What are the top Start-Up cities in Europe and why?
By Emily Lansdowne (on behalf of WONE Internship)
The top cities in the ranking have gained prestige by having the highest number of companies in Europe funded by venture capital. Europe has been an attractive market for Start-Ups for years and therefore many of the funding campaigns are looking for late stage investment rather than seed funding. Thanks to the rapidly growing firms, more Europeans than ever are now employed in Start-Ups.
Start-Ups based in the UK on average receive the most venture capital (€2.75 million). The large service sector, along with the low levels of regulation, low corporate taxes and a generally strong economy makes London an ideal destination for new companies. However London may lose its spot on top to a newcomer with lower living costs and higher emphasis on innovation.
“One (start-up) born every 20 minutes” is the claim of German entrepreneurs. Fast transportation and high levels of efficiency are some of the main reasons that Berlin is increasingly popular with Start-Ups, especially in the tech industry. Berlin Start-Ups generally only need to go through 1.7 rounds of funding (the second lowest)
The Parisian business environment supports the growth of consumer services and retail as well as general business. There is government support for small and medium enterprises (SMEs) but the high taxation can put some firms off.
Out of all of the European cities Barcelona has seen the biggest increase in Start-Up activity and rose 24 places in the ranking (1995-2014). Madrid grew the second fastest, showing that Spain is gaining more momentum as a Start-Up hub. Another reason why the Start-Up community is growing so fast in Barcelona is that companies on average go through 1.5 rounds of funding before they reach their target (the lowest in Europe).
Although one of the pricier cities in Europe, Stockholm is a great incubator of internationally thinking businesses. Specialising in market reach, firms that start here are bound to expand abroad very quickly.
This city allows founders to enjoy a work-life balance as well as a country whose grasp of English is amazing. Not only does Amsterdam have simple bureaucracy (something that slows down business in Spain) but also great networking options and easy immigration for entrepreneurs.
How do Founders choose which country?
Where Start-Up CEOs decide to found their company is affected by more than just the innovative capabilities of a country.
Often founders are swayed by their perception of a country instead of its real assets. This means that other factors such as ‘ease of doing business’ and the ‘attitude’ of its citizens really can influence the decision of where to set up. In fact perception plays a large role in deciding the hottest spot for Start-Ups, a topic which is highly debated. For Start-Ups, location is key as it directly impacts on the amount of funding accessible as well as the opportunities to meet investors.
One of the key issues in starting a company is securing funding; in order to do this you need to go through rounds where new investors are recruited so building a network of wealthy contacts is also a crucial element. This is where Start-Up hotspots are essential, as these areas tend to have high levels of investors combined with established incubators which will give advice to Start-Ups on the best way to successfully access money.
Why going abroad to run your Start-Up is a great idea:
There are 2 main reasons that many entrepreneurs go to a foreign country in order to set up their business.
Firstly: It can be much cheaper to live abroad (especially Bulgaria: Varna/Sofia and Poland: Lublin). By reducing your living costs you are expanding the amount of funds you can put towards your new business. It can be surprising how much can be saved simply by living somewhere new.
Secondly: When you are in a new country you are focused on the needs of your business and don’t know the social norms. This means you a much less likely to let yourself be distracted from your goals and push the boundaries of the society to achieve success.
For sure there will other things to consider when picking a country such as visa restrictions, developed quality infrastructure, or will there be fast and reliable Internet? One thing we have found out from looking at previous successful entrepreneurs is that many are ‘immigrants’, in other words, people who have stepped out of their comfort zones.