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Cape Town has again been ranked as the top tech entrepreneurial ecosystem for startups among 71 emerging markets cities by the Seedstars Index (SSI).
The results of the global emerging markets competition Seedstars’s 2017 index were released today in a publication made available ahead of its annual Seedstars World summit which takes place tomorrow (12 April) in Lausanne, Switzerland.
With a measure of 74.4 (with Silicon Valley at a base of 100) Cape Town is ranked ahead of Santiago, Chile (69.6) in second, Nairobi (68.4) in third and Mexico City (68.1) in fourth. Johannesburg ranks eighth and Lagos 21st.
While Cape Town remained at the top of the index for emerging markets cities, Nairobi shot up from 11th to third place. Warsaw was not included in this year’s index.
Cape Town is this year ranked ahead of economic powerhouses such as Shanghai, China (6), New Delhi, India (7), Istanbul (10) and São Paulo, Brazil (14).
Now in its third edition, the index uses a composite index based on three pillars: culture, environment and opportunity when ranking those cities the organisation’s team visited in 2017.
It’s the second year in a row that the Seedstars Index has ranked Cape Town as the top tech startup ecosystem among emerging market cities
It draws on data from the World Economic Forum (WEF) on things such as technological readiness and market size and the World Bank’s ease of doing business index.
The index also relies on feedback Seedstars drew from over 400 stakeholder meetings (on things such as training and mentoring, access to funding and community collaboration) while assessing 74 ecosystems in 62 countries.
Cape Town ranks highest for culture – which the index determines from Seedstars surveys on things such as the entrepreneur density, event variety, media coverage and community collaboration. The city is ranked second on the opportunity measure, following Shanghai, China.
The opportunity measure – which is dominated by Asian ecosystem – is key, as the element contains 39% of the index’s weighting, followed by culture (32%) and environment (29%).
The measure is gleaned from various Seedstars surveys on talent, access to funding and training and mentoring – as well as data from WEF on things such as market size and market receptiveness.
However, Cape Town performs less well on the environment pillar – where it is ranked 25th. Kuala Lumpur, Malaysia is ranked first on this measure. Seedstars notes that the environment pillar is the hardest for ecosystem stakeholders to influence, as initiatives require government buy-in.
Seedstars notes too that the city’s startup ecosystem appears to correlate with the gross domestic product (GDP) capita of the country in which the city falls.
However, the index notes that Cape Town, Nairobi, Santiago, Johannesburg, Lagos, Mexico City and a number of other cities are outliers, in that their index score is more like that of a country with a higher GDP per capita.
Despite Nairobi and Cape Town ranking high on the index, sub-Saharan Africa remains the poorest performing region.
Sub-Saharan African countries scored an average score of 47.5, against 53.6 for Latin America, 54.1 for Middle East, 53.7 for Eastern and Central Europe and North Africa and 55.5 for Asia.
However, promising is that sub-Saharan Africa was the only region to see its score increase over 2016 (from 46.4). Could things then be looking up for tech startups on the continent?
Ventureburn is a guest of Seedstars at its annual world summit which takes place tomorrow (12 April 2018) in Lausanne, Switzerland.