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Methodology

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Lessons learnt

By looking in depth at these different ecosystems the analysis and research has identified a number of important findings in relation to the scale, nature and integration of the startup ecosystems within Europe.

A thriving sector raising investment and creating jobs

Despite the incomplete data set the Dynamic Mapping process identified nearly 300,000 startup businesses that are less than five years old. These young businesses employed 1.1 million people, had a combined revenue of €87 billion and have raised nearly €10 billion in investment. These businesses are creating jobs and opportunities and at the same time helping to enhance European competitiveness, drive innovation and foster entrepreneurship.

Country specific cultural influences and the need for a more entrepreneurial culture

While the historic culture of individual countries has influenced and shaped the attitudes held toward entrepreneurship and over time impacted on the likelihood of starting a business these views are shifting. There are now a generation of young people growing up in a Europe where running you own business is not only seen as a viable career opportunity but an exciting one. It is a shift that can be further accelerated with more entrepreneurial education in both schools and universities: giving people the tools they need to start, run and grow their own business.

The importance of role models

With an increasing number of high profile and successful startups being born in Europe there is a growing number of ‘role models’. Role models were widely regarded as a critical part of a successful start up ecosystem: they help to excite and inspire; they plot a path to success that others can follow; they raise the profile of the cities and ecosystems in which they were born; and there is often a willingness to reinvest and give back to businesses either financially or through advice or guidance.

Given their importance, increasing work is being done across the different ecosystems and Europe as a whole to showcase the success of different startups and to help identify role models.

Access to talent – skills and the flow of labour

Accessing the skills and labour necessary to grow a successful startup was frequently cited as the single biggest challenge or indeed threat to individual ecosystems. The challenge manifested itself in a number of ways including: the need for technical and higher levels skills – with the talent battle being won by the more established hubs; a lack of entrepreneurial skills – with the result that commercialising ideas and innovation was a challenge; and a lack of sales and marketing skills – often driven by the culture of particular countries.

Funding for growth across the continent

Another commonly cited challenge directly impacting on the health and success of an ecosystem was the access to funding. In general, there was a consistent narrative across all of the hubs with the exception of London, that while seed money and early stage funding rounds up to €1 million were available it was the lack of follow on money and later funding rounds that were significantly hindering the growth and scaling of businesses.

Connecting ecosystems

Across a number of the hubs there was a longing for improved connectivity between them. For some this was driven by geographic proximity, for others language connections or others the small local markets that existed. Connections between ecosystems were therefore regarded as a means of sharing skills and idea, foster growth and providing attractive opportunities to funders.

Given the importance of connections, supporting the linkages between different ecosystems has therefore been a key focus of many of the other initiatives in the European Commission’s Startup Europe Programme.

Competing ecosystems – the appeal of more developed hubs

There is a clear sense of hierarchy emerging across the European Union in terms of those ecosystems that are more developed, such Berlin and London. These ecosystems are seen to be able to exert a greater pull for both money and talent and in turn this makes them a more attractive proposition for businesses. While posing a challenge for smaller less developed ecosystems the strength of these ecosystems is however important for Europe as a whole as they provide a viable alternative to Silicon Valley and an attractive proposition for other global startups.

While there was a general acceptance that there will always be larger, more appealing ecosystems there was frustration when this variation was driven by structural differences such as different tax regimes, or different requirements for setting up a business.

Effective ecosystems – developing tech solutions but personal interaction and community

Personal interaction, networking and community were seen to be important ingredients in creating effective ecosystems. The best examples of these groups were often those that had grown up from the grass roots, driven by the entrepreneurs themselves and requiring minimal curation. These interactions and networks were seen as important in creating linkages between businesses to: driving new ideas and innovation; opening up new markets and supply chains; providing informal support and advice; providing an opportunity to celebrate success or indeed failure; and creating a sense of community and scale for individuals who would otherwise feel quite isolated.

Effective ecosystems – infrastructure and support

Alongside personal networks infrastructure in the form of high speed internet and suitable workspaces were also seen as other important ingredients in helping to create effective ecosystems.

Alongside this the support available to individual businesses was also highly valued. This support took a variety of different forms and combinations but could be broadly categorised into three broad types: accelerators and incubators; business support programmes; and collaboration between startups and corporates.

The role of Government

Across the different ecosystems there were a range of views about the role of government in helping to shape, influence and develop startup ecosystems. Often these views differed within individual ecosystems. In terms of the type of interventions that were felt to be most successful there were four main types: removing regulation and tax burdens - making it easier to ‘do business’; creating incentives either to the business of the investor community; providing funding and support programmes; and promoting and raising the profile of individual startups or the ecosystem as a whole.

The data challenge

One finding that has become particular apparent through this study has been the challenge of data. It is a challenge that is multivariate in nature and requires a more joined up and collaborative approach if a solution is going to be research. The problems in the data manifested themselves in three main ways: availability – with data difficult to obtain for some ecosystems; consistency – with data collected in different ways; and appropriateness – with traditional classifications no longer appropriate for the digital and tech sectors.

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Policy recommendations

Based on the key findings from this project it is possible to identify a series of policy recommendations:

(i) Focus actions and investment on addressing market failures at key stages in the business life-cycle eg starting up, scaling, expanding into new markets. At it is these different trigger points that have the greatest potential to drive growth and economic benefits.

(ii) Teach entrepreneurship in schools and universities to provide people with the tools they need to start, run and grow their own businesses.

(iii) Review the regulation relating to business failure and explore opportunities to change this so that entrepreneurship can be encouraged without creating a moral hazard in terms of encouraging more reckless behaviour.

(iv) Create a programme of activities that promote and celebrate the success of European entrepreneurs.

(v) Make it easier for new businesses to connect with successful entrepreneurs from other European countries.

(vi) Support the development of technical skills courses at all ages.

(vii) Explore requirements for creating a working visa to enable those with specific technical skills sets to take up employment more easily. The application of these visas could by strategically deployed to support the development of early stage ecosystems.

(viii) Create a European-wide venture capital fund.

(ix) Explore the opportunity to introduce European-wide tax relief schemes for investors and corporations.

(x) Undertake cross-border review of movement, trade, taxation and employment laws to identify the barriers that are specifically impacting on the tech startup sector.

(xi) The European Commission should encourage member states and the different actors involved in the digital agenda to view the European startup ecosystem as a whole and not multiple individual ecosystems in competition with one another. This will encourage collaboration and ensure that strengths and opportunities are promoted in a coordinated way.

(xii) Encourage collaboration between startups by promoting the benefits and providing places to meet so that grass roots groups can grow up and flourish naturally. Direct Government intervention should be minimal.

(xiii) Develop a suite of interventions that support collaboration between corporates, start-ups and higher education institutions.

(xiv) Review evidence of related to the impact and effectiveness of different member state business support activities (both programmes and accelerators/incubators) with the objective of identifying what works to promote the best and inform the design of future activities.

(xv) Review the range of recommendations and lessons emerging from the different Startup Europe activities to create a clear action plan for the next five years.

(xvi) Encourage the consistent capture and publication of data across all member states including standardise practices around the capture and publication of data.

(xvii) Explore how best to introduce a more appropriate sector classification for digital organisations.

(xiii) Creating links within business registry data sets to facilitate the linkages between businesses in different jurisdictions.