Dateline:Kuala Lumpur, Malaysia
Just the other day, we discussed the fact that New York is no longer the billionaire capital of the world, having been replaced by Beijing, China.
This new development is a reflection of something I’ve been talking about for the last three years: the world economy is shifting to the East and other emerging markets.
And that shift is showing up in more than just the number of billionaires outside the United States.
I have been saying for years that as countries in Europe and Asia catch up with what has been happening in the US there would be new, global, Silicon Valleys. I recently read an article in the Financial Review that confirmed just that and highlighted the five best cities for entrepreneurial ecosystems around the world.
Just like billionaires are shifting from New York to places where people are adapting and making innovation in bigger ways in other countries, entrepreneurs are moving beyond Silicon Valley, New York and Boston in the US to new start-up communities across the globe.
Right now, we are at the crux of the shift. China becoming the new billionaire capital of the world is like a log in the dam finally came loose: something that big is going to get people to realize that China, or anywhere else for that matter, can be an entrepreneurial hub.
People get nervous to leave a place like San Francisco, but they are doing it anyway. The sheer growth in these new ecosystems has reduced that fear, allowing more and more people to take advantage of the “Silicon Valleys” that are not only outside California and the US, but also offer lower taxes and make it easier for you to start a business.
I fully support this shift and the people making it happen.
That’s why people in our orbit have started businesses in Ho Chi Minh City, Bucharest, Medellin, and other nomad hubs. But let’s take a look at the five cities that Financial Review highlighted to get an idea of the kind of options that are out there.
Financial Review’s 5 Best Entrepreneurial Ecosystems
The article suggested that, in general business circles, Singapore is not usually thought of as a start-up hotspot. For me, Singapore seems like the obvious answer. You don’t become one of the greatest economic miracles of the past 50 years by being anything less than a top-notch entrepreneurial ecosystem.That being said, the start-up scene in Singapore is definitely getting even better than it already was. The nod to becoming a new Silicon Valley is a result of Singapore’s recent efforts to increase growth in the tech industry, something that will make Singapore even more of a draw in the coming years.
2. London, England
London has a unique, but strong tech sector that builds on the city’s different strengths. It uses its leadership position in the banking industry to create disruptive financial products such as WorldRemit and TransferWise; capitalizes on its innovative computer science in areas like big data and artificial intelligence; and expands on its world-renowned fashion to create online retailers like Farfetched and Net-A-Porter.The article even stated that many of the Oxbridge-educated elite have abandoned the more traditional career paths like banking, consulting and law to get in the entrepreneurial lane. Plus, London has become a regional destination of the tech and start-up minded throughout Europe, which has prompted the government to create a special visa class that allows companies to fast-track technical talent, no matter the worker’s original nationality (including those from the US).
For me, I don’t believe that London is the answer. It is overpriced and there are better frontier options out there. I’ve talked to some folks who say it’s easier in terms of taxes and dealing with the government than in the US, but in other ways it’s harder. Overall, however, your still dealing with the same western attitudes.
3. Tel Aviv, Israel
This was an interesting one for me. I have written before about how to get citizenship under Israel’s Law of Return, and we have discussed real estate opportunities in the country, but we have never discussed Israel’s incredibly strong technological innovation.Besides the United States, Israel has more NASDAQ-listed companies than any other country in the world. Known as the “Start-up Nation”, Israel’s tech sector is strongest in cybersecurity-oriented products.
The one downside the article mentions is that, after the seed financing stages of start-ups, many companies tend to leave Israel and try to pull in a big American VC firm. Nevertheless, if you are interested in building a cybersecurity-focused company, Israel might just be the place to start.
4. Sao Paolo, Brazil
While the article mentions that Brazil is undergoing a horrific recession, it still holds high hopes for any investor with realistic business plans who is in it for the long term. It also argues that the culture allows you to have a good time and is much easier to assimilate to in comparison to countries like China or India.
But Brazil is a disaster.
The recession is so intense that the government just raised the investment required to start a business there and get residency by fourfold. Plus, it takes months to open a bank account and then, once you open it, it takes another week to get your money credited to you.
The article made a good point that the lifestyle is great with beautiful beaches and restaurants and clubs; and the cost to live or travel there are incredibly affordable. I just saw a flight from Milan to Sao Paolo for $199. But the paperwork to get a visa (just to visit) is ridiculous. So, weigh your options before jumping on board.
5. Bangalore, India
As I mentioned just a couple days ago, India has a growing middle class that is more and more present on the internet with each passing day. The fact that people are taking advantage of this trend has created quite a few billionaires in the country, placing India in the number three spot behind the US for billionaires living in a single country.India’s history as a call center hub means that the workforce is accustomed to technology, which has created many tech market-oriented cities. Bangalore has the strongest start-up ecosystem of all of them, with an infrastructure similar to Singapore’s.
The downside the article mentions is that, while seed capital is easy to find, the follow-on investments needed for growth are getting harder to obtain.
I would add that there are other downsides, as well.
Choosing a new Silicon Valley
The truth of the matter is that you have a very high probability of becoming very, very wealthy by taking advantage of a growing tech sector in an emerging economy like Bangalore.
The question is, how much are you willing to sacrifice?
If you don’t mind living in a frontier market, the sky is the limit. One of my business mentors’ likes to tell the story of a man and his family in Africa who was in the business of building and running gas stations. To maximize their savings, he and his family lived in their gas station. They would save all their money and then would go start another gas station and would live in that one.
There are numberless ways and extremes to which you can go to start a successful business. What are you willing to trade to do so?
You can take the traditional route and stay in the US, but you’ll trade predictability for high taxes, government regulation and high entry barriers.
If you want to diversify, but not too much, London will mostly provide a change in scenery. If you’re willing to adventure out of the West, however, places like Singapore and Tel Aviv have solid fundamentals. And then there’s Bangalore for the more adventurous entrepreneur willing to trade predictability for high potential.
In my experience, cheap cities are a good place to get a business started, but not always for growth. Typical nomad cities like Ho Chi Minh City in Vietnam are great for solopreneurs and people looking for a certain type of lifestyle, but not for growing mega-million dollar companies.
You can hire for cheap and build western-quality teams, but are you going to start a billion dollar company in Ho Chi Minh City? Perhaps. Perhaps not.
One of the other countries on this list will probably be a better fit if a million or billion dollar business is your end goal. You won’t always get everything you want out of one country. Plan accordingly.
The good news is that you have options.
If you are ready to take a serious look at those options and commit to a solid game plan, apply for Strategy Call and we can design a blueprint that will help you and your business take advantage of the new entrepreneurial ecosystems the world has to offer.
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