By Lee Gomes

Startups: Those are the things that only happen in Silicon Valley, New York and Boston, right?

Maybe once, a very long time ago. Today, entrepreneurialism is a global phenomenon, and as a result, there is hardly a developed part of the world that lacks some sort of startup scene to speak of. Some locales are much further along than others, though, and some are stronger in some characteristics and weaker in others. Do an easy Google search and find numerous startup ecosystem rankings from think tanks and media outlets, based on this or that formula (see to the right for two examples).

global startup ecosystems top 10sWhat we’ve done here is follow a simple formula: We looked for ecosystems that are generally accepted as international entrepreneurial hot spots where Wharton alumni also have a strong presence.

Then we narrowed them down to five cities: London, Tel Aviv, Sao Paulo, Singapore and Bangalore.

Your tour guides for these startup ecosystems are all members of the Wharton community, who also double as founders and/or financiers in the spot.

So welcome to the world of startups, Wharton-style.

Going Global With Entrepreneur Ecosystems 3

The casual reader of economic news about London would assume that the city is experiencing only two business trends of any real significance: 1) The City, London’s Wall Street, continues to consolidate its position as one of the world’s premier financial service centers; and 2) Russian oligarchs continue to buy up all of London’s poshest real estate, helping make the city one of the world’s least affordable to live.

Like all stereotypes, says Sean Seton-Rogers WG05, a partner with the London-based venture capital firm PROfounders Capital, “those are based in some semblance of reality.” But there is another reality as well, he says: “London’s startup community is growing incredibly rapidly, and is starting to make a meaningful impact.”

Some of those startups, says Seton-Rogers, take advantage of the city’s global leadership in banking to create potentially disruptive products in financial services. TransferWise and WorldRemit, for example, are both attracting customers by cutting some of the stiff bank fees associated with international money transfers.

But London specifically, and the U.K. generally, has other strengths besides financial services providing a foundation for startup activity.

One of the most important, says Christian Hernandez Gallardo WG03 of London’s White Star Capital, involves cutting-edge computer science, especially in areas like artificial intelligence and big data. U.K. universities now have some of the best computer research programs in the world, and they have contributed to some celebrated startups. The best known is probably DeepMind, an artificial intelligence company founded in 2010 by researchers at University College London and acquired by Google in 2012 for an estimated $400 million.

That wasn’t a one-off event, notes Hernandez. In October, Apple acquired VocalIQ, formed inside Cambridge University, whose technology is designed to allow humans and computers to better interact with each other using everyday English.

Something else London has going for it, say boosters, is sheer style. London is one of the world’s fashion capitals, and entrepreneurs are taking advantage of that fact to create fashion-oriented online retailers like Net-A-Porter and Farfetch, some of which have achieved billion-dollar “unicorn” valuation status. One of the consequences of the success of U.K. startups involves subtle sociological shifts throughout the British Isles. For example, many of the country’s Oxbridge-educated elite have been bitten by the entrepreneurial bug and are joining startups after leaving university, rather than pursuing more traditional career paths such as banking, law and consulting.

Another result is that London has become a regional destination for the tech- and startup-minded.

The open borders of EU countries makes it a simple matter for a well-trained Polish or Romanian programmer with a good idea to decamp to London and start looking for angel investors. But in the U.K., as in the rest of

Europe, immigration has become a hot-button political issue, and how long that free movement will continue is an open question.

Hernandez doesn’t expect that to be an issue with startups. The government recently created a special class of visa that allows young companies to fast-track technical talent, regardless of the worker’s nation of origin, including, of course, talent from the United States, which is a good thing considering the size of the American community in London. Many are from Wharton.

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Tel Aviv

When it was published in 2009, Start-up Nation: The Story of Israel’s Economic Miracle called the world’s attention to something that was already old news in Silicon Valley: Israel was becoming a technology innovation hotbed, so much so that it accounted for more NASDAQ-listed companies than any country except the United States. It’s impossible today to have a conversation about the Israeli startup scene without the book’s title being invoked at least once. Observers describe the situation in terms similar to the book, especially the crucial role played by the Israeli Defense Forces in training future entrepreneurs, particularly in security-oriented businesses.

But the story has a sequel. Many say that in the last few years, Israel has evolved into something much more than simply a startup incubator. Public perceptions have failed to catch up with this new reality.

“Everyone knows about Israel as a startup nation, but we are now home to many companies that are not just startups but that are the actual market leaders. We have not been doing as good a branding job about this aspect of Israel,” says Tal Slobodkin WG08, a managing partner at Israel-based StageOne Ventures. “People will come to Israel to find some cool new technology, but they will not come here to find the market leader in, say, content marketing.”

If they did, says Slobodkin, they would come across a company like Outbrain, headquartered in New York but founded in Israel. Its algorithms help websites like that of The New York Times suggest additional stories in which their readers might be interested. Another market leader is Mobileye, which makes vision systems for cars and which now has a market cap of $10 billion. Then there is the granddaddy of all Israeli startups, Check Point Software Technologies, founded in 1993 and considered tops in computer security systems for companies. Most people say that it was Check Point that put Israel on the map in terms of technology companies.

While best known for cybersecurity-oriented products, Israeli startups draw on other national strengths. For example, Eyal Gura WG08, an investor and serial entrepreneur currently working on his fifth startup, Zebra Med, notes that Israel has long had digitized health records, something that the American health care system is currently struggling to implement. That means, he says, it already has hundreds of millions of longitudinal data points that can be analyzed by big data-style algorithms to help improve medical care, something several startups are now in the process of trying to do.

As startups in Tel Aviv and elsewhere in Israel have become more diversified and customer discovery processes can be done digitally and remotely, says Gura, Israeli VCs have become more comfortable with the sorts of consumer-oriented plays more common in the United States, in which a company hopes to prosper not because of its unique intellectual property but because it can execute better than competitors and acquire more customers. Previously, he says, due to distance to market, local VCs weren’t comfortable with a company unless it had sufficient IP protection to keep competitors at bay. If there’s a downside to the Tel Aviv startup scene, it’s that companies tend to wander abroad after they reach a certain size. Israeli venture capitalists tend to be active in the seed financing stages of startups. As startups grow and move toward an initial public offering or a purchase, they usually seek to rope in a big American VC firm.

The flipside of that is that the world also comes to Israel. Virtually all those American venture firms have satellite offices in Israel, usually Tel Aviv, a newer and more commercially oriented city than Jerusalem. Elli Streit WG65, a veteran of Israeli science-based industries and technology transfer and licensing specialist, notes that nearly all of the big American and European technology companies, from Google to Siemens, have R&D operations in Israel.

That’s one reason, he says, Israel isn’t plagued by copycat companies that simply mimic a successful firm’s business plan.

Sao Paolo startup scene
American startups have a lot to learn from Brazil thesedays—especially how to handle themselves when a frothy investing bubble pops and everyone with gum stuck on their faces leaves the party.

While Silicon Valley venture capital outfits debate whether Uber-style valuations represent a new craze, there is no such disagreement in Brazil. A few years ago, the startup investment scene was riotous, with American and European investors pouring money into the world’s sixth-largest economy that was growing at a torrid pace. Now, though, Brazil is in a recession, the victim of slumping oil prices, reduced demand from China for commodities and a freeze in consumer credit comparable to what occurred in the U.S. following the subprime lending crisis. Needless to say, there has been a sharp fall in startups—many of which were little more than clones of American companies in the first place.

The good news, says Benjamin Gleason WG07, founder of GuiaBolso, an app that helps Brazilians manage their personal finance, is that the investors and companies with realistic business plans and a long-term focus have as many opportunities to prosper as ever.

“There has definitely been a shake-out,” he says. “But there are positives to it. Both entrepreneurs and investors are thinking harder about real businesses that can operate in a sustainable way.”

Nicholas Reise G11 WG11, whose startup, Xerpa, helps companies manage their human resource operations, agrees.

“We got back to a healthier level. In fact, there is actually more long-term capital available in Brazil now than during the bubble. The investors that remain are mainly Brazilian and are here for the long term,” he says, comparing them with the “helicopter VCs” who dropped in when the action was hot, only to quickly depart.

The two expat entrepreneurs say that the fundamentals of doing a startup in Brazil haven’t changed, in terms of both positives and negatives. On the plus side is the country’s sheer size, as well as a middle class that is emerging, however fitfully. The negatives: an often-stifling bureaucracy, baroque tax and labor laws, and an infrastructure that continues to lag behind what has been developed in smaller neighbors like Chile and Argentina.The bulk of Brazil’s startup activity is in Sao Paulo, Brazil’s most populous city.

One of the city’s newest entrepreneurial hotspots is CUBO, a 50,000-square-foot co-working space housed in a new, smartly designed five-story building. Co-sponsored by Redpoint Ventures, the Silicon Valley venture capital firm, and Itaú Unibanco, Brazil’s largest bank, CUBO aims to create the sort of critical mass of entrepreneurs that can help make for breakout companies.

The country doesn’t yet have any Facebook-style success stories, though several startups are being closely followed, such as Nubank, a credit card provider. A number are trying to fight off their gringo competitors; 99Taxis, for instance, hopes to become a Brazilian alternative to Uber.

Despite whatever hard times might have befallen startups, one reason Brazil will always be popular with American entrepreneurs is, well, Brazil. While startup life is hardly nonstop samba and cachaça, says Gleason, “it’s much easier to assimilate and have a good time here than it is in other BRIC countries like China or India. There are restaurants, clubs and beaches; it’s a very good lifestyle.”

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It may be one of the world’s great economic miracles of the last 50 years, but Singapore is not usually thought of a startup hotspot in general business circles. That’s beginning to change, with the arrival of a new crop of foreign investors and serious efforts by the government to give a boost to the city-state’s entrepreneurs.

Alan K. Hsu WG06 G07, long active in the Singapore venture capital scene, says the government is working on a number of fronts, including providing matching grants for startup investments and providing the funding to allow young Singaporeans to spend time abroad working in an overseas startup, learning the ropes. Already the site of some form of office for most of the world’s biggest companies, Singapore should also be a natural for startups for other reasons besides a friendly government.

The city’s efficiency and modern infrastructure are the stuff of legend. English is the de facto first language. And the local workforce is near the top of most lists for education and productivity.

One measure of the extent to which the scene is heating up, he says: Valuations are rising, so much so that the same company today can raise double or triple the capital it could have just a few years ago, even with the same fundamentals.

Until about a decade ago, says Hsu, most of Singapore’s venture capitalists were local. About five years ago, there was a wave on Japanese investors, and in the last few years, they’ve been joined by VCs from the U.S., Europe and even Russia.

But the Singapore entrepreneurial scene still has a ways to go before it catches up with the U.S., says John Kim ENG00 W00, also an active VC.

“In Silicon Valley when an entrepreneur is trying to solve a problem, she can probably get 10 people within one phone call who have solved that same problem before. There’s also a culture of openness and sharing so she can get a handful of opinions,” he explains. “In Singapore, you can find some of the world’s foremost experts in more capital intensive industries like palm oil or real estate. But there aren’t as many in capital-efficient industries like tech, where more entrepreneurship is focused.”

But, adds Kim, Singapore’s talent ecosystem is developing rapidly, making him confident that “these and other challenges, like hiring top-tier talent, will improve over time.”

Because Singapore investors are targeting a part of the world that’s less developed than the West, many startups offer services that are taken for granted in the U.S. or Europe. One example is, which might look like a simple truck rental service but is actually filling what is too often a missing piece for Malaysian businesses: reliable delivery service.

“We are trying to solve some real-world problems,” Hsu explains.

Which is not to say that Singapore doesn’t also boast any number of startups that would be equally at home in tiny neighborhoods of San Francisco or New York. Some of them are among the relatively small number of Singapore companies that have managed to achieve an “exit.” For example, several upscale restaurants and fashion retailers in Singapore have been snapped up by LVMH, the French luxury-brand conglomerate, for amounts estimated as high as $400 million.

Fans of high-end taxi services who want to “buy locally” can turn to GrabTaxi, which is attempting to outcompete Uber—at least in Singapore.

Going Global With Entrepreneur Ecosystems

As global technology centers, Bangalore has a lot in common with Singapore. The Indian city has become synonymous with the trend toward outsourcing, especially call centers, meaning it has a technology-aware workforce and a robust infrastructure similar to Singapore’s. But, like Singapore, it didn’t have much of a reputation for a homegrown startup scene, at least until recently.

It’s making up for lost time, though, says Presha Paragash, who with her partner, Shweta Singh, both WG14, operates Sol Primero, a VC firm co-located in Bangalore and New Delhi.

A big reason for Bangalore’s popularity, Paragash says, is that the cost of living is lower than in India’s bigger cities, like Mumbai.

But the entrepreneurial influx has had its consequences. As soon as a startup gets funded (especially when it receives large amounts of capital), the space can get crowded overnight with many early-stage startups without much differentiation. Paragash saw that personally when her fund invested in the Karrier, an intracity trucking service.

“Now, there are a dozen people doing the same thing, which eventually led the company into a full pivot,” she says.

Those entrepreneurs shouldn’t be blamed for trying, though, considering what might await the winner in any given market. India is, after all, a country of 1.2 billion people, and now the second-largest Internet user base behind China (it overtook the U.S. this year). Prashant Mehta WG97, co-founder of VC firm Lightbox Ventures, cites more figures. About 80 percent of traffic is mobile, and smartphone usage is doubling every year (up to 130 million in 2015). Indians downloaded an estimated 9 billion apps in 2015, up five times since 2012.

“It’s the sheer scale of the population, sure, but the sheer scale of the people on the Internet too,” says Mehta, who co-founded Lightbox with Sandeep Murthy ENG98 W98 WG05.

It’s the sheer scale of some of India’s Internet startups too. The top two most valuable companies in retail, for instance, are e-commerce firms started within the last decade: Flipkart (with $16 billion market cap) and Snapdeal (with $5 billion market cap and founded by Kunal Bahl ENG06 W06).

India as a whole is “clearly the hottest tech market on the planet right now,” says Mehta. In part, it’s because Bangalore isn’t the only hot spot; there’s Mumbai (where Lightbox is located), Delhi and to a lesser extent Chennai.

Underlying the tech startup activity is capital. In 2013, overall VC investments were about $1 billion, estimates Mehta; in 2015, that jumped toward $14 billion. Funding in Series A rounds averaged $2.5 million in 2013, Series B $6 million; both averaged double that in 2015.

The fact that seed capital is so easy to find might give Bangalore’s entrepreneurs a false sense of security. While early money is plentiful, Paragash says, the follow-on investments that companies need for growth are becoming increasingly difficult to come by. The follow-on investments are also taking much longer to close as investors become more cautious.

“It’s simple to get the first $200,000,” she says. “But the problem comes when you need to move to the next level.”

That’s especially true, she adds, on account of the fact that the Bangalore startup scene appears to be headed to what she calls a “correction,” with fewer me-too ideas getting money tossed at them, as distinguished from a full-on bursting of the bubble.

“Things had gotten a little carried away,” she explains. “Deals were closing too quickly, and some fundamentals were being ignored. The correction is a relatively small one, but it has been very much needed,” she says, adding that startups are now focused on long-term, sustainable business models, rather than just burning cash to gain market share.

Yes, Wharton alumni in India are upbeat. For Mehta, it’s still very early days, with only growth ahead.

—Lee Gomes is a freelance writer living in San Francisco who has covered business and technology for a number of publications, including The Wall Street Journal.