The Seattle area’s startups scene is building clout, but according to one study, it’s already one of the 10 best in the world.
Seattle ranks No. 8 in the Global Startup Ecosystem Ranking 2015, a report recently released by analytics firm Compass. Silicon Valley, New York City, and Los Angeles top the list. Seattle is sandwiched between Chicago at No. 7 and No. 9, Berlin. The list doesn’t include cities in China, South Korea, Taiwan, or Japan, so hubs such as Tokyo and Seoul aren’t included. The No. 8 spot isn’t entirely rosy, though — Seattle was ranked fourth in the previous ranking, in 2012.
“Seattle’s weak spot is funding. While it is sufficient to fund a major share of promising early stage startups, a lack of big VC funds causes a noticeable gap of later-stage investments—a key reason why the Seattle ecosystem is not among the global elite in 2015,” the report’s authors wrote. “However, Seattle’s venture capital is growing 40 percent faster than the U.S. average, so the funding gap is likely to narrow in the future.”
While firms like Madrona Venture Group and Ignition Partners lead the charge in early-stage rounds, the Puget Sound lacks late-stage investors that propel the largest startups.
Seattle is ranked third in startup experience and fourth in talent. Despite catching up in some categories, Seattle still trails Silicon Valley in many areas. The Valley has three times the number of startups per capita, and its volume of startups is eight times Seattle’s.
Another area in which Seattle must improve is female entrepreneurship. A mere 9 percent of founders in Seattle are female, 56 percent lower than the North American average.
The report, unsurprisingly, said tech will continue driving the startup ecosystem here. “Seattle has a deep history of software expertise due to the prominence of local companies like Microsoft and Amazon,” said the study. “Although Seattle dropped four positions … (it) remains a vibrant place for tech entrepreneurship.”
One interesting takeaway from the report is Seattle’s reliance on nearby customers, investors, and workers. Local startups serve 41 percent fewer foreign customers than the North American average, and 78 percent of funding rounds feature only local investors, a sharp departure from the 61 percent in Silicon Valley, home of the most prestigious VC firms. Local startups have local employees, too —only 21 percent of employees work remotely. By contrast, 43 percent of Silicon Valley employees don’t come to the office.
Here’s a breakdown of the report’s top 20 startup ecosystems and their rankings in each category: