Start-ups are a key component of the contemporary entrepreneurial landscape. Encouraging start-ups, and providing an environment for them to scale up, has in recent years been seen as an important feature of not merely the creation of start-up hubs, but also the remit of cities in their bid to have the unicorns of the future begin within their boundaries. In a recent study, the top start-up and scale-up locations in Europe are considered, crowning London the top location for both start-ups and scale-ups, with Amsterdam and Stockholm in second and third spots.
Start-ups and entrepreneurship remain important features to today’s economy, and supporting the development of start-ups has become an important part of the wider business environment. Around the world, more and more incubators are being set up with the goal of encouraging start-ups. These specific incubators are, however, only one part of the puzzle. The locations, often large cities, in which entrepreneurs begin their projects, may also have an effect on the eventual success of those projects.
To identify the most friendly cities of the globe for start-ups and scale-ups, Nesta, in association with the European Digital Forum*, developed the ‘The European Digital City Index’ (EDCi). The aim of the analysis is to provide a “holistic and local view across Europe, describing what ecosystem factors are most conducive to encouraging digital start-ups (and scale-ups).”
The analysis is built from 38 metrics across ten themes, which cover 28 countries including their capital cities, as well as various cities deemed to have a strong entrepreneurial profile. The theoretical framework was developed from wide ranging interviews with 75 experts across the region as well as secondary academic literary analysis regarding the various cities. Further data selection and gathering relating to the metrics were collected, before being checked, processed and presented in a visual form.
According to the analysis, London ranks the number one city for start-ups in Europe. The country has over 275,000 companies which employ nearly 1.5 million people. Since 2005, these companies have raised €8.3 billion. The city scores highly on access to capital, entrepreneurial spirit as well as knowledge spill-over. The high cost of living and the high cost of talent reduce its viability slightly however, putting its business environment at number 24. Amsterdam comes in at number two. The city has strong access to capital (#3), a robust business environment (#4) and entrepreneurial culture (#4). It is also considered a great place to live with a permissive and clean environment – although it is too expensive. The city performs less well on digital infrastructure (#17) and market (#19). In third spot comes Stockholm, scoring strongly with its 8000 start-ups with nearly 52,000 employees. In the previous decades, Stockholm’s start-ups secured €1.8 billion in investments.
Helsinki, with its strong skills profile, and Copenhagen, with its strong business environment, come in at #4 and #5 respectively. Paris secures a #6 spot, while Berlin makes #7. Dublin, Brussels and Munich complete the top ten. The study highlights that most southern European capitals fare relatively poorly in the index. Lisbon is found at #17, Rome at #28, and Athens at #34 – Madrid pulls in a moderately strong performance, on the back of the #2 business environment, to come in at #12.
Scaling the start-up to a world class business requires a different environment than the start-up phase. The researchers also consider the locations in terms of their scale-up viability. London again comes in at number one, providing the best access to capital, entrepreneurial culture and knowledge spill-over – while access to skills remains a problem (#33). Stockholm comes in at number two, with strong scores in skills (#4), entrepreneurial culture (#2) and business environment (#6). Amsterdam too scores well in the scale-up category, at #3 on the back of access to capital, entrepreneurial culture (#4) and non-digital infrastructure (#2) – digital infrastructure (#17) is lacking however. Helsinki and Copenhagen come in at number 4 and 5 respectively.
For the top ten, the cities scoring in start-ups are shuffled around a little. Brussels moves to the #7 spot while Berlin moves down to #9. Paris, Dublin and Munich remain were they were for the start-up ranking. Across the board, there are few big movers. Rome drops to #31, while Madrid sticks to its #12 spot. Cambridge and Oxford come in at #11 and #13 respectively.
* The Index is developed in partnership with Dias_ and supported by the European Commission.