European startup scenes compared: Tel Aviv, London, Paris, Moscow, Berlin
How do European startup hubs rank in the world? Not spectacularly, it turns out. Only two European ‘hubs’ make the top ten – Tel Aviv (2) and London (7). The rest of the top 10 are US or Canadian. Berlin, for all the recent hype about competing with London as the place to be to launch a company in Europe, finishes behind Paris. We highlight a few findings from the report, which you can download here.
Watch the interactive infographic from Telefonica:
Global rank: 2
Tell aviv has the highest density of startups in the world. There are also 63 Israeli companies listed on NASDAQ (more than Europe, Japan, Korea, India and China combined!). Almost 40 % of Israeli hi tech employees work in the R&D department of a multinational company like Intel, Microsoft, Cisco or Google, all of whom have subsidiaries in the country.
Tel Aviv has the highest output of startups and a healthy mix of startups in all stages. Importantly, Israel attracts a high number of immigrants. As the only “European” startup hub, Tel Aviv has no funding gap.
The Tel Aviv scene is too dependent on tech-driven exits rather than on big market winners, the report warns, which could lead to a contraction or ossification of the scene. Also, the Israeli tech scene is behind Silicon Valley, the report warns.
Global rank: 7
“The most successful startup ecosystem in Europe, producing the largest output of startups in the European Union by far, but its output is still 63 % lower than Silicon Valley”.
“The only comparable hub to SV. It offers a wide range of support networks, capital infrastructure and diverse talent.”
London is the female tech entrepreneur capital of Europe. It has the highest proportion of female tech entrepreneurs in Europe (although it’s still only 9 percent.
Funding gap, probably caused by a lack of super angels and micro VC’s. London entrepreneurs are more risk averse than SV counterparts, and are more likely to be consulting next to their activity as entrepreneurs. London entrepreneurs are “slow in adopting mobile”.
Global rank: 11
Paris startups are a lot more focused on B2B than SV entrepreneurs. On the downside, the Paris startup community is “not much of a magnet for out of town entrepreneurs. France and Paris has a long way to go in this area to be able to compete with London and Berlin.”
In general, attracting immigrant talent is a problem in Europe, it seems. This is a sentiment that was also expressed by Alex Brabers of GIMV at a recent VC panel debate in Brussels: he said much of the success of Silicon Valley was achieved thanks to immigrants from India and China, and it was just too hard for European companies to attract foreign talent – or for foreign founders to start a company in Europe.
Just like most other European startup scenes, Paris has a significant funding gap in the later stages: 95 % less capital in stage 3 (efficiency) and stage 4 (scale) than Silicon Valley startups. Funding in Paris relies more on incubators and self funding than on VC’s and angels.
Memorable quote from the report:
“Seen from abroad, France is the last country an entrepreneur wants to go”
Marc Simoncini, Jaïna Capital. (ouch!)
Global rank: 14
There are more entrepreneurs with Master degrees than in Silicon Valley, but also more dropouts who are entrepreneur. Moscow startups are less ambitious in the markets they tackle than Silicon Valley startups, and funding is far more reliant on friends and family money than on VC’s and angels.
Again, Moscow startups face a significant funding gap before and after going to market. Moscow startups receive 93 % less funding in stage 2, 94% less in stage 3, and 76% less in stage 4.
Moscow startup founders are in general a lot younger than their SV counterparts, meaning there is no health mix of experienced and inexperienced entrepreneurs in Moscow.
Global rank: 15
Berlin is “a magnet for worldwide entrepreneurs and investors”, like Alexander Ljung and Edial Dekker of Gidsy. Berlin even “feels like a startup itself”. Berlin is certainly trying hard to beat its drum lately, what with the arrival of a Pier 38-like tech hub ‘The Factory’. Geographically, its location is interesting – it’s more peripheral than Paris or London, but it does have better access to the Russian and Eastern European markets, which are less mature than the Western European markets.
Berlin has a healthy mix of early stage and late stage startups, but the report does ask whether Berlin will be able to live up to its hype, since it produceces 88% less startups than Silicon Valley. (Rude Baguette’s Liam Boogar thinks Berlin is too much hype and too little substance, but he’s paid to favor Paris over Berlin, after all ). Office space is cheap in Berlin.
Funding gap in the validation stage and after going to market, with almost 80% less capital raised than in Silicon Valley. The Berlin startup scene is more reliant on FFF money and bank loans than on VC’s and angels.
OVERALL CONCLUSIONS FOR THE EUROPEAN STARTUP SCENE
First, it’s clear that Europe’s tech scene faces a big funding gap. With the exception of Tel Aviv, every European tech hub has significantly less money flowing into the startup scene than Silicon Valley.
This has direct consequences on the ability to create big exits, as Axel Brabers of GIMV explained at a VC panel debate last week: “Getting a company to the exit costs a great deal of money.” Unfortunately, it’s only in the later stages and even post-IPO that companies create most labor, he added, so it’s something the European scene urgently needs.
European startups raise up to 94 % less capital in all stages of the startup lifecycle than their Silicon Valley counterparts. The report doesn’t explain whether this is because of a lack of active VC’s (like some VC’s think), or because of a difficulty for European startups to scale – it’s probably a vicious circle effect of both.
Second, European entrepreneurs are still a lot less ambitious and focused than their counterparts in Silicon Valley. European entrepreneurs are a lot more likely to do some consulting on the side than their Silicon Valley counterparts, even in London, which has a very decent startup scene. This is understandable, given how difficult it is to raise money in Europe (‘the funding gap’). Even dry freezed noodles cost money – but it will necessarily have an impact on the product and the speed of execution.
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