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SHM2019: Startup High-Ways are Redefining Location

Geography is a decisive factor for startup success. But while location is mostly seen as the choice of one particular spot, we believe the reality of transnational mobility and networks of founders has overcome these boundaries at least partially. Therefore, we propose a new way of looking at networks of locations bound together by founder inter-connectivity. Somehow bluntly, we use the image of highway systems, to depict the fluidity among startup ecosystems.

The Startup Highway System

A «highway» is defined as a strong connection measured by the recognition of a place by founders from another location. We have set the threshold for visualization at 3%. We define as mutual connections, where founders of both hubs recognize the startup scene in the other place and as one way connections, where we only see a strong recognition into one direction.

Founder recognition is based on >6,000 answers of founders since 2016 to the question of where they would like to start their company in Europe. This is an important proxy not only for the attractiveness but also for the connection among startup hubs as founders tend to choose locations they feel close and familiar with.

The Circle Line

The core of Europe’s startup scene is the “Circle Line” which is comprised of the top 6 hubs attracting jointly 75.3% of all founders in Europe in 2019. Together they have also captured >44% of the investments in the Top 55 VC hubs in Europe (10.4bn €).

Without exaggeration, we can state this is where the most entrepreneurial activities and opportunities flow in Europe.

And it seems that the hubs in the Circle Line are a complementary match: While London brings strong Funding Availability (endorsed by 95% of founders) and Industry Connections (92%), Lisbon and Barcelona bring great value for money (87% and 76%), Amsterdam has the best business environment (91%) and Berlin has a great Startup Ecosystem (91%). Access to Talent is rated relatively high in all leading hubs respective to the average in the top 25.

Europe's Top Hubs Are Complementary

Rank 2019: 1st
(+/- 0)

Marketshare: 37.91% founders (-2.69%)
Reach: 29 countries
Foreign-Born Founders: 70-80%
Strongest Vertical: FinTech (52.59%)
2018 Investments: 4,200 mn €
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Reputation:

Rank 2019: 2nd
(+/- 0)
Marketshare: 35.02% founders (-4.89%)
Reach: 27 countries
Foreign-Born Founders: 50-70%
Strongest Vertical: Consumer & Platforms (43.39%)

2018 Investments: 2,200 mn €
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Reputation:

Rank 2019: 3rd
(+/- 0)
Marketshare: 18.14% founders (-2.18%)
Reach: 23 countries
Foreign-Born Founders: 50-70%
Strongest Vertical: eCommerce (25%)

2018 Investments: 873 mn €
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Reputation:

Rank 2019: 4th
(+/- 0)
Marketshare: 15.23% founders (-4.98%)
Reach: 17 countries
Foreign-Born Founders: 0-30%
Strongest Vertical: Tech/Hardware & IoT&VR (14.30%)

2018 Investments: 2,400 mn €
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Reputation:

Rank 2019: 5th
(+1)
Marketshare: 14.96% founders (+2.87%)
Reach: 24
countries
Foreign-Born Founders: 50-70%
Strongest Vertical: eCommerce (24.38%)

2018 Investments: 372 mn €
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Reputation:

Rank 2019: 6th
(-1)
Marketshare: 10.33% founders (-1.85%)
Reach: 22
countries
Foreign-Born Founders: 30-50%
Strongest Vertical: Health & BioTech and eCommerce (15.63%)

2018 Investments: 358 mn €
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Reputation:

The Circle Line is particularly popular among founders from the West, the CEE, the Mediterranean and the UK & Ireland, where it reaches >75% while it only reaches about 60% of founders in the Nordics, the Baltics and Benelux.

The strongest connections within the network run between London and Berlin, where 15% of London-based founders would startup in Berlin and 10% vice-versa.

The connections between Lisbon as well as between Barcelona and London are the strongest outflows with 17% and 16% respectively.

It is equally interesting to see who is not included in the core network.

Somehow surprisingly the Nordics do not show a mutually strong connection to the Circle Line, even as they are often seen in close connection to London Venture Capital and Stockholm is ranked as the 4th largest investment hub in Europe. Although the Swedish Capital has almost always made the top 10 in our popularity ranking, their connection to London and Berlin remain one sided. Only 2% of founders from there were choosing Stockholm while the number was 17% vice-versa.

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