Evaluating a startup ecosystem

Where to found your startup?

tl;dr: You can’t always choose where where to found a company but there are a myriad of different factors to consider which may give you great advantages especially in the early stage of your startup. We took a closer look at a data-driven approach by Nimbelfins “best European country for startups”. Further discussion and conclusions can be found below.

Evaluating a startup ecosystem

The data-driven personal finance site nimblefins.co.uk evaluated 50 European nations to find the best European country for startups. They had a closer look at publicly available hard data, i.e. the nation’s general economic health, the cost of doing business, business environment and quality of the domestic workforce. Of course every startup is individual and further moving or founding a company in the wining country will definitely not guarantee business success, but startup-friendly environments also indicates how welcome economic innovation in this nation is and also if some advantages especially for your startup may evolve. Let us have a closer look at each factor and also on the winning nation in each area and why this area is important for what kind of startup.

General economic health

Obviously healthy economies provide stability and security. The data used to determine economic health were total GDP, GDP Growth, Unemployment Rate and GDP per capita.

However, this data only describes the general economic strength and because of this also the potential for young companies to secure their share of this economic development.

The winner in this area is surprisingly the Netherlands, followed by Germany and Switzerland. But why is the Netherlands so superior in this area? Nimblefins does not reveal how the composite score is calculated but if you have a closer look at the numbers the Netherlands have a strong combination of relatively high GDP growth, a low unemployment rate and also an above average GDP per capita.

Especially important, if:

You aim at large markets
Provide a higher-priced product
You need high economies of scale

Cost of doing business

Cost is something every company wants to reduce as far as possible. The costs of doing business are a significant liability in each startup’s balance sheet. Nimbefins compared the costs of living, the salary expectations and the amount of corporate taxes. The Czech Republic won this race followed by Estonia and the United Kingdom. Regarding the workforce the Czech Republic and Estonia share place one and two in costs of living and salary expectations. The United Kingdom is in the Top3 when it comes to the level of corporation tax.

Especially important, if:

You need to hire lots of people
You need specialists at a low price
Your company has huge profits

Business environment

How easy it is to start a business, the trust in the justice system, the venture capital access and also market dominance are important factors to take that you need to take in to account. Denmark wins this category followed by Germany and Norway. Denmark provides the most trustworthy justice system and is also the nation with the lowest obstacles when it comes to starting a business. Norway ranks in those areas also very high at number two. However Germany ranks very high in providing access to venture capital and also provides a high market dominance in Europe.

Especially important, if:

You are heavily dependent on certain jurisdiction
You need to start fast
You need venture capital

Labor force quality

The quality of the labour force is one of the hardest factors to evaluate in any economic system. Nimblefins took into account the share of adults with tertiary education, the share of adults with at least upper secondary education and also the local availability of specialized training services. With a clear lead over other nations Switzerland dominates this sector with a very high score in all three areas. Coming in second and third are Estonia and Finland.

Especially important, if:

You need staff members with high educational levels
You produce high-quality / high-technology products
Your team has to continuously innovate

Discussion

We like nimbelfins’ idea to use data in evaluating a nation’s startup-friendliness and their production of a composite score. However, founders should look very carefully at the precise industry that they are trying to disrupt and then look for a corresponding strong ecosystem in Europe. For example, smart mobility is a particular strength of Germany and the UK has a deep pool of expertise in Fintech.

Fundamentally, we believe that startups can succeed wherever they are founded across Europe as long as they have access to the correct smart growth capital, strong IP, a supportive network, mentors and dedication. After that, their journey to exit is as unique as the founder themselves.