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Innovation Index US and Global Q3 Rankings

by S. Jack Heffernan Ph.D
Innovation Index US and Global Q3 Rankings

Florida, Texas, Utah and Colorado Take Top Spots in DII US Rankings – California Declines

Russia Dives to Near Bottom of DII rankings; China slides as well Belarus, Cuba, Kazakhstan, Sri Lanka, and Western Sahara Fall Dramatically – U.S. remains #1 by a Significant Margin

The Draper Hero Institute (DHI) is proud to announce its 3rd Quarter 2022 Update of the United States Draper Innovation Index (DII US) and the Global Draper Innovation Index (DII Global). In this quarterly Executive Summary, DII US and Global datasets have been updated to the most recent data available, some have been replaced with more up-to-date metrics, and the DII US and Global algorithm has been refined to provide the most accurate snapshot of not only innovation and entrepreneurship but for economic opportunity as well, with increased emphasis on weighting the importance of small business policy and regulatory environment.

With a number of global trends including inflationary pressures, rising political tension, wars, and supply-chain disruptions the global economic landscape is filled with uncertainty and challenges as never before, but also great opportunities in emerging sectors such as Crypto/Bitcoin and Blockchain. 

“Today’s entrepreneurs, investors, and business leaders are overwhelmed with information,” said Tim Draper, founder of the Draper Hero Institute. “Big data is growing bigger every day and the problem isn’t finding information, it’s sifting through it and making it actionable. In this context, the Draper Innovation Index provides a vital service: an up-to-date, curated picture of each state and countries’ business climate which is comprehensive without being overwhelming.”

DII US Q3 2022 Key Takeaways

1. States with beneficial regulatory environments and business friendly policies see impressive gains

Florida (1st), Texas (2nd) and Utah (3rd) take the top spots in the Q3 2022 Draper Innovation Index US (DII US) update. Business-friendly tax-rates, supportive small business and investor policies, and strong entrepreneurial and innovation support environments all helped push these states to the top of the rankings. Other states benefitting from emphasizing improving business climates include Colorado, North Carolina, Arizona, Delaware, and Georgia.  

2. States need more than tech and innovation to be successful and attractive to entrepreneurs

California fell from 11th to 14thin the overall rankings despite finishing 1st in IT Infrastructure. Similarly, Massachusetts dropped from 5th to 16th despite finishing 1st in Tech Workforce. California was dragged lower in the overall rankings due to finishing last in Small Business Environment and 48th in Tax Environment; Massachusetts ranked 44th in Small Business, 40th in Entrepreneurship and 34th in Tax Environment.

3. As exemplified by changes in the DII US Top 10 rankings, post-COVID competition between states is volatile and intensifying

The competition between states for entrepreneurs, talent, emerging industries, and venture capital investors is exhibiting increased competition. The pandemic served to shift traditional labor trends and has resulted in dramatic migration shifts in the U.S. as entrepreneurs are no longer geographically tethered to either their place of work or traditional entrepreneurial “hotspots”. As such, states have had to rethink traditional economic policy operational practices and reinvent products and services to better appeal to shifting social, economic, regulatory, and technological preferences. These trends will continue to transform start-up markets across the nation, as evidenced by the ascent of Utah, Colorado, North Carolina, Arizona, and Georgia in the latest rankings.

4. Entrepreneurs, Investors, and Tech Talent in a Post-COVID economy – A Whole New Ballgame

The world of work’s ongoing transformation, as exemplified by the increasing prevalence of remote work, requires quick adaptation and flexibility from employers and employees. The approximately 40% of the workforce who can work remotely is now less tethered to high cost areas – creating potential opportunity in states which may not have been considered innovation hubs in the past. With the ability to work from anywhere in the nation, state leaders and policymakers will also need to adapt. This starts with better understand how best to attract and retain residents and workers in this emerging world. This is especially important in the context of inflation and an overall skyrocketing cost of living – remote workers are now less tethered to traditional – but increasingly expensive — innovation and entrepreneurial hotspots such as Silicon Valley.

5. The DII-US helps to highlight states’ competitive advantages and pitfalls

In a corollary to Key Takeaway #4, Governors, state elected officials, and other state leaders should note that business leaders analyze a broad variety of metrics when studying different markets; the DII-US provides a quick snapshot of how states perform across a number of categories, enabling entrepreneurs and investors to quickly gain an understanding of the current business, social, entrepreneurial, regulatory, and tax environments they may have to contend with and take action in terms of their location-based strategies.

DII Global Q3 2022 Key Takeaways

1. Economic, civic, and social freedoms continue to drive top ranked nations

The United States, United Kingdom, Canada, Australia, and Norway hold the top five ranks on the Draper Innovation Index Global’s (DII Global) overall rankings while nations with more authoritarian governments held some of the lowest rankings, including North Korea and Western Sahara. Russia fell 40 more spots and now ranks 220th overall out of 228 countries tracked by DII Global. Additionally, China continues to fall, dropping from 15th to 29th in the last 3 months. Simply put, individual rights and freedoms correlate strongly with innovation and business growth; how nations treat their citizens has significant ramifications for future economic success and prosperity. 

2. Cryptocurrency/Blockchain sectors continue to evolve

The prices of cryptocurrencies have been extremely volatile in a post-pandemic economy as uncertain economic and demographic trends served to impact both stock and digital coin prices. Yet, despite moderation on non-fungible tokens (NFTs), shift in digital real estate, and price volatility impacts on countries such as El Salvador, this sector continues to grow and expand. For example, the Central African Republic adopted Bitcoin as its official currency in April 2022.

3. Crypto/Blockchain remains a significant opportunity for both small and large economies

Some of the top nations on the DII Global’s Crypto Friendliness sub-index include Vietnam, Ukraine, Liechtenstein, and India as well as the United States and United Kingdom, leading to significant improvements in their respective rankings as shown above.

4. DII Global rankings reflect how quickly countries can rise and fall in the rankings in the competition for entrepreneurs and investors due to rapidly changing global circumstances

Due to updated data and new data sources emphasizing economic freedom, the DII core scenario saw a number of significant country movements.  At the top, the United Kingdom, Canada, Australia, and Norway all improved their positions, while China, Singapore, Iceland, and Poland all dropped. Peru, Angola, Brazil, and Puerto Rico all rose significantly, while Western Sahara, Belarus, Cuba, Kazakhstan, and Sri Lanka fell precipitously down the rankings. In this light, countries need to monitor and continually rethink their value proposition to better appeal to shifting entrepreneurship and investor preferences.

5. The Increasing Importance of Robust, Accurate, Impartial Real-Time Data in Monitoring and Assessing Global Entrepreneurship and Innovation Trends

In a corollary to Key Takeaway #4, updated DII Global data and new data sources continue to track evolving global entrepreneurship trends. The primary driver of our new data model results from the significant issues regarding World Bank data, which caused World Bank Group management to come to the difficult decision of discontinuing their Doing Business data series following an independent audit that uncovered significant data irregularities. The audit documented that World Bank leadership pressured researchers to manipulate the 2018 and 2020 Doing Business results, specifically favoring China and Saudi Arabia.

DII Global’s expert and varied approach of using a broad, diverse set of credible data sources is designed to circumvent any of the potential issues and biases of any one index.

6. Global economic, political, and social uncertainty weigh heavily on many nations

Despite making it through the COVID-19 pandemic, the world has also recently had to contend with the Russia-Ukraine war, major supply chain disruptions, global inflation concerns, and increased tensions between Taiwan and China. These global concerns may have disparate impacts on different regions and are thus likely to result in dramatic shifts in DII Global rankings in the future. Russia’s steep decline to nearly the bottom of the global rankings should be taken as a cautionary tale. Small countries, such as Sri Lanka risk financial insolvency in the face of skyrocketing food and fuel prices as the Russia-Ukraine war rages on, while major affordability concerns more established countries. 

The DII US and Global will continue to be updated each month and can be accessed here.

About Draper Hero Institute
Founded by legendary Silicon Valley venture capitalist and entrepreneur Timothy C. Draper, Draper Hero Institute (DHI) provides applicable and modern resources for future entrepreneurs globally and ensures inclusiveness and opportunities for all. As an action-based research institution, DHI focuses its efforts on non-traditional pathways to guide future entrepreneurs in the new economy. Through programs that ignite innovative research; united through connectivity and networking; and mentoring efforts through applied education, DHI provides a portal for creative thinking and ultimately driving change to better prepare future entrepreneurs to take on heroic endeavors.


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