European Startup Pulse
European Startup Pulse

Episode 1 · 5 months ago

Europe’s most attractive startup hubs? Berlin beats London


This is the first podcast cooperation of DEEP Ecosystems (with their product Startup Heatmap Europe) and, before we started our cooperation. The podcast was originally published on May 6th, 2021. 

"When we started 5 years ago, London and Berlin were unreachable, getting 60% of the votes. Now they are between 30% and 40%." Thomas Köster, President Startup Heatmap Europe

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Find all options to subscribe to our newsletter, podcast, YouTube channel, or listen to our internet radio station here: has the highest share of female entrepreneurs in Europe with 34% of the hubs we are tracking. On average only 15,5% of startups in Europe are founded or co-founded by women. Thomas Köster, President Startup Heatmap Europe

The President/Co-Founder

In this interview, we talk to Thomas Köster ( , President and Co-Founder of the Startup Heatmap Europe ( Their Annual Survey is out for the 5th time and we take the opportunity to talk to one of the authors about their findings. You can learn more here: Direct Link:

In our Heatmap Survey, we only publish the top 50, but we are tracking more than 200 cities in Europe. Thomas Köster, President Startup Heatmap Europe

27% of startup founders [in Europe] are starting their company in a country, they did not grow up in. … in the top hubs like Berlin and London you have a share of more than 65% Thomas Köster, President Startup Heatmap Europe

Welcome to start up bread, that I own, your podcast and Youtube blog covering the German startup scene with News, interviews and live emits. Welcome, everybody. This is Joe from startuperator, the Oh, your startup podcast, and you to blog from Germany, as as well as the words first Internet radio station dedicated to startups and tech companies. Make sure to eat the like and subscribe button and leave us a good grating wherever you're listening to this all watching this today I bring you another expert interview, together with Thomas here. Hey, Thomas hid in Hijol, nice to be here on your podcast. Totally our pleasure. The reason you are here is, for the very is very simple, because you are one of the authors of the most recent report of the Startup Heat Map Europe, which I downloaded. I found very interesting and so I thought, let's talk to the authors, and that's why we are here today. Can you tell us a little bit about the background, where this is coming from and what you did in order to get this report, of right now, more than eighty pages together? Yes, exactly. So. The start up heating map report is actually come out for the fifth time already, for the last five years it's been a steady publication. It is produced by entrepreneurs, so everyone in the start up heat map team has an entrepreneurial background. We work in the startup scene and five years ago when we started, we were really interested to understand what are the cross border relations of the startup communities in Europe, what's happening in terms of connecting across Berlin, London, but also other hubs like Frankfort and and all the countries in Europe. So what we did was designing methodology to understand how these connections are growing. So one of the main elements we look at is the perception founders have of start up places. So that's why we also have this by now quite famous ranking of the most attractive start up hubs in Europe, because we asked the founders, where would you go if you could choose freely in Europe? Where would you go to start your company? And that gives us this, this prominent ranking, and it has been quite interesting to watch the changes in the rankings over the last five years. And one thing is interesting. The top ten, for example, is quite stable over the time, but you see developments that are, let's say, long term trends so, for example, that you see a more democratic landscape before the top hups. When...

...we started five years ago, London Berlin, they were unreachable. They were sixty percent of the vote. Basically, everyone said, if I could choose, I would go to London, I would go to Berlin. Today that picture is quite different. They reach something between thirty and forty percent now, so that's a that's a huge decline and in, let's say, preference. And now we have like we have more cities that are on an equal footing, if you will, which is quite good. That means they're more and more places in your way can successfully found a startup company, and I do believe so far. Let me quickly check the document I have here right now. You have on your list. I do believe. Oh yeah, fifty two cities, and I would be more than happy if it would be two hundred and one point in time. Yes, indeed, is actually more than the fifty two that we publish. We track about hundred nineteen cities. In principle you could name in the survey any city you like. So I don't know. In the area of Frankfort there's probably some smallst cities that could also be named. I know my cofounder, for example, comes from Marb work. My Book hasn't made it into top fifty yet, but still they have a interesting startup scene there. Nevertheless, we do try to track more cities then then the most popular ones, because there's of course other factors as well at play, and this is what we have been building over the last five years. Is More than this survey. We do have a database that tracks a lot of ecosystem dynamics. Got It starts really from from simple things like investments. How do the investments develop? Also different sectors in like what is the fintech scene in the various places? What is the seed investments situation versus the total investments? Or looking at other dynamics that are less monetary. For example, you can look at diversity. How many female entrepreneurs do you have? You can look at the meet up scene. So we have collected about hundred metrics that we track and they go from really diversity to community activity, transnational connections, expansion locations, how many Unicorns opened in office in your city and so on. So we really have like a large data set that allows us to understand the various developments in the cities and yeah, on the website they startup heat mapcom. You can browse those, those metrics and see for the various cities, the the scores and rankings for each of the the the metrics. Of course, as always, everybody can learn more down here in the shourn notes and there is a link and I just see the trusts score...

...of Frankfort is seventy one percent, which actually means right now nothing to me. Can you like get in your the survey data actually tell us how to interpret the data we are seeing there? So you're looking at the trust score, which is basically the popularity. Now, so this is based on the on the vote by the founders and is calculated in relevance to the results of all cities. So, simply said, the higher up in the ranking you are also the higher the percentages. When you now see a seventy one percent for Frankfort, then you would also see the rank next to it. And if I just click here and see it myself, so that would be the rank thirty four in in the whole of Europe, which is, for Frankfort, probably not bad. It is a like it's not known as to be one of the top ten hubs in Europe. It is fairly popular. People know it. There is some international connections as well that you can detect. People from outside Germany have voted for Frankfort have said I can imagine to start my company here, but it's not like top of the mind of every founder in Europe yet top of the mind. Let us get a little bit into the executive summary and everything that goes with it. Basically, what did you do to get this start up heat map two thousand and twenty one start up? He met Europe Two thousand and twenty one together, and what was like the major findings and what was the finding that surprised you the most? H Yes, so the work for the heat map report takes almost a full year. It includes a survey of a representative sample or founders from all over Europe. So every year we're putting together like this, the sample where we identify founders that we approach to fill the survey. We make sure that this is balanced in terms of the regions and then we also correct these results so that if we don't have like the representativeness in a certain country, then we will correct the results in that manner, so we have a robust sample. That's that's for. That's very important to understand and that's why also take several months to run that survey. The survey gives us a lot of Selim and actually would have found very interesting is that you really directly select and approach entrepreneurs. For the very simple reason I found many surveys to be scooed towards the bigger hubs just for the simple reason that they're more people that can actually then either... see it, that have to time to vote there or just in total, more people more vote. So that also is something you guys are correcting, which I've found very interesting, pretty good, and it gives a lot of smaller cities, like in terms of absolute number of startups, much better visibility and much better scoring than it would be otherwise, which I also find pretty good. Yes, so we we have one advantage here, but there's of course a lot of considerations when looking at the data. So what we saw with other surveys that are connected to an event, for example, is that you collect a lot of votes from or survey participants, from the participants of that particular event, and if that event is strong in a certain city or region, then you will have like a skewedness towards that. This is what we try to avoid by spreading our our sample on this in this way. So it is very important for us to to maintain that. Approach is, of course, making life a little bit harder, because you need to identify the founders and then you need to approach them and ask them and you have a certain response rate, but in the end I believe it's more robust. Also, we we work with the population size and not with the let's say, with the startup size, or so the number of startups or the number of investments and so on. That's that's a difficult decision to take, but we believe that if we would use like existing databases to correct, let's say, for the number of startups, then we would have, like again, the problem that potentially the database is skewed towards a certain geography and has up just a better representation one country then the other. So if you use that, our sample would be againstkewed. So what we used here is the most secure way of of waiting our our data, and that is the population I see, and getting a little bit into the data. Would I like WHO's that? You guys had management summary that basically what he need to know. Oh, this bike corona, the overall funding has grown by fourteen percent. Was this like in line with the growth you've seen with a bigger WIZ IT smaller? Yeah, so the executive summary Basically is based on, okay, what happens in Europe in the startup scene in general. And again here this is beyond the survey. So we look at the data. We use different data sources like dealroomcol crunch base etc. And what we look at is the annual change of investment growth in Europe overall, and then we try to understand is there like an effect by any external shocks, for example covid or...

Brexit, etc. And there was a shock by by covid. We actually would have had a stop of growth of funding in Europe if there weren't the government intervention. So what we were able to do is to divide between what is we see funding, let's say the typical. We see funding that's more from the private side. Of course there's lps that are stayed backed as well. So you definitely have some government money inside the VC industry, but in principle that has been stable over the past years already. So we didn't change the the picture because of that. But then, additionally, we had a lot of government interventions in two thousand and twenty that actually managed to maintain the growth of we see investments. That we saw also in two thousand and nineteen, which was fourteen percent. So also two thousand and twenty, the VC investments grew by fourteen percent and that is thanks to the government interventions. If you count the government money in, you have a growth of fourteen percent. If you wouldn't have counted the government money in, then it would have been stagnant and basically the same as two thousand and nineteen. So covid did have an impact. It would have stopped the growth of the VC investments. It wouldn't have led to a decline. It wouldn't have been less than two thousand and nineteen. We would have had the same but we we the government funding. We even saw a growth of receie funding. You also right about the challengers feast competition. Twenty seven percent of founders start the company abroad, which is pretty good for you. Do you have some kind of measure what those like? The share of founders who are from Europe and settle in another city or who are really from abroad, like talking about Latin America, Africa, Asia, the US, Canada and so on and so forth. Yes, so, first of all, it's very interesting to see that twenty seven percent of all the founders that we have in Europe actually now working and living in a place that they didn't grow up in. And that's, by the way, the measurement we're using here. We ask the founders where did you spend most time growing up? So it's not the nationality. Again, if you ask the nationality, you would have like you wouldn't measure the same thing, because I have a CO founder who has grown up in Germany, but his nationality was in German. So is that now someone that really moved? Now? He grew up here. So when he's still in Germany, he's not a far I'm not a mover for us, and you do and you do it based on like a whole countries. So that means I didn't grow up here in Frankfort, but I would still not be considered being I'm founder abroad... your system here now, because you are still in the same country. We do have the city, we have the city level, so we even know that. How many founders change the city. This percentage is around forty percent, if I'm not wrong. So the it's even higher, but that's natural. A lot of founders change the city to start up, but they stay within the country. Now twenty seven percent is the average of all founders that are form boy, which is quite high if you consider that in Europe the on the individual level, only about two percent of the population is foreign born. So it's much more higher. But even more interesting, in the top hubs like Berlin or London, you have percentages of foreign born founders that is above sixty five percent. So to be a top Hup, you really see that effect. To you need to have like a huge international base of founders coming to you, because in that that's very logic. If you think the term hub means exactly this. You are a hub if people come to you, settle in your city to run their business there. That makes you a hub. And so if you want to be a top hub, you have to have a very, very high percentage of foreign born founders exactly. But you were asking also how many people come from from outside Europe, and that's it's very interesting. I will look up the number while we talk, but it's important to understand that migration is not following, let's say, the the idea of okay, everyone is moving from the poor countries to the rich countries. One interesting finding is, for example, that the highest outward mobility is from the UK. So UK born or raised founders are the ones that are most likely to leave the UK and start in another in another country in Europe. But it's also the other way around that the UK is the most likely to be chosen by other founders who leave their country right so they also have the highest percentage of inbound migration. So there is quite a we call this whirlwind and there's in in migratory studies here there is this term the world wind migration in the European continent. The World Wind means you see migration from Western countries to other Western countries, if you want to use the term Western here. So you would see like the core European countries interchanging high also in IT professionals. You see that and you see that also with founders. You see a lot of change between the UK, Germany, France, the nordics and so on, Ben it looks. And then there is the other part of migration, which is from, let's say from outside Europe or from cee or southern Europe to the northern countries, Western countries, which is not much...

...higher or even the same. So you don't have like only this stream from poor to rich, so to say, if you want to put it very bluntly, that is not the case. You actually have a very strong whirlwind migration. And then you have this, of course, also the attraction from non European founders that come there, and we do see always a steady stream also of US based, US born founders that come to Europe. That always have played a role and they they have come to Europe steadily over the five years. But let me just quickly get you the number. How many come from outside Europe? A Maj just add during the time you're looking up some data. That is like a popularity vote you have here and paxit pushed down London. We're boiling, took over just in founder popularity and also the virtualization of event generated fifty two, one hundred to sixty percent growth rates in meet ups in top hubs where, admittedly, I've seen a lot of digital only, remote only events popping up. Let's say, corona hit stronger in March and then in April, June it started. It got really, really crazy around Christmas and before Christmas and then it kind of dropped a little bit. But would have always seen and heard was a lot of people just register for an event and actually don't show up. So the no show rates are usually pretty high. In terms of MEETUPS, for example, I talked to the host of the vintake meet up Frankfort, the biggest one in continental Europe, of Finntake meetups, and he says he has a no show rate of at least a third. And in digital events I do see sometimes even half of the people are just no shows, and in the free events especially. Yes, yes, of course, but it's a very interesting statistic that you mentioned. Maybe I can for the youtube viewers. I can share my screen here. You were mentioning this statistic about the effect of Covid, so to say, on on the meet up landscape. Our assumption was when covid hit, that meet UPS would have taken would have taken a big hit, and we also saw, actually the first thing we saw was that in our tracking system, where we were tracking various websites that are listing meetups and and events, that many of them stopped doing that. So that was, for us, the first indication that we felt like, Oh wow, so meet ups are not going to survive this. But then we this source that was stable,...

...was meet UPCOM, so we now rely on this one, and here we saw an interesting development. Actually, the meet up attendance increased by thirteen percent. Now, okay, attendance is the registered attendance, of course, so it might be an effect that few fewer people actually joined the events, but that would be a stable change over all cities, I would say, and in general the numbers went up. So the what you could say the interest in joining meetups increased during the during covid which at least gives us a positive sign that the scene is alive. People were not turning away from entrepreneurship and saying like, Oh, okay, so now there's nothing we can do anymore, we give up now. They were active, they were looking for possibilities to still exchange and meet UPS was a place state turned to. But even more interesting is that you see here there's a huge difference between the locations and actually in some places you had that effect that the meet up attendance was decreasing. So, for example, if you look here, Madrid, minus fifty eight percent. So yeah, it also noticed Frankforts, twenty percent, unfortunately, but also apparently Munich had a big minus sign, minus twenty one percent. And when I've seen this plus the plus fifty one percent in Berlin, I was wondering if this digitalization remote only did not just lead to people just focusing more on the interest and, let's on physical location, which was just the thought I had in mind at this moment. I think it is. Yes, I think that people said, okay, I go to a meet up to learn something. Where are the best speakers? Where is the discussion happening that I want to join? Where do I learn something? And they went to the places that had the strongest brand. So you see like here, the top hubs that people look out to, saying, like this is a hub where where I feel something's happening. People were going to so that, I think, is is this effect. It was suddenly possible to join meetups virtually in other places. So you decided, would I go to my meetups in Madrid with speakers maybe from Madrid, or would I go to London where I have like a maybe the founder of a Unicorn speaking at the meet up. So people were choosing to go to the to these places, and I think also for the speakers, I think it was the similar effect. Those meetups also got more interesting because suddenly they could invite speakers that were not from Europe, that maybe had a world rank. It was much easier to reach these guys because in a virtual world you have a level playing field.

You can invite basically everyone to join your meetup. I think that is the effect here. That is pretty interesting. What would have found, what I even shared on social media, was very astonishing dangerous developments in your highlights. Discrimination against women entrepreneurs amount to two three building years in two thousand and twenty. How did he come up with that number? And have you seen like have you seen data in the past and the can you make up a development there? M Yes, we actually created a full report on female entrepreneurship in Europe end of last year and for that we analyzed very interesting data sets. So we created the data set of around Twentyzero founders to identify how many female entrepreneurs we have in the top cities in Europe. So we really were keen on develop because city level database for thirty cities where we could say, okay, we have a resentment representative sample for each of these cities, saying how many female founders do they have? This works by the name of the person. So the Algorithm detects the name and tells us, okay, out of those two thousand founders we have in Berlin, so in so many are female. And with this over like a large data set, with Twentyzero, you could back like some thirty cities, and that was very interesting to see the percentage and the differences between the cities. So, for example, we found that Vienna had the highest percentage in all over Europe or female entrepreneurs, with thirty four percent of female entrepreneurs, and that that's a very interesting finding. In general, there's only fifteen point five percent female entrepreneurs in Europe. That's the that's the average in Europe. In this whole data set, fifteen point five percent of founders are female. And here we're talking about founders and CO founders. Most statistics ask does the startup have a female co founder, and then they count as one and they divided by the total number of startups. I think what we were able to confirm is that even if you count the number of individual founders, you get this percentage of people out of the total pool. That's very interesting because it makes a difference if you have one female founder in a team of four where three three are male, or if you have two female founders in a team of three. Right makes a difference. So we wanted to get behind that. Good thing is we confirmed the numbers that the others had as well. That the in the end it evens out. It's not that it makes a huge difference and in the results, but it could have been. It's important that you do these checks. Now the other question that is always in the media is how much we see funding goes to female founders. And there is a statistic out there that only three percent...

...of we see funding goes to female founders. That is always based on that number of female founded startups. And hear what they do is they take the they take the all female startups. So they say, is this startup completely founded by women? And then they say we we count that one. And teams that are completely founded by women only raised three percent of the total we see funding in Europe. Now this is a problem. I agree. There is very few all female teams and they also get very little VC funding. Okay, but it is not yet the end of the research we need to do. So we need to go a little deeper and understand what is the situation. So we try to understand what is the expected number of we see funding that female entrepreneurs would need to get, and we use that fifteen point five percent number here and said, okay, if it is fifteen point five percent, then they should reach also fifteen point five percent of the VC funding, right. That would be the the thought. And here we compared this perspective and saying like, okay, the female entrepreneurs. And here we take founders with had at least one female startups, with at least one female founder. How much percentage of we see funding did they get? And how much is the difference to the fifteen point five percent of all recie funding? And that is three billion in two thousand and twenty, which doesn't make the life much better for them. It is still there's huge discrimination. It is definitely harder for me entrepreneurs to get receive funding. I can totally see that. And now I'm sure how you can kind of up with the number I have. Yet fifty eight percent of startup community trank due to the pandemic, I do believe, just in total number of startups, entrepreneurs. Well, this is a funding, funding, okay, and internationalization rate of startups false below fifty percent. Oh, what do you mean with that? HMM. Yes, so we were looking at how international startups are by asking the founders whether they have international branches or if they have hired international team members or if they have raised from international investors. So we have asked for these different different possibilities for internationalization. And then we are and that. We do this over the years and we see the development of the rate. So we see do does it increase? And until two thousand and twenty it did increase. Every year it was a little bit more, and now it fell below fifty percent. For the first time in two thousand and nineteen it was something sixty percent and...

...and now it fell to forty eight. So the pandemic had an immediate effect here. And here we can really say it's an immediate effect because we also ask the founders how fast do you did that happen? And over the years the founders told US internationalization for them happens in the first year and the first year of establishment internationalization is already happening in most of the cases. So when we see a drop in two thousand and twenty of people tell us in two thousand and twenty we are not international, that is an immediate effect of of covid because it would have happened in the first year of establishment. And althose startups who took our survey that were in the first year didn't manage to establish international ties yet. That's why the number dropped, I see. So basically what we did right now was just going through the management summary and, as people could tell from your enthusiasum, there's like a lot in the almost eighty pages left there. We will leave a link down here in the show notes for everybody to find the report. And before I say thank you very much and goodbye, what was, for you, the highlight? What was the most surprising piece of information, data point that you found in this survey? I mean, there's too much things to point it down to one thing, but for us the top three Aso work. Top three works. Okay, so the main thing is more of a general observation. Is the this question. Do we see a more democratic development or do we see a more alcopolistic development in Europe, because at the moment we have still like the dominance of some small number of hups, London, Berlin, maybe Paris, and then it's already getting very, very problematic. So this was a very all coopallistics structure. You have most of these hups raise more than fifty percent of all the re see funding in Europe. Now the question is, is that going to change over time? And, as I said, the percentage of the vote that these hups get is diminishing over time. Also, we saw that we have more and more cities where founders were able to raise more than one billion Europe. So that's the so called Unicorn Ecosystems, where the total amount raised in one year is above one billion euros. And now we have six cities that manage to do that. Six it was only two in two thousand and fourteen. So increased over the last six years dramatically, but it is still a small number. So for UST the most interesting question really is what is the opportunity here? Will more see it is raised, to be prominent...

...and functioning start up hubs with a functioning ecosystem that produce results, or is this going to be a small club of a few cities where you see like continuously successful startups. I'm not talking about outliers like one time you have like uipath coming out of book arrest and becoming like the the most valuable start up in Europe. Okay, that happens. It's an outlier, I would say. But what we are interested in is book or as changing in an ecosystem that continuously strives and produces continuously successful startups, like London and Berlin do already. And that is the question that that still is out to be answered. We see tendencies to a more democratic ecosystem landscape, but it's it's still not decided. And also the question will be how big will that club be? Will it be as very small club with baby five or six players, or will it be something where we have thirty cities in each country will have a functioning ecosystem? And that's that's still to be debated and we try to UN to understand the dynamics that lead to this. Just just on the thing left for me to say, great closing words. The dynamics, I yet to be understood. I personally would guess that there will be like two thousand and twenty five big startup ecosystems here. Just just in location we have, like, a lot of population, a lot of potential for good entrepreneurs and over time also the VIC's neat to get out and start looking beyond like the top three to top five hops, because they are also in competition. That's at least what I hope, and they will be a lot, hopefully a lot, more interesting startups. This covered by them, Thomas, who's just a pleasure having you here. You'll share the link with me after the recording and so everybody can download from the show notes the report. Thank you very much. Thank you as well. If you are a professional looking at the European startup scene, Germany is a place you cannot miss. Fortunately for you there is start up Rad dot EO, the authority on German startups. This English only podcast brings you fresh interviews each week. Most likely you have never heard or read anything on these startups before in English, but you will in the future be ahead of the curve and subscribe to start up Rad dot EO podcast or check for the start up Rad dot EO Internet radio station. Check your Alexa for the Startup Rad dot EO skill as well.

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