Phoenix Takes a Step Up on Global List of Emerging Startup Ecosystems

Article originally posted on HERE on June 26, 2023

The Valley’s startup scene keeps gaining steam, and that has increased its prominence on key annual evaluation of the world’s leading locations for new and innovative companies to thrive.

The Phoenix metro stepped up a notch to No. 19 this year on the Emerging Ecosystem Ranking from San Francisco-based innovation policy advisory and research firm Startup Genome. That’s an advance from the No. 20 spot last year.

The ranking assessed the 100 budding ecosystems with the highest potential to be global performers in the years to come. It was unveiled alongside the 2023 Global Startup Ecosystem Ranking of the 30 strongest cities to develop new tech companies.

When narrowed down to just North American emerging ecosystems, Phoenix rises to is No. 5 with only Detroit, North Carolina’s Research Triangle, Minneapolis and Houston coming in ahead.

The strongest ecosystems overall in North America are Silicon Valley, New York City, Los Angeles, Boston and Seattle.

Phoenix’s showing was lifted by a strong showing in the areas of performance and knowledge, both having scores of 9 on a scale of 10.

Phoenix sees higher startup valuations, exits — and more unicorns

The performance score was based on things such as the number of exits over $50 million and over $1 billion, along with exit growth; the overall economic impact of an ecosystem, measure by the total exit valuation and startup valuations over a two- and-a-half-year time period; and the number of startups that succeed in early and late stages. The knowledge score was based on measures for patents and research in an ecosystem.

Between 2018 and 2022, Phoenix saw $8 billion in exits, which compares to the global average of $11.3 billion. And Phoenix’s ecosystem value between the second half of 2020 and the same period in 2022 was $24 billion, compared to the global average of $34.6 billion.

The assessment also measured factors of funding, where Phoenix scored 8; connectedness, and talent and experience, in both of which Phoenix scored 7; and market reach, where Phoenix scored 5.

Funding considered early stage volume and growth, as well as the number, experience and activity level of local investors. When it comes to early stage funding, the report found that Phoenix’s total was $1 billion between the second half of 2020 and 2022. That surpassed the global average of $970 million.

The report found that top 100 emerging ecosystems are collectively worth over $1.5 trillion in ecosystem value, and Europe is the most represented region in the Emerging Ecosystems ranking, expanding its share from 37% to 41% since the 2022 report. Copenhagen led the list overall.

Phoenix is one of only two emerging ecosystems in North America — and one of 19 worldwide — that boasted four or more unicorn companies in the last 10 years. Phoenix had six, while the other North American city, Santa Barbara, Calif., had five.

Unicorns — startups that reach a valuation of $1 billion or more — are one of the key indicators of the startup economy in Startup Genome’s reporting. The report found that fewer unicorns are being produced across the board, with numbers declining 40% through 2022 after rising significantly in 2021.

The largest unicorn declines were in Asia and North America (down 46% and 45%, respectively), but some successes in Europe helped offset those globally. In any case, even though unicorns were down by the end of 2022, they remained at about the same level they had been at before 2021’s surge.