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1 Dynamic Mapping of Web Entrepreneurs and Startups Ecosystem Project FINAL REPORT A study prepared for the European Commission DG Communications Networks, Content & Technology by: Digital Single Market

2 This study was carried out for the European Commission by: INTERNAL IDENTIFICATION 30-CE /00-84 SMART 2013/0035 DISCLAIMER By the European Commission, Directorate-General of Communications Networks, Content & Technology. The information and views set out in this publication are those of the author(s) and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission s behalf may be held responsible for the use which may be made of the information contained therein. ISBN doi: / European Union, All rights reserved. Certain parts are licensed under conditions to the EU. Reproduction is authorised provided the source is acknowledged. 02 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

3 ABSTRACT This project seeks to understand more about the scale and nature, strengths and weaknesses of, and the relationships between, Europe s startup ecosystems. In doing this it has been one of the most ambitious projects of its kind undertaken. The project has revolved around two inter-related components: first, the development of a dynamic mapping platform, which has created for the first time a business level analysis across 20 European ecosystems; second, an extensive stakeholder engagement process across the 20 ecosystems engaging with over 200 entrepreneurs, investors, accelerators, co-working spaces, government officials, universities, businesses, network groups and other market influencers and shapers. Together these activities have provided rich insight into the barriers and opportunities that exist within these startup ecosystems. Through this insight this report identifies a number of important findings and recommendations for policy makers, investors and other actors involved in European startup activity. Dynamic Mapping of Web Entrepreneurs and Startups l September

4 EXECUTIVE SUMMARY The Dynamic Mapping project comprises two inter-related components. The first is a dynamic mapping platform that presents and analyses a range of data related to startup businesses and in doing so seeks to provide a detailed and consistent analysis of 20 startup ecosystem across Europe. The map can be viewed at The second component is this report that presents the findings and recommendations that have been identified through both the process of building and developing the map but also through an extensive stakeholder engagement exercise across Europe. The purpose of this large engagement exercise was simple: to understand more about the scale and nature, the strengths and weaknesses and the relationships between Europe s startup ecosystems. From the outset of the project gathering robust data has been a significant challenge. It is a challenge that has revolved around the availability of data for example employment data for some companies was simply not available or not accurate; the consistency of data with data stored and collected in different ways; and the appropriateness of data with limited insight available with regards to many of the emerging tech sectors. The result is that while this project has made significant progress in seeking to gather consistent pan-european data the results presented, while insightful, are incomplete and certainly not a full picture of Europe s startup ecosystems. The ambition is that this project is therefore the start of the process of truly understanding Europe s startup ecosystems. Across the 20 ecosystems mapped it is possible to segment the ecosystems into three broad groups: developed and established; growing and emerging. The second group of growing clusters is the largest group with ten ecosystems: Amsterdam, Copenhagen, Dublin, Helsinki, Madrid, Manchester, Munich, Oslo, Rome and Vienna. These ecosystems have a number of strengths with a good supply of early stage funding, generally good infrastructure and a range of support mechanisms. They do not however currently have the scale of the four more established hubs and later stage funding and a lack of skilled employees are common challenges. The third group comprises the remaining six ecosystems of Athens, Brussels, Bucharest, Malmo, Tallinn and Warsaw. These ecosystems are starting to emerge and are very much in the earlier stages of development. The local market is often small in terms of both business numbers and levels of investment as well as the scale of the wider consumer/ business market. There are also challenges in relation to growing and retaining talent with many of the most talented individuals leaving to go to more developed ecosystems. There are however a range of activities taking place and support networks often with academia, local government and other corporations are strong and helping to foster growth and development. 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. In the developed and established group are the four ecosystems of Berlin, London, Paris and Stockholm. Each of these ecosystems have a number of common characteristics including a large number of businesses; active flows of venture capital and other funding mechanisms; high profile success stories; strong infrastructure; and a range of support mechanisms and levers. 04 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

5 KEY FINDINGS 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 one million people, had a combined revenue of 41.8 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 startup 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. 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 level 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 ideas, fostering 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. 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. Dynamic Mapping of Web Entrepreneurs and Startups l September

6 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 as 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: drive new ideas and innovation; open up new markets and supply chains; provide informal support and advice; provide an opportunity to celebrate success or indeed failure; and create 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 or 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 particularly 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 reached. 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. 06 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

7 POLICY RECOMMENDATIONS Based on the key findings from this project it is possible to identify a series of recommendations CULTURE Teach entrepreneurship in schools and universities to provide people with the tools they need to start, run and grow their own businesses. 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. Create a programme of activities that promote and celebrate the success of European entrepreneurs. Make it easier for new businesses to connect with successful entrepreneurs from other European countries. SKILLS Support the development of technical skills courses at all ages. Explore requirements for creating a working visa to enable those with specific technical skill sets to take up employment more easily. The application of these visas could by strategically deployed to support the development of early stage ecosystem. FUNDING Create a European-wide venture capital fund. Explore the opportunity to introduce European-wide tax relief schemes for investors and corporations. REDUCING BUREAUCRACY Undertake a cross-border review of movement, trade, taxation and employment laws to identify the barriers that are specifically impacting on the tech startup sector. Dynamic Mapping of Web Entrepreneurs and Startups l September

8 PROVIDING SUPPORT Focus actions and investment on addressing market failures at key stages in the business life-cycle eg starting up, scaling, expanding into new markets. 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. 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. Develop a suite of interventions that support collaboration between corporates, startups and higher education institutions Review evidence 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 best, and inform the design of, future activities. 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. Consider the policy recommendations emerging through this report and other activities and appropriate levels of intervention required both pan-europe but also within individual member states. DATA Encourage the consistent capture and publication of data across all member states including standardising practices around the capture and publication of data. Explore how best to introduce a more appropriate sector classification for digital organisations. Create links within business registry data sets to facilitate the linkages between businesses in different jurisdictions. 08 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

9 INTRODUCTION TO THE DYNAMIC MAP The Dynamic Mapping project is made up of two interrelated components. The first is a dynamic mapping platform that presents and analyses a range of data related to startup businesses and in doing so seeks to provide a detailed and consistent analysis of the startup ecosystem across Europe. The map can be viewed at The second component is this report that presents the findings and recommendations that have been identified through both the process of building and developing the map but also through an extensive stakeholder engagement exercise across Europe. The purpose of this large engagement exercise was simple: to understand more about the scale and nature, the strengths and weaknesses and the relationships between Europe s startup ecosystems. This project is just the start of truly understanding Europe s startup ecosystems. Indeed, this project has only examined 20 ecosystems across 17 member states. However, the platform has been created with the intention that further hubs will be added and the data available will grow, making the map an even better representation of Europe s startup ecosystem. A NOTE ON DATA It is important to note from the outset of this report that gathering consistent business data has been a significant challenge for this project. Some countries have accurate, comprehensive records of business activity. Other countries have patchy, out of date information. This makes it difficult to present a consistent picture. Few jurisdictions release company data as free or open datasets. In most cases a significant fee is levied for providing data. Within the scope of the project it was only possible to obtain a one-off snapshot of registry data from each jurisdiction. It would have been preferable to acquire a complete historic picture with quarterly updates of new data but the cost would have been far beyond the resources available to the project. These challenges grow when the focus of the analysis is primarily on web entrepreneurship and tech startups, neither of which appear consistently within the data. In addition, the sector information available from government registries is too patchy to provide a reliable differentiator. An approximation can be provided by filtering out all companies that have not raised investment. However, this obviously understates the true picture. Faced with these challenges through the Dynamic Map we have sought to provide the widest possible array of data which can then be filtered according to user interests and requirements. For the purposes of this report we have focused on a general definition of startups as those businesses that are less than five years old. Unless explicitly specified we have included all sectors as we wanted to provide the broadest possible picture of new business formation and growth, or because it was not possible to filter the data by sector. Grant Thornton UK LLP and Trampoline Systems have obtained the data set out in this report from a range of databases, in particular CreditSafe UK, Crunchbase Inc., Dealroom.co, Bureau van Dijk and AngelList Limited. 1 Given the challenges in obtaining data we know there are gaps in the evidence base and the Dynamic Map is therefore very much a work in progress. Dynamic Mapping of Web Entrepreneurs and Startups l September

10 METHODOLOGY Following agreement with the European Commission to include a city within the map, 2 the first stage in the process was to source the government registry data for each country/city. The city boundary was defined on the EuroStat Nomenclature of Territorial Units for Statistics (NUTS) classification. The registry data was filtered to select all companies with a registered address falling within one of 20 selected NUTS boundaries. These companies were then auto-matched against the CrunchBase dataset using company name and city. The next stage was to filter out all companies with turnover above 20 million unless they were present in the CrunchBase dataset. This approach was agreed with the European Commission as a pragmatic solution to dealing with some of the inherent weaknesses in the source datasets. The rationale was that this approach would remove larger corporations but still enable the map to identify those businesses that have scaled quickly. All of the remaining companies were geo-coded to generate a latitude and longitude for the registered office and then these companies and their associated data were placed on the map. This included the following: Company name Registration number Sector Formation date Registered office address Date of most recent filing Number of employees reported in most recent filing Turnover reported in most recent filing Investment raised As noted above there were both gaps and inaccuracies in this data. For some companies there was no employment, turnover or sector data and for others certain data points appeared wrong given other data points. However due to the number of companies being mapped it was not possible to independently verify this. Finally, once the individual companies were matched we then ran another auto-matching exercise to identify companies that have expanded across multiple European jurisdictions via subsidiaries. Where a company was identified, formation dates were compared to identify the parent company and children. We then generated a network visualisation linking parents and children across the hubs. Alongside the technical build and development of the map the project has involved detailed fieldwork across the 20 hubs all of which are at different stages of development and maturity. Through this fieldwork the project team has engaged with over 200 entrepreneurs, investors, accelerators, co-working spaces, government officials, universities, businesses, network groups and other market influencers and shapers. These stakeholders have been engaged through a combination of semi-structured interviews and facilitated workshops. ECONOMIC OVERVIEW As Europe continues to recover from one of the worst economic crises in many generations ever increasing attention is being given to delivering and supporting economic growth. Across the European Union (EU) policy makers within both the European Commission and individual member states are focused on providing the investment, levers and support to facilitate growth. At the heart of these activities lies the creation and sustaining of jobs along with associated actions to enhance competitiveness, drive innovation and foster entrepreneurship. In direct response to this challenge the European Commission established the Entrepreneurship 2020 Action Plan, 3 in 2013, identifying three areas for immediate intervention: 1 Entrepreneurial 2 Removing 3 Reigniting education and training to support growth and business creation; existing administrative barriers and supporting entrepreneurs in crucial phases of the business lifecycle; and the culture of entrepreneurship in Europe and nurturing the new generation entrepreneurs 1: We have not independently verified that this data is accurate, complete or up to date. It should be used as a guide only. Readers should consider the appropriateness of this data in the context of their specific requirements and carry out any further relevant research or checks, or confirm information from another source, if it is of sufficient importance for you to do so. Any third party who chooses to rely upon our work shall do so entirely at their own risk. 2: To date the following 16 cities have been mapped: Amsterdam, Athens, Berlin, Brussels, Bucharest, Helsinki, London, Madrid, Malmo, Manchester, Munich, Paris, Rome, Stockholm, Tallinn, Warsaw 3: 10 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

11 In creating this action plan the Commission set out its blueprint for action to unleash Europe s entrepreneurial potential, remove existing obstacles and revolutionise the culture of entrepreneurship in the European Union. One of the specific actions set out in this plan was to support web entrepreneurship through the Startup Europe Partnership. Startup Europe was established with the aim of strengthening the business environment for web and ICT entrepreneurs so that their ideas and businesses can start and grow in the EU. This ambitious agenda was given further weight in May 2015 with the adoption of the Digital Single Market Strategy, built on the three pillars of: better access for consumers and businesses to digital goods and services across Europe. creating the right conditions and a level playing field for digital networks and innovative services to flourish. maximising the growth potential of the digital economy. The Digital Single Market has the potential to create significant opportunities for businesses and citizens alike. It is within this context that the need for a Dynamic Map was identified as a principal first step in beginning to understand the breadth and depth of the startup ecosystems across 20 cities spanning 17 member states. The rationale for the creation of the Dynamic Map was simple: without data and insight on the scale and nature of European startups the Commission cannot adequately direct, shape and resource policy. A NOTE ON BREXIT On 23 June 2016 the people of the UK made a decision to leave the EU. What happens next and the implications for businesses operating in the UK or EU markets are unclear. This uncertainty is likely to remain for some time as the UK will first have to negotiate its exit terms with the EU s remaining 27 member states and then negotiate its future trading relationships with the EU. As a result of the vote countries across the EU as well as the Union itself will likely also undergo significant change in the coming months and years. While it is too soon to know what this means specifically for the tech sector and web entrepreneurship a number of potential issues are coming to the fore. This includes: Regulation and the potential for even more variation in the regulatory environment. Access to talent is one of the primary challenges facing tech businesses and with the UK currently one of the places that attracts a lot of pan-european talent there are a number of emerging questions about where this talent will go. Commercial and intellectual property law and where and what patents are granted. Tax with the potential for the UK to reshape tax laws. As such, when reviewing the findings and recommendations of this report it is important to consider the extent to which the UK leaving the EU will exacerbate or alleviate the different issues. THIS REPORT The remainder of this report is split into four main sections: Lessons learnt An overview of the 11 principle findings that emerged through the development of the map and the extensive stakeholder engagement exercise. Analysis of the current situation of web entrepreneurship in the EU An overview of each of the 20 ecosystems, their scale, strengths, opportunities and challenges. Conclusions A short section drawing together the key findings from the project. Recommendations A series of recommendations for the European Commission to consider in light of the findings of this work. Dynamic Mapping of Web Entrepreneurs and Startups l September

12 LESSONS LEARNT Through the technical development of the map, the analysis of the data contained within it, wider data sources and the extensive stakeholder engagement exercise we have identified 11 principal findings covering the scale, nature and integration of the web entrepreneur culture and ecosystem within Europe. In relation to each lesson we have also identified a series of policy recommendations. These recommendations are set out in more detail in the final chapter of this report. 1. A THRIVING SECTOR RAISING INVESTMENT AND CREATING JOBS The Dynamic Map has gathered data on nearly 800,000 4 businesses to date. Together these companies employ over 4.5 million people, have a combined revenue of 428 billion and have raised investment of 36 billion, although it should be noted that not all of the businesses mapped are in the tech sector. When analysed further, nearly a quarter 290,000 are less than five years old, underlining the entrepreneurial culture that is being created across Europe. These young businesses employ nearly 1.1 million people, have a combined revenue of 87 billion and have raised nearly 10 billion in investment. The scale of activity shown in the map is reflective of wider data from Eurostat which showed that Employment in the digital economy has grown on average by 3 percent 5 per annum from 2006 to 2015 with Finland, Sweden, the UK and the Netherlands being the largest employers. This growth rate is more than eight times higher than the average total employment growth for Europe. In terms of levels of investment raised this ranges across the 20 hubs mapped from 7.3 million in Athens to 12.7 billion in London. POLICY RECOMMENDATION: (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. It is these different trigger points that have the greatest potential to drive growth and economic benefits. 4: It should be noted that due to the limitations of some of the datasets used the estimates of revenue, employees and funding are likely to be conservative. 5: This statistics are from Eurostat and a full breakdown of those statistics mentioned can be found here: in_employment 12 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

13 2. COUNTRY SPECIFIC CULTURAL INFLUENCES AND THE NEED FOR A MORE ENTREPRENEURIAL CULTURE The perception across many of the different ecosystems was that the culture of the country directly influenced the attitudes held towards entrepreneurship. Attitudes that in turn impacted on: the likelihood of starting a business; the appetite to take risks; the response to failure; and the wider support provided by family and relatives. While there was limited quantifiable evidence, the different stakeholders spoke assertively about how the mindset in cities like Madrid and Helsinki was that jobs at large corporations were better and more desirable than starting your own business. Or how in Stockholm the strong social security system meant that there was more openness to taking risks. Or how in London and Manchester business failure continued to be regarded as personal failure and a hindrance to starting other businesses, rather than the learning experience it is seen as in the United States of America. The deeply embedded nature of these cultures has made it all the more difficult to challenge and change in some countries. However, a generation of young people are currently growing up in a Europe in which running your own business is not only seen as a viable career opportunity but an exciting one. It is a shift that can be accelerated with more entrepreneurial education in both schools and universities, giving people the tools they need to start, run and grow their own businesses. This coupled with further work around removing the stigma of business failure along with further promotion of successful entrepreneurs (see point below) will help create and embed a more entrepreneurial culture within Europe. It was mentioned during some of the consultations that certain hubs, such as Helsinki, Madrid and Warsaw, are seeing a natural change in opinions on becoming an entrepreneur. In Helsinki, for example, prior to the growth of King and Supercell, entrepreneurship was seen as a career for those who didn t complete their studies. However, the success of King and Supercell has completely reversed opinions. POLICY RECOMMENDATION: (ii) Teach entrepreneurship in schools and universities to provide people with the tools they need to start, run and grow their own businesses. A good example of this is Entrepreneur First, an entrepreneur training programme that begins with a six month intensive programme in an Entrepreneur First office followed by specific support for a further 18 months. To qualify for the programme the applicant must be either a computer science graduate, postdoctoral researcher or an engineer working in the tech sector. The commission should explore the opportunity to deliver programmes like these to school leavers or undergraduates. Another positive example is the École 42 in Paris. Students are given problems to solve and have 24-hour access to computers and the internet to work out how to solve the problem. The school runs a one year programme with a maximum of 1,000 people in each year. (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. ENTREPRENEUR FIRST What they do Entrepreneur First is a London-based startup accelerator which assists promising UK and Central European tech graduates and those already working in technology firms to design and run their own startup and has helped establish 75 startups in its first four years. Why they are effective Entrepreneur First differs from other accelerators such as Y Combinator and Wayra in that it seeks out individuals with concepts rather than existing companies. It is aimed to attract the top graduates in computer science and engineering, with the goal of encouraging them to start their own businesses rather than enter traditional career tracks in the corporate or banking world. The programme also accepts applicants who are already working in tech firms. Applicants do not need to have an idea for a business or a team in place before applying, but are evaluated solely on the basis of technical talent. The six-month, cohort-based programme is divided into two parts. The first three months are devoted to building a team and identifying a problem they want to solve before creating a product to solve it. Dynamic Mapping of Web Entrepreneurs and Startups l September

14 During the second three months, participants receive guidance in running a business from mentors in the science, academic and venture capital fields. What we can learn from them Focusing on talent rather than ideas has allowed Entrepreneur First to produce over 75 startups which have raised over 130 million in external funding. Who they ve helped Magic Pony Technology Moonfruit Blaze AdBrain StackHut Soapbox 3. 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. These role models are regarded as a critical part of a successful startup ecosystem. First, they help to excite young people and as such make a positive contribution to building an entrepreneurial culture. Second, they help to plot a path to success that others can follow. Third, they raise the profile of the cities and ecosystems in which they were born (even if they are no longer based in that city) this was felt to be particularly important in terms of attracting investment and capital into a city; the example was given of Skype and Transferwise in Estonia. Fourth, there is often a willingness to reinvest in the hub and give back to the sector, be that financially or through providing advice and guidance. Some stakeholders argued that this reinvestment in the sector was evidence of a truly thriving ecosystem. Given their importance, increasing work is being done across the different ecosystems and Europe as a whole to showcase the success of different startups across a broad range of different sectors. This activity is being facilitated by a wide variety of sources from across the public and private sectors including government, intermediaries, trade and specialist press and large corporates. In Manchester stakeholders pointed to three big IPOs as proof that the city was a place for startups to thrive. In Helsinki stakeholders regularly cited the success of Supercell and Rovio as having accelerated collaboration, networking and leading as others want to emulate their success. POLICY RECOMMENDATION: (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. 4. ACCESS TO TALENT SKILLS AND THE FLOW OF LABOUR Skills and accessing talent was frequently cited as the single biggest challenge, or indeed threat, to the individual ecosystems. It was a headline challenge that manifested itself in a number of different ways. First, and perhaps most starkly felt, was the need for more technical and higher-level skills in coding, system architecture and programming. This challenge was particularly acute for smaller, less established hubs as they would increasingly lose the talent battle with the most talented people moving to more established hubs such as Berlin and London, or even outside of Europe to Silicon Valley in the United States. This migration of people was therefore seen to be a significant threat to the success and viability of the early stage hubs. 14 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

15 Next was the lack of entrepreneurial skills with European universities seen to be producing well qualified graduates but lacking the core skills necessary to start and run a business. The result is that while there is a pipeline of good, innovative ideas and propositions for products and services the ability to take these ideas and to commercialise and scale them is often missing. This gap is however starting to be filled with examples given of Austrian universities now explicitly focusing on entrepreneurship, and entrepreneurship competitions with monetary prizes to further support commercialisation in Bucharest. Third was an issue particular to those ecosystems in the Nordics: a lack of sales and marketing skills. This is closely linked to entrepreneurial skills but it was also a challenge that was deemed to have it roots in the culture of those countries. It was seen to be a challenge that impacted on both the selling of the product to businesses and customers as well as on selling the business idea and opportunity to investors. POLICY RECOMMENDATION: (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 skill sets to take up employment more easily. The application of these visas could by strategically deployed to support the development of early stage ecosystems. For example, the UK, Ireland, Italy, Spain, Denmark, the Netherlands and France have all put in visa programmes to allow the tech communities to hire the talent they need. These programmes are a positive step. However, if competition is to be reduced between different member states then a pan- European visa is required. We have highlighted the UK and Denmark s visa process below. Finally, for some hubs, such as Copenhagen and London, the cost of living was deemed to be a further factor that negatively influenced and impacted on the attraction of talent. TECH NATION VISA What they do The Tech Nation Visa Scheme was created to allow talent from around the world to come and work in the UK s technology sector. This visa system is seen as a way for the UK to maintain its globally competitive digital economy. Why they are effective Tech City UK have designed a competent body to specialise in these visas and also endorse the applications. The visas can be granted for up to five years and will allow the applicant the right to settle in the country. The cost for the visa is also kept as low as possible with the current cost being 574. The system went live on 19 November 2015 and has received circa 300 applications with over 200 endorsed. The Government has a limit on the number of these visas but there are still visas available within the cap set and these are valid for application until April The largest portion of applications have come from Australasia with the Middle East and Africa being the next largest requests. What we can learn from them The UK is well known for its technology sector and also startup community, therefore to ensure this sector continues to be one of the strongest in Europe this visa scheme needs to be efficient, and this seems to be the case. The scheme has helped large companies as well as startups to attract the right talent to the country. Who they ve helped Magic Pony Technology Giggypop Mindbin Disney Dynamic Mapping of Web Entrepreneurs and Startups l September

16 START-UP DENMARK What they do Start-up Denmark is a visa scheme launched by the Danish Government to allow talented entrepreneurs to relocate and grow high-impact startups in Denmark. The application is based on a business plan which is evaluated by an expert panel. If the panel approves the business plan then the applicant will be eligible to apply for a residence and work permit as a self-employed entrepreneur. The permit is granted for a period of up to two years with the possibility of extension for three years at a time. Why they are effective The expert panel are volunteers and are specialists in the technology sector ensuring that the businesses that are being accepted are of a high calibre. The cost of the application is 235 and open to only non-eu (European Union) and non-eea (European Economic Area) citizens. The scheme is capped to 50 entrepreneurs per year to ensure that the entrepreneurs are supported. The Danish government is focused on supporting the technology sector as they have seen the positive economic impact startups have had to the economy in Denmark, especially with success stories such as Just Eat. What we can learn from them The government is focused on strengthening and bringing the community together as they are aware that some of the success stories to date have had to battle with the current schemes in place. 5. FUNDING FOR GROWTH ACROSS THE CONTINENT Alongside attracting and retaining talent, securing funding was the other most commonly cited challenge that impacted on the health of the ecosystems and the growth of startups within them. In general there was a consistent narrative across all of the hubs with the exception of London. 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 was significantly hindering the growth and scaling of businesses and ultimately the health of the ecosystems in which they operated. However, below this headline finding there were a number of complicated contributory factors. These included: The role of public money. For some ecosystems this was seen as an effective way of lowering the risk of private investment. For others the public money was viewed as a break on growth as it created dependency on grants and results in supporting businesses that the private sector would not have otherwise invested in. The funding landscape. The differences between how countries encourage and stimulate investment and the uneven funding landscape that has resulted. A number of stakeholders cited UK EIS and the positive benefits that brought. The boxes below provide case studies of two examples that were regularly cited during the consultations as possible schemes that could work across Europe. The lack of venture capital. For a number of stakeholders the presence of a functioning and expanding venture capital market was one of the strongest indicators of an ecosystem s maturity and strength. Access to funding. The sense that getting funding shouldn t be easy and that if Europe is going to create startups that can grow and scale then businesses need to prove their value and opportunity to investors. For the stakeholders that held this view, the logic was simple truly successful startups in Europe have attracted investment and have scaled. From the consultations we have conducted, four specific schemes have been cited as good examples that Europe should consider adopting as a whole. These examples were Tekes, the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme, High-Tech Gründerfounds and Bpifrance. We have provided details on each of the schemes below to summarise the main aspects of the schemes, what we can learn from them and who they have helped. 16 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

17 POLICY RECOMMENDATION: (viii) Create a European-wide venture capital fund. Since much of the fieldwork was undertaken for this report there have already been two positive steps in relation to this recommendation. In December 2016 French Finance Minister and German Minister for Economic Affairs announced a 1 billion fund which will support the scaling of startups. While in November 2016 the European Commission is established a Pan-European Venture Capital Fund-of-Funds. Alongside which venture capital fund regulation has been expanded and work has been undertaken to address the bias in the tax system towards debt over equity (see point 10 below). (ix) Explore the opportunity to introduce European-wide tax relief schemes for investors and corporations. Dynamic Mapping of Web Entrepreneurs and Startups l September

18 TEKES WHAT THEY DO Tekes is a publically funded body which supports research, development and innovation in Finland. Although Tekes is publically funded the body is completely impartial and will only fund companies that the advisors thinks are viable. All companies are given commercial and financial support and in some cases only commercial advice if required. Tekes will only fund at the early stage and growth stages. At the early stage Tekes will provide a maximum grant of 50,000. At the growth stage the company will offer a noncollateral loan and a maximum of 250,000 will be invested alongside a private sector funder providing at least the same amount. All financial support given to each company is detailed online for transparency. WHY THEY ARE EFFECTIVE There is no political bias in the support given to companies. If the idea is good then funding and commercial support will be given. Tekes provides commercial support with all funding and even when funding isn t given. The advice the companies are receiving is helping to improve the quality of entrepreneurs and in Finland there is a perception that a startup that hasn t been through Tekes is not a good startup. Tekes has had a direct impact on the innovation growth in Finland, increasing growth and globalisation of Finnish companies. Tekes has also helped to build international networks and cooperation and increase the consumer network for Finnish companies. WHAT WE CAN LEARN FROM THEM Without political influence, Tekes is able to fund companies on merit rather than any political bias. By combining financial support with commercial advice Tekes has been able to improve the success of the startups it supports. As Tekes is ultimately a government body the international connections are easier to make through diplomatic channels. WHO THEY VE HELPED Nokia SuperCell Rovio Applifier Confidex Rightware Transfluent ZenRobotics 18 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017

19 ENTERPRISE INVESTMENT SCHEME (EIS) AND SEED ENTERPRISE INVESTMENT SCHEME (SEIS) WHAT THEY DO The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) look to help smaller, higher risk companies raise finance by offering tax relief to investors who purchase shares in the company. SEIS Eligibility: 150,000 maximum amount able to raise 2 years trading history 25 employees 200,000 in gross assets EIS Eligibility: 5 million maximum amount able to raise per annum Must be an unquoted company 250 employees 15 million in gross assets For both schemes, the company needs to meet HMRC qualifying criteria. For example, property management companies do not qualify. WHY THEY ARE EFFECTIVE The schemes are designed to encourage investors to invest in UK companies that may be deemed high risk. EIS and SEIS seek to remove some of the risk when investing in SMEs by giving investors 30% (EIS) or 50% (SEIS) tax relief and also exempting them from corporate gains tax if they do not sell within three years. The schemes also seek to address one of the biggest barriers to SME growth in the UK, access to capital. The schemes offer very generous tax relief for investors. Investors can receive 50% tax relief up to 100,000 per annum for the SEIS scheme and 30% tax relief up to 1 million per annum with the EIS scheme. Both schemes also exempt the investor from capital gains tax if they hold their investment for a minimum of three years. WHAT WE CAN LEARN FROM THEM These schemes have successfully targeted a main barrier to growth which was access to finance. These schemes remove some of the risk when investing by providing the investor with attractive tax breaks to compensate for the risks they are taking. These schemes also allow the company owners to keep control of their companies as the scheme restricts the equity in the company. These schemes also restrict how the funding is spent thus ensuring the funding is specifically spent on investing in the company s growth. WHO THEY VE HELPED Brewdog Rated People Zoopla Farm Drop Scarlett & Mustard Pariti Dynamic Mapping of Web Entrepreneurs and Startups l September

20 HIGH-TECH GRÜNDERFOUNDS (HTGF) WHAT THEY DO HTGF is a public-private venture capital investment firm based in Bonn, Germany. The fund provides early stage seed investment up to market launch. HTGF will invest a maximum of 2 million per company and hold this investment for six years with a seven year disinvestment period. HTGF has household names such as the KfW Banking Group, Robert Bosch, Daimier, Deutsche Telekom and RWE Inogy as some of its investors. The firm has over 430 companies in its portfolio currently with 60 exits already completed. To be eligible for funding the company must be classed as a technologyoriented business which is less than a year old and located in Germany. The company must have a promising idea/ research that can be converted to a marketable product. WHY THEY ARE EFFECTIVE This fund is unique in Europe as no other venture capital fund is part privately funded and part publically funded. The fund allows the very early stage startups to develop their concept and bring their refined product to market with support and guidance from the fund. The fund is stimulating the high-tech startup market and is available to sectors which private funds tend to see as higher risk and require capital investment from the start, such as life science and mechanical engineering. WHAT WE CAN LEARN FROM THEM This fund is one of the most active funds in Europe and allows the public sector to use the private sector s expertise to invest in early stage startups without taking unnecessary risks. The startups also have the chance to access funding in the early stages when funding can be crucial to their survival. WHO THEY VE HELPED ewings.com KonTEM RAIDBOXES REBELLE Trademob Wunderlist 20 Dynamic Mapping of Web Entrepreneurs and Startups l September 2017