Tel Aviv was ranked seventh in an annual survey of the world’s most attractive ecosystems for startups and innovation by the US research firm Startup Genome.
Since the last report, Tel Aviv’s startup ecosystem reached a value of $120 billion, notched three $1 billion exits and saw its startups raise a record-high $20 billion.
The city gained 30 new unicorns, or firms valued at over $1 billion, and 20 companies went public, raising $4 billion. Over 130 multinational companies now have innovation centers in Tel Aviv, the report said.
The study, released on Tuesday, mapped the global startup industry in 140 leading ecosystems worldwide. According to Startup Genome’s model, the higher the ranking of the ecosystem, the better the shot of an early-stage startup at building global success.
Tel Aviv scored most strongly in performance, knowledge, connectedness and exits, while its biggest weakness was local market reach. The number of new patents increased 169% last year. AI, cybersecurity, and big data and analytics were the strongest sectors.
The city’s average time for a company to exit was seven years, quicker than the global average of 9.4 years. Funding for seed rounds, Series A rounds and total venture capital were all far higher than the global average.
The report noted Israel’s tight-knit entrepreneurial community, strong research and development, educated population and government support, and that it has the most startups per capita of any country, with nearly 3,000 in Tel Aviv alone.
The Tel Aviv ecosystem far surpassed anywhere else in the region, with no other Middle Eastern city making the top 40 best cities. After Tel Aviv, the top ranked cities in the region were Dubai, Cairo, Riyadh and Abu Dhabi.
Tel Aviv accounted for 84% of the region’s share of venture capital funding in 2021, followed by the UAE, with 8%.
The Middle East has a young population, much of which is seeking entrepreneurial opportunities due to political instability and unemployment. Small business make up 94% of registered companies in the region, but only 3% of them have access to global funding. Large exits and investment activity are growing quickly, though, with investment climbing 104% from 2020 to 2021, the report said.
Also in the Middle East, the report said 95% of all firms in the UAE are startups or small-to-medium enterprises, accounting for over 40% of the country’s GDP. The Emirati city of Sharjah, home of the region’s fastest-growing tech park, had its startup ecosystem more than double in value to $208 million last year.
Cairo’s venture capital funding jumped 156% from 2020 to 2021.
The top ecosystems globally were Silicon Valley, in first place, followed by London and New York City, tied for second. Boston was fourth, followed by Beijing, in fifth, and Los Angeles in sixth.
Trailing Tel Aviv to round out the top 10 were Shanghai, Seattle and Seoul.
The top five cities remained at the head of the list, as they have for the past five years, but Beijing dropped one spot, being overtaken by Boston. The startup ecosystems of the top five cities were worth $3.8 trillion, compared to $2.3 trillion for the remaining top 30. Overall, China’s growth slowed, while India saw a significant rise.
North America dominated the global rankings, accounting for 47% of the top 30 startup ecosystems, followed by Asia, with 30%. Seoul entered the top 10 for the first time and Berlin was the leader for continental Europe.
The report said startups added $6.4 trillion in value to world economies last year.
Tech companies grew 2.3 times more than non-tech firms since the start of the pandemic, and last year, a record 540 companies reached unicorn status, up from 150 in 2020.
Startups have been fundraising much more successfully since the report started 10 years ago, with the global average for Series A funding rounds tripling to $18 million.
The Global Startup Ecosystem report, published annually since 2012, is a comprehensive study of the global startup scene. To compile the report, the group worked with 300 partners, collated data and research on over 280 innovation ecosystems, ranked the leading 140 and analyzed 3 million startups.
Startup Genome is a leading research firm based in San Francisco that has ranked startup ecosystems worldwide in an annual report since 2012.
The firm has ranked Tel Aviv second globally for cleantech and fourth for agtech.