An extensive study of the world’s top 25 cloud and software-as-a-service (SaaS) startup clusters places Toronto and Vancouver higher on the list than you might think.

U.K.-based business software sales and review platform Crozdesk Ltd.’s new “SaaS and Cloud Startup Report 2018,” released on Nov. 20, places Toronto at number 12 on its list of the world’s top 25 cloud and software clusters, and Vancouver – part of what Crozdesk calls the “North West Cluster,” which includes Portland and Seattle – at number six.

While individual numbers for Vancouver, Portland, and Seattle aren’t given (Crozdesk made “the editorial decision… to bundle them into one cluster due to their shared investment and business infrastructure”), the three Pacific coastal cities are collectively home to 3.51 per cent of all cloud and software startups, according to the report, and receive 3.33 per cent of total funding. Toronto, meanwhile, is home to 1.7 per cent of all cloud and SaaS startups and receives 1.27 per cent of total funding.

Collectively the top 25 clusters represent just under 64 per cent of all cloud and SaaS startups, and receive just over 81 per cent of all sector funding, as can be seen in the table below.

Courtesy Crozdesk (click for a larger version)

Unsurprisingly, Crozdesk discovered that the vast majority of investment in cloud and SaaS startups was concentrated in North America, with Silicon Valley alone accounting for 16.4 per cent of total companies and 38.68 per cent of funding. In fact, Crozdesk researchers wrote, the companies surveyed from California had raised $58.74 billion in funding since their incorporation, representing 43.69 per cent of the sector’s global funding.

Elsewhere in North America, the company discovered 13 U.S. states and one Canadian province (Ontario) that were home to companies worth more than $1 billion USD in equity and debt capital. (In case you’re wondering, Ontario’s companies are collectively worth more than $2.10 billion.)

Concentrating the majority of companies in the cloud and SaaS sector to a handful of areas has led to a high concentration of funding in those areas as well, perpetuating a lack of growth elsewhere, Crozdesk researchers observed.

“A recent Crunchbase study has found that, in the U.S., 66 per cent of angel and 58 per cent of venture capital deals happen in the investors’ states of residence,” they wrote. “In Silicon Valley this is even more extreme. San Francisco Bay Area investors invested in Bay Area companies 66.2 per cent of the time. By and large, investors on the the west and east coasts tend to overlook the midwest and south of the country when they invest outside of their own region and opt for the opposite coast instead.”

For example, northeastern investors contributed to west coast businesses 34 per cent of the time and midwestern businesses only three per cent of the time, researchers wrote, while west coast investors invest within their region 78 per cent of the time.

Other cloud and SaaS clusters worldwide included Tel Aviv, Israel, which landed at number eight on the top 25 list, and London, England, which came in at number five. You can check out some others on the map below.

The full Crozdesk report can be downloaded here.

Courtesy Crozdesk (click for a larger version)
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