Over the last couple of decades, startups have taken over the world of business with innovative ideas, industry disruption
and a new way of working
that is kicking old fashioned corporate companies to the curb. In particular, tech startups
have captured our imagination and changed our way of life in a hugely positive way, with the provision of simple and efficient solutions that change our daily habits and solve our problems.
The global hub of tech innovation has historically been the San Francisco Bay area - the so-called 'Silicon Valley', but many other epicentres for tech startups have begun to spring up, shifting the focus across the Atlantic and away from the west coast of the US.
Europe is fast becoming the global hotbed for tech startups who want to push the boundaries of the industries they operate in, and grow and scale rapidly. Where are the main European centres for tech startups and innovation?
Of course, not all cities in Europe have managed to enjoy the same level of startup success as others. There are a few key cities which have become centres of the European tech startup scene, and are home to many companies that are fast becoming some of the biggest, most disruptive and most popular in the world.
Five of the top European destinations for a vibrant startup culture are:
All of the above cities have seen hundreds of tech startups successfully grow and scale in recent years, which is no mean feat - given that somewhere in the region of 90% of startups end up failing
So what is it about these cities that have made them such a rich breeding ground for exciting startups that find a place in their chosen market and capitalise on their funding to become profitable? Here are some of the main reasons:
- They are able to recruit skilled and qualified talent who want to move to these cities for the vibrant and exciting lifestyles available there. What's more, many of these cities are major university towns, and so it is easy for startup businesses to recruit interns and entry level workers who already live in the close vicinity.
- Startups can offer young and ambitious professionals amazing career opportunities. They give workers the valuable chance to upskill themselves, continually develop their business acumen and experience, and earn decent and fair wages. These opportunities can be hard to come by with larger corporations, and so people are keen to join and grow with startup businesses, and stay with them for a long period of time.
- The above mentioned cities can all be considered global cities given the fact that they are very much cosmopolitan areas with many different nationalities in one place. This means that startups can generally draw on many different skills, experiences and languages when they recruit people for their businesses.
- The thriving financial landscapes in these cities mean that they are fertile places for financial investment from venture capital firms. Investment is an essential part of the life cycle of any startup, and so being in these locations with highly developed and historic financial importance can encourage startups to locate here and seek investment in the same cities.
What are some of Europe's most successful startups?
- Startups have a huge emphasis on creating a fantastic company culture, and so they are able to attract and retain the best talent. With bustling, up-and-coming districts with trendy bars and restaurants in these cities that help startup culture to thrive, startups are more likely to locate there so that they can share this culture with their employees.
Many successful startups undergo a period of rapid growth fueled by investment before becoming profitable, and then a select few go on to become household names that truly disrupt their industries and change the day-to-day lives of their millions of happy customers.
Here are four European startups that have been massively successful in what they do: Delivery Hero
There are plenty of online food ordering sites and apps out there, and Delivery Hero is one that has proven a big success in the lucrative German market, and has subsequently expanded its operations worldwide. Based in Berlin, it has a network of over 100 restaurant partners globally, and processes hundreds of millions of dollars every year in online food orders. It has so far raised 2.6 billion US dollars in funding
Taking the payments world by storm with their unique 'Buy now, pay later' philosophy, Klarna is a Stockholm-based tech startup that has become Europe's most valuable FinTech, with a valuation of over 5 and a half billion dollars! With financial backing from none other than rapper Snoop Dogg, Klarna has brought a new level of cool to the world of FinTech! Klarna has raised over 1.2 billion US dollars in funding
The money transfer industry has changed dramatically thanks to services moving online to web platforms and smartphone apps, and TransferWise has led the charge. It is a London-based FinTech startup that lets its users send money abroad with low fees and no hidden charges, bypassing traditional transfer methods like high street banks or remittance outlets. TransferWise has received just over 772 million US dollars in funding
Farfetch is an online luxury retail platform based in London. Like many other startups - and particularly important to the fashion industry - it champions sustainability as one of its core pillars. Farfetch has currently received just over 700 million US dollars in funding
. Startups that don't get things right
It is vitally important to remember that not all startups go on to be famous businesses like the ones mentioned above. The vast majority do not manage to successfully sustain profitability, and end up shutting down almost as soon as they start.
Here are four startups that have not survived, with some of the reasons why: Laurel & Wolf
Laurel & Wolf was an online interior design marketplace which tried to make professional interior design affordable and accessible for everyone. They received 35.8 million dollars in overall funding, but operational and management challenges including unhappy employees and unforeseen operational costs meant that they weren't able to survive. Shyp
Despite raising 62.1 million dollars in funding, Shyp was a startup that couldn't make the most of its good fortune and has recently crashed into obscurity. The business tried to shake up the personal logistics industry by making it easy to order delivery services from a customer's smartphone. The company had a 'growth at all costs' mentality and weren't able to successfully scale and shape the business to keep up with their growth, and eventually, as consumer growth slowed, profits soon ran out. Stimwave Technologies
After receiving 54.7 million dollars in funding, Stimwave Technologies tried to disrupt the medical industry with wireless, microsize medical devices for neurology. Unfortunately, they hadn't spent enough time matching their product with their audience, and when they launched their product, it was met unenthusiastically and with low demand, and so the company bombed. Beepi
Beepi was a used car marketplace which managed to make a big splash when it was first founded. In a world of exploding on-demand marketplaces, Beepi's future looked very positive to both consumers and investors. In 2015, Beepi secured an impressive $60 million Series B funding round. However, poor management, including huge salaries for executives and aggressive negotiating for a higher valuation, meant that it lost investors and blew through its funding quickly. Top tips for startup success
Although there is no one simple solution that all startups can use to make sure that they end up like the former companies mentioned compared with the latter, there are certain best practices that they can follow to try to make it more likely that they will succeed. These are:
- Collaborating with fellow startups
One of the best things about the European start-up scene is that there is a definite community feel to it, meaning that other startups will often be keen to collaborate with you and help you out when you need it. Startups by their very nature are agile, flexible and opportunistic, and are constantly on the lookout for new partnerships to add additional expertise to their products and solution. Make sure you are always looking for networking opportunities with other European startups.
- Counting your costs
Making the most of your money from investment is key if you are going to be a success, become profitable, and keep the faith of your investors. This means limiting unnecessary costs to reduce your overheads, and prioritising what you spend your capital on. Make sure that you have a sound economic mind in your business that can help you to make good financial decisions, and streamline your costs wherever possible. Any expenditure that is not essential to achieving profitability should be cut straight away.
- Outsourcing projects
An incredibly simple way of streamlining your business processes and bringing vital expertise into your company is by outsourcing certain projects using external agencies. This means that you don't have to internally hire experts for every aspect of your growing business; rather, you can hire teams to help you out as and when you need them. Outsourcing will cut your overall operating costs and give you specialised skill sets for difficult tasks, increasing efficiency right across the business.
- Being a solution to a problem
One of the easiest mistakes to avoid is making sure that you have a product or service that solves a problem for people. If you think you have a solid idea that will work, you still need to conduct extensive research to make sure that there is a gap in the market that you will be able to fill. If not, then your business will be doomed to fail. All of the successful startups mentioned towards the beginning of this article all had in common the fact that they have identified a problem in their respective markets, and engineered a fantastic solution to alleviate this problem, and that's what all startups must do.
- Championing diversity
Startup culture goes hand in hand with diversity of all kinds, and drawing experience from all over Europe and the rest of the world plays into this notion. As we have said before in this article, there are a number of startup hubs all over Europe that have helped small businesses to grow and become immensely successful for a number of reasons. If you have a startup that is looking to grow, then you can benefit from the experience and expertise available all over Europe. So look to diversify your team by hiring people not only from your country, but who have life and work experience from different locations and cultures across Europe.
- Giving back to the community
A key hallmark of successful and much-loved startups is that they give back to the community and environment in a way that their customers are proud to buy products and services from them. Being a morally good startup will help you to strike a chord with customers in multiple markets, and will drive your startup towards profitability and success. In particular, the increasingly affluent millennial generation have a great desire to make purchases from startups that are socially and environmentally good. So if you are a startup owner, you should make sure that your business earns a reputation for having a positive impact locally and globally.
To sum up, Europe has several locations which encourage startup culture, and provide an amazing platform for entrepreneurs to begin their business journey and turn their amazing ideas into a profitable reality. Having said that, the road is not easy by any stretch of the imagination, and they must work hard to manage their budgets, provide a valuable service to their target market, and create a harmonious team culture that allows the startup to scale and evolve.