17. August 2016–
There is a fierce tussle among startup hubs in Europe to see who can attract the best entrepreneurs. In fact, novel research shows that 1 in 5 EU founders have started a company abroad. According to the Startup Heatmap Europe study, talent, more than access to capital is the strongest driver of startup migration in Europe, with access to capital surprisingly emerging as the least important factor for startup location. Moreover, according to the 700+ founders who participated in the survey, Berlin and Munich are some of the hottest places to startup in Europe, making Germany the most represented country in the ranking of the top 10 startup hubs.
Talent: the most crucial element
23% of founders have moved from their countries of origin to startup. That translates to a 5 times higher likelihood of cross-country mobility than an average European citizen! In fact, 85% of migrant founders have moved far away from their broader home region, for examples, from Eastern Europe to Benelux or from Latvia to Italy. The question is “Why?”
It emerges from the Startup Heatmap Europe survey that entrepreneurs are on the move, in search of talented candidates adequate for the development and realisation of their ideas. When rating the main factors for the location of their startups, 71% of founders voted access to talent as very relevant (4/5 stars out of 5). The runner-up was quality of the ecosystem (that is, access to support, partners, mentors and customers) with 69% of survey participants agreeing to its centrality. Cash burn rate (that is, monthly costs) of the location was the next element considered highly essential with over 50% of votes. Interestingly, availability of capital sits on the bottom rung of the ladder with only 44% considering it as absolutely important. Actually, 1 in 6 founders do not think it is relevant at all! It could be said that capital is not restricted by location or borders but are entrepreneurs hinting at something else?
Figure 1. Chart showing which factors were rated most relevant (4/5 points out of 5) and percentage of votes.
Where the founder goes, the money follows
Furthermore, one may assume that citizens of countries with low GDP per capita (with respect to the EU average) may be more inclined to place significantly more weight on access to capital when choosing their new locations compared to their counterparts that hail from richer countries. Interestingly, this was not the case (see the full report here). The importance of attracting top talent to startups seems to unite founders across the continent.
Considering that this pattern remains the same both for the 43% of startuppers in the survey who had moved cities within the same country and for founders who haven’t moved at all, it is crystal clear that the competition is not for the highest sponsorship but for the best brains. Perhaps founders believe that with the right team and the correct ecosystem, the money will come. Conceivably, if more resources should go into building ecosystems and development of platforms aimed at increasing technical skills of the workforce, invariably founders will emerge to take advantage and as a consequence, bring the much desired investments. Read more on founder mobility here.
“Where would you startup if you could begin all over again?”
This question was posed to the survey participants on the premise that when looking for the next hotspot, founders’ perceptions of opportunities in the area, rather than past successes, represent the best indicators. Simply put, perception will shape reality.
Figure 2. Chart showing top 10 EU startup hubs as chosen by founders.
See the complete ranking here: www.startupheatmap.eu.
Interestingly, Germany stands out as the only country with two cities in the top 10 list: Berlin at the zenith and Munich in the eighth position. Berlin is especially appreciated for its pool of experts, low overheads and highly functional ecosystem. Its popularity spans across the continent particularly in Western Europe and Benelux, where 58% and 53% of founders respectively, imagine to startup there. London, number 2 in the ranking, only retains the top position for capital-intensive startups. On the other hand, Munich is popular with high tech startups (big data, IoT, health, hardware, biotech) and rated favourably for access to capital. It is worth mentioning that though it does not make it to the top ten, Hamburg gains admiration from founders as it graces the 14th position flanked by Zurich, Tallinn and Paris above; Warsaw, Prague and Madrid below. It climbs a decent +5 steps (with respect to rankings by prominent tech blogs): an attestation to the competitiveness of the home country at the EU level (see founders’ ratings of hotspot cities versus startup media rankings: www.startupheatmap.eu).
Leading the pack
Already the battle for top-notch talent is on and Germany is at the forefront. With a net startup migration inflow of +11%, Germany is proving to be an exciting option for new entrepreneurs. According to the European Startup Monitor which studies regional ecosystems, approximately 1 in 4 startup employees in Germany are not citizens. Furthermore, the Times Higher Education states that “Germany is the second most-represented nation in the list of the top universities in Europe, with 36 institutions, almost a third of which are in the top 50.” Therefore, startups in search of talent may be rest assured that there are highly qualified candidates ready to take up the challenge.
Diving deeper, Berlin holds promise to become the Eldorado of Startup Europe. Its high standard of living, co-working culture, vibrant cultural charm and international appeal is further attractive for startups who wish to leverage the expertise of young adventurous open-minded people and increase their global outreach. With Brexit, Berlin is expected to become the EU powerhouse of innovation and business. By the next Startup Heatmap Europe survey in November, we may expect to see founders’ perceptions lean more strongly in favour of the German capital as consequences of England’s exit from the EU unfold (for updates on the next survey register on: www.startupheatmap.eu).
Startup Europe is booming and the competition is fierce to attract and retain the crème de la crème of startup enthusiasts. With concentrated national and regional efforts, hubs may be kept attractive for innovative businesses and investors. Community builders need to keep a keen eye on the future, beefing up support to local ecosystems and augmenting the quality of programmes aimed at equipping and igniting the entrepreneurial spirit among young professionals.
Startup Heatmap Europe in this pedantic approach, succinctly dissects founders’ views on EU hotspots revealing the gigantic influence of the German tech revolution on the continent’s startup topography. If access to talent is the entrepreneur’s magnet, it goes without question that German hubs are poised to keep pulling weight in the fight for who becomes the undisputed startup capital of Europe.
For the in-depth report visit: www.startupheatmap.eu
Startup Heatmap Europe 2016 Full Report: http://www.startupheatmap.eu/link-to-download
Victor Umeh oversees content development and partnerships at the European startup initiative (which is behind the Startup Heatmap Europe). He is very passionate about startups, social innovation and youth empowerment. He is currently doing a Masters in Cognitive Neuroscience at the University of Trento, Italy.