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Entrepreneurship 23 Jan 2019

The cities that attract Europe's most successful startups

A European Commission report warns that across the EU the technological divide between large cities and the rest of the region is growing.

“The innovation economy in Europe is heavily concentrated in about 50 main hubs, while all the other cities and municipalities – that have been the backbone of the European economy traditionally – face the risk to be increasingly marginalized,” explains Alberto Onetti, Chairman at Mind the Bridge. This is the conclusion of the European Commission’s report StartupCity Hubs in Europe, which was produced by the Mind the Bridge Foundation. The most telling fact from the report: 48 European cities represent the backbone of innovation across the whole continent.

In measuring how “startup talent” is distributed across the different regions, the report calculates that there are 476 cities in Europe with at least one scaleup. This term refers to startups that have  managed to raise a least one million dollars in capital and now face the challenge of scaling-up their business model. The most significant detail of the report, though, is that of these 476 cities, only 48 – with a maximum of one or two per country – dominate the innovative landscape. The European Commission regards these 48 cities as the “Top StartupCity Hubs” because they attract the greatest concentration of scaleups in their respective countries.

In the case of Spain, 85 percent of all scaleups are concentrated in Barcelona and Madrid – 125 in Barcelona and 93 in Madrid – representing 95 percent of all scaleup capital in the country. Comparing the population of these 48 cities and their contribution to Europe’s GDP reveals an even more striking imbalance regarding capital and the innovation generated by these cities: they represent 14 percent of the continent’s population with a GDP contribution of 34 percent.

The inequality between the innovation-leading metropolises and other urban areas is repeated across Europe. Copenhagen has amassed 70 percent of Denmark’s scaleups, representing 85 percent of associated capital. Paris wields a similar dominance over France’s other cities: it has attracted 72 percent of the country’s scaleups and 80 percent of the capital. Among Europe’s leading countries, Germany achieves the most equitable distribution among its different towns. Berlin walks away with the biggest piece of the pie, but the imbalance with other major cities is noticeably lower: 54 percent of scaleups and 66 percent of the capital.

An additional divide has to be added to the imbalance between top-tier cities and the rest: the chasm between the different EU countries themselves. A city like London exerts much more innovative potential than dozens of countries. In fact, numerous European Commission reports single out the United Kingdom as the absolute leader in innovation across the continent. Specifically, according to this report, London has more than double the scaleups than the city that immediately follows it, Paris. 1,153 compared to 487.

The solution? The report points to the strengthening of a number of “second-tier startup cities”. Promoting these cities would alleviate the growing disparity and expand innovation throughout EU countries, creating networks instead of nodes. The principal Spanish candidates, according to a classification included in the study, are Valencia and Bilbao.

“A sizeable portion (33%) of European scaleups is still scattered across several cities. The emergence of these tier-two scaleup hubs is an interesting phenomenon that is common to most of the European countries. Their potential and role both in innovation and local development cannot be neglected. Therefore, strategies to support and connect these tier-two hubs at an international level and to increase their participation in the startup economy are key at both national and European levels,” the report concludes, pointing out that there are already active initiatives, such as the StartupCity Europe Partnership, that champions this mission.

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