International Is The New Normal

As we have seen in the 7 mutant rules of the digital economy, markets are global.

In order to grow and benefit from scale effects, startups should target very large markets. For a European startup, given the small size of the local market, this involves thinking and building internationally from day one. With the disappearance of frontiers and the rapid deployment of US startups in particular, competition is international by nature.

Innovation hubs at the heart of transformation

This general acceleration that we are experiencing is specifically materialising in the development of hubs, high-density innovation centres in many geographic areas.

It is necessary to increase granularity and focus on specific places, in order to study the potential for innovative startups. Innovation effectively takes place within ecosystems, which materializes in megacities, encompassing the following traits:

  1. economic centrality characterized by the presence of head offices of multinational companies (potential partners, customers or buyers for digital startups), support companies and consultancy firms and the most promising startups,
  2. financial centrality embodied by the presence of financial institutions (stock exchanges, banks, investment funds, funds of funds, family offices, etc.) and that of their managers and analysts, capable of channelling assets into the best opportunities,
  3. centrality of human capital with the presence of successful entrepreneurs, including a dynamic of international talent, multinational executives, financial and political institutions, but also with the presence of professors-researcher, research labs and local or foreign students from the most prestigious programmes in the country,
  4. centrality of individual transport infrastructures, essential for the development of startups by making these areas attractive for their day-to-day lives,
  5. political centrality with the presence of decision-making centres on a national and global scale (international organizations, governments, legislators, etc.).

Tech hubs in Europe

The most comprehensive report measuring the innovation index of cities around the world (the Innovation Cities Index, by World 2Think) measures 162 indicators across 31 segments (arts and culture, architecture and history, infrastructure, education, economy, health, etc.).

The ranking highlights 6 European cities in the top 10 (London, Paris, Vienna, Munich, Amsterdam, Copenhagen) and Berlin comes in 13th place.

The influence of the environment at city level is verified in the figures. The study we conducted shows that:

- the 18 most highly valued European startups were founded and developed in 6 European cities (Paris, Berlin, London, Helsinki, Stockholm and Amsterdam),
- of these 18 startups, 13 startups were developed in Paris, Berlin and London.

These hubs are notably renowned for the following digital successes:
- in Paris: Criteo, Iliad, Vente Privée, BlaBlaCar…
- in London: Wonga, Powa Technologies, Shazam, Markit, King, Asos, Rightmove…
- in Berlin: Delivery Hero, Soundcloud, Zalando, Rocket Internet…
- in Copenhagen: JustEat, Zendesk, TrustPilot…
- in Amsterdam: Adyen, Elasticsearch, Booking…
- in Stockholm: Spotify, Mojang, Klarna…

And the consolidation of their ecosystem continues with the emergence and development:

- of major events (e.g.: Le Web, France Digitale Day, DLD, Slush, Hyberlin, Web Summit, FoundersForum, The Next Web Europe, Noah…),
- of professional associations (France Digitale, NOAH, EVCA, FEVAD, etc.),
- of pan-European investment funds (Index, Accel, Balderton, Mosaic, daphni …)
- incubators and accelerators (Startupbootcamp, seedcamp, Techstars London, the family, Halle Freyssinet, The Factory, etc.)

and naturally startups themselves and the head offices of middle-market companies and major groups.

However, hub tectonics is real. Centers, world’s centre of gravity are always shifting. Thanks to the energy emerging in new areas, growing their own schools, accelerators, investors and with connections to bigger companies and pools of talents coming from European countries, local ecosystems are expanding fast. So we will keep looking East and South.

International as a mindset and strategy

Being global shouldn’t be seen as expanding by opportunity, it asks to stop focusing only on product/market fit and requires to let the company fill its natural theater of operations: the world. This includes building a shared mindset among the founders and in the company culture, with clear expectations for the team. 
But it requires also to build its plan of internationalization as early as possible, getting to know the different models that could work, being curious about the launching strategies and tactics applied by startups in other market & industries.

And of course, one of the important cornerstones of the proper implementation and success of these initiatives includes adequate funding. By financing startups, we do not only refer to the money provided, notably equity, but the clear understanding by investors of the needs of entrepreneurs.

*listen to Prince’s Around The World In A Day

We are looking for global leaders, and we will make sure to give them the proper means to do so. Part of the financing chain is also already in the reconstruction phase.

Want to know more about our investment thesis? Read our articles :