What the fastest growing startup cities have in common

Posted October 3, 2022


By Thibault Serlet.

Dozens of cities around the world are implementing programs to attract startups. These programs include all types of job training, grants, and government-sponsored infrastructure programs.

But are these programs really successful in attracting startups?

We decided to do our homework and answer that question.

A few weeks ago, my research team published the Startup cities map, a map of startup cities around the world. This map was developed by our research company, the Adrianople Group. We collect data on the ease of doing business in emerging markets. Our map data is open source and available under license Creative Commons so that other researchers can use and disseminate them.

We created this card for Balaji Srinivassan, a technology investor and former CTO at Coinbase.

Srinivassan has three definitions of a startup city:

  1. A city that attracts startups, like San Francisco, California, or Austin, Texas.
  2. A city that (attempts) to act like a startup, like Miami or Singapore.
  3. A city that is literally a startup, like Gurgaon in India or Prospera in Honduras.

It’s no surprise that economic freedom is strongly correlated with cities that are able to attract startups. Ivette Cano, who led the research team that made the map, explained to me how the data on our map correlates with economic freedom:

Seventy-five percent of the most innovative and startup-friendly cities are located in countries that fall into the “free” and “very free” categories of the 2022 Index of Economic Freedom. law, small government, regulatory efficiency and open markets is the best way to attract startups and foster entrepreneurial innovation. »

What we found is that thousands of cities have very pro-business rhetoric, but in reality, they don’t promote startup-friendly environments. In France, for example, Paris created a government program that granted tax breaks to startups over five years. Although tax rates were low, the tax exemption application process was long and difficult and required expensive lawyers and accountants.

Technology adoption requires a streamlined regulatory system that encourages innovation rather than punishes it. Mr. Cano explains:

We found that dozens of cities, mostly in emerging markets like India, China and the UAE, are run by private companies. Cities should see new technologies as the spearhead that will lead them into the future, rather than something to be tamed. More often than not, cities over-regulate new technologies, with a restrictive approach that thwarts innovation.

These Startup Cities Don’t Have Mayors, But CEOs and Shareholders

Many are special economic zones, meaning they enjoy some regulatory autonomy. They often have private infrastructure such as private police, private fire, off-grid electrical systems and private waste management systems.

These private start-up cities are run by real estate companies, who profit by renting land to companies. Although there are only a few dozen private startup cities – cities that are literally startups – they play a disproportionate role in the development of the global startup ecosystem.

Gurgaon is a private city located outside of New Delhi, India. It was built in the early 80’s by the real estate company DLF. It is home to the Indian headquarters of the world’s biggest technology companies such as Google, Oracle and Microsoft. He now has the second highest per capita income in India. Companies moved there because the city completely privatized all municipal services; as a result, they perform well. In other parts of India, local governments struggle to provide basic services such as clean water, electricity and fire services.

The city of Masdar, located on the outskirts of Abu Dhabi, in the United Arab Emirates, was built by the Mubadala Development Company in 2006. The real estate developers who built the city managed to negotiate a special agreement with the government, which l ‘was exempt from various taxes. , laws, visa rules and restrictions on foreign ownership. As a result, it has attracted hundreds of tech companies, large and small. For example, many satellite companies that provide Internet, GPS and cellular services to the Middle East are based there. The city was built with completely renewable energy and its carbon footprint is one of the lowest in the world.

Finally, Forest City is a private city in Malaysia built across the border from Singapore. Forest City is still under construction but has managed to secure more than $100 billion from private investors. She hopes to create an open market-oriented business center for companies that want to do significant business with Singapore but cannot afford the high real estate costs there. The forest city covers an area of ​​30 km² and will be completely off-grid, using privately financed renewable energy. If successful, this project will be the city’s biggest start-up project to date.

All cities have the potential to attract startups, but few do. Cities do too much. Most startups aren’t interested in subsidies, tax breaks or “smart” infrastructure hubs – they just need to be left alone so they can focus on innovation and creating new value for customers.

According to Ivete Cano:

If cities want to attract startups, doing nothing is often better than doing something.. If cities really feel the need to do something, they should just cut red tape.. If there is one thing to take away from our research, it is that government micromanagement does more harm than good. Make it easy, don’t limit. »

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