What factors do founders consider when choosing to locate their companies?
In the 2018 Startup Heatmap Europe Survey 28% of founders were foreign-born. But there is many reasons for people to change location: personal motives (22%), studies (18%), work (31%) – but curiously, also a large portion of this population, nearly a third, responded that they crossed borders specifically to start a company. The Startup Heatmap Europe survey is the very first to ask founders the reasons why they moved to a certain place and the main challenges they faced. Here, we look closer at choices of these startup migrants to examine how these decisions factor into our list of top European startup hubs.
Western Europe has the most movers
The subset of founders who changed their location to start a company comprises of 102 founders.
Most of the mobile founders come from the Western region, which is comprised of France, Germany, Switzerland and Austria (30%). The second most mobile region is the Mediterranean with a share of 22% of founders who moved specifically to startup. Around 18% come from outside Europe. This is in line with overall mobility findings and shows that mobility is a phenomenon irrespective of origin. When it comes to regions that attract the greatest share of incoming mobility, we find that despite London being the most popular destination for founders, the UK does not attract the greatest inflows in our sample of founders moving specifically to startup. Rather Western Europe leads capturing 25% of all founders who changed regions specifically to startup, followed by the Mediterranean and Benelux with both 19% of inflows. The UK comes 4th with 17%.
Overall, the greatest share of mobile founders has either moved within their origin country (37%), or moved outside their broader region (46%). Only a small group moves to a nearby country.
Startup Ecosystem and Culture is the most important factor
We asked founders who moved specifically to startup to identify the most important reason for choosing their current startup locations. On top came out the startup ecosystem and culture with 30% of mobile founders naming this as the most important. The second most important factor was the availability of local funding with 23%. This result stands out when compared to the stated preferences of all the founders in our survey, irrespective whether they moved or not. When we asked all respondents in our survey (both movers and non-movers) talent availability was the most important factor in determining a startup location. For founders who actually moved to start a company, the availability of talent was less of a deciding factor. This is contrast might be explained by the fact, that talent is quite evenly spread in Europe, but more accessible in a home ecosystem and therefore rather a factor to stay than to move.
Do these evaluations change according to a respondent’s location? When we choose two very different regions, the West (which includes France, Germany, Austria and Switzerland) and the Mediterranean (which includes Italy, Greece and Spain), we find they perform very differently both in terms of mobility and evaluations. Interestingly, while the Western region’s startup ecosystem is most frequently identified as the reason that makes the region a great place to startup, it is also the most frequently mentioned push factor. While at first might seem counterintuitive, it can easily be explained by digging deeper into the cluster. We find that the divergence is found among founders who moved from a small city as Kiel or Innsbruck to a larger one, such as Berlin or Cologne. Despite the vast differences between these regions, they share key similarities. We find, a location’s startup ecosystem, funding availability and regulation are important push factors for founders both from the West and the Mediterranean. There is further congruence among the pull factors. For both regions, the most important pull factors include attending an accelerator program and government incentives. There are also a few key differences: In the West, we can see that the proximity to other players of the startup ecosystem are important pull factors, alongside proximity to customers and other startups. Conversely, for the Mediterranean, the proximity to mentors and the opportunity to create a great team are important factors when it comes to identifying a great startup location.
The decision to move
The Startup Heatmap Europe survey also investigated the rationales that encouraged founders to move to startup their companies. We can distinguish these between push and pull factors. Push factors are identified as the most common (negative) factors encouraging founders to move away from a region, whereas, pull factors capture the most attractive features convincing founders to establish in a new place. The most frequently mentioned push factors for founders moving specifically to startup are a poor evaluation of the local startup ecosystem (49%) and funding availability (38%). Which align precisely with the search profile identified above. Furthermore, difficult business regulations in a respondent’s home area is also identified as a key push factor.
When examining pull factors, the proximity to customers (35%) as well as participation in an acceleration program (35%) are most frequently mentioned as encouraging founders to move to startup their companies. Further pull factors identified by respondents in our survey include government incentives (32%), proximity to investors (24%), other startups (24%) and finally mentors (8%).
Moving comes with Challenges
The challenges most frequently mentioned after moving include building a local network (28%) and finding a place to live or work (21%). Fortunately, overall we find that for movers, key considerations such as setting up the company, bank account and establishing residency were generally not perceived as difficult obstacles. However these findings differ by location. For instance, in the Mediterranean, setting up the company is perceived as the hardest aspect to face when moving here. In Central and Eastern Europe the key is adjusting to local people, way of life and climate. In the Benelux region, founders identified that setting up local bank accounts and Tax IDs created the most headaches. While many of these remain perennial challenges linked with mobility, startup hubs can work to establish solutions, events and activities to help make the transition easier for newcomers. As European startup hubs compete for the most promising companies, strong startup ecosystems can work hard to become an accessible launchpad for founders from anywhere.