Best countries for launching a startup

The rate of new business formation has not been quite the same since the 2008 financial crisis. Take the United States as an example – the number of new startups in 2007 was over 500,000, dropping a whopping 20% to a tad over 400,000 in 2012. However, there are signs of a slow recovery, with the United Kingdom experiencing the largest rebound amongst OECD countries. If you are thinking about riding this rebound wave to kick start your own business, where should you do it?

To answer this, let’s start by looking at what is important to any founder:

• Ease of doing business: Will you be swept up in complicated regulations and onerous steps just to get registered?
• Quality of labour: Is the workforce trained by a well-developed math and science education system and do the labour regulations favour flexibility?
• Technology readiness: How ready is the country ready for a digital economy and how connected is the population?
• Funding: How available is venture capital?
• Quality of life: Will you have to live off of ramen noodles or will you still be able to afford things such as real food and vegetables? And how happy are the people who live there?

While the above by no means cover every aspect of what an entrepreneur should consider when launching a business, it is a start. So, let’s get crackin’!

Ease of doing business

The World Bank’s annual Doing Business rankings look at 190 economies, measuring 10 dimensions of each economy’s business regulatory environment (see the bottom of this post, Figure 1, for more details).

The dimension-specific rankings are based on how far each economy is from the “frontier,” which is fancy speak for how far the economy is from the best performer on each of the dimensions. In the graph below, you'll see which performance quartile each country fell in, broken up by region. Not surprisingly, the advanced economies dominate the first quartile. Developing and emerging Europe and LatAm have a strong presence in the second quartile grouping.

Labour

Now let’s go to labour. Specifically, how well-developed is the science and math educational system that’s training the country’s workforce, and how easy is it for workers and companies to find their perfect matches? After all, people in general want to be incentivized appropriately and companies don’t want to be stuck with employees they don’t need. As you can see from the graph below, there's much more regional divergence in this category compared to the chart above - specifically in emerging and developing Europe, MENA, and Sub-Saharan Africa.

Tech readiness

The world is increasingly more and more digital, and so are the businesses that power it. But, countries are not equally set up to go digital. Let’s look at what I’ll call “tech readiness” – i.e., what is the availability of the latest technologies (1), how readily do businesses adopt new technologies (1), what percentage of the population uses the Internet, and what are the subscription rates for fixed broadband and mobile broadband.

Venture capital availability

Of course, the above is no good if you’re planning on a big scale up and there’s no financial resources to help you do so. The data below from the World Economic Forum captures how easy it is for entrepreneurs to find venture capital.

Quality of life

Perhaps what’s most important is the quality of life – i.e. how happy are the people who live there and how much does it cost to have a decent standard of living (2)?

The chart below graphs each country's ranking on these two metrics - the x-axis is cost of living and the y-axis is the World Happiness index. For both, the lower the number, the better the country performance.

There does look like a correlation between income status and happiness, which isn't surprising as previous data crunchers have found. However, there is quite the spread within each income group - take for example, Japan and Luxembourg. Both are in the same ballpark in terms of cost of living, but almost night and day in terms of how happy their citizens are.

Summary

Okay, let's sum it all up now. The chart below shows the top 10 country rankings (with equal ratings on each metric) and their breakout quartile rankings across the 5 broad dimensions discussed above. So, where are you moving to next?

NOTES

Figure 1

(1) In its Executive Opinion Survey, The World Economic Forum asks:

• In your country, to what extent are the latest technologies available? [1 = not available at all; 7 = widley available] 
• In your country, to what extent do businesses adopt new technology? [1 = not at all; 7 = adopt extensively]
• In your country, how easy is it for entrepreneurs with innovative but risky projects to find venture capital? (1 = very difficult; 7 = very easy).

(2) The World Happiness Report asks a sample of 1000 people in each country a simple question – Think of a ladder, with the best possible life being a 10, and the worst possible life being a 0. Rate your current life on that 0 to 10 scale. On costs, Numbeo is a large user-contributed database of various city-specific data, including various costs of living.