models that create jobs, increase corporate competitiveness, drive economic growth and address social challenges. For a city, a portion of this value can be quantified by its tech startups’ ecosystem value (EV) – a standardized measure created by Startup Genome to benchmark local startup ecosystems.

While GDP is a measure of production rather than asset value, the ratio of EV to GDP is a useful gauge showing variations across the G20.

The Economic Value of Startups
The Economic Value of Startups Image: Startup Genome 2024

The gaps between leading and lower-performing countries represent significant opportunities. If lower-performing G20 countries reach the average EV/GDP ratio, a staggering $2.7 trillion in ecosystem value will be added to the global startup economy.

How can we know to what degree countries are maximizing their potential for startup performance and what can they do to improve?

Approach to the APEXE ranking

The APEXE Report offers a first-ever view of startup ecosystems on the national level, complementing the annual Global Startup Ecosystem Report (GSER).

It establishes a data-driven, reproducible framework to help countries score startup policy actions, identifying how they can unlock innovative entrepreneurship by assessing how effectively they utilize their potential.

APEXE offers the new Lab-to-Startup Conversion metric – normalized to GDP and population – while answering the following questions:

1. What is a country’s innovation potential?

2. What is a country’s startup ecosystem performance?

3. To what degree has a country converted its innovation potential into startup ecosystem performance?

South Korea, Germany and Brazil exemplify the APEXE Report’s Lab-to-Startup Conversion and Policy Action Scorecard metrics.

In other R&D and innovation rankings, both South Korea and Germany frequently rank among the top in the world and, not surprisingly, their normalized innovation potential is similar. South Korea’s startup scene was behind Germany in the early 2010s and Berlin counted among GSER’s top 10 startup scenes in 2017. At this time, startups were not yet part of Korea’s economic priorities.

But then a shift occurred: the governments of South Korea and Seoul started investing aggressively in startup policies and initiatives. As a result, Korea’s startup ecosystem value as a percentage of GDP (EV/GDP) now stands at 9.8% versus 5.2% for Germany, with Korea and Germany respectively positioned 5th and 9th in terms of Lab-to-Startup Conversion in the APEXE ranking.

The figure below displays the position of the G20 and a total of 80 countries along the above dimensions.

Startup Ecosystems vs Innovation Potential Scores
Startup Ecosystems vs Innovation Potential Scores Image: Startup Genome 2024

The normalized Innovation Potential Score captures the factors quantifying and influencing traditional innovation. These include patent production, talent quality, economic strength, corporate fabric and business-friendly laws.

APEXE offers a scorecard of a country's (relatively) recent startup policies and initiatives against best practices codified by Startup Genome over the last 10 years. These practices are based on what we’ve measured, advised and learned from 85 ecosystems in 45 countries, including the world’s top performers.

Policy actions as a vector of future performance

Our scorecard of startup policy action – which can be considered a leading indicator or “vector” of future startup ecosystem performance – shows South Korea now slightly outperforming Germany thanks to its investments in startup policies and initiatives. This suggests South Korea’s Lab-to-Startup position should improve in the future and earn it a final APEXE rank of 5 versus 9 for Germany.

Brazil, meanwhile, has converted a much lower innovation potential into a good startup ecosystem performance, outperforming Germany in Lab-to-Startup Conversion with a 7th position and EV/GDP of 5.8%. Unfortunately, Brazil’s startup policy action trails the G20, suggesting its relative position will slide further unless it takes action. Brazil earned an APEXE rank of 12.

Other Latin American and African countries rank among the top in terms of Lab-to-Startup Conversion, showing the truly global applicability of the measure as a fair benchmark.

The final G20 APEXE ranking below shows final factor scores, each of which can be broken down into multiple dimensions to provide an actionable scorecard for policy action.

APEXE G20 Ranking
APEXE G20 Ranking Image: Startup Genome 2024
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