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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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There was a corona funding shock in the European Startup scene. Without government intervention, we would have seen a stagnation in startup funding in 2020.Thomas Köster, President Startup Heatmap Europe
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Vienna 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 (https://www.linkedin.com/in/thomas-k%C3%B6sters-8602a247/) , President and Co-Founder of the Startup Heatmap Europe (https://www.startupheatmap.eu/).
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: https://startupsandplaces.com/release-startup-heatmap-europe-2021/
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 Europe27% 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
The Video Interview is set to go live on May 6th, at 17.00 CET (Frankfurt / Paris / Zürich / Milano)
UK-born founders are the most likely in Europe to set up their company abroad. This is also true the other way around, the UK is the most chosen for foreign born entrepreneurs.Thomas Köster, President Startup Heatmap Europe
People from outside of Germany have voted for Frankfurt: I can imagine starting my company here.Thomas Köster, President Startup Heatmap Europe
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We track approx. 100 metrics for each startup hub in our database.Thomas Köster, President Startup Heatmap Europe
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This interview was conducted by Jörn “Joe” Menninger, startup scout, founder, and host of Startuprad.io. Reach out to him:LinkedInTwitterEmail
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Transcript
[0:00] Music.
[0:08] That I owe you were podcast and YouTube blog covering the German startups.With News interviews and Live Events welcome everybody this is Joe from startupradio your startup podcast and you to block from Germany as well as the words firstinternet radio station dedicated to startups and Techcompanies make sure to hit the like And subscribe button and leave us a good rating wherever you are listening to this or watching this today I bring you anotherexpert interview together with Thomas here Hey Thomas how you doing hi Joe nice to be here on your podcast.
[0:50] 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 mapEurope which I downloaded are 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 80 pages together.Yes exactly so the startup heat map report is actually coming out for the fifth time already.
[1:32] For the last five years it’s been a steady publication it is produced by entrepreneurs so everyone in the startupnewsteam has an entrepreneurial background we work in the startup scene and five years ago when we started we were really interested to understandwhat are the cross-border relations of the startup communities in Europe what’s happening in terms of connectingcross Berlin London but also other hubs like Frankfurt and and all the countries in Europeso what we did was designing a methodology to understand how these connections are growing so one of the main elements we look at is the perception.Founders half of startup places so that’s why we also have this.By now quite famous ranking of the most attractive startup hubs in Europe because we asked the founders where would you go if you could choose freely in Europewhere would you go to start your company and that gives us this this prominent ranking.
[2:38] 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 10 for example is quite stable over the time but you see.Developments that are let’s say long-term trends.I’m so for example that you see a more democratic landscape than before the top hops when we started five years ago London Berlin they were unreachable they were 60% 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 in let’s say preference and now we have like we have morecities that are on on an equal footing if you will.
[3:30] Which is quite good that means there are more and more places in Europe where you 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 52 cities and I would be more than happy if it would be two hundred and one point in time.Yes indeed it’s actually more than the 52 that we publish we track about a hundred 19 cities in principle youit name in the survey any City you like so I don’t know in the area of Frankfurt there’s probably some smaller cities that could also be named I know my co-founder for example comes from Mob work my book hasn’t made it into.Top 50 yet but still they have a interesting startup scene there nevertheless we do try to track more cities than the most popular ones because there’s of course other factors as well.
[4:36] 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 it starts really from from simple things like Investments how do the Investments develop also different sectors in.Like what is the fintech seen in the various places what is the seed Investments situation versus the total Investments orlooking at other dynamics that are less monetary for example you can look at diversity how many female entrepreneurs to you have you can look at the meet up scene so.
[5:16] I 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 an office in your city and so on so we really have like aa large data set that allows us to understand the various developmentsin the cities and the on the website on the startup heatmap.com you can browse thosethose metrics and see for the various cities the the scores and rankings for each of the the metrics.Of course as always everybody can learn more down here in the show notes and there is a link and I just see the trust score of Frankfort is 701% whichactually means right now nothing to me can you like before we get into 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 foundersand is calculated in relevance to the results of all cities so.Simply set the higher up in the ranking you are also the higher the percentages.
[6:42] When you now see a 71 percent for Frankfurt then you would also see the rank next to it if I just.Click here and see it myself so that would be the rank 34in the whole of Europe which is for Frankfurt probably not bad it is a like it’s not known as to be one of the top 10 hubs in Europe it is.
[7:09] Fairly popular people know itthere’s some International connections as well that you can detect people from outside Germany have voted for Frankfort have set I can imagine to start my company here but it’s not like top of the mind of every founder in Europe yet.
[7:27] 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 the startup heat map 2021 startup heat map Europe 2021 together.What was like the major findings and what was the finding that surprised you the most.Yes so the work for the heat map report takes almost a full yearit includes a survey of a representative sample of Founders from all over Europe so every year we’re putting together like this the samplewhere 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 of that if we don’thalf like the representativeness in a certain country then we will correct the results in that manner so we have a robust sample that’s for that’s very important to understand and that’s why also take several monthsto run that survey the survey gives us a lot of sanlianactually 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 skewed towards.
[8:56] Beaker hops just for the simple reason that there are more people that can actuallythen either you see it that half the time to vote there or just in total more people vote so that muscle is something you guys are correcting which I find.Very interesting pretty good and it gives a lot of smaller cities like in terms of absolute number of startups much better visibility much better scoring than it would be otherwise which I also find pretty good.Yes so 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 fromthe participants of that particular event and if that event is strong in a certain city or regionthen you will have like ass cuteness towards that this is what we try to avoid.By spreading our our sample on this in this way so.
[10:04] It is very important for us 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 potentiallythe database is skewed towards a certain geography and has just a better representation than one country than the other so if we use that.Our sample would be against cute so what we used here is the most secure way of waiting our our data and that is the populationI see and getting a little bit into the data what I liked was that you guys had a management summary that basically what you need to know over.
[11:20] Despite Corona the overall funding has grown by 14 percent was this like in line with the gross you’ve seen with a bigger wizard smaller.Yeah it’s l the executive summary basically is based on okay what happens in Europe in the startup scene in general and again here this isbeyond the survey so we look at the data we use different data sources like deal room dot Call crunchbase Etc andwhat we look at is the annual change of investment growth in Europe overall.And then we try to understand is there like an in effect by any external shocks for example covid or brexit Etc and there was a shock bye-bye covid-19.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 VC funding let’s say the typical VC fundingthat’s more from the private side of course there’s LPS that arestate-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 weak.
[12:39] Change the picture because of that but then additionally we had a lot of government interventions in 2020.Actually managed to maintain the growth of Ricci Investments that we saw also in 2019 which was 14% so also 2020 DVC Investmentsgrew by 14 percent and that is thanks to the government interventions if you count the government money in.You have a gross of 14% if you wouldn’t have counted the government money in then it would have been stagnant and basically the same as 2019 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 2019 we would have had the same.But with the government funding we even saw a growth of receive funding.
[13:34] You also write about the challenges faced competition 27% of Founders start the company abroad which ispretty good for Europe do you have some kind of measure.
[13:50] What those like the share of Founders who are from Europe and settle in another city of 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 the 27% of all the founders that we have in Europe actually now working and living in a place that they didn’t grow upand that’s by the way the measurement we’re using here we ask the founderswhere 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 becauseI have a co-founder who has grown up in Germany but his nationality was German so is that now someone that really moved.
[14:43] He grew up here so when he’s still in Germany he’s not a fan not a mover for us and you and you dude based on like.Whole country so that means I didn’t grow up here in Frankfurt but I would still not be considered being a.
[15:02] Founder abroad in your system hereno because you’re 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 40% if I’m not wrong so the it’s even higher but that’s natural.A lot of Founders change the city to to start up but they stay within the country now 27% is the average of all founders that are formed point which is quite high if you consider that in Europe theon the individual level only about 2% of the population is foreign bornso it’s much more higher but even more interesting in the top hubs like Berlin or London.You have percentages of foreign-born found us that is above 65 percent so to be at top up you really see that effectdo you need to have like a huge International base of Founders coming to you because in that it’s very logic if you think.Term hop 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 hubsyou have to have a very very high percentage of foreign-born founders.
[16:23] 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 thethe 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.
[16:52] 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.
[17:04] But he’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 then I also have the highest percentage of inbound migration so there is quite awe call this Whirlwind there’s in migratory studies yet there is this term the world wind migration in the European continent.
[17:28] The Whirlwind meansyou see migration from Western countries to other Western countries if you want to use the term Western here so you would see like thethe core European countries into changing hi also in it professionals you see that and you see that also with foundersyou see a lot of change between the UK Germany France the nordics and so on and 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.
[18:23] Attraction from non-european Founders that come there and we do see always a steady stream also of US based u.s. 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.
[18:43] Let me just quickly get you the number how many come from outside Europe.
[18:49] I may just add to in the time you were looking up some data that is like a popularity vote you have here and practice it push down London where Berlintook over just in founder popularity and also the visualization of event generated 50 to 100 with 60 percent growth rates.In meetups in top hubs where admittedly I’ve seen a lot of.
[19:19] 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 Christmasbefore Christmas and then it kind of dropped a little bit but what I’ve always seen and heard with a lot of peoplejust register for an event and actually don’t show up so the no-show rate are usually pretty high in terms of meetups.For example I talk to the host of the fin Tech Meetup Frankfurt the biggest one in Continental Europeof fintech meetups and he says he has a no-show rate of at least 1/3 and in digital event I do see sometimes even half of the people are justno shelves and in 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.
[20:29] Of covid so to say on on the Meetup landscape our assumption was when covid hit.Meetups 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 thatso that was for us the first indication that we felt like oh wow some meetups are not going to survive thisbut then we distorts that was stable was meetup.com so we now rely on this one.
[21:09] And here we saw an interesting development actually the Meetup attendance increased by 13% now okay.Attendance is the registered attendance of course so it might be an effect that.Fewer people actually joined the events but that would be a stable change overall cities I would say andin general the numbers went up so the what you could say the interest.
[21:39] 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 no okay so now there’s nothing we can do anymore we give up.They were active they were looking for possibilities to still exchange and meetups was a place they turn to but even more interesting is that you see here there’s a huge difference between the locations.Actually in some places you had that effect that the Meetup attendance was decreasing so for example if you look hereMadrid — 58 percent so yeah Rift also notice Frankfurt — 20% unfortunately but also apparently Munich had a big minus sign minus 21 percent.When I’ve seen this plus the plus 51 percent in Berlin I was wondering if thisdigitalization remote only did not just lead to people just focusing more on the interest and less on physical location withputs just a 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.
[23:00] 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.
[23:10] So you see like here the top hubs that people look out to saying like this is a topwhere 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 amaybe the founder of a unicorn speaking at the meet up so people are choosing to go to the to these places and I think also for the speaker’s 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 basicallyeveryone to join your Meetup.
[24:08] I think that is the effect here that is pretty interesting would would have found what I even shared.On social media was very astonishing dangerous developments in your highlights discrimination against women entrepreneurs amounted to threebuilding the Earth in 2020 how did he come up with.Number and have you seen like have you seen data in the past and do you can you make up a development there.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 20,000 founders.To identify how many female entrepreneurs we have in the.Cities in Europe so we really were keen on developing on City level database for 30 cities where we could sayokay we have a reception representative sample for each of the Cities saying how many.
[25:12] Female Founders do they have this works by the name of the person so the algorithm detects the name and tells us okayout of those 2,000 Founders we have in Berlinso and so many are female and with this over like a large data set with 20,000 you could track like some 30 cities and that was very interesting to see the percentage and thedifferences between the cities so for example we found that Vienna had the highest percentage in all over Europe of female entrepreneurs with 34% of female entrepreneurs and that’s a very interesting finding in general there’s only 15.5 percent female entrepreneursin Europe that’s the that’s the average in Europe in this whole data set 15.5% of founders.Our female and here we’re talking about Founders and co-founders most statistics ask.Does the startup half 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 foundersyou get this percentage of people.
[26:25] 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 in the end it evens out it’s not that it makes a huge difference 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 VC funding goes to female Founders and there is a statistic out there that only 3% of VC funding goes to female Founders that is always based on that number offemale founded startups and hear what they do is they take the take the all-female startups.So they say is the startup completely founded by women and then they say we we count that one.
[27:26] Teams that are completely founded by women only raced 3% of the total VC funding in Europe nowthis is a problem I agree there is very few all-female teams and they also get very little VC funding okay butit 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 situationso we tried to understand what is the expected number of VC funding thata female entrepreneurs would need to get and we use that 15.5% number here and said okay if it is 15.5 percentthen they should reach also 15.5 percent of the VC funding right that would be the thought and here we compared this perspectiveand 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 receive funding did they get.And how much is the difference to the Des 15.5 percent of all VC funding and that is three billion in 2020 which doesn’t make.They live much better for them it is still this huge discrimination it is definitely harder for women entrepreneurs to get receive funding.
[28:46] I can totally see that and now I’m sure how you can come up with the number I have.Yet 58 percent of startup Community trank due to the pandemic I do believe just in total number of startups entrepreneursthis is funding funding okay and internationalisation rate of startups Falls below 50% Widow.Do you mean with that hmm yes so we were looking at how International startups areby asking the founders whether they have international branchesor 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.
[29:39] And then we under we do this over the years and we see the development of the rate so we see.Do does it increase and until 2020 it did increase every year it was a little bit more and now it fellbelow 50 percent for the first time in 2019 it was something 60% and now it felt 48 so depend emic had an immediate effect here and here we can really say it’s an immediate effect because we also asked the foundershow fast do you did that happen and over the years the founders told us internationalisation for them happens in the first year.
[30:21] In the first year of establishment internationalization is already happening in most of the cases so when we see a drop in 2020 if people tell us in 2020 we are not International.That is an immediate effect of of covid because it would have happened in the first year of establishment and all those 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.Deep management summary and as people could tell from your enthusiasm there’s like a lot in the almost 80pages left there we leave a link down here in the show notes for everybody to find the reportand before I say thank you very much and goodbye will was for you to 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.
[31:31] For us do not talk top three also work for top three trucks okay so the the main thing is more of a general observation is this question do we see a more democratic developmentor do we see a more oligopolistic development in Europe because at the moment we have still like the dominance of.Some small number of hubs London Berlin maybe Paris.
[31:59] And then it’s already getting very very problematic so this was a very early couple lipsticks structure you have most of these hubs raised more than 50% of all the VC funding in Europe nowthe question is is that going to change over time and as I said.The percentage of the vote that this helps get is diminishing over time also we saw that we havemore and more cities whereFounders were able to raise more than 1 billion Euro so that’s the so-called unicorn ecosystems where the total amount raised in one year is above 1 billion euros and now we have six cities that manage to do that.Six it was only 2 in 2014.
[32:46] Increased over the last six years dramatically but it is still a small number so for us the most interesting question really is.What is the opportunity here will more cities.Raised to be prominent and functioning startup 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 Bucharest and becoming like the the most valuable startup in Europe okay that happens it’s an outlier I would say but what we are interested inis Bucharest changing in an ecosystem that continuously.
[33:36] Strives and produces continuously successful startups like London and Berlinto already and that is the question that that still is out to be answered we see Tendencies to a more democratic ecosystem landscape.
[33:51] But it’s it’s still not decided and also the question will be how big will that club be.Will it be a very small club with baby 5 or 6 players,or will it be something where we have 30 cities in each country will have a functioning ecosystem and that’s that’s still.To be debated and we try to understand the Dynamics that lead to this.
[34:14] Just just on the thing left for me to say great closing words the Dynamics are yet to be understood I personally would guess that there will be like 20 25 big startup ecosystems here.
[34:28] Just the gist in locations where you have like a lot of population a lot of potential for good entrepreneurs and over time also the VC’s need to get out and start lookingBeyond like the top three to top five hubs becausethey are also in competition that’s at least what I hope and they’ll be a lot hopefully a lot more interesting startups this covered.By them.Thomas was just a pleasure having you here you will share the link with me after the recording until everybody can download from the show notes the report.Thank you very much thank you as well.
[35:09] If you are a professional looking at the European startup scene Germany is a place you cannot miss.
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