At Atlantic Leap, our mission is to help digital startups to become global leaders, and in this context, we’re often asked which cities US companies should head for in Europe. Although there are plenty of lively and thriving tech-savvy communities across the continent, we’ve picked six that stand out – Stockholm, Berlin, Helsinki, Amsterdam, Barcelona and London.
They all share some vital characteristics - they’re cosmopolitan cities with buzzing cultural scenes and great networks, and they have thriving startup ecosystems bolstered by the presence of major players and serious investment. Let’s look at each in more detail.
- Population: 932,917
- Main universities: Stockholm University, The Royal Institute of Technology
- Startup successes: Mojang - $2.5 billion, Skype - $2.6 billion, King - $5.9 billion
- No. of Developers: 51,547
Skype, Spotify, Klarna, Mojang (Minecraft) and King (of Candy Crush fame) have emerged from the Swedish capital in recent years, and with 8,000 startups employing a highly talented 52,000-strong workforce, there are likely to be more in the near future. It has the second highest number of billion-dollar companies per capita after Silicon Valley, with 6.3 companies per million people.
Pär Hedberg, CEO and founder of Stockholm incubator STING, told the Telegraph recently that in 2014, “Stockholm was rated as the world’s second-fastest growing market for VC investment in technology. It now has the most billion-dollar startups in Europe. There is no question that we are the startup capital of Europe.”
Stockholm’s domestic market is small, so there’s a theory that companies think globally from the start. That also means that Swedes are skilled English speakers, so there’s no need to worry about the language barrier.
And Skype’s $2.6bn exit in 2005 has given rise to a generation of entrepreneurs from that company spreading their tentacles across Stockholm and beyond, in a new Euro version of the PayPal Mafia. Skype’s founders and early employees have gone on to start VC funds and new companies across Europe, like Atomico, Rdio (now taken over by Pandora) and Ambient Sound Investments. Atomico is primarily London-based, but in March 2015 it doubled down on its commitment to Stockholm, partnering with incubator SUP46.
One recent success story is Tictail, who are looking to plug the gap between Etsy and Amazon. They have attracted 125,000 indie brands to their virtual shelves, as well as pulling in over $32m from investors including Thrive Capital. Another is Acast, whose podcast platform services 30m users every month through big-name web destinations such as Buzzfeed, The Huffington Post and the FT.
With more billion dollar startups per capita than anywhere else in Europe, Stockholm has set a high bar, but the ecosystem this has created is likely to drive further startup success.
- Population: 3,610,156
- Main universities: Humboldt Universität zu Berlin, Freie Universität Berlin, Technische Universität Berlin
- Startup successes: Soundcloud - $2 billion, ResearchGate - $Unknown
- No. of Developers: 81,868
Berlin has a reputation as one of the most fun cities on the planet, and it’s one of the hottest places in Europe for startups too. Soundcloud, 6Wunderkinder/Wunderlist, ResearchGate, Number26 and Delivery Hero all call the city home.
Low rents, high times and plenty of investment make the city an attractive place to live and do business, and startups are flocking to Berlin. According to Gruenden, an advisory agency for new businesses in Germany, a new company is founded every 20 minutes in the German capital. English language skills are strong here too.
One of Europe’s most valuable tech companies calls Berlin home - Rocket Internet. Fronted by the Samwer Brothers, the tech giant has established a somewhat unfair reputation as a copycat firm, taking proven concepts like Uber and Amazon and exporting them around the world. Detractors call it the clone factory, and it’s endured a somewhat rocky 18 months since its IPO but its property portal for emerging markets, Lamudi, recently raised $31.4m and its legacy is not to be ignored: a new generation of Rocket alumni founding their own companies across the city.
One of the startling aspects of the Berlin tech scene is the sheer variety of startups, covering everything from fintech (Number26, the smartphone bank which raised $10 million from Valar Ventures in 2015) to subscription meal kits (HelloFresh, which has expanded globally thanks to a $110 million funding round from Rocket Internet and others) and health (Clue, a menstrual cycle tracking app, was the number-one health and fitness app in the Apple App store in 2014 and has raised $3.3m in funding).
According to some reports in 2015, Berlin was on target to surpass London in terms of VC investment, but a year later this was by no means certain. Brexit could have an impact, with some fintech firms already moving from London to Berlin (ahead of Frankfurt, the traditional German economic hub), but only time will tell.
- Population: 629,512
- Main universities: University of Helsinki, Aalto University
- Startup successes: Supercell - $10.2 billion, Rovio - $6 billion, Holvi - $150 million
- No. of Developers: 29,208
For many years, it was Finnish second city Espoo that served as the nation’s tech hub, home as it was to mobile phone giant Nokia. As the Nokia star faded in the wake of Apple’s iPhone, Helsinki came to prominence as a hub for phenomenally successful mobile games developers, including Rovio (of Angry Birds fame) and Supercell (Clash of Clans, Clash Royale). Ironically, both firms made their money by embracing the nascent smartphone revolution led by Nokia’s usurpers, Apple and Samsung.
The success of these gaming studios has seen both investment and tech talent flow into Helsinki. Unsurprisingly, some of the current crop of startups also have a gaming angle. Futureplay, founded by ex-Rovio Executive VP Jami Laes, hit $1m in revenue for their first mobile game and are now looking at video tech to build ad-supported, free-to-play games that do not frustrate and annoy users.
With 35 million people downloading games from their ‘Best Friends’ series, Seriously are now looking to become a multi-media player, led by another former Rovio VP and supported by $18m in Series A round funding from Northzone amongst others. This contributed to the $1.82 billion of investment that flowed into the Nordic region in 2015.
Late night dev sessions at Futureplay or Seriously may have been fuelled by food ordered through Wolt, an online food ordering and delivery system, which launched in 2014 with $2.4m of venture capital and then raised a further $10m in April 2016 to expand into Sweden and Estonia.
Wolt was co-founded Miki Kuusi, who also co-founded Slush, the startup event held in Helsinki every year, billed as ‘Burning Man meets TED’. It brings together startups and investors, celebrates entrepreneurship and pushes the mantra of #nordicmade.
While Slush has done much to grow the Helsinki startup scene, Kuusi was thinking bigger, telling Wired Magazine that “the biggest issue for startup companies in Europe in general is that everyone’s doing something inside of their own country’s borders. They’re not thinking big enough. So we launched Slush.”
It is that kind of global thinking that has put Helsinki alongside Stockholm at the forefront of the Nordic block.
- Population: 1,343,647
- Main universities: University of Amsterdam, VU University Amsterdam
- Startup successes: Booking.com - $10 billion (estimate based on market cap and turnover), TomTom - $5 billion (estimated)
- No. of Developers: 66,778
Before it was a tech hub, Amsterdam was a travel hub, with its Schiphol airport rivalling Heathrow as the centre of European air travel. The fact that so many flight paths lead to Schiphol is undoubtedly a factor in making Amsterdam an attractive investment destination, not just from the US and the rest of Europe, but also from the Far East.
While the nineties saw Booking.com and TomTom launch in Amsterdam, it was the first Next Web conference, held in 2006, that laid the foundations for the Dutch capital’s role as a tech hub. Over the next few years, startup entrepreneurship flourished, driven in part by a move by the leading universities in the Netherlands to produce and nurture tech talent in a way that encouraged it go its own way rather than get swallowed up by Dutch multinationals such as Shell and Phillips.
The Rockstart incubator launched in 2011, swiftly followed by the Dutch arm of the Startupbootcamp network of accelerators, the latter becoming one of the best known in Europe. All of this has ensured that Dutch startups raised almost $270m in 2016 across 140 deals, the largest slice of which went to medtech firm G-Therapeutics, which raised $26m in funding from INKEF Capital and other investors
At the other end of the scale, nearly 70 startups were able to raise between $50k and $500k through a mix of seeding, equity crowdfunding and convertible notes, making Amsterdam one of the best places in Europe to get things moving.
Finding further funding can be more of a challenge, but Bux, a two year old fintech app company with the aim of opening up the trading floor to the man in the street, secured $6.4m in series B funding to support its expansion into Germany.
The Dutch government has also had a hand in boosting the profile of Amsterdam as a tech hub, with the launch of the public-private StartupDelta partnership. StartupDelta promotes the Netherlands as having the “world’s most connected economy”, thanks to the Schiphol airport links and the fact that the Dutch population has the highest percentage of English speakers in mainland Europe.
With disruptive multinationals setting up shop in the Netherlands and the Dutch government introducing a fast-tracked ‘Start-Up Visa’ to attract overseas entrepreneurs, Amsterdam’s role at the heart of European tech is likely to grow further.
- Population: 1,604,555
- Main universities: University of Barcelona, Polytechnic University of Catalonia, Pompeu Fabra University
- Startup successes: Softonic - $275 million, eDreams - $1.5 billion
- No. of Developers: 51,809
It is safe to say that the construction of Barcelona’s famous Sagrada Familia has been something of a slow burn, with work starting in 1882 and scheduled to go on to at least 2026. Similarly, the growth of Barcelona as a tech hub has been less meteoric than some of its northern European counterparts, but is built on solid foundations.
While the ongoing economic issues in Spain have taken their toll, the relatively low cost of living and the concerted push by the Catalonian government to attract overseas investment have made the historic city an appealing destination.
Barcelona already has several tech successes under its belt. eDreams, the online travel agency was founded in the city at the turn of the millennium and became Spain’s first ever IPO of an internet startup, valuing the company at around $1.5 billion. Other success stories include collaboration suite TeamBox (now known as Redbooth and headquartered in California) and online fashion brand Privalia.
Seed funding is not difficult to find in Barcelona, particularly with international players such as Lenovo and Cisco making R&D investments in the city. Spanish telecommunication giant Telefonica has also been making funds available through its Wayra startup accelerator, although one Wayra Academy manager was happy to admit that: “It’s not just about the ideas. We are using Wayra as a way of acquiring great talent for Telefonica”.
Barcelona is also not short of angel investors to allow its startups to move to the next level, including local funds Cabiedes & Partners and international outfits such as Active VP, Highgrowth and Inveready. Access to such investment has allowed foreign-exchange platform startup Kantox to break the $3 billion transaction barrier in April 2016, after completing an $11 million funding round a year earlier.
Another well-funded success is Wallapop, a used-item trading app created in 2013. Initial funding of $1.7 million from a raft of investors allowed expansion into the UK, France and Mexico, followed by a subsequent $40 million round that now sees it boast 30 million active users, processing 20,000 transactions a day. Some commentators have tipped Wallapop as Barcelona’s first billion dollar startup and hold it up as evidence that the city has entered the tech hub big league.
- Population: 8,673,713
- Main universities: University College London, King’s College, London School of Economics, London Business School
- Startup successes: Worldpay - $2.6 billion, Sophos - $1.6 billion, Zoopla - $1 billion
- No. of Developers: 300,345
London is home to 275,000 startups, employing some 1.5 million people, and those numbers are only going to get bigger. It has more $1 billion businesses than any other European country, and in 2015 it attracted a record $2.28b venture capital investment, a 69% increase compared with 2014.
This hasn’t happened overnight. Tech City UK was opened by David Cameron in 2010 to create “the optimum conditions for digital technology businesses and entrepreneurs to thrive across the UK.” Whether it was this and other UK government endeavours that have attracted the likes of Google, Facebook, Amazon, Microsoft, Intel, Cisco and Qualcomm to the capital - or whether it was simply that the UK was too big a market to ignore - that fact is that their arrival has had a huge knock-on effect on the startup scene: the technology startup sector grew by 200 per cent between 2014-15.
With high rents and other costs it’s not a cheap place to do business, but the city’s bursting with talent, energy and know-how.
But London is more than just a Silicon Roundabout. It’s one of the world’s key financial centres, and for this reason it’s become a driving force in the fintech sector. It’s home to top universities and a cultural scene that’s been white-hot for centuries. And its close proximity to the US is more than just flight times; its shared heritage with the US makes it an excellent cultural fit for US businesses.
For many years, London has established itself as a gateway to Europe for US businesses looking to land and expand across the Atlantic, but what about in the wake of 2016’s Brexit vote? Initially, there was panicked talk of ‘techxit’ and growth forecasts were slashed. Investments into the UK fell by 40% for Q2 2016, in the immediate aftermath of the vote, but started to pick up again in Q3. This was indicative of calmer thoughts prevailing, in part because the true impact of the vote will not be understood for some time.
The 2016 Atomico State of European Tech report saw only 2% of survey respondents highlight Brexit as the biggest risk to the future success of Europe’s tech ecosystem (1% saw Donald Trump as a bigger threat). 82% of responders stated that the vote to leave the EU had not had a negative effect on their company.
Uncertainty may will bring opportunity for some, with the fall in the value of the pound making dollar investment in the UK particularly good value at present. As such, London remains a natural home for all kinds of startups, from fintech to fashion, and retailing to media.
We include Dublin here on reputation alone. After London, it has an immediate and obvious draw for US startups. It is famous for its tax advantages, Ireland is the only English-speaking country in the Eurozone, and Google and Facebook’s presence makes Dublin an attractive prospect.
While its startup scene is definitely on the rise, we’d sound a note of caution about the Irish capital for now. The scene isn’t as diverse as some would like, and Google and Facebook’s presence can prove a hindrance rather than a help: their communal dominance of the tech scene means that they tend to snap up talent, diverting it away from smaller companies. Also, some of the historic tax advantages are lessening as the EU cracks down on tax avoidance.
So what does this all mean? Essentially, the time has never been better for US digital startups to move the move across the pond: the ecosystems and infrastructures in all these cities are already in place, and they’re certainly not short on talent. The challenge for US startups is not in deciding whether to expand to Europe, it’s where to set up when they do.
Atlantic Leap has helped some serious US players make the leap to Europe. Take a look at some of those here. And for more info on what we do, take a look at our services.
Stockholm via Wikimedia Commons
Berlin via Wikimedia Commons
Helsinki via Wikimedia Commons
Amsterdam via Wikimedia Commons
Barcelona via Wikimedia Commons
London via Wikimedia Commons