Where is the European Silicon Valley?

Many years Silicon Valley has indeed been a global center for high technology, innovation, and social media. However, policies limiting new immigration in the country but more importantly prohibitive living cost, massively affect entrepreneurial-friendly conditions. Hence more and more insider recently voiced their concerns in The Economist, TechCrunch and Forbes and ask the question: Is the region losing some of its entrepreneurial magic?

Even though, entrepreneurs often take pride in explaining how they started in a garage, today’s reality is a different one. Living costs these days are often too expensive to bootstrap a company. Silicon Valley therefore seems to be a victim of its own success. Also there are other hot-spots emerging, for instance Shenzhen (China), which is home to Tencent, the company behind WeChat. Europe is in a great position to benefit from the reduced gravity and attractiveness of Silicon Valley, too. The continent has great talent and education, one third of universities ranked in the top 100. And with over €9b in grants provided by the EU there is plenty of (public) funding for fundamental research. According to Dealroom also VC funding is on the rise with over € 6b invested in Q1 2019.

We asked ourselves if there is any regional concentration, with cities like London, Paris, Stockholm and Berlin often perceived as the hot-spots of startup activity in Europe. In regard to absolute numbers theses cities are definitely leading. However, we also wanted to account for population to get a better understanding about density. Thus we looked at cities in Europe with a population of at least 100.000 and normalized core indicators like number of startups, scaleups, exits and received funding with population:

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Top 20 cities, normalized by population (# per million, € per person)

The resulting “top” list by amount of startup, scale-ups, exits and funding from 2010-2019 reads differently. What jumps into attention are a lot of well known university and research cities topping the list, like Cambridge, Dublin, Oxford, Lausanne or Zurich. But there are also some more unexpected places like Reykjavik, Lund, Geneva or Luxembourg.

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Top 50 cities by startups, scaleups and exists per million population and funding per inhabitant

We digged deeper into this investigating several regions focusing on continental Europe and less well known hot-spots. Based on 15 qualitative interviews with technology transfer offices, policymakers and incubators, 5 regions particularly stood out:

  • Switzerland is dominating our ranking with 4 cities in the Top 100, both Zurich and Lausanne being in the Top 10. Excellent talent and research output from leading universities like ETH Zurich and EPFL Lausanne meets a lot of startup creation as well as good availability of funding. Aside from strong focus on data and algorithm driven competencies with companies like Bestmile, Gamaya, Deepcode, there is a lot of Blockchain related activity, also because of helpful regulation.
  • Netherlands hosts the Food Valley, located around Wageningen. The region is host to 1800 agrifood companies and 8000 scientists on top of big names such as Arla and FrieslandCampina. The Foodvalley Accelerator and the Foodvalley summit ensure a great connectivity between the actors of the ecosystem. Anterra, one of the largest Agrifoods fund, isn’t far from the region and manages $200 m to be invested in the space. But in and around Amsterdam there are also a lot of amazing Enterprise Software Companies.
  • Bavaria (Germany) is home to numerous automation and robotics associations like Automation Valley Nordbayern. On top of those 6 different robotics or automation associations, the Technical University of Munich and the automation company Kuka in Augsburg further inspire and drive the ecosystem.
  • Czech Republic is making itself a name in cybersecurity. Last December, the country’s cyber-watchdog warned against the security threats of ZTE and Huawei products. The country tops the ranking of National Cyber Security Index and is also home to the cybersecurity giant Avast and data loss prevention software vendor Safetica.
  • Luxembourg has high ambitions for space. Founded a year ago, the Luxembourg Space Agency aims to support innovation-focused and business-minded entrepreneurs to pioneer the future of space. The country has implemented a regulatory framework for space ventures, including for space mining. Luxembourg hosts the headquarters of the communications satellite owner and operator SES and companies Made in Space, Cube Rover and HydroSat also chose to settle their branches there.

Summing up our research Europe is a very existing place to be a tech entrepreneur and investor, with a lot amazing talent that will apply their superior knowledge in amazing and game-changing products and services. While there is still a big gap in regards to startup-creation and funding compared to regions like Silicon Valley and Israel, certain regions in Europe are in a very good shape to become innovation hubs driving the next wave of technology creation and entrepreneurship.

Research by Peter Lasinger and Gerald Pollak. For more details feel free to contact us via office@capital300.com

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