Why The Fuzz About Location In The European Startup Scene?

„In Estonia, it is super easy to start a company.“ I am watching two aspiring founders in their early twenties at a startup meetup in Berlin. „Yes, they even have e-citizenship“. Chatting about which European startup hub is the best to build a company, has grown to be commonplace on these events.

How come, location is such a big topic? In times, where we have internet and frequent plane connections between all major economic hubs – why would it matter where you start-up? Couldn’t we all stay close to our friends and families and do business just where we happen to be?

The Grass Is Greener On The Other Side

Of course a lot of those discussions are about how the grass is always greener on the other side. Still, both experience and data show that exponential startup growth is more likely in centers with an established track record. Berlin for example raised more than 70% of total venture investments in Germany in the first half of 2015. And founders that have moved to these centers, frequently quote material advantages from that decision.

Clearly, startup growth is highly dependent on the access to resources. These resources might or might not be available in the city a startup idea is born. Especially when it comes to raising capital and acquiring talent, these resources can be limited in the home region. Even when resources are available, founders might have difficulties to get access. Regularly, cities try to convince startups by quoting their strong economic position and industry presence. However, it remains rare that traditional corporations or even medium-sized companies really open their doors to startups.

Startup Hubs Can Become Overcrowded

Startup hubs function as filters for global businesses and investors and even talent to find the most promising startups. Opportunities are traded face-to-face based on trust relations – especially in a high risk environment. A startup raises the chance to access large scale resources when they show presence in hubs, where they can interact face-to-face with middlemen.

That said, it would be too easy to state, that all European startups need to move to London or Berlin to prosper. In fact, with increasing success, startup hubs can become overcrowded leading to scarcity of resources and a reflective disapproval of newcomers by established actors. In this sense, it is wise to look beyond the obvious choices and try to understand where capital and talent is moving next.

Being In The Hot Spot vs. Building The Next Hot Spot

A startup that is able to establish a strong foothold early on in a newly booming ecosystem might have better growth perspectives than when putting up their tent in one of the established hubs. This, I believe, is exactly the point why startups have started flocking into Berlin, and this will be the reason for startups flocking into the next upcoming hub. The startup world is not black and white. And there is a variety of choices on the startup world’s map.

Knowing Where To Go: A Startup Heatmap For Europe

The battle on what is the most promising startup hub is heated. A lively startup scene became an important indicator for a region’s attractiveness. However, part of the debate is the difficulty to measure a hubs quality. Quite a few approaches focus on mapping investment deals being done in a region. However, data quality is a huge issue in this, since numbers are often outdated and incomplete. My biggest concern about the existing approaches is not that they are based on incomplete data – they all highlight important points – however, their biggest pitfall is that they are looking at the past, and therefore struggle to inform decisions about the future.

I believe, that perception shapes reality and therefore, we must map the perceived attractiveness of startup hubs today, to see where opportunities will concentrate tomorrow. This is why, we initiated the StartupHeatMap.eu – to map where founders want to go in Europe. We believe that Europe has a very diverse startup ecosystem which is breathing and demands mobility from founders and investors to get the optimal mix of ideas, talent and capital together in the right spots at the right time. We aim at helping to make people realize this potential by visualizing these trends in real-time.

Add-on:

Where is Europe’s Next Silicon Valley? Cast your vote for your favorite startup places in Europe
Vote for your favorite startup hubs in Europe on www.startupheatmap.eu – The non-profit European startup initiative, supported by the Allianz Cultural Foundation and Atomico Ventures, started a European-wide survey on the most popular startup places on the continent. By asking “Where would you startup?” the group is creating a live map, which shows both where people come from and where they want to go. Leave your trace on the map and help find Europe’s next Silicon Valley!

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