Startup Genome, the Silicon Valley group that assesses startup ecosystems around the world, has ranked the 100 top emerging ecosystems in its 2020 report, and Atlantic Canada failed to make the list.

The organization last year ranked Atlantic Canada as the No. 4 best ecosystem in the global “activation phase”, the category for young ecosystems with small startup communities.  Startup Genome this year changed its format, ranking 100 “emerging ecosystems” and the only Canadian jurisdictions to make the list were Calgary and Ottawa.

The omission of Atlantic Canada is surprising given that the region showed strong metrics on many fronts last year. The Canadian Venture Capital and Private Equity Association, for example, said the region raised $608 million in venture capital in 2019 – almost four times the 2018 figure and more than six times the 2017 level.

“Obviously, we have some challenges and we have a long way to go,” Innovacorp CEO Malcolm Fraser, whose organization is a Startup Genome network member, said in an interview. “There are some positives in the report we can look at as well.”

Startup Genome each year ranks startup ecosystems around the world, and Innovacorp signed up Atlantic Canada to be included in the 2019 study. Startup Genome, which this year assessed 270 ecosystems, said last year there were only three activation phase ecosystems that scored higher than Atlantic Canada.

The highlight of the 2020 report is the ranking of the top 40 ecosystems in the world, which this year shows Toronto-Waterloo slipping five spots to No. 18. Vancouver fell one spot to No. 25 and Montreal made the list for the first time at No.36.

Then Startup Genome ranks the next 100 jurisdictions, which it classifies as emerging. These rankings are based on each jurisdiction’s performance, funding, market reach, and experience and talent. Performance accounts for 45 percent of the score, and Startup Genome assesses performance mainly on the value of exits and the valuation of startups within the ecosystem.

Atlantic Canada scored a 1-out-of-10 in Startup Genome’s Exit Growth Index, and the same dismal score in the Investor Activity Index. 

“What this is telling us is that if we’re thinking about the long-term goal of being a top ecosystem in the world, then exits count,” said Fraser. “If we have a good crop of exits in the next three or four years, things will look different. And I’m certain we’re on track to get there.”

Startup Genome pegged the value of the Atlantic Canadian ecosystem (which again depends heavily on exits and valuations)  at US$401 million (C$547 million), a fraction of the global average of US$10.5 billion.

However, Innovacorp Vice-President of Investment Andrew Ray said he believes Startup Genome is greatly undervaluing Atlantic Canadian startups, because the region doesn't log the valuations of its best-funded companies often enough with groups like Crunchbase in Silicon Valley. He believes the value of the Atlantic Canadian ecosystem is far higher and that it belongs in the list of top emerging ecosystems. 

"If I were to put a number on it [the value of the ecosystem], I would say it's closer to $3 billion than $500 million," Ray said in an interview. 

On the bright side, Startup Genome assigned Atlantic Canada a score of 9-out-of-10 for its Funding Growth Index – no doubt aided by the record $515 million equity-and-debt financing announced by St. John’s-based Verafin last autumn.

Atlantic Canada is the No. 2 North American ecosystem in terms of affordable talent, and places within the Top 10 in North America in the Startup Genome’s “Bang for Buck”, index, which assesses costs in each jurisdiction.

Exits have become rare in Atlantic Canada in recent years, even though there was strong momentum early in the last decade.

Two New Brunswick companies, Radian6 and Q1 Labs, announced exits worth a total of about $1 billion in 2011. A year later, Halifax-based GoInstant sold out for more than $70 million and Ocean Nutrition Canada of Dartmouth was acquired for $540 million. Charlottetown-based BioVectra sold out for $100 million in 2013.

Since 2013, the only Atlantic Canadian-owned company that booked a nine-figure exit was STI Technologies of Halifax, which sold out in 2017 at a reported price of more than $200 million.

Disclosure: Innovacorp is a client of Entrevestor, and taps the Entrevestor Databank to provide information to Startup Genome.