STEM Graduates vs Tech Startups: Shocking 7 Data-Driven Insights on the Innovation Pipeline (2010–2025)

The “innovation pipeline” is a framework for understanding how an economy generates technological progress. The input is human capital—specifically, graduates trained in Science, Technology, Engineering, and Mathematics (STEM). The output is the commercialization of that knowledge, often measured by new business registrations or tech startup formation.

For policymakers, the assumption has historically been linear: fund STEM education, and startups will naturally follow. However, the data from 2010 to 2025 shows that this pipeline is prone to blockages. If local capital is scarce, regulations are tight, or corporate salaries are too safe, STEM graduates will opt for traditional employment or emigrate rather than taking the entrepreneurial leap.

Between 2010 and 2020, nearly every major economy pushed initiatives to increase their STEM graduate output. Countries like Germany and South Korea maintained exceptionally high baseline shares, with STEM degrees often making up over 30% of all tertiary graduates. Meanwhile, the United States and the United Kingdom saw steady, incremental growth in their STEM shares, driven heavily by international students seeking tech degrees.

(Explore Chart 1 above to view the STEM graduate trajectory across these key economies.)

This surge solved the “input” problem. The global talent pool expanded significantly, providing the raw intellectual material needed for a golden age of tech development. But as the next data point shows, having the talent is only half the battle.

When we look at Startup Formation Intensity—measured by the World Bank as new business registrations per 1,000 working-age people—the graph looks entirely different from the STEM graduation chart.

The United Kingdom and the United States exhibit high levels of entrepreneurial density, despite having a lower overall percentage of STEM graduates compared to industrial heavyweights. The UK, in particular, has seen massive acceleration in business formation since 2010.

This reveals the “Startup Formation Gap.” The economies with the highest density of new businesses are not necessarily the ones minting the highest proportion of engineers. Instead, they are the economies with the lowest friction for incorporating, accessing early-stage venture capital, and navigating failure.

Germany and South Korea present a fascinating paradox. Both countries are undisputed titans of engineering and manufacturing, consistently boasting STEM graduation shares near or above 30%. Yet, their new business density (per 1,000 people) remains structurally low.

Why does this happen? In these economies, the innovation pipeline flows heavily into established corporate giants (like automotive or electronics conglomerates) rather than disruptive startups. The opportunity cost of leaving a stable, high-paying corporate engineering job to found a risky startup is immense. Furthermore, venture capital ecosystems in these regions have historically been more conservative than their Anglo-American counterparts.

On the flip side, the US and the UK operate as high-conversion ecosystems. While their domestic STEM graduation shares hover in the 15% to 25% range, their structural capacity to churn out new businesses is exceptional.

(See Chart 3 above to directly compare the STEM Share against Startup Density in the latest available year.)

These countries benefit from deep, aggressive capital markets, bankruptcy laws that do not perpetually penalize failed founders, and a cultural premium placed on disruptive entrepreneurship. They efficiently monetize whatever STEM talent they produce.

It is impossible to discuss the US and UK startup dominance without addressing immigration. Because domestic STEM output often fails to meet the ravenous demand of their tech sectors, these high-conversion ecosystems rely heavily on importing talent.

Foreign-born students make up a massive percentage of STEM graduate degrees in the US, and a disproportionate number of billion-dollar tech startups are founded by immigrants. Therefore, looking solely at domestic educational output misses a crucial variable: some countries build the pipeline internally, while others simply tap into the global reservoir.

A vital caveat to the “New Business Density” metric is that it measures all formal business registrations. A new software firm and a new local bakery count exactly the same. To isolate the impact of STEM graduates, economists look at proxy metrics like the OECD’s “start-ups in information industries.”

When you filter the data specifically for tech and digital startups, the gap between the high-conversion countries and the engineering powerhouses narrows slightly, but the overall hierarchy remains. The US, UK, and Israel continue to punch above their weight in pure software and IT enterprise creation.

Looking at the timelines, you can see a distinct bump in startup formation starting around 2020 for countries like the US and the UK. The pandemic served as a massive catalyst for new business creation.

Layoffs, the normalization of remote work, and a sudden influx of capital (both government stimulus and aggressive VC deployment) lowered the barrier to entry for digital startups. STEM graduates who were previously comfortable in corporate roles suddenly found the time, capital, and motivation to build their own software and e-commerce solutions.

The data from 2010 to 2025 makes one thing abundantly clear: human capital is necessary, but not sufficient, for startup growth. If a country wants to foster a booming tech sector, subsidizing STEM degrees is only step one.

Our analysis suggests that policymakers must focus equally on the “conversion” mechanics. If it takes six months to register a business, if early-stage capital is heavily taxed, or if failure results in permanent financial ruin, the smartest engineers will simply take safe jobs at established banks or automotive firms.

For founders and investors, this data acts as a heat map. It shows where the raw talent is highly concentrated (but perhaps underutilized) and where the entrepreneurial velocity is fastest. The ultimate competitive advantage belongs to economies that can successfully merge the two: producing native engineering talent while maintaining frictionless, aggressive capital markets.

• What is the STEM graduates share?
  It is the percentage of total tertiary graduates who earn degrees in Science, Technology, Engineering, or Mathematics.
• How is startup formation intensity measured?
  It is typically measured as new business registrations per 1,000 people ages 15–64 (working-age population).
• Does a high STEM graduation rate guarantee more tech startups?
  No. Many countries produce a high volume of STEM graduates but struggle with entrepreneurship due to a lack of venture capital, risk-averse cultures, or rigid regulations.
• Why do some countries have high startup density but lower STEM output?
  Some regions have highly efficient ecosystems that attract global talent (immigration) or have strong funding networks that rapidly convert a smaller talent pool into businesses.
• What is the ‘innovation pipeline’?
  It refers to the process of translating education and human capital (the input) into commercialized technology, patents, and new startups (the output).
• How did the 2020-2021 period affect startup growth?
  Many countries saw a surge in new business formations during the pandemic due to shifting digital demands, remote work tools, and structural economic changes.
• Why are digital/info-industry startups tracked separately?
  Not all new businesses are tech startups (e.g., restaurants, retail). Tracking the information and communication technology (ICT) sector specifically isolates tech-driven growth.
• What role does immigration play in the STEM-to-startup pipeline?
  Immigration is crucial. Many top tech hubs rely on foreign-born STEM graduates to fill the talent gap and launch high-growth startups.
• Can policy improve the conversion rate of STEM to startups?
  Yes, policies that reduce bureaucratic friction, offer early-stage grants, and incentivize R&D commercialization significantly boost conversion.
• Where can I find global data on STEM graduates and startups?
  Authoritative sources include the UNESCO Institute for Statistics, the World Bank Entrepreneurship Database, and the OECD Going Digital indicators.

• STEM graduates (UNESCO/World Bank Data360 indicator)
• New business density (World Bank Entrepreneurship Database)
• Tech-sector start-ups proxy (OECD Going Digital)
• Field-of-study graduates reference (OECD)