Startups
Ecosystem development / Startups

In 2023, DC is the 11th best startup ecosystem in the world (again)

Don't fret, Baltimore, you get to share in the success, too, according to Startup Genome's latest report.

An aerial view of DC. (Photo via Pixabay, used under a Creative Commons license)

For the fourth year running, DC is the proud owner of an 11th-place ribbon for the top global startup ecosystems, according to the latest report from Startup Genome.

The annual Global Startup Ecosystem Report ranked the DMV as the 11th best city and corresponding metro area in the world to found a startup (to no one’s surprise, Silicon Valley ranked first, and New York City and London tied for second). That includes all the companies in the district’s boundaries and 60 miles beyond, which incorporates Baltimore, Maryland but leaves out Richmond, Virginia.

While some might find four years of no change a little frustrating, Forrest Wright, a Startup Genome research assessment lead, thinks remaining just outside the top 10 for four years running is actually a positive thing. Staying stagnant throughout the surge of investment in 2021 and then back down again in 2022 — instead of going down a few spots, as many cities did — is a show of strength.

“The fact that DC, which is a fairly mature, established ecosystem in the US, has stayed firm in a fairly high position for several years in a row as this rising tide lifting many ecosystems has been occurring, I think that’s fairly positive,” Wright told Technical.ly. “Because what we saw the last couple of years in a lot of startup ecosystems, particularly kind of fairly mature ecosystems, is they start to dip back a little bit.”

Startup Genome researchers found a good amount of early-stage dealmaking in 2022, Wright said, with a 26% increase in the number of deals year over year — which is pretty on par with Boston and NYC, he added. That’s compared to global numbers, which are trending down, meaning DC is overperforming in early-stage deals. There are also some large exits to shout out, such as ZeniMax. In fact, Wright said that large exits (defined as $50 million and above) increased by about 40%. From 2021 to 2022, the number of unicorns also grew from eight to 15.

The not-so-good, by the numbers:

Startup Genome measures six success factors when it ranks ecosystems. DC did well in the performance, market reach and talent and experience categories at eight, nine and eight out of 10, respectively. Where Startup Genome analysts think the region could still use work is funding, which earned a five; connectedness, which scored a measly two; and knowledge, which got a three.

For Startup Genome, Wright identified exits as a metric that holds a large amount of weight and is interpreted as an overall performance indicator. This is because founders with successful exits tend to stay in the area, have a network to share experiences and are new-money millionaires with cash to invest in emerging startups.

“It’s representative of a very strong and healthy ecosystem because when you get a large exit, it means that that startup came up in Washington,” Wright said. “They went through the funding pipeline and they built a pretty strong company with a good foundation and hired employees to get that kind of valuation. So it’s almost like a lagging indicator of an ecosystem’s health. ”

As for whether or not DC can ever move into the top 10, Wright thinks it’s promising. Right now, he sees DC as a mature market with strong early-stage action, the large exits to back it up and strengths in several markets. He noted that DC has a strong cyber scene, ranked number seven on Startup Genome’s 2021 life science report and came in at number 13 in an AI ranking published last year.

So, if DC keeps chugging along, he thinks there’s a strong chance that it can finally nab that crucial top 10 spot.

“I don’t have a crystal ball, but I think the fact that it’s a positive that DC has held firm these past few years, I think just statistically it’s likely to move up,” Wright said.

Read the full report

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