European Startup Pulse
European Startup Pulse

Episode 2 · 3 months ago

Exclusive Data on Europe’s Startup Hotspots in Q4 2021

ABOUT THIS EPISODE

This is the official kick-off of the cooperation between DEEP Ecosystems and Startuprad.io, originally published on March 10th, 2022.

“The main message is that 2021 was an exceptional year. 2021 saw an 150% growth of startup investments in Europe”Thomas Kösters – Managing Director DEEP Ecosystems

Media Partnership

This is just the kick-off for our cooperation with the DEEP Ecosystem and we will bring you at least four more episodes with them. All data available here and discussed in our episode is only available here with us. Let us know what you would be interested in for the next episodes.

“We detected the uptick in Lisbon early, when we started. We asked ourselves if we are wrong as no one else was talking about Lisbon as a startup hub.”Thomas Kösters – Managing Director DEEP Ecosystems

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“Seed rounds are actually a lagging factor of the success of a startup hub”Thomas Kösters – Managing Director DEEP Ecosystems

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The DEEP Ecosystem

DEEP Ecosystem is a company founded by entrepreneurs for entrepreneurs, also the entity behind the https://startupheatmap.eu/. The company is an analytics company focusing on startup hubs in Europe. They are actively tracking more than 100 cities across all of Europe, from Meetups in the respective cities, to the share of female founders and all the accelerators active in the cities and even much more.

The Guest

Thomas Kösters (https://www.linkedin.com/in/thomas-k%C3%B6sters-8602a247/)is our guest today, he is the Managing Director. Before he started with the startup heatmap, he was working for companies like Siemens, Microsoft, and EIT Digital.

The Report – Exclusively for our Listeners and Viewers

The data we are sharing here is nowhere else legally accessible. We are sharing here exclusively an excerpt of the Q4 Startup City Signals report, with more than 10 pages of exclusive data.

You can find all data here (hint: it is interactive when you hover with your cursor over it).

https://infogram.com/1pe2qp17963ej1bm75jlwzk23nhl1ky39zw?live

Welcome to start up bread that I own, your podcast and Youtube blog covering the German startup scene with News, interviews and live events. Hello and welcome everybody. This is Joe from start up Rayo, your startup podcast, and you to block from Germany, Austrian Switzerland, as well as the woods first Internet radio station dedicated to startups and tech companies. Today's interview is sponsored by start up Raven, the easiest way to meet new corporation partners and investors. You can register for early access down here in the show notes, DUB DUB DUB, start up ravencom. That said, I would like to welcome Tomas here again. Hey, hi, you doing? Hi jout? Yeah, I'm Thomas of deep ecosystems. Nice to be here. Glad to have you here. I'm our audience may remember that you are a repeating guest here and actually we are just kicking off a corporation with this interview here, and what we are doing is giving you a little bit oversight of the European startup ecosystem, because you guys are actually tracking single hops within Europe. How many cities are you currently tracking? Never tracking around hundred twenty cities in Europe. And Yeah, so we're tracking everything from investment data to exit job creation by startups different verticals. What's happening in the meetup space? What are the accelerators doing? So all of that can be found on our website. To start up heat map that I presented the last time already. And Yeah, we can talk about the findings today. Yes, and for your subscribing members, that's must of time, I would assume, corporates, investors and the cities them...

...selves. Yes, we work with ecosystem builders, so people that are developing the ecosystems. We help them to get an understanding of the trends happening locally but also globally, to compare against others, understand opportunities develop strategies to grow their ecosystem. Hm. And they are helping you. So, admittedly, do we not only will dispete the first kickoff of a series of interviews. So we give you guys quitely startups on the together with a deep ecosystem. And there will be some show notes down here in the links. There is a link down here below. Wherever you listen to this or watching this, there is a link and there will be a presentation of pdf way can actually look at the data again that we are sharing here. So that's a you can expect at least four more interviews to yea, the most likely with Thomas and me, even though you're not the only one working there, because I assume tracking one hundred and twenty cities, even though you can automate a lot, I assume it's a hell lot of work. Yes, actually, we are a little bit of a larger team, so we have a lot of analysts with us. We do all sort of manual analysis. So data collection is based on third parties data that we aggregate and analyze, but also we collect some data that's hard to get by ourselves. So, for example, when we look at accelerators and their participants, that is data that is really not available in any database. So we create our own and we track the activities of the accelerators in these cities very timely each quarter to analyze what's happening, is their shifts and trends. Who Do they accept? Who Do they invest in? How much do they invest, how much equity do they take? They focusing more on female founders now? Is it more on clean tech,...

...etc. So, depending on the data, we need to do it ourselves or we do it with data provide us from the outside. MMM, I see, I see, and ahead of me I have here the report for your fourth quarter. But before we get into that, you are called start up heat map Europe, and I assume you have not been focusing on generating startup maps during university study. So how on earth did you end up with this job and this company? Exactly? So the start up heat map is been around for has been around for six years. It's been an initiative by entrepreneurs for entrepreneurs. So around twenty entrepreneurs have come together to start this, this mapping, and last year, one year ago, we took this over into a professional company, which is called deep ecosystems, that is supporting the growth of ecosystems worldwide. And the startup Heeadmo of Europe is one of our products. It's the basically the backbone of our data unit. And Yeah, of course the startup heap of Europe now is European, but in the future that might be also start up head maps in Latin America, in Southeast Asia, in Africa, or what you can imagine. I actually in myself. I studied a lot around cities. I was studying economics and politics and I focused on city development already my study. So, if you will, I started during my university times to look at rankings of cities and indicators on the economic growth of cities already. Then I did a detour, let's say, into the startup world. So my whole professional life for the last ten years I've been in the startup industry. Three have been an investor for the...

...past five years. Before that I was with Microsoft in the startup world and before that at the University of Munich, where we worked a lot with deep text startups and spinoffs from from the university. So yeah, I've been through and through focusing for the last decade on this topic and I'm very glad that I can work with such an exciting topic of cities as well, because cities are really where the future is being created and I think the time of Nation States is kind of over, so cities are really at the focus of our attention. I was wondering, since you're already doing this for six years now, soon seven, I sume, I would be wondering what are really good forecast factors, for example, let's say the seed grounds. If there's an uptick in sea grounds. Is this really a promise that this hup, this city will thrive? M Yeah, this is very difficult. I mean we have seen over the time some ecosystems grow fast. So one of them was Lissabon and Lisbet and Portugal, and we detected that really early on. Actually, when we started about six seven years ago, we had an uptick in our data on Lisabet and we were like, okay, that is that is strange. Is there something or are we wrong? Because no one at that time was talking about about Lisbon. And over time we saw actually, yeah, these these indicators of, for example, popularity among founders, where would they move? Are Quite indicative of future growth, because talent is a driver of this kind of developments. So and when talent aggregates in your city, you have a high chance that this will actually lead to future growth. It's...

...not a guarantee. US might be also that you have a lot of talent in flux, but then they are not becoming successful start up entrepreneurs. The seat rounds, they are little bit closer to what you would call like a lagging factor because in the end the investments and seed rounds are already already an output, right. So if you see investors coming and putting money into startups, that most likely already the effect of something you have done. But in that sense it is pretty likely that after increased seed rounds you will also see increased later state rounds. So I would expect also serious a rounds to go up after the seed rounds and so forth. So I think that is that is closely connected and there's a correlation between the two years. I see. Let us dive a little bit in. Everybody who's watching this as a video can see what I'm seeing here. For everybody who is just listening to it as an audio podcast, go down here in the show notes. If you're listening to this on our Internet radio station, go to DUB DUB DUP, start a break dot io and look for start up a heat map. Let's have a look here what we are seeing, right. So basically we start out with the investments and the interactive chart that I have here and strong qt with the amount equivalent to the sum of three quarters of two thousand and twenty. So what should this tell us? The people who can see see that London is the number one in like investments in cities Paris is number two. We're talking about equity investments, right. Yes, these are empty investment. Harris is number two, Berlin is numbber three, and then we have Amsterdam...

...and Stockholm. Yes, I think these are not necessarily sorted in rankings. Might be that Berlin actually leads before London, before a sorry, Britain, before Paris, but it's changing places all the time. So you basically see London on the top and then behind its Paris Berlin. Quarter to quarter, one of the others better. And these are the three leaders in the terms of investments. And then this is by a far margin. You find then the others afterwards, which are Stockholm and Amsterdam, changing orders as well. I mean in general, the main message that you should take from from that data is that two thousand and twenty one was really an exceptional year. After two thousand and twenty had stagnant growth compared to two thousand and nineteen, two thousand and twenty one saw a hundred fifty percent increase of startup investments in Europe. So one point five times as much investments as the year before. Absolute records. Basically, Q two was almost the volume of the whole year two thousand and twenty. So in three months you had as many investments as you had in the year before, which had basically the same level as all the years before. So there was a boom. There was really a boom in investments and that was remarkable. Basically not it was not obvious that after the pandemic, basically you would see such a strong recovery. MMM. I just ancrgate that the news because soon the month will be over. And I always track interesting startup news from the German speaking area like DSA, Germany, Switzerland and Austria, and I've noticed that there is already a ten building startup program running in Germany that should slowly pick up speed, that should become active pretty...

...soon. We talked to Mr yet some back last year in summer about it and we already have and request out there for his for his replacements from the current government, but no confirmation yet. Then there is the initiative of Germany and I do believe, friends for another ten billion program then we do have Mr Lindner, who is the secretary of finance in Germany and also head of the Liberal Party in Germany, a member of the coalition government, so he has a lot to say he's also finance minister and he was just in the news that he wanted to catch to a hand out one billion euros for scale ups. Do you think those numbers will drive the startup investment in the future? Yes, there is a lot of government money in the market already and it's not going to decrease over time. Since there's many initiatives, you're listed a few, there's always the question how much of these announcements will actually turn into reality. But we have seen the past that, for example, the EIF, European Investment Fund, has been used often to manage this these funds. That's also how they accruede a lot of competence in this area, and the EF is generally seen by professionals in the startup world as a good manager of these public funds. So in the in the end we see that it works, that there is a there is a professional fund management with a good understanding of the market workings and dynamics investing these kind of funds, and then, yes, it is really just an increase of the available capital for startups...

...and it will have like a positive effect. Of course, public money comes with strings attached and that's something that many players in the start up ecosystem see with also worrying. I if you look, for example, at the discussion that you have around the European Innovation Council, which is more like an accelerator type of model, which is also in cooperation with the EF and investing in startups in an earlier stage or series a stage, there there is a lot of questions around whether the model, how the money is invested and the requirements that the startups have to fulfill are actually market standard, if they are actually helpful for for the startups, or if there is a there's also some snowing factor in that, because public money works differently than private money, so it's not easy to say if public money can be seen as equivalent to just the private capital as, of course, also the argument that public funding goes into areas that private funding is not. See if you look, for example, it hardware, it's something that classic VC's with more private lps have shied away mostly over the over the years and they are not investing in hardware or also high tech that has a long time to market, high development costs, etc. That's where public funding is being used a lot and and I think for these kind of startups that are in this area, especially clean tech batteries, you will see an advantage from public funding. In other places maybe the private...

...funding would be preferable because it's more flexible, faster movement. So you will maybe not see like the the kind of platform successes that you've seen in the US over the last decade from public funding in Europe. I think that's that's probably not going to happen. Talking about funding, you collected larger steals in Que two thousand and twenty one. Berlin on Top with two fundings and twenty six, series nine hundred million the as dollars, and Flink, the quick delivery start up, with the series be of seven hundred fifty milled in you as dollars. Then there's Barcelona. Then there's Sweden. They are likely net light, not located in a big city. We do have a cap capital on tap in London. We and what really surprised me, with five hundred fifty five million series a in Malta. That that is a quite a big investment for such a small and beautiful island. Yo, neaty growth equity in Munich energy. Then there's London, again Monso. Then there's my good job and talent, and then es Quanto in Paris, which is actually quite a few surprises in there. I would have expected London to be a little bit more on top with bigger fundings. Right. Yes, yes, this is surprising and it's also not the picture we got used to. So there's changes in the top ten. We more often see large rounds in unlikely places like I mean Malta has been, of course, a place where many Fintech and also gaming gambling companies have had their headquarters. So you have seen some of the larger rounds going to Malta also in the past. So they popped up once in a while, but here. Yeah, that is something that that...

...definitely speaks for, for for the Multese ecosystem, at least in terms of headquarters. I don't know the case if they are really based in multi if the team is really there, or if it's more of a choice forget to put your headquarter. You talked about cities and that was something that really was interesting for me, and we now looking at a map of Europe. By the way, you cannot find all the data we sharing here on the data you can get from your link. You have to be subscriber of the deep ecosystem, but noneless. They were three years average funding. Use you rank the city spy and of course there's London, there's burling, this Paris, this Tel Aviv, Stockholm, Amsterdam, and then this. Already, Nick will really surprised me with Madrid, health and key and Dublin finishing this list. That that was quite surprising for me because I haven't had them, like say, on my mental radar as start up hups, at least so far. M Yes, that's what we often realize when we look at the data and we do really a clean analysis of what the data means, then we find results that are that are surprising to some practitioners because, and fortunately, we are bombarded with a lot of marketing data out there and rankings that are made to make us believe something, while if we use, for example, a simple a simple metric here that creates some clarity, which is who has, on three years average, raised as how much did they raise on three years average, so every year past three years, and then the average, you'll see that there's around eight cities in Europe that managed to raise one billion...

...euros per year, every year on average, and I think that's a simple metric that you can put up there. We call this the the Unicorn ecosystem just because it's one billion, and we say this is a city that regularly raises more than one billion euros, and there's only eight in in Europe, and these eight might also be a bit surprising, for example, Munich. You said Munich, you wouldn't have put them there, but Munich is actually one of the fastest growing ecosystems in Europe. It has a long term investment growth of over seven hundred percent. So that is the growth of that three year average and that puts them into this top list. Two years ago they didn't have one billion in investments per year, but now they are far beyond that result. So it is it's important that we try to understand the real numbers and create a geography in our mind that actually matches the reality. And yes, Madrid, Helsinki and Dublin, they are there. They are close to this one billion, the closest, closer than others. Dublin has on average six hundred sixty million, as in ki six hundred and eighty million per year, Madrid eight hundred million per year. So these are these are hubs that are on the way to get to this ecosystem Unicorn states. What actually surprised the hell out of me, just next to it was the long term investment growth, because on top their three cities, Prague, Bucharest, mint that out. Maybe Minsk, I get a lot of outreach from there for startups encoding services, but the other two are would not have put there. Really actually surprising. Also utreshed, I've heard in the Netherlands it's very nice. Of course, Munich, you already said, more than seven hundred percent long term investment growth. doostled off. Also in Germany, more than six...

...hundred percent long term growth. Amsterdam six hundred percent, Frankfort five hundred sixty percent. Who Home Turf? And then there's Antwerp. I do believe. They're in Belgium, famous for diamond trading, right, and talent in I don't will fast. Sorry, diamonds and fashion. I'm it's a fashion talent. And of course, Tell Aviv very interesting. That means Eastern Europe is growing pretty fast and it's a good things to happen. Right. Yes, you see these super large growth rates in places that, of course, had a low level of investments before. However, for this. Statistically filtered, I think the threshold was that they had at least two hundred million annual investments before. So that the the growth in still is telling US something. Of course, if you had no investments or, I don't know, a couple of thousands and now you have a billion, like book arrest, with you Ipam, you have of course a huge jump in investments because of you, ipath, and that put Bucaras there, but it's not the only case. So there's other startups there as well that have increased the fundraising, and so Bucharest has really made itself and up. That is getting closer to the to the to the top. Of course, wasn't in the top ten and the total numbers now I was not close to to those yet. I'm that is what I would call the paypal effect, also famous for the Papal Mafia. It's basically people who have been at paypal and then start successful companies. You see the same effect here, for example, in Berlin, and twenty six for me and twenty six employees starting new companies. And I do believe you. I path is also such a center of growth and I do believe they're they're more they're important for teaching the skills. Plus I do believe exits are...

...also important because that lets that floods a city with investment money, and I do believe some of the exits that we've seen, for example last year in Frankfurt, they'll also push the ecosystem further. Talking about pushing the ecosystem further, here we are now at the seat investments and you track the number of these between five hundred thousand you as dollars, and two million, you as dollars, and it goes a little bit up and down. But actually I would have expected a much bigger bump during the times of Corona. Bump up or down down. Okay, okay, good. Yes, the the seat investments are quite stable. They are rather declining over time. So, year over year in two thousand and twenty one you had minus thirteen percent. Of course there's a certain reporting leg of course you have reports on smaller seat rounds only later. But even if you go back the data here reaches two thousand and nineteen, you don't see a big different. So it's not that this reporting leg my makes it completely different. So the surprising thing to me is that seat is quite stable while later stage is crazy going through the roof. Basically, you have hundred fifty percent increase of investments in later stage and then you look at seat and seed is just not doing anything. It's just staying there, even declining a bit, and I mean that for me personally, looks like a problem. Or maybe it's going in waifers. As we said, seat successful companies and then it takes some time until people drop out and then start their own business again. Maybe we will see you data, I'm sure, will show in twenty years or something. Talking a little bit about the top hups here, London minus four percent in terms of seat funding,...

Paris minus nine percent, Amsterdam plus eighty four percent, berlins eleven percent and Stockholm minus forty two percent. Do you have any indications what led to the bump up in Amsterdam and the bump down in Stockholm? Yes, so the interesting thing is that the trend, the overall trend of a slide decrease is also seen in the cities. But then in Amsterdam, for example, where you had this huge increase also of the total funding, you see that it's parallely going up also for seat funding. So that, for Amsterdam, looks very, very healthy. So the ecosystem in Amsterdam seems to be in a good shape and the indicators go in parallel up, while in Stockholm you have a huge increase in funding, which is drive by a few startups that raise a lot of money. So, for example, climber and Northwold, which are exceptional great success stories and rightfully put Stockholm on the map as the place that has a lot of UNICORNS per capita and is really punching up off its weight. But also shows the problem that sustaining that over time is extremely hard. If you have a small ecosystem, if you don't keep the funnel up, if you don't have enough seat stage investments, it will be difficult to have these high growth success stories at the end. So I think that for it really depends on city by city. The general trend is stable seat funnel, maybe decreasing a bit. That will be a problem down the road for five years you will see also that we have difficulties in finding so many success stories and in places that are decreasing strongly in seed funnel you will have less...

...you will have less large rounds also in the future. So I would say if that persists for a city, it will also disappear from our map in total funding. We are not even half through the report you you have been sharing with us. The last thing I want to talk about here is early stage investments by sectors, especially talking about a for Foo quarter graph you shared here with us percentage of deals and deals since so. That's basically the more deals, the higher the percentage of the deals, the more they are growing. Yes, exactly here we look at is there a change year over year versus the long term position of that sector in the in the startup world. So since two thousand and nineteen, three years back, fin tag is really one of the player, one of the sectors that receives a lot of investments. So that's why they are vertically very high up. And then the question is, does it also grow, and I do we also see in two thousand and twenty one? Is it like a higher amount in two thousand and twenty one than in the other years? And yes, that's the case. So fintag is high up and still growing. So that's why it's in the stable growth sectors quadrant, the upcoming growth sectors. For them the position is they are not so so large in the last three years. So they are not like a super important sector yet, but they have a strong growth so last year was exceptionally strong for them. So if you see the most right hand side, you see clean tech, the bubble on the center. Yes, so clean tag in two thousand and twenty one was extremely strong year and that means it's it's coming up in terms of growth. It has a increase over time and it's really like an upcoming growth sector. And there's quite a...

...few of those growth sectors that we can identify here. Of the education, for example. I should also home and living boards, mobility, as fashions, biotech, life science. Yes, the distakes always. That's that's pretty interesting. So these are the factors that have grown in the last year versus the three years. MMM, I see. See, as we promised our our audience, we will have you back for at least four more interviews. We share some data with the presentation. You'll provide us with link down here in the show notes or you'll find it on our block, because we are already talking for more than thirty minutes and I do believe for everybody who's just listening on all your podcast this gets pretty tired. Guys, go on Youtube, look for the video and you'll see we're all with sharing some graphs along with that. Thomas, would you like to share one or two more highlights from your report as a final closing remarks of this podcast corporation? Yeah, maybe I can just say as a summary that we see a lot of dynamics in the ecosystems now. So the question of geography is is changing a lot. It's not the case anymore that only London and Berlin and Paris are on top. There there is these breakthroughs of other places and I think we will see a lot of democratization of innovation in the future. There is a race smaller hubs coming up. Your hometown, Frankfurt, is trying everything they can. We see Lisbon there, we see Bouch arrest. So it's very exciting times now. This kind of democratization process is not only exciting for politicians who...

...can brag about it, is also exciting for founders who are in these places and maybe decide either to move to another hub that's booming or stay in their place and help to build it up and help to put it on the map. So I think it's one of the most exciting times of this of this startup development and yeah, so I love to follow it and happy to join again this podcast and explain more about the data recollect everybody who has questions now still open, questions about the data or questions we should be covering in our next recording. Reach out to me, Joe at start up break dirt io, and will consider it for the next reporting guys. Thank you very much, Thomas. Thank you very much, looking forward to have you back in let's a approximately three months. Thank you very much. Being fins, always thinking job. That's all. Folks find more news streams events at interviews at www dot startup dhio. Remember, Sherry is carry.

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