“In Estonia, it is super easy to start a company.” I am watching two aspiring founders in their early twenties at a startup meetup in Berlin. Chatting about which European startup hub is the best to build a company has grown to be commonplace during these events.
How come location is such a big topic? In times when we have internet and frequent plane connections between all major economic hubs, why would it matter where you startup? Couldn’t we all stay close to our friends and families and do business just where we happen to be?
The grass is greener on the other side
A lot of these discussions at startup gatherings centre on how the prospects seem brighter in other places – the proverbial greener pastures. Still, both experience and data show that exponential startup growth is more likely in centers with an established track record. And founders that have moved to these centers, frequently quote the functionality and support provided by the entrepreneurial ecosystem.
Clearly, startup growth is highly dependent on the access to resources and these resources may or may not be available in the city where a startup idea is born. This is especially true when it comes to raising capital and acquiring talent as these resources could be limited in the home region. Even when resources are available, founders might have difficulties to get access to them. Regularly, cities try to convince startups by quoting their strong economic position and industry presence. However, it is not common for traditional corporations or even medium-sized companies to welcome disruptive startups with open arms.
Startup hubs can become overcrowded
Startup hubs function as filters for global businesses, investors and even talent to find the most promising startups. Opportunities are traded face-to-face based on trust relations especially in a high-risk environment. A startup raises the chance to access large-scale resources when they show their presence in hubs, where they can effectively interact in-person with middlemen.