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Where Are The Most Attractive Startup Hubs In Europe?

According to a survey by Startup Heatmap Europe, Berlin leads among the 50 cities ranked according to their startup “hottness”. Luxembourg trails in 24th place, Zurich counts 76% foreign-born founders and Vienna has the highest share of female entrepreneurs (34%). On a less positive note, “Female startuppers have only attracted 8% of total investments in 2020.”

Photo: Berlin is once again the most attractive European city in which to start a company / Credits @ Shutterstock

Startup Heatmap Europe, a benchmark report on the attractiveness of startup hubs in Europe, has released its SHM2021 on the top 50 most attractive startup cities in Europe.

The annual survey that was conducted between April and August 2020 questioned 1,295 founders about the attractiveness of European start-up cities (75 startup hubs). The questions included a wide variety of criteria including investments, job creation, meet-up activities, trends, diversity and performance.

The influence of Covid and Brexit

Out of the 1,295 founders, 39% picked Berlin as the most attractive European city in which to start a company. Berlin is closely followed by London (36%) and both Amsterdam and Barcelona shared the 3rd spot on the podium (17% ).

“One explanation might be the overwhelmingly positive perception of the German COVID-19 response during the time of the survey, but also the Brexit discussion that has supported uncertainty,” the author of the survey explains.

While Luxembourg only ranks 24th with 2% of the votes, the capital city received the highest rating (90%) together with Dublin and Tallinn in the category “Ease of Doing Business”.

“Founder ratings for Ease of Doing Business show that startup friendly regulation pays off for governments and that smaller hubs are well positioned to outperform the incumbents in this category,” the survey notes.

Mattia Lattanzio, CEO of Familyplug, a startup based in Mamer and specialising in communication solutions for patients and families was one of the the respondents of the survey.

He told Startup Heatmap Europe that “Luxembourg is an ideal place for startups: the administrative environment is friendly, easy to understand and multi-language. Geographically it is the center of Europe and it offers valid resources for international trades. Finally, the fiscal regimen offers a positive business environment and a soft imposition”.

Fintech’s decline

Among the top 10 tech-trends founders foresee for 2021, the survey notes that “AI & Data is dominating the debate”, followed by arts and culture, mobility and fintech.

“Fintech in contrast was sharply declining in attention of communities, dropping from 1st to 4th rank with only 7% share of voice in 2020,” the study continues, adding that new topics such as health & biotech, cleantech, sustainability, logistics and agritech are emerging on the European startup scene.

Another interesting, and perhaps surprising finding of the study includes that only 31% of European Founders Know How to Code. Furthermore, Eastern Europe has the highest share of founders who are engineers or programmers. “Cluj-Napoca (Romania), a strongly developed nearshoring hub for Europe’s industry, leads the list with an impressive 65% share of tech-skilled founders, followed by Timișoara (55%) and Brno (53%), the home of Avast, in Czechia,” the survey details.

A lack of diversity

In terms of diversity, the authors observe that Western European startup hubs have the lowest share of female entrepreneurs: “The largest shares among the big hubs are still below 20% with Stockholm leading this group (19%) followed by Berlin and London reaching each only 18%,” they explain.

On the other hand, “some small and mid-sized ecosystems have a much higher share of female founders. Vienna is the overall champion in this category with 34% women entrepreneurs, followed by Budapest (30%) and Oslo (26%),” they continue.

Furthermore, and perhaps most importantly, female founders are widely underrepresented when it comes to VC funding. “Startups with women in the founder team only attracted 8% of total investments in 2020 according to our analysis of data from dealroom.co,” Startup Heatmap Europe says. “Even worse: The trend is negative, having decreased from 10% in 2018 to 8% in 2020”.

Another indicator for the inclusiveness of the startup scene is the share of foreign-born founders. “Top hubs have >65% foreign-born founders,” the authors of the survey say observing an increasing trend over the years. “Also we see a clear indication that tech hubs that are successful, base their success on the immigration of talent from abroad.”

Zurich leads with 76% of foreign-born founders, followed by London (72%), Berlin (67%) and Barcelona (65%). The Swiss city “is very international and also benefits from the proximity to Germany and the low language barrier that favors immigration,” the study concludes.

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