From Reykjavik to Kiev: What’s fuelling the rise of Europe’s emerging tech hubs?
In December 2018, Atomico published its annual State of European Tech report in partnership with Slush and Orrick. Given that there were hundreds (!!!!) of graphs and charts in the report, we wanted to share our favourites, while keeping light on the commentary so you can draw your own conclusions.
In the past year, we’ve seen amazing tech companies in surprising places get funding. Frontify in St. Gallen, Switzerland, NA-KD in Gothenburg, Sweden, Teatime Games in Reykjavik. To figure out the magic sauce that’s fuelling the growth of these unexpected tech hubs, we ran some numbers from our generous data partners at Meetup, dealroom.co, and Stack Overflow.
It turns out there is a very high correlation (r-squared of 0.914 — show that to your statistics professor!) between the strength of tech community engagement within cities, as defined by the number of tech-related Meetups, and the rate of VC-backed tech company formation. And it makes sense: If there are opportunities for like-minded individuals to share experiences and ideas, innovation will follow.
This data ties in with anecdotal evidence we heard from the dozens of ecosystem members we interviewed for the report: community is key in encouraging talented people that they too are capable of being entrepreneurs, and supporting them as they take their first steps.
Jamie Mcfarlane at Creator Fund, that backs student entrepreneurs, told us when we spoke to him for the report: “Entrepreneurship might feel riskier to students because they think they can’t find the funding. Second, students see their friends taking a job at a large corporation or going into a law firm and therefore by comparison it feels risky to break out and start their own thing. Creator Fund is changing that by building a community where potential founders or people interested in starting a business meet other people like them. They realise that entrepreneurship is viable, and that there will be people to support them.”
Having a strong tech community also means more capital invested, as shown below. Interesting to note that Paris is punching above its weight in terms of capital invested compared to the engagement level of its tech community, while the data suggests that Dublin should have more capital invested.
So where are the next hubs?
The key to unlocking potential is building active tech communities in cities where there is active tech talent (who can become founders and operators at great companies!). That hasn’t happened everywhere yet, as evidenced by the graph below. We got a lot of questions about what’s going on with Cologne and Frankfurt — our hunch is that developer talent in those cities is still working in traditional industries or still locked up in academia. In Cologne that could be in academia, in Frankfurt, finance.
Countries such as Italy, Poland, and Spain still have large potential to punch at a greater weight in the European tech ecosystem given the size of their developer pools compared to relative levels of historical capital invested.
At the city level, Cologne, Kiev and Vienna, are examples of cities that have lots of talent but not a lot of companies formed.
In 2018, there were 182 cities in Europe that had over 50 tech-related Meetups a year and developer populations are growing across the continent.
All of these cities are tech hubs now. As we spoke about before, the communities in each city will expose talented people to what great looks like when it comes to starting, growing, and financing a startup, and inevitably make them more likely to create their own company. That creates a positive feedback loop. The more of a community is created, the higher the bar is raised, and the better the entrepreneurs and companies emerge.
Conclusion: we’re going to see a lot more exciting tech coming from surprising places in Europe.
