In Partnership with
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Key Findings

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Investors

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Purpose

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Policy

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Appendix

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Picking Places

Getting started

In the People chapter (06.2), we explored a number of the business-related motivations behind why founders set up their companies where they did. We also wanted to explore the personal side of this decision. In a European tech ecosystem where there are so many emerging tech hubs and where people mobility is so significant, what are the personal factors that shape the decision to start a company in one city versus the next?

The answer from founders is interesting; for the significant majority (60%+), regardless of the level of experience, there is no place like home.

Picking places


60%+
of all founders chose to start where they live.

What were the most important personal considerations for you when choosing where to locate your company when you founded it?

Source:

Legend

  • First-time founder
  • Repeat founder with limited experience in scaling company
  • Repeat founder with significant experience in scaling company
Note:
Founders only. Numbers do not add to 100 as respondents could choose multiple responses.

In this context, it's interesting to look at how the personal considerations vary for local founders who have started their companies in their home country versus migrant founders who have started in a country other than their country of origin. What is clear is that migrant founders are often already in situ prior to having started their company, perhaps because they had already moved earlier in their career. This is an important point that reinforces the need for countries not only to focus on attracting founders from overseas, but also to attract talent before they embark on their entrepreneurial journey.

What were the most important personal considerations for you when choosing where to locate your company when you founded it?

Source:

Legend

  • Founder (migrant)
  • Founder (local)
Note:
Founders only. Numbers do not add to 100 as respondents could choose multiple responses.

Most founders also shared that they are unlikely to change their original decision. Given the choice to start over and to found and build their company again, the overwhelming majority of founders, both first-timers and repeat, would choose either to stay exactly where they are or to stay in Europe, but in a different city.

If you were to start over, where would you choose to found and build your company?

Source:

Legend

  • First-time founder
  • Repeat founder with limited experience in scaling company
  • Repeat founder with significant previous experience in scaling company
Note:
Founders only. Numbers do not add to 100 as respondents could choose multiple responses.

Still, there are some differences by region worth noting. The interest for the US and other international hubs remains low, but European tech founders from CEE and DACH are more likely to pick a location different from where they started.

Starting over


30%
of founders from CEE would pick a different European city.

If you were to start over, where would you choose to found and build your company?

Source:

Legend

  • CEE
  • DACH
  • France & Benelux
  • Nordics
  • Rest of Europe
  • Southern Europe
  • UK & Ireland
Note:
Founders only. Numbers do not add to 100 as respondents could choose multiple responses.

Clearly there is way more international talent in French startups than a few years ago.

Clearly there is way more international talent in French startups than a few years ago. This is for two reasons. First, President Macron has clearly projected a very pro-business image of France, which wasn't necessarily the case before. It's not just political blabla; the quality of the startups here is also attracting this talent. But part of it is also that entrepreneurs and startup employees are looking for new locations different from some of the other, more traditionally sought-after ecosystems. For example, I don't hear as many entrepreneurs getting hyped up to move to Silicon Valley.

Roxanne Varza

Station F

Director

Where next?

But staying in Europe does not mean settling for proximity. European tech founders have international ambition and build companies with this mindset.

In fact, European scale-ups, i.e. those that have reached $1B+ valuations or more, are more likely to have internationalised than those in the US. 83% of European tech scale-ups established an international office versus 70% of tech scale-ups in the United States. So how do founders chose where to go next?

Share of leading VC-backed European and Bay Area tech companies (%) with an international office footprint

Legend

  • International office location
  • No international office location
Note:
Based on a sample of 80 European tech companies and 182 Bay Area tech companies that have reached $1B+ milestone and/or raised more than $50M in venture capital, excluding Biotech.

The Top 10 most popular countries for international office locations of European tech scale-ups is dominated by other European countries, most frequently the UK and Germany, and then France. But the huge prize of making a dent in the giant North American market unsurprisingly means that the US comes in as the second most popular location for international offices for European tech scale-ups.

Note:
Based on a sample of 80 European tech companies that have reached $B+ milestone and/or raised more than $50M in venture capital, excluding Biotech.

When you go to market in your own local market, you have a different scale that you are working against, which translates into the availability (or lack thereof) of experienced talent you can find when you need to scale up.

Being a European company is one thing, being a Belgian company is another. Personally I believe that the biggest challenge for scaling in Europe is Europe's fragmented marketplace. When you go to market with a product in Europe, you aren't going to market in Europe as much as you are going to market country by country.
Every country has their own identities, languages, cultures, laws, channels,… which means that - all else being equal - a dollar (or euro) spent in a US go-to-market goes a lot further than one distributed over the different geographies in Europe. If you then look at orders of magnitude, Belgium has 10M+ people, Germany 80M+, France 65M+, the UK 66M+, ... whereas the US has 330M+ people. This means that when you go to market in your own local market you have a different scale that you are working against, which translates into the availability (or lack thereof) of experienced talent you can find when you need to scale up.

Stijn Christiaens

Collibra

Co-Founder & CTO

London is an obvious choice as a location to start. It has attracted the most capital investment of any European tech city, and it has produced the most $1B+ companies. It also has the highest density of startups, talent and investors. But it all comes at a cost. In terms of the cost of prime rent for office space, it's the most expensive European city by some distance. Office space in Barcelona, by contrast, is about 75% cheaper.

Cost of prime rent ($ per square metre per year) for office space by city, 2Q 2019

Note:
EUR to USD (1 EUR = 1.1367 USD) conversion taken from 30 June 2019 from Bloomberg.

European tech continues to undergo a strong level of geographic diversification, meaning that tech activity is growing in more cities in more countries than ever before. This trend also includes geographic diversification within countries and away from the main hubs. There are potential downsides, of course, but there are also material benefits from the lower cost to operate outside of the main hubs.

Cost of prime rent ($ per square metre per year) for office space by city in selected countries, 2Q 2019

Note:
Based on data for 2Q 2019. EUR to USD (1 EUR = 1.1367 USD) conversion taken from 30 June 2019 from Bloomberg.

As consumers are more and more aware that tech is changing their lives, this conversation between governments and tech is only going to become more crucial.

For a European tech company, the challenge is always around paths to expansion. As a continent, we are made up of many different markets, with separate cultures and languages. For a startup in China or the US, their initial markets are much, much larger. European startups, on the other hand, have to think global from day one. This can be their strength, of course, but to succeed they have to be absolutely ruthless about product market fit. The flip side is that we are much more diverse as a continent, have some of the best universities in the world (especially for deep tech) and are more open to regulation.

The latter is something I think will only become more important. Fintech is a good example of this already in action — London became the world leader because the regulators have been engaging with the technology, not because it has been left alone to do its own thing. As consumers are more and more aware that tech is changing their lives, this conversation between governments and tech is only going to become more crucial.

Simon Cook

Draper Esprit

CEO

The material increase in the cost of prime rent in certain cities over the past five years is certainly a consideration for founders. In Stockholm, for example, office space rental costs are up 76% since 2013, while in Berlin they are up 56%.

Top 20 cities by change in prime rent per square metre, 2Q 2019 versus 2Q 2014

The cost of office space is perhaps not at the top of the list of considerations for founders when thinking about where to start and build a company, but the data certainly helps' to understand the relative cost of different cities, particularly as companies choose to scale and build office presence across multiple locations as they grow and seek access either to new customers or new talent pools.

Prime rent ($ per square metre per year) by city in selected countries, Q2 2018 vs Q2 2019

Legend

  • Q2 2018
  • Q2 2019
Note:
Q2 2018 EUR to USD conversion rate taken at 1 to 1.1663 from 30 June 2018; Q2 2019 taken at 1 to 1.1367 from 30 June 2019.

Amsterdam has built a growing reputation as an attractive location choice for international tech companies to set up overseas offices - and it's not hard to see why. It is home to one of Europe's largest developer talent clusters and also offers reasonable costs in terms of office space.

Number of professional developers versus prime rent ($ per square metre per year) versus capital invested ($M) by city (bubble size)

Note:
Bubble size represents the capital invested amount annualised based on data to September 2019.

The average capital invested ($) per professional developer has increased by 23% year-over-year. Berlin, and and now also Munich and Hamburg, rank in the top 10 cities, asserting Germany's position as the technical powerhouse of Europe.

Top 10 European cities for capital invested ($) per professional developer

Legend

  • Capital invested per professional developer ($)
  • European average ($)
Note:
Investment amounts are based on capital invested in the cities in aggregate between 2015 and 2019 9M divided by the total number of professional developers in the city. Only cities with at least 50,000 professional developers in 2019 are included.

It is also interesting to assess the capacity of certain countries to mobilise their talent pool effectively and look at how much capital has been invested based on the size of the local professional developer talent base. Finland and the United Kingdom are in the lead, but it is also important to note that countries in Central & Eastern Europe such as Romania, Lithuania and Estonia are starting to emerge though being under the radar the year before.

Capital invested ($) per professional developer by country

Legend

  • Capital invested ($)
Note:
Investment amounts are based on capital invested in the country in aggregate between 2015 and 2019 9M divided by the total number of professional developers in the country. Only countries with at least 1 million inhabitants included.

European tech can grow faster by tapping into hidden talent pools. The number of professional developers compared with the amount of capital invested in countries across the region suggests that countries such as the Netherlands, Spain and Poland still have the potential to exceed expectations in the European tech ecosystem.

Professional developer talent pool vs capital invested ($M) by country, 2015-2019

Note:
Capital invested is based on amount invested in respective countries in aggregate between 2015 and 2019 9M. Only countries with at least 50,000 professional developers in 2019 are included.

There are a number of challenges facing the tech ecosystem in Spain. However, the biggest issue by far is a lack of real support for the tech companies here, especially when compared with France or Portugal.

There are a number of challenges facing the tech ecosystem in Spain. However, the biggest issue by far is a lack of real support for the tech companies here, especially when compared with France or Portugal.

While it's fair to say that policymakers around the world are wrestling with how to effectively regulate disruptive technologies, the vast majority are trying to do so without reigning in or stifling innovation. In Spain, the impact of regulators so far suggests a determination to hold back new technologies and new ways of working in favour of maintaining the traditional industries' status quo. From our point of view, Spain is the only country (out of the 26 in which we operate globally) where we haven't been able to open a constructive dialogue with local regulators around the labour market rules for startup workers. When you couple this with rising taxes, and a tax system not adapted to providing share-based incentives to employees, it can be difficult for tech companies to gain a foothold in the Spanish market without quickly becoming embattled.

In terms of its strengths, Spain has so much to offer the global tech community. It's easy to attract top talent, especially to Barcelona, and there are many good universities here. The high quality of life and low living cost also make it much more affordable than other big European tech hubs, such as London, to set up and launch a business. And the country's geographical position makes expansion in Europe easy and gives it a distinct advantage in Latin America, due to the cultural ties with that region.

Oscar Pierre

Glovo

Co-Founder & CEO

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