Unicorn Countries

How some countries are becoming startup incubators of the future

The US was once untouchable in basketball. This makes sense since the sport was invented in America and professional leagues had existed since the 1930’s. When men’s basketball became an Olympic sport in 1936, the US dominated winning seven consecutive gold medals.

Despite boycotts and controversies in the 70’s and 80’s, the US was still the overwhelming favorite. That is until the 1988 Seoul Games where the former Soviet Union handily beat the US team to win the gold medal.

What happened? A team of the best college amateurs from the US was no longer good enough to compete at the highest level against teams built from professionals paid and coached like the pro players in the US that were barred from participating in the Olympics.

Then the International Basketball Federation changed the rules to allow the best players in the world whether amateur or professional to play in the Olympics. But would US professionals commit to playing in the Games? The answer was a resounding yes! When the next Summer Games came to Barcelona in 1992, the US debuted the Dream Team, a team comprised of the best basketball players in the world.

The US once again dominated international basketball, winning each game in the ’92 Games by an average of 44 points. It sent a unequivocal statement about the state of international basketball. The best players in the world were in the US and the rest of world was playing catch up.

While the US is still the basketball world power in both men’s and women’s basketball, the world has caught up. Argentina defeated the US in 2004 on the way to winning gold, and other teams like Spain, Serbia, and Australia have elevated their play. The National Basketball Associate (NBA) also sports top international players like Nikola Jokic, Giannis Antetokounmpo, Luka Doncic, etc. Basketball is no longer just an American game.

Just as you have startup unicorns, countries too are becoming unicorn hubs

Just as basketball has evolved, so has the tech startup world. Silicon Valley has been the dominate force of tech innovation for over sixty years going back to the founding of companies such as HP, Intel, Apple, and Oracle, and then later on Google, Facebook, NVIDIA, and Adobe. The backing for many of these top companies came from the Venture Capital industry based in the heart of the valley, firms like Kleiner Perkins, Sequoia Capital, and others along Sand Hill Road.

The idea of launching a tech startup in any place other than the Bay Area seemed insane a couple of decades ago. Even in NYC, which is now the second largest startup ecosystem in the world, the advice was that if you want your startup to be taken seriously, you had to move to Silicon Valley. Outside of the US, you would barely hear anything about local tech companies or venture capital firms.

Nowadays, startups are launching everywhere. As I write this newsletter, I am listening to some tunes on Spotify, following up with my contacts in Pipedrive, sending money over Wise, and scheduling a Grab taxi to pick me up later. None of these companies are American. And beyond startups, some of the most iconic technology and gaming companies like Acer, ASUS, Nintendo, Nokia, Samsung, and Sony have been staples of the consumer electronics world.

With nearly every country getting startup fever, how successful have countries beyond the US been at building and fostering a healthy startup ecosystem. One measure we could look at is the number of unicorns, startups valued at or above $1 billion USD. From the most recent analysis by Crunchbase, there are currently 1,537 unicorns around the globe as distributed in the following chart:

Chart of Global Unicorns per Country

The United States is still quite far ahead with about half of all unicorns globally created there. After China (18.7% of all unicorns), the drop-off is pretty steep. Even places with notable startup ecosystems like the United Kingdom, Singapore, Israel, and India only barely eclipse 12% of global unicorn creation.

What if we look at venture capital funding levels around the global? Using data pulled from Dealroom for 2023 global startup funding, the numbers track closely to unicorn creation. US startups have taken nearly half of all VC dollars globally, China startups have brought in 15.2%, and startups based in UK, Singapore, Israel, and India makeup 12.7% of the global total of $315 billion. If you switch from dollars deployed to valuations, the difference becomes even more stark.

Top 20 Countries for VC Funding from 2019 to 2023

Does this mean startups is still an American game? On the surface it may seem that way, but there was a point when the gap was even more stark. Twenty years ago, startups did not even register as entities in most countries and venture capital was barely understood as an asset class, one that was much more risk adverse than their American counterparts.

The numbers are much more encouraging today. There is at least one startup that has achieved unicorn status in 57 countries, or one-third of all nations. Emerging nations such as Colombia, Indonesia, Mexico, Vietnam, etc., have shown significant progress in developing their homegrown startup ecosystems over the past decade. Even smaller countries like the Baltic States, Finland, and Switzerland have developed active startup hubs.

What has enabled some of these countries to succeed in developing as startup hubs? Some nations have cultures that exhibit much higher tolerance for risk taking like in Israel. Some are gigantic underserved markets on the cusp of digital adoption such as Indonesia and Nigeria. Some countries have become safe havens of economic stability and legal transparency in a region including Singapore and Uruguay. Then others have been more intentional from a governmental and policy perspective to foster startup activity like UAE and Saudi Arabia to promote their startup programs and import startup talent.

Even as startups have now become a pillar of economic activity in many nations, some have been much more effective in building high-growth ecosystems. These are countries that have become known for startups, where startups have become intertwined with the cultural fabric of the society. More than simply abundance of talent, favorable policies, deep pockets of capital, or established support networks, these are deeply entrepreneurial nations where the lack of resources have not been an impediment to success. In fact, in the absence of support, these founders have become more resilient and resourceful. And the demographics of these nations means they have much more growth ahead of them.

I call these nations Unicorn Counties. They are nations of builders where a combination of factors has helped these countries to create the conditions for startups to scale into unicorns. Some are well known like Israel, which is often referred to as Startup Nation. In a country of 9 million, Israel has produced 26 unicorns within the country and 89 unicorns in total founded by Israeli nationals. Another is Singapore, itself having only been a nation since 1965, that has produced 19 unicorns for a population of 6 million.

There are many more potential Unicorn Countries in the making. These are nations that are just on the cusp on doing something interesting, but are still early in their journey or held back by various internal factors. Some of these factors range from lack of domestic capital to overly bureaucratic processes to limited startup scale experience. When you examine the overall trends in GDP growth, the rise in per capita earnings, the rapid adoption of digitization, and a younger and growing working population with increasing disposable income, the ingredients exist for a vibrant startup ecosystem!

What are some of these up-and-coming Unicorn Countries? Next week we will dive into one such nation in depth to understand how they are positioned to become a startup incubator and the opportunities and challenges ahead.

Do you need to be wealthy or come from the right background to succeed in startups? That was at the heart of a tweet from one Silicon Valley founder. She stated that you had to have some prosperity before even jumping into startups:

Do startup founders have to start out with some prosperity?

The same week someone asked about stories of successful founders that came from poor or disadvantaged backgrounds. Other than Jan Koum of WhatsApp and Gibran Huzaifah of eFishery, folks were hard-pressed to come up with concrete examples.

There are advantages to privilege. Growing up in economically advantaged households means access to better schools and resources. This leads to admissions to top universities and building tight networks of high-achievers. Graduating from top schools leads to higher-paying and more prestigious jobs. A few years in high earning roles leads to greater savings and enough cushion to try something crazy like a startup.

The opposite also applies. Growing up in an economically disadvantaged family puts someone behind for top universities, more lucrative jobs, access to elite networks and talent, and much less financial buffer to afford the risks of a startup.

Silicon Valley often touts itself as a culture of meritocracy. Everything an entrepreneur does and has access to is because of their talent alone. In a sense that is true, but to enter that world often requires having some advantages or good fortune early on in life.

The hard truth is that launching a startup is a massive financial gamble. An entrepreneur foregoes salary and suffers the opportunity cost of not earning their normal salary. If you come from a well-known tech company, that is often a huge chunk of compensation you give up. For founders of startups that failed, they often spend years cleaning up their credit and clawing themselves out of debt even if they had substantial financial means before their startup.

As more startup ecosystems emerge globally, we are hopeful that more stories emerge of founders that succeeded despite growing up in poverty. That is part of the promise of startups, that they can provide opportunities for life-changing wealth and financial freedom. If you know of successful startup founders that overcame societal or financial hurdles, we would love to hear those stories.

We are in the thick of AWS Summit season with Summits happening in Milan, Los Angeles, and Hong Kong this past week. Then we have three more in Bangkok, Dubai, and Shanghai this coming week!

Mark on the ground for AWS Summit Hong Kong with startups!

Mark covered Hong Kong with talks about community building using Generative AI to automate a lot of the heavy lifting of community management. He then spoke on the startup journey and how AWS is supporting founders at every stage of startups from idea to scale. It was amazing to see the energy and enthusiasm for all things Generative AI, industry solutions, and startups in HK!

Mark will continue the startup tour of Southeast Asia with events and office hours in Bangkok and Saigon. Definitely grab Mark while he is at Tech in Asia Saigon Summit!

Basil is going to be busy working the AWS Summit Dubai, so definitely reach out to him and asking him how you can create your own AI co-founder!