What’s the most startup friendly city in the world? You may be surprised.

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by Engine Policy Fellow, Aidan Ali-Sullivan

You can also read this post on Medium.

The rivalry between San Francisco and New York City heated up last week when New York City took top honors in a global analysis of leading cities supporting start-ups through municipal policy. The CITIE (city initiatives for technology, innovation and entrepreneurship) report -- a collaboration between UK based innovation charity Nesta, global consulting firm Accenture and urban idea accelerator Future Cities Catapult ranked global cities on their support for tech entrepreneurship and start-up facilitation. The report grades cities on their overall startup-friendly climate by comparing a variety of policy considerations - from traditional elements like physical infrastructure and regulatory environment, to modern considerations like smart city data analytics - and ranks startup-friendly climate.

While many cities with historical advantages persist in the top tier, the rankings highlight the fast pace of change in technology and the associated municipal policies needed to keep up. The top five cities were New York, London, Helsinki, Barcelona and Amsterdam, highlighting traditional market leaders (like San Francisco) are no longer the only innovative actors in this space and increasingly face global competition. The report asked the question of how cities around the world support innovation and entrepreneurship. By examining forty diverse global cities in the categories of Openness, Infrastructure, and Leadership, the authors identified what policies best support startup growth, and how cities are implementing them.

The first category, openness, is identified as a general willingness to support new ideas and businesses. At the city level, this manifests as favorable regulatory regimes, self promotion as an innovation hub, and efforts to be a customer for innovative local companies. The report cites Sao Paulo, where local startups receive preferential treatment in city contracts. Meanwhile, Amsterdam recently relaxed municipal lodging regulations to better allow shared housing, creating the status of ‘private rentals’ with policies outlining the rights and responsibilities of homeowners. In both these cases cities are directly and indirectly supporting, rather than hindering, innovation and growth.

Cities also need physical and digital infrastructure in place to ensure on the ground policy success. This includes fostering spaces for start-up companies to grow, facilitating digital and physical connectivity within city limits, and investing in the citizens driving innovation. NYC recently added coding classes to public school curriculum, an initiative other mega-cities are following. The skills learned in these classes will help students develop and grow their ideas within innovative workspaces like Paris based “1000 Start-Ups”set to be the world's largest business incubator when it opens. Cities that build and support the foundations upon which startups grow will be uniquely positioned to reap the economic benefits.

Finally, cities need municipal leadership, and in particular a direct plan of action that engages citizens and utilizes smart data. The Greater London Authority did just this, by opening up 850 proprietary municipal datasets to residents, allowing them to build interpretative applications and businesses off the data. Cities must include innovation in their activities, and in particular use big data to solve problems and engage citizens.

So what should a city do to grow their entrepreneurial ecosystem, and how can cities with emerging tech sectors race to the front of the pack? While there's no single path to success, the report identifies three common traits of top cities. First, they share a willingness to open doors. All the answers are unlikely to be found within the corridors of city hall, so municipal governments need to be open to collaboration with outside experts. Second, people serving in disparate areas of policy communicate and work above departmental silos towards broader goals. As noted, “good policy in one area can be undermined by bad policy in another”. Third, they think like startups: top cities try new ideas and are not afraid to fail. Agility and risk may not come naturally to unwieldy bureaucracies, but if NYC can lead in this space, others certainly can follow a similar path.

For further information and analysis, the full report can be found here: http://citie.org.