From London to Lisbon: Uncovering Europe’s Prominent Startup Scenes | Startuprad.io E 396
Every year, we’re doing a survey, with thousands of entrepreneurs across Europe, to really have a robust sample that represents all of different regions and all of the different types of entrepreneurs…” — Thomas Kösters MD at DEEP Ecosystems
Executive Summary
This is the one-year anniversary episode of our cooperation with DEEP Ecosystems in our Sub-Podcast European Startup Pulse. In this episode of Startuprad.io, host Jörn “Joe” Menninger and guest Thomas Kösters discuss recent developments in the European startup scene. They explore the growing preference of founders to stay in Europe and the prominence of certain European cities, such as Malaga and Lisbon, in attracting startups. They delve into the challenges of building a startup hub brand, the underrepresentation of female founders, and the importance of founder mobility in the European ecosystem. The episode also analyzes the impact of startups on regional development and debates whether startups can solve societal challenges like climate change.
“European startups are hypermobile. They are really, really making use of that integrated market and trying to plug into the resources available in various countries.” — Thomas Kösters MD at DEEP Ecosystems
71% of founders are optimistic!
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“Top Startup Locations in Europe: ‘London and Berlin, for the majority, is not a place they would go to.’” — Thomas Kösters MD at DEEP Ecosystems
Still 66% of founders prefer Europe over the US
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Top 20 Startup Hubs: “Being in the top 20 is not the only way to attract international founders.” — Thomas Kösters MD at DEEP Ecosystems
About the Pulse of the European Startup Ecosystem
The European startup scene is changing fast. There are new players, old ones fading away, and even more to come in their place- all vying for a piece of this growing pie! To avoid getting left behind, you need regular updates on what’s going on so that our entrepreneurs can stay one step ahead when building or investing in companies here. That’s why we started the “Pulse of the European Startup Ecosystem” which will provide you with quarterly podcasts chronicling different aspects related to startup activity across European Hubs, supported by the data from the specialized analytics company DEEP Ecosystems.
Thomas Kösters is a visionary leader and ecosystem builder at DEEP Ecosystems, a renowned accelerator for ecosystems. With a strong passion for supporting start-ups and promoting sustainability, Thomas strives to revolutionize the system in which entrepreneurs operate. Utilizing data-driven approaches, he tracks the growth of ecosystems and shares valuable insights with entrepreneurs worldwide. Through his collaboration with Joe for the past year, Thomas analyzes European startup policies to identify the next big challenge for entrepreneurs in Europe. His expertise and commitment make him a driving force behind the success of DEEP Ecosystems and the entrepreneurs it supports.
The Influence of Local Networks on Mobility: “So if you move to another place, you lose access to your existing network. So I would say the better, let’s say, your local network gets, the, lesser is your willingness to go far away.” — Thomas Kösters MD at DEEP Ecosystem
The Video Interview is set to go live on Thursday, September 21st, 2023
Are Start-Ups Overtaking the Economy?: “So in many places, The startup sector is not irrelevant, let’s say, a contributor to the through the regional economy.” — Thomas Kösters MD at DEEP Ecosystems
The Audio Interview is set to go live on Thursday, September 21st, 2023
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The Impact of Startups on Laggard Regions: “There are some examples that, where you could say this is happening. I mean, most notable probably Estonia and Tallinn Which come from a post-Soviet, kind of structure, weak economy, low GDP In all of the traditional rankings, definitely some, of the lower ranks, in economic output and power. And now in the start-up sector, per capita, one of the best, one of the leaders.” — Thomas Kösters MD at DEEP Ecosystems
European Startup Pulse
Welcome back to Startuprad.io, the podcast that dives deep into the world of startups and entrepreneurship. In today’s episode, our our series “Deep Ecosystem,” we have a special guest joining our host, Jörn “Joe” Menninger. We’ll be exploring the fascinating world of startup ecosystems and their impact on the European landscape.
Our guest today is Thomas Kösters, MD at DEEP Ecosystems, a leading organization in analyzing and understanding the European startup scene. Thomas will share his insights on founder mobility, regional trends, and the challenges faced by female entrepreneurs. With their organization’s partnership with the European Startup Initiative, they have access to data and analysis that gives us a comprehensive view of the European startup landscape.
From the discussion, we’ll learn about the attractiveness of different European cities as startup hubs, the impact of startups on the economy, and the strategies for building successful ecosystems. The conversation will delve into the correlation between popularity and venture capital, the acceptance of failure in Europe, and the potential of startups in economically struggling regions.
So join us as we explore the deep ecosystem of European startups, uncovering the factors that drive founder mobility, and examining the successes and challenges faced by entrepreneurs in this ever-evolving landscape. Stay tuned for an enlightening and informative episode of Startuprad.io. Let’s dive in!
Start-Up Sector and Climate Change: “Are those hopes that the start-up sector is transforming our economy for the better solving climate change and other problems, Are these, like, these hopes too big? Is that really a possibility? Is the start-up sector working in this direction or not?” — Thomas Kösters MD at DEEP Ecosystems
Most Popular Startup Cities in H1 2023!
This is the result of the DEEP Ecosystems proprietary survey. They are of course not 100% correct, but they have a certain predictable capability, e.g. forecasting the rise of Lisbon before most others. In H1 202§: Paris makes the largest leap, followed by Malaga, Munich, Copenhagen, and Stockholm. London took the lead again
- London
- Berlin
- Barcelona
- Amsterdam
- Paris
- Lisbon (losing ground)
- Munich
- Tallinn (losing ground)
- Stockholm
- Zurich (new in top 10)
2nd tier
11. Madrid
12. Dublin
13. Copenhagen (+7 the rising star?)
14. Warsaw
15. Milan (losing ground)
16. Helsinki (+5)
17. Brussels
18. Sofia (+9 top performer?)
19. Malaga (Spain) NEW
20. Vienna (losing 5 spots, worst performer?)
The Business Model of Co-Working Spaces: “There’s a large share of co-working spaces that are not profitable. Often they are driven by other motifs not so people have co-working spaces because they believe In the ecosystem they are building, Impact Hubs are probably the prime example for that.” — Thomas Kösters MD at DEEP Ecosystems
Questions Addressed in this Episode:
- How has the improvement of the startup ecosystem in Europe affected founder mobility within the continent?
2. Why do you think more people prefer to stay in Europe rather than move to the US for startup opportunities?
3. What factors contribute to a city becoming a successful startup hub, such as Malaga in Spain?
4. How does being in the top 20 startup hubs impact a city’s ability to attract international founders and investment?
5. What challenges do cities face in building and maintaining their brand as a startup hub?
6. What role does the startup economy play in the overall economy, and how can its impact be measured?
7. Why do you think the percentage of female founders in Europe is significantly lower than in other regions?
8. What steps can be taken to increase the representation of women in entrepreneurship, including access to funding and support programs?
9. What are the benefits of conducting surveys and analyzing data on the European startup scene, as done by the European Startup Initiative?
10. How does founder mobility and the presence of startups impact regional development and economic growth in areas that may be struggling?
Gender Disparities in Entrepreneurship: “Women entrepreneurs do have not the same opportunities even if they start at the same, starting line as their male counterparts. If we take CEOs, Female CEOs that participate in accelerators alongside male CEOs, they raise 38% less funding, after the end of the accelerator. So even if they are selected by the same jury, they are selected at the same stage to join the same support program Enter the same community and network, and they raise almost 40% less funding afterward. And, that that I that would Speak very clearly to a situation where you have, discrimination structurally embedded in the ecosystem.” — Thomas Kösters MD at DEEP Ecosystems
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The Interviewer
This interview was conducted by Jörn “Joe” Menninger, startup scout, founder, and host of Startuprad.io. Reach out to him:
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All Links and Show Notes
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Topics Discussed in this Interview
mobility, costly, access to existing networks, moving, US, attractive, Central Eastern Europe, preference, improvement, ecosystem, Europe, Western Europe, CEE, Spanish cities, startup hub, capital cities, knowledge, infrastructure, accessibility, Malaga, top 20, international founders, connectivity, legal benefits, Madrid, South American founders, startup map, brand, challenging, competitive, startup economy, COVID, GDP, investment, economy, jobs, female founders, discrimination, funding, acceleration programs, public funding grants, structural changes, women entrepreneurship, historical issues, cultural issues, European Startup Initiative, survey, data analysis, founder mobility, transnational setups, Lisbon, DACH region, Nordics, popular hub, investment levels, innovation, jobs, opportunities, diversity, Germany, Austria, Switzerland, hypotheses, climate change, impact, e-commerce companies, sustainability, CO2 storage, acceptance of failure, innovation capabilities, struggling regions, economic situations, talent attraction, coworking spaces, regional development, London, Berlin, Barcelona, Amsterdam, Paris, Lisbon, Munich, Tallinn.
Automated Transcript
Jörn “Joe” Menninger [00:00:00]:
Hey, Madu. This is a, recording note. Please only cut into the screen. We are sharing, when we talk about it. Otherwise, you should focus either on Thomas or on me. Hello, and welcome, everybody. This is Joe from Startuprate.o, your start up podcast and YouTube blog from Germany, Austria, and Switzerland as well as the founder of the world’s number one tech entrepreneurship radio called start up .radio. You can now also follow us on TikTok and Pinterest. We just set up the accounts there. And I would like to welcome for the 1st birthday of the European startup Pulse, Thomas here back from me. Hey, man. How you doing?
Thomas Kösters MD at DEEP Ecosystems [00:00:44]:
Hi, Joe. And happy birthday to you as well. Glad that we’re doing this for 1 year already. It’s very exciting, and we have a lot to discuss today.
Jörn “Joe” Menninger [00:00:55]:
Yes can you go a little bit into because we’ve been crying like crazy in this year, we’ve been starting out pretty good but in June of 2023 there was a month when we had more than a 100,000 viewers, downloads and listeners across all of our channels. Can you introduce yourself and the deep ecosystem, the company you co founded we are working with S Startup Radio a little bit to our audience to just to give them a head start because there’s a lot of new followers, new new new subscribers, new listeners out there?
Thomas Kösters MD at DEEP Ecosystems [00:01:32]:
Absolutely. Yes. So Deep Ecosystems is an accelerator for ecosystems. So ecosystems are support structures for start ups that help entrepreneurs to become more successful, to help you change the system in which you operate, Not to turn maybe also from a purely profit oriented, unicorn orientated system towards a more sustainability focused system. So we support ecosystem builders all around the world, and one thing that we do is we track the growth of ecosystems, And we do that with data. And here with Jove, since 1 year, we are reviewing our insights. We’re sharing our insights With entrepreneurs around the world to understand how, in this case, the European, startup policies, developing. And, so we share our reports, our data, discuss it here, and see what can be the next big challenge for entrepreneurs in Europe.
Jörn “Joe” Menninger [00:02:29]:
We may also hint that those reports are accessible to subscribers, but we’re the only media outlet who have access to those very extensive reports. Just looking at the one we are sharing now called Startup Heat Map Europe 2023. We recorded this on August 9, 2000 and 23. Your report just came out and it’s more than 102 slides. And usually I would say, something around 80 to 90 are full of content And all of, of this content there goes a lot of research work in this, like aggregated data, like looking for data And then analyzing, aggregating it, analyzing it, and then make it look pretty. Will you agree to that?
Thomas Kösters MD at DEEP Ecosystems [00:03:22]:
Yes. So that is definitely a lot of work. We have, a partnership with the European Startup Initiative, which is a nonprofit, association which brings together Practitioners and researchers that work on the data that we are deep produced, that they find, and it’s really a lot of work. Every year, we’re doing a survey, with thousands of entrepreneurs across Europe, to really have a robust sample that represents all of different regions and all of the different types of entrepreneurs, this data then needs to be analyzed. It needs to be Enriched with other data sources, investment data, community activity, number of meetups, number of co working spaces, Salary levels, you name it. We look at almost all of the things you can imagine. So we look at More than 87 variables, I think, to analyze more than 120 cities. And the results, they give you then, trends overall, what’s happening in the overall European startup scene, which topics are coming up, which, trends do we see in mobility, etcetera. But also then on a regional level, like, which cities are the ones that are winning the race for popularity For the founders, where do the founders want to go? How do they position? What are their strategies? What are their secrets? How do they, manage to perform better than others. So you can see best practices for ecosystem building and also identify maybe the place you want to move to and find the start up community where you feel at home.
Jörn “Joe” Menninger [00:05:02]:
We may add that this survey you’re just talking about is proprietary data from you guys. Plus in the past we’ve spoken about for example, that on your screen you had places like Lisbon, who then popped up as a European white start up hub years later. So there is a pretty good forecasting ability in this survey. Do you have like a rough number? How big the correlation is? How strong it is when the city is in the top 5 top 10 of this survey on an annual basis, how long does it take to really get the stuff going there? Because we may add the logic. 1st, the entrepreneurs move there, then they set up the company, then the investors come. And with more and more people, more and more employees, there is a certain pull to that and that also leads at 1.2 critical mass under European white start up hub.
Thomas Kösters MD at DEEP Ecosystems [00:06:04]:
Yeah. Absolutely. The, the mobility of founders is a key ingredient in the creation of the European ecosystem. There’s 2 types of mobility. 1 is the founder actually moving, changing locations, setting up their headquarters in a different place. Maybe they move even before they started their company, but still they set up in a different country. So that’s the mobility that we all know, some are moving countries. But then, of course, there’s also the expansion and the transnational setup of companies. So you can also observe that more than 60% of all of the startups in Europe have transnational setups. So they work from different locations. They have employees, investors, partners, and offices in other countries. And this transnational setup is a second, let’s say, type of mobility that we can observe. And we what we find is that European startups are hypermobile. They are really, really making use of that integrated market and try to plug into the resources available In various countries. And as you said, Lisbon has been a super popular hub. First of all, I think founders from UK discovered it, Then maybe the DACH region, the German, Austrian, Swiss region, they they discovered it. Maybe now it gets more popular also in the Nordics, Where you see founders moving to Lisbon, moving to Porto, or Braga, which is a little bit of a secret tip, and they are setting up their headquarters or expanding to open up branches, sometimes hiring local talent that comes From South America, to to Portugal and, and works there. Portugal is super international, super attractive, not only for founders, but also for talent. So, this expansion makes a lot of sense. And, yeah, since 7 years, we’re running that survey. And already in the very first survey, I think, Lisbon was in the, top ten, which was surprising because there was nothing like a start up scene. And still, Lisbon has not, like, in terms of investment, doesn’t have, like, a large start up scene, but that’s not the only metric. You need to look at different things. And Therefore, when you ask for a correlation, well, I could not say that when you’re popular, there is definitely also an increase in venture capital coming later. That might not be the case because venture capital follows its own rules, but you still have, like, a positive spillover effect Into society, you have more innovation. You have more jobs. You have more opportunities and more diverse, society. So you have benefits, that come with that increase in popularity, also downsides, obviously. But I would say, that, that it’s definitely showing movement.
Jörn “Joe” Menninger [00:09:05]:
Mhmm. Talking about this here, we have the most popular start up hubs 2023. London just shift changed places with Berlin. We are we already seeing an impact of Brexit on London as a start up hub, or don’t we?
Thomas Kösters MD at DEEP Ecosystems [00:09:28]:
Yes. That is the question that has been asked Now every year and last year when London dropped down and Berlin was the most popular, people were, like, already like, those that are Not in favor of Brexit. We’re excited saying, wow, now London is, is finally losing. I would be a bit careful, on this. So here, what we do is we ask founders all over Europe a simple question. Where would you start your company, if you could choose freely in Europe, you can give 3 options. The first priority is You put on top and then you have 2 further priorities. And we see that London and Berlin, they reach around 34% of founders. So 34% of founders say London or Berlin. And that has been declining over time. 7 years ago, this share that said London or Berlin was much larger. It was more than half of all the founders, saying they would go to these places. Now you see that, actually, the majority is not even having them, on their list. Right? So London and Berlin, for the majority, is not a place they would go to. But still, it’s the largest chair Amongst cities, they received the largest share of farmers, 34%. It’s far ahead Still of Barcelona and Amsterdam as well as Paris, who are somewhat in the area, somewhat in the same percentage, Also 17% for Barcelona and Amsterdam, and Paris and Lisbon have 12, Munich has 10, Tallinn, nine. So you see only Barcelona and Amsterdam are somewhat in the area. No? So half of the percentage.
Jörn “Joe” Menninger [00:11:17]:
But talk talking about the top cities, Barcelona held steady at spot number Three, Amsterdam is spot number 4. Paris gained 2 places to spot number 5. Lisbon dropping 2 places to spot number 6. Munich gaining 1 to spot number 7. Tallinn also dropping 2 places to spot number 8. Stockholm stood Steady at number 9. And then we do have Zurich in Austria in Switzerland, plus 1 getting into the top 10 here.
Thomas Kösters MD at DEEP Ecosystems [00:11:53]:
Yes. Yes. So in in to be honest, the top ten is very stable over time. We don’t see, like, large changes. So we see that sometimes a place so Zurich is getting into the top ten, sometimes it’s falling out, but it’s it’s been there. So over time, the the top ten is relatively stable, since 7 years. That shows on the one side that the methodology is working. Right? So we we kind of measure, the the the right thing, we we measure something that is there, the attractiveness. But on the other side, we also see how difficult it is to attract international founders and to become, a hub, if you don’t make a big change, let’s say, in in your ecosystem, it will be very difficult to overtake, the the, leading players now.
Jörn “Joe” Menninger [00:12:52]:
And outlets like Stelabrator. Io also play a role, Not necessarily always us, but media outlets like us who inform other entrepreneurs about places that they would not have thought of. Because I’m seeing here spot 11 to number 20, Dublin gaining 2 places, really strong Copenhagen in Denmark gaining 7 places, Warsaw in Poland, 2 places, Helsinki in Finland 5 places. The biggest jump was most likely Malaga who’s completely new at number 19. And the 2nd biggest biggest was Sofia plus 9 places. This is pretty awesome. And sorry I misspoke, before in Zurich, because I had in mind Vienna who still made it to spot number 20, but dropping 5 places there.
Thomas Kösters MD at DEEP Ecosystems [00:13:50]:
Yes. Very interesting. I mean, Spain, Malaga has been very interesting case. Spain is performing surprisingly well, I would say. So you have, like, 3 Spanish cities in the top 20, that’s quite strong. We see it otherwise a lot of capital cities That benefit from the knowledge about the cities, that benefit from the infrastructure they have, the, accessibility by plane and trains and so on. So people know capitals rather than, smaller towns like Malaga. So that’s definitely, a special award, I would say, for, for non cap capitals to get into the top 20. And on the other side, of course, we need to take into account that, that basically Being in the top 20 is not the only way to attract international founders. Right? So you still have your cloud. You still have your reach Where you can access, particularly, connected founders that maybe come from countries where you traditionally have a connection with. For example, in Spain, in Madrid, we see a big, influx of South American, founders. We did a small publication on the Latin diaspora in in in Europe, and we see that there’s a strong influx into these places That are traditionally connected, where there’s also some legal benefits for the mobility, etcetera. So Definitely, being in the top 20 doesn’t mean that you are not attracting, actual movers. But, of course, it shows in in general if you want to be really a top up on the map and you want to outgrow, like, your your standard size, you need to you need to do a lot, because, building a brand as a start up hub is increasingly difficult, increasingly competent, competitive.
Jörn “Joe” Menninger [00:15:48]:
When you talked about a special war to all those places that gained, due to all those cities that gained spots, I would say the the rising stars definitely led by Malaga because as you said, they’re not a capital. We also have Sofia, which is the capital of how is it properly pronounced? Bulgaria? Bulgaria in English. Right? Yes. And we do have Helsinki, which is the capital of Finland. So we do have capitals. And Copenhagen, of Kors, which is the capital of Denmark. So we have 3 capitals plus Malaga gaining ground here as rising stars.
Thomas Kösters MD at DEEP Ecosystems [00:16:31]:
Absolutely. Yes. So that is a good observation. You now open this nice slide which has the timeline. I like to watch that. You see, over time through 2016, which hubs are moving, up and down in the top twenty. Tel Aviv is an interesting case. You have to keep in mind, we ask European founders whether they want to move to Tel Aviv. Surprisingly, Tel Aviv is not, in the top 10 because the willingness to move there is low, but still, it’s Moving up and down a bit in the top 20. At the moment, not in there, but, yes. So so it’s an interesting observation over time what’s happening there.
Jörn “Joe” Menninger [00:17:15]:
Yes. And for everybody who’s just listening to this either on a podcast on our internet radio station or on one of our partner Internet radio stations. You can find all the links and the show notes on our blog, medium.com forward slash startup rate minus I o. This is our publication on Medium, or just look for startup rate.io on medium.com, And there you should be able to find the blog post going along with this publication. And there you, of course, find the link to 102 slides full of data. And even in this case, we’re just talking about slide number 10 here, animated content where actually the cities are moving up and down here, which I really like, because I like to look at stuff. What what does did one of my bosses say, men are always working primarily with their eyes. So that’s the way we do it. Getting a little bit more into the more serious pieces. You also wrote that 71% of founders are optimistic. I was I was wondering about the future outlook. I was wondering if it’s because they’re basically very positive people. They are entrepreneurs. Or do we have seen the worst of corona downturn, energy crisis, Ukraine war, and so on and so forth?
Thomas Kösters MD at DEEP Ecosystems [00:18:47]:
Very good question. Here you have the timeline of the, of the question, how Optimistic they are about the development of their own ecosystem. So the question behind that is, how do you see The future development of your own ecosystem, is it going to improve, or is it going to to get worse? And the percentage shows us those founders that are extremely or very optimistic. And here, you get the answer to your first Part of the question, they are, in general, rather optimistic people. Now because the, the amount is pretty high And steadily high over time, where founders say we are very or extremely optimistic. Right? So, In in general, that’s a that’s a trade of entrepreneurs to be optimistic. What what else can they do?
Jörn “Joe” Menninger [00:19:41]:
You you you clustered All the data in in different geographical areas and what I find interesting here the most optimistic are the entrepreneurs in Western Europe followed by Nordics and Baltics and least optimistic other entrepreneurs in the Mediterranean. Overall, I think we’re right now at 71.33% of your pin founders are optimistic.
Thomas Kösters MD at DEEP Ecosystems [00:20:09]:
Yes. And you can see the difference. No? So 79% of Western Europeans are very or extremely optimistic versus 62, 63% in the Mediterranean, area and in CE, 65. So there is a huge difference. Right? So the the 71 is is an average, but in some places, people are very, very optimistic. None. That’s mainly Nordics and Baltics as well as Western Europe. The UK and Ireland, there, I think you see the most Brexit effect. You see like a huge up and down over the years, and it’s now pretty much at the average. In 21, everyone was a bit more optimistic. No? We had the, we had since 2020 the highest numbers. But this year I think within
Jörn “Joe” Menninger [00:21:07]:
Except for Benelux, Belgium, Netherlands, and Luxembourg, they they’ve been down here at the lowest place in 2021 and now they’re, a lit a little bit below average. So, it’s not constant. But I would say, overall, the entrepreneurs are much more optimistic people than the average European citizen. Wouldn’t you agree?
Thomas Kösters MD at DEEP Ecosystems [00:21:30]:
Yes. Yes. For sure. Yes. And but on the high level, you see then the nuances and you see the effects. No. So if you if you see the break in of the optimism in 2020, corona was something that, that definitely got the the entrepreneurs to worry. And then they got very optimistic when things turned out differently in 21. And now I think the Russian invasion in in Ukraine, inflation, and insecurities, they have lowered expectations quite a bit.
Jörn “Joe” Menninger [00:22:05]:
What I also found interesting, 66%, so 2 thirds of founders prefer Europe over the United States. Can you elaborate a little bit on that and I do believe that is something we have seen during the last year already that European founders prefer to stay in Europe.
Thomas Kösters MD at DEEP Ecosystems [00:22:26]:
Yes. So, mobility is Also something that’s costly. So if you move to another place, you lose access to your existing network. So I would Say the better, let’s say, your your local network gets, the, the, lesser is your willingness to go far away. So moving to the US is attractive If you feel like your home ecosystem is really not good at all and you have nothing, to to lose. Right? So that’s definitely one of the the, drivers, or was one of the drivers. When there was no ecosystem in Central Eastern Europe, There was a huge preference towards the US. Over time, that declined. And now you see found the same opportunities at home. And when they move too far away, they feel they would lose those. So it’s better to make a move closer to home. Maybe just move to Berlin, expand your business Between Central Eastern Europe and, and and Germany or UK and keep close, context to to your existing network. So I think overall, the improvement of the ecosystem in Europe leads to a, to a higher preference of staying here as well. And, yeah, it’s also quite different. So Western Europe is again, the highest, with the biggest, percentage saying they would prefer Europe, and other places like CEE, there’s just 44% that would stay in Europe.
Jörn “Joe” Menninger [00:24:06]:
Mhmm. And if you’re talking about expanding in Europe, almost 80%, 79 of founders opt for Europe, especially Germany, France, Switzerland, and Austria, which makes us very happy because we cover most of that region. We we’re right now only at slide number twelve. So everybody can see and hear that there’s a lot of data. There there are few more data points we want to go over, we want to highlight but nonetheless, as I said in our blog post, there is the link to the report, and you can dive in yourself into the more than 100 slides there. The complete top 50 list is is is not so charming. It’s it’s basically an excel sheet. But would have been taken from there that in the top 50 hubs for Germany, Austria, and Switzerland, DACH or GSA region, there is Frankfurt on 27. 29, there’s Hamburg. 35, there’s the city of Essen in the Rheingru conglomerate. Thirty six, there is the city of Leipzig in Eastern Germany, and 46, there’s the city of Stuttgart, popular being the home of Porsche and Mercedes. We’re now talking a little bit About the trends in European ecosystem, there are 3 hypothesis you try to prove or this proof here in this report, can you elaborate a little bit as a kind of a a wrap above these 3 hypothesis here in our podcast?
Thomas Kösters MD at DEEP Ecosystems [00:25:45]:
Yes. So every year when we do the report, we try to ask the questions that are most relevant, at the time of writing. So the hypothesis the first hypothesis is, are start ups overtaking the economy? So After the record years of investments during, COVID, the question was, are we seeing now, like a relevant contribution of the startup economy to the traditional normal overall economy? And is it really, like, the most important sector that we should look at? Is it the future of our economies in Europe? Or is it, just like, a storm in the water glass? Is it just for those that are inside the startup bubble? What are really the comparisons? So we looked at what is the percentage of GDP that we see in terms of VC investments, on a local level. So for example, in London, we see a very high Share of GDP of the, the city level, the metropolitan level, being invested in, in start up is really impressive. We see that in different places around Europe where we see a higher share between 1 3% of GDP going into the start up sector. So that’s pretty impressive. But overall, the, let’s say, the the contribution is not so large. So in many places, The startup sector is not irrelevant, let’s say, contributor to the through the regional economy. So there’s definitely a mixed result. If you’re a super hub, if you’re, like, a super super well developed, ecosystem, Then you manage to get to that level where influence, let’s say, the availability of jobs where you influence the direction of the economy, to an extent that that, let’s say, also the overall population needs to take it seriously.
Jörn “Joe” Menninger [00:27:43]:
I would personally say that this has already been proven in the past. There was, of course, a very special situation in 2021, But you guys may remember the Pfizer BioNTech vaccine for corona, COVID nineteen. Biotech in this year alone, 2021, was responsible for lifting the GDP of all of Germany, one of the largest DDPs in the world by 0.5%. So I think if that doesn’t prove an impact, I don’t know what would.
Thomas Kösters MD at DEEP Ecosystems [00:28:18]:
Yes. That that’s a very nice observation. Of course, the question is like, how common is that? Right? So how is this startup seen, overall contributing here. But, yeah, I mean, it’s a these are these are good talking points, not to to go into detail. The other point, especially biotech, is maybe a good one, so because they come from a city called Mainz in Germany, which is, traditionally, the home of one of the national TV stations, but otherwise is not one of the richest regions. And now
Jörn “Joe” Menninger [00:28:51]:
it’s very important. It was the city I was born in.
Thomas Kösters MD at DEEP Ecosystems [00:28:55]:
Very good job. That’s good. Yes. So so I didn’t know that. So you you still have some good ties there. It’s that far from Frankfurt, is it?
Jörn “Joe” Menninger [00:29:08]:
It depends on the traffic. But if there’s no traffic, it’s something like 25 to 30 minutes if few are hitting rush, or it can take an hour.
Thomas Kösters MD at DEEP Ecosystems [00:29:18]:
Ah, you see. You see. So, maybe Mainz is now helping the Frankfurt startup scene also to To improve. That’s a bit of a mean side kick. So but Mainz, I would Call it maybe one of the regions that economically is a bit of a laggard, area. And that was our second hypothesis, Our startup saving the Laggard regions. And for example, you see if you deal with the European Union, You see that innovation scoreboard, that they publish, every year. And you see, like, the huge differences in Innovation capabilities across Europe and especially Central Eastern Europe and Southern Europe having difficulties To, keep up with the innovation capabilities in the, in the North and West. And, yeah, basically, the question we asked was, Is that startup boom that we’re seeing now, is that reaching the province, if you will? Is that reaching the places that struggle economically? And is it a way to to leapfrog, the development and basically put yourself, on top? And There is some examples that, where you could say this is happening. I mean, most notable probably Estonia and Tallinn Which come from a post Soviet, kind of structure, weak economy, low GDP In all of the traditional rankings, definitely some, of the lower ranks, in economic output and power. And now in the start up sector, per capita, one of the best, one of the leaders. So you you see examples that it is possible. There’s also, signs of this in Greece. A lot of you remember, economic crisis hit Greece very hard. A lot of, structural funds going into, Greece. And there is signs that there is an uptake In innovation and the start up sector in Greece, following specifically also these kind of structural, investments. The same could be said for for Portugal. We see that we talked about it before. Also one of the places hit hard by the, economic crisis, and then, now improving a lot. Maybe not so much in the venture capital availability. There’s Greece and Estonia are performing better here. But you see definitely activities, for example, co working spaces, attraction of talent. So the investments of startups into these regions lead to to an improvement of the economic situation. So the hypothesis is, to be answered again in a mixed way, But we find some signs that the startup sector can have a positive effect on the development of the region, and that’s already,
Jörn “Joe” Menninger [00:32:17]:
would would come to mind for me as the city of Mainz. They gave an interview to us. Back in the days for the very simple reason they are a city that had to deal with €100,000,000 annual budget And of course they they don’t give details to individual taxpayers even if they’re big companies, but nonetheless they have, they have Received more than €1,000,000,000 in tax revenues only in the 2 years corona vaccine was booming. So I do believe, there there is a there is a culprit in there hidden somewhere that you could attribute this massive influx of taxes. And what they’re trying to do is through a Biotech is a city in Denmark we talked about in one of our last, interviews. If you don’t know it, I don’t know what’s wrong with you, go down here in the show notes and have a look. That is a conversation between Thomas and me where there’s a little town in Denmark becoming a major global hub in robotics. So what Minds is trying to do right now is building up itself as a biotech hub. They have different initiatives for that. And it’s very interesting it will be very interesting to see if they can achieve it or not.
Thomas Kösters MD at DEEP Ecosystems [00:33:38]:
Yes. Very interesting case. We discussed it as a case study, about how do you build an ecosystem. And, I think that’s that’s really at the Core of this, what can we learn from the data to build our own ecosystems? We we do that in our ecosystem accelerator as well. So we run as deep ecosystems. We run an accelerator to grow your own ecosystem hub in your Home region, instead of moving away to London or Paris, you can build your own ecosystem up. And, Deep Ecosystems is helping you do that. One way is to work with data and have an advantage over your competitors by knowing where the world is going. Yes. And where the challenges are? Hypothesis 3, are ecosystems open to transform the economy? So the the starting point of that question was simply when looking at the success of of start ups, We see a lot of, you know, not so impactful, companies. Let’s say they are doing delivery and e commerce, Maybe Fintech pay first, buy first, buy, pay later. Sorry.
Jörn “Joe” Menninger [00:34:53]:
Buy now pay later.
Thomas Kösters MD at DEEP Ecosystems [00:34:55]:
Get out.
Jörn “Joe” Menninger [00:34:56]:
Get out.
Thomas Kösters MD at DEEP Ecosystems [00:34:58]:
That was German. So you see a lot of startups that do things like consumer products, user experience, ecommerce. The question really is, like, are those hopes that the start up sector is transforming our economy to the better solving climate change and other problems, Are these, like, these hopes too big? Is that really a possibility? Is the start up sector working in in this direction or not? So so that was our, our question at the core of this third hypothesis. And so we wanted to analyze questions like, whether there is actually new ideas that get investment, or is it basically just the survival of the e commerce giants that in in corona and now needed to scale up or needed to be, bailed out or similar. So that was one of the the questions. Do we see an increase in the, early stage investment? Also Which sectors receive investments? Do we see, an openness to climate tech sustainability, CO two storage or is it only e mobility when we talk about impact investments? Is it only going to, to e mobility and unfortunately, the quest the answer is yes. A lot, is going to that. We also asked, is is Europe open to failure? So which, regions have which openness to failure? Is it okay to try out something new? Is it okay to fail? And that is quite different from region to region in, in Europe. So you see that not everywhere you have a high acceptance, of failure. So founders still say They cannot talk openly about failure, actually only in Western Europe and the UK. You have more than 50% of the founders saying they can talk openly about, failure. So that’s, that’s still a bit low. Right? So if we say that that’s basically the mantra we’ve been repeating since 20 years, that failure is okay and acceptable. Still it seems not the case in Europe.
Jörn “Joe” Menninger [00:37:19]:
Oh, yeah. We we’ve been talking about in the past how you as a start up hub could establish yourself. We’ve talked in the past about accelerator programs. But also now co working spaces are good strategy even though today, at this very day I read on Bloomberg that WeWork is not sure if they will stay in business. So how do you solve this problem? Apparently there’s demand for co working spaces, co working spaces are also good, but at least some of the business models don’t seem to work.
Thomas Kösters MD at DEEP Ecosystems [00:37:56]:
Yes. Co working spaces have a very tricky business model. There’s a large share of co working spaces that are not profitable. Often they are driven by other motifs not so people have co working spaces because they believe In the ecosystem they are building, Impact Hubs are probably the, prime example for that. An impact hub might be a co working space, has a co working space, but, most of the time, their prime revenue It’s not from the from the renting of the desks, but they work around the ecosystem. And you have that in smaller Scale, local level where people just want to create a space, and they are dependent on subsidies, dependent on, on projects, to survive. And, these people are very, heroic, I would say, individuals that are really doing something for the community give the community a place to to grow, without becoming, let’s say, rich themselves. So without co working spaces, probably, we would not have the start up scene that we have, but it’s not necessarily a strategy to get rich.
Jörn “Joe” Menninger [00:39:15]:
Mhmm. Talking about the startup ecosystem we want to have, you also, have some very interesting data on female founders, especially the cities, where you have data, we have calculated the shares of female founders. I’ve seen the top three small cities still far away from parity. Sheffield, 21%, Geneva, 20%, and Luxembourg, 19%. In the larger cities, it’s a little bit better, but also far away from parity. That’s what you said more than 1,000,000 people, Kyiv, 25%, Vienna, 22%, Brussels, 20%, Amsterdam, nineteen, Stockholm, 17, Milan, 17, Rome, 17, and Zagreb only 16%. Are their measures? The hops, the governments, other entities could take to increase this share.
Thomas Kösters MD at DEEP Ecosystems [00:40:19]:
Mhmm. Well, we are trying. So there’s a lot of attempts to increase the share. Unfortunately, last year, the share decreased. So we saw Over the last years, a stable development. And now overall in Europe, we have, less female founders, only thirteen percent, 13.2%. Before it was, I think, 15, 16%. I think that Still, there is like a lot of factors that would lead, for example, to, women to react more to insecurity, of the economy. So now I would see that the economy with the higher inflation and the, situation with Ukraine, has taken a hit. And I I would see that also there is less female entrepreneurs now even though there is more support. So I think that’s that’s still a big challenge. And, overall, the, the data shows us that Women entrepreneurs have not the same opportunities even if they start at the same, starting line as their male counterparts. If we take CEOs, Female CEOs that participate in accelerators alongside male CEOs, they they raise 38% less funding, after the end of the accelerator. So even if they are selected by the same jury, they selected at the same stage to join the same support program Enter the same community and network, they raise almost 40% less funding afterwards. And, that that I that would Speak very clearly to a situation where you have, discrimination structurally embedded in the ecosystem. You can do things about this. I I think there’s, a broad literature around, what can be effective. We know that, for example, female only, acceleration programs can help, quite a bit. We see also that the accelerators is something that increases. We see that there are certain, activities towards the VC side To increase the number of investors on the VC side, on the selection side, these are all elements that that can work. On the public side, we’ve seen top up, funding for grants, if there is female entrepreneurs, running the proposal. So Nudging maybe some teams where it’s not clear who is the CEO, nudging them towards asking the the female But cofounders to be, among the leadership team and to take the step. So this these are all measures that can can help. Probably, they help more on an incremental, size. So the effects are probably incremental If you do this kind of hands on support where you make changes in the incentives, I think the structural changes, are needed that would, lead to a higher proportion of women going into entrepreneurship. You see, by by the way, in other regions in the world, you see much higher rates. Now we work also with non European ecosystems. And there you see higher percentages of women going into entrepreneurship. So it’s really a Western and European problem as well. And we might need to ask ourselves what’s our historic and, cultural, issue we’ve created there.
Jörn “Joe” Menninger [00:44:03]:
Mhmm. I have to say I’m very, very sorry. I was reading, In A Small Cities number 2 Ghentf with an f at the end. But apparently, I’m not wearing my glasses, and it’s Ghent in the Netherlands instead of Geneva in Switzerland. I’m I’m very very sorry to the beautiful cities. I just confused you guys. So in the small cities, the top three cities with the most female entrepreneurs are Sheffield, Ghent, and Luxembourg, followed by Malaga, Oslo, Malmo, Vilnius, and Tallinn. I hope I don’t have any rigid mistakes in there right now.
Thomas Kösters MD at DEEP Ecosystems [00:44:44]:
Yes. Interesting, by the way, that the small cities are not necessarily better in terms of percentages. So you would have, sometimes you have the expectation. This is, this is a metric where a small city could outperform the large ones, especially on a percentage basis. But, then you see that Vienna, for many years is one of the leading hubs. I think they benefit a lot from the, influx of Central, Eastern European founders, women founders that study, in, in Vienna and start the company there, or that moved to Vienna to start the company, they’re coming from CE. That’s definitely something. Belgium is interesting. Kiev, Well, there might be special effects there. It has always been, CEE is very strong in female entrepreneurship. But, of course, now there’s a special situation That might have reduced the male, amount of founders, in this context and, so, yeah, the war might have an effect, on on this as well.
Jörn “Joe” Menninger [00:45:51]:
Thomas, we’re now talking for more than 45 minutes. I’m very sorry this has gotten to be a little bit longer episode. And we’re only on slide 45 of more than one 100. I would therefore say we leave it at that point and continue with our next regular update scheduled in a quarter. Would also would would hint everybody who’s listening to this look at the mobilities of founders within Europe, slide 53, 31% of European founders are foreign born, 61% of Accelerate participants relocate it to a different city for an accelerator. And 74% of start ups have a presence in more than one country. I would leave it with that. Everybody as always, please make sure to like and subscribe and share, to our podcast, and go to our medium blog where you will find link down here in the show notes, we can find the whole presentation. Promise.
Thomas Kösters MD at DEEP Ecosystems [00:46:58]:
Great.
Jörn “Joe” Menninger [00:46:59]:
Thomas, it was as always a pleasure talking to you. I assume I’ll have you back. Let me look at my calendar maybe in October or early November. And then we’ll talk about the next hot topic here, in European startups.
Thomas Kösters MD at DEEP Ecosystems [00:47:17]:
Great. Was a pleasure as well as always. I’m looking forward to the next time.
Jörn “Joe” Menninger [00:47:23]:
Me too. Have a great day. Bye bye.
Thomas Kösters MD at DEEP Ecosystems [00:47:25]:
You too. Bye bye.
