Startup Ecosystem Guide: The USA

and Canada

The startup ecosystem of the USA and Canada are two dominant
forces that occupy top-ranking positions globally. Their incredible
diversity, regional differences, and population size create a
complex interconnected web of ecosystems and the strongest
represented continent. 

This article will discuss some of the core features of the two North
American startup ecosystems, and present the limitations and
strengths of each one. The leading regional ecosystems present
will also be explored briefly.

Are you interested in startup innovation and entrepreneurship? You

can access more reports on global and regional economic
development as well as our new Coronavirus Innovation Map that
shows the best countries fighting the pandemic and facilitating new
developments in the pandemic era.

Top Performing Startup Cities in the USA &

Canada 
The North American startup ecosystem is made of the United
States and Canada. Note that Mexico is found in the Latin America
section of our annual Global Ecosystem Report. You can find the
2020 ranking and insights here. The North American region has the
biggest representation of startup ecosystems in our annual report,
with 412 in total and 383 of those from the United States. You can
read an overview of the global startup scene by continent in our
relevant guide here. It is important to note, that startup
ecosystems do not just represent cities but clusters of activity. Due
to its size, the United States specifically requires extensive
clustering of large urban centers like the San Francisco Bay Area
that includes San Jose and Palo Alto. 
  Click here for a detailed look at more than 23424 startups in the
United States plus coworking spaces, accelerators and
incubator spaces.  

 Click here for a detailed look at more than 2356 startups in

Canada plus coworking spaces, accelerators and incubator
spaces.  

The United States

The United States startup ecosystem is without a doubt the

dominant global ecosystem. This is not only in its scale and
authority but also by the margin between the USA and the second-
best ecosystem, the United Kingdom. In comparison, the UK has a
fifth of the total score compared to the United States. 

This is also evident by the fact that 10 out of the Top 25 Global
Ecosystems are from the United States, including the San Francisco
Bay Area, New York, Boston Area, Los Angeles Area, Seattle, and
Chicago. 

While population size and technology are important weapons in

the arsenal of the startup ecosystem, the United States has
something even more important. The entrepreneurial culture,
mindset, and flexible government regulations are key factors that
have made it hard to replicate the success of this ecosystem
anywhere else. 

Recently, the United States startup ecosystem has also taken

the lead in the fight against the Covid-19 pandemic, with innovative
health tech solutions. 

Some promising ecosystems that are overperforming in their

verticals in the USA outside the major centers should also be
mentioned here. Madison, Wisconsin, has seen a substantial
increase this year, placing it within the Top 100 startup ecosystems
globally. A vibrant college town with strong verticals in the health
and hardware industries, Madison is actively supported by the
Wisconsin Economic Development Corporation (WEDC). The city is
showing a strong commitment to promoting its unique ecosystem
and taking an active approach to establishing a hub of talent,
innovation, and growth.

Canada

Canada has retained a position in the Top 4 amongst other well-

performing players like the United States, Israel, and the United
Kingdom. Some of the larger ecosystems in the country, like
Toronto and Vancouver, have seen a small drop in the momentum
of growth. On the other hand, smaller ecosystems are coming into
their own with a strong focus on verticals of software and data, e-
commerce, and retail. In contrast to the United States, the
ecosystems of Canada are regionally disconnected, however, this
has not proven to be a disadvantage. A familiar name here will be
the tech giant, Shopify that came out of Ottawa, and has continued
to reign as one of the best e-commerce platforms globally. 

In the Top 100, the cities of Ottawa, Edmonton, and Calgary have
shown impressive gains this year. Kingston has also seen its
ecosystem rise to a Top 150 – among 1000 cities. The growth of the
smaller ecosystems is a very positive sign for developments in the
area, however, we would love to see some Canadian cities gaining
global hub status and going back in the Top 20 in the near future. 

One area where Canada has shown its considerable strength is

health and Covid-19 innovation, placing it in the global Top 5. 

Overall, there are signs that the ecosystem as a whole is gaining

momentum, undoubtedly supported by the focus on ecosystem
development, government incentives, and increased financing. In
Western Canada, the capital of Alberta, Edmonton, is taking
advantage of its young population and university talent pool, with
an impressive network of meetups, incubation, and accelerator
programs and is heavily investing in ecosystem development. In
addition to the half a dozen incubators on offer, Edmonton can
boast of being the home of the third-best university-based
incubator globally, TEC Edmonton. 

Strengths and Limitations of the Startup

Ecosystem in the USA & Canada 
In this section, we will explore the strengths and limitations of the
startup ecosystem in the USA and Canada.

United States Startup Ecosystem Strengths 

Entrepreneurial Mentality – Startups in the United States
practice a global domination mindset, that drives them for
exponential growth from day one. This is supported by access to
funding (second biggest strength) but is also supported by other
driving factors like risk tolerance, and an open and collaborative
mindset, where there is a flow of information and ideas. 

Funding – The United States ecosystem has long supported early

and late-stage funding for startups. With the only true contender
being China, the United States has some of the highest-
valued startups in the world and disproportionate access to
alternate funding sources through crowdfunding, angel investors,
and VCs in comparison to European and Asian startup ecosystems.
Growth mindset – The growth mindset advantage is directly tied
or to a large degree dependent on point number 2, which is
funding. As US companies are fighting for market penetration and
trying to cause a stir, direct money flow is achieved through late-
stage funding that keeps the wheels turning. This is in contrast to
most ecosystems, elsewhere, especially in Europe, where late-
stage funding is infrequent at best and companies need to tread
slowly and carefully to stay alive. 

United States Startup Ecosystem Limitations 

Adopting to local markets – One of the potential drawbacks of

the United States startup ecosystem compared to Europe and Asia
is the ability to adapt to local market needs from the start. By
nature, European and Asian ecosystems need to target countries
with different languages. Their smaller population, in some cases,
is also forcing them to look outwards. While this isn’t directly a
problem for the large national market the US offers, European
startups can pivot to the demands and needs of different cultures
much faster overall.

Work-life balance – This is one area where the United States’

mindset towards world domination is not coveted. One survey by
Deloitte found that 77% percent of people in the US have
experienced burnout in their jobs while 90% of them responded
affirmatively to whether stress caused by their job is impacting
their work negatively. The United States has no federal or state-
mandated number of paid public holidays or minimum paid
vacation, the only country in the Organization for Economic
Cooperation and Development group that includes 36 nations. This
unsustainable work ethic is not as prevalent in other ecosystems
where family and downtime are highly valued.

Canada Startup Ecosystem Limitations 

Funding – While Canada has been making leaps in the area of
venture capital, it is still comparatively behind its neighbor and
needs to scale higher to retain and support startups in its
ecosystem. The Covid-19 pandemic landed a heavy blow on
venture capital investments, with the Canadian Venture Capital &
Private Equity Association reporting a 45% quarter-over-quarter
decline in Q1 2020. 

Risk Aversion – Canada has long been considered a more

conservative and risk-averse culture than its neighbor, an idea that
is largely tied to wider structural issues like access to capital. The
failings of past giants in R&D, like Nortel and BlackBerry, may also
have painted a “slow is safest” approach towards disruptive
innovation. While “betting big doesn’t mean you’ll make it big”, the
Canadian startup ecosystem will need to develop its own culture-
appropriate strategies to balance the risk-averse nature of its
entrepreneurial culture. It will also surely need to leverage its
healthy influx of immigrant population, which brings a more risk-
tolerant approach to the field. 

Canada Startup Ecosystem Strengths 

Talent  – While access to talent is not an issue in most of the

regional Canadian ecosystems, retaining it has been a sore point in
the past. Now, relaxed immigration policies and the new startup
visa that launched in 2018, after a pilot program in 2013, are key
indications of the commitment to attracting global talent. The
Global Talent Stream program launched in 2017 by the federal
government to make it easier for businesses to hire highly-skilled
global workers, has also brought more than 40,000 people to
Canada, including 24,000 in areas of computer programming and
software engineering. With the United States tightening
immigration laws, Canada is well-positioned to take advantage of
the influx of international talent looking for a supportive
environment during and after the Covid-19 pandemic. 

Universities – Canada is home to more than 60 university-led

incubator and accelerator programs that are pushing innovation
forward and creating a new generation of entrepreneurs. The
contentious open IP university system has allowed more
companies and student entrepreneurs to develop companies and
be able to take their IP with them when they go. This is in addition
to government services that provide access to education, IP
legislation, and strategic growth, for companies to be developed
and commercialized successfully.