Mention start-up centres, and most people think Silicon Valley. Think start-up hubs, and you probably think of Y Combinator: the storied US accelerator, whose motto is “make something people want”, has attracted budding entrepreneurs from all over the world who, like Steve Jobs of Apple fame, dream of putting “a dent in the universe”.
Since 2005, Y Combinator has nurtured and funded 4,000 start-ups with a combined valuation of $600bn, including Airbnb, Dropbox and Stripe.
Every region of the world has looked on with envy at this model of entrepreneurial dynamism and tried to copy the West Coast playbook. None has succeeded in the same way.
But what has emerged in Europe, at least, is a far more diffuse and diverse tech ecosystem, supported by a scattered network of incubators and accelerators across the region. By 2021, some 98 cities across 28 countries in Europe had produced a unicorn — a start-up business with a valuation of at least $1bn.
To map these emerging start-up hubs, the Financial Times — with its research partner, Statista, and FT sister publication, Sifted — has compiled a ranking of Europe’s top incubators and accelerators. The inaugural list, covering 125 hubs in 21 countries, is published today. The hubs included vary from offshoots of established universities, to corporate incubators, to fully commercial accelerators.
Unsurprisingly, perhaps, the UK — with London being the venture capital centre of Europe — is home to the largest number of those listed (24), followed by Germany (16), and Spain (15). But the research also identifies a growing number of promising hubs in central and eastern Europe, especially in the Czech Republic, Poland and Romania.
The three top-ranked hubs are UnternehmerTUM in Germany, Hexa in France/Belgium and SETsquared in the UK.
Each hub was rated by its own alumni, 2,600 in all, in six categories: mentoring and training development; infrastructure; legal assistance; business development; networking; and funding. Independent experts, including angel investors, VCs, entrepreneurs and academics, also added their evaluations. And additional scores were awarded, according to the most successful start-ups to have emerged from each hub.
UnternehmerTUM, which is affiliated with the Technical University of Munich, scored particularly highly among alumni for networking. “My whole journey and transformation into being an entrepreneur was fostered by UTUM,” wrote one. “UTUM is a unicorn-making machine.”
TUM, which calls itself The Entrepreneurial University, boasts that its alumni have created 11 unicorns — known locally as Munichorns — including the software company Celonis, the flying car start-up Lilium, and the AI-video content generator Synthesia.
Many of Europe’s most promising start-up hubs are linked to universities. But academic founders have often criticised universities for being overly protective of intellectual property and demanding too high an equity stake in any university spinouts, suppressing value for other investors.
European start-ups have also suffered from a lack of growth capital to enable promising companies to reach global scale.
Nathan Benaich, general partner at the VC group Air Street Capital, says that European countries need to develop bigger pools of growth capital to build promising businesses and encourage enlightened universities to be “long-term greedy, not short-term greedy” when it comes to spinouts.
“It is fair to say that, in Europe, up until today, we have one or the other, but rarely both,” says Benaich.
The second-placed hub, Hexa, describes itself as a start-up studio, creating multiple companies in parallel and as a team. To this end, Hexa takes a 30 per cent equity stake in start-ups — which is extremely high by the standards of most hubs, although it covers all the companies’ costs for the first year.
Hexa focuses, in particular, on building enterprise software, fintech, and web 3 companies. It has launched 40 companies with a combined valuation of more than $4.5bn. “Hexa has provided us with invaluable product advice in the SaaS [software as a service] industry, as well as a strong network of business angels to raise from,” one participant commented.
The third-placed hub, SETsquared, is an unusual, collaborative business incubator run by six British research universities: Bath, Bristol, Cardiff, Exeter, Southampton and Surrey. Since its launch, in 2002, SETsquared has supported more than 5,000 entrepreneurs, enabling them to raise £4.4bn of funding.
One participant cited the benefit of multiple meetings with investors and industrial partners, which was critical for the success of the business. “The team is truly committed and supportive,” the alumnus wrote.
These three very different approaches to building start-ups highlight the diversity of Europe’s tech ecosystem. “There’s probably nothing equivalent to Y Combinator in Europe,” says Benaich. “But Y Combinator was founded in a different era. They provided a product that was unique at the time.
In other words, Europe no longer needs to try to emulate Y Combinator. It is creating a vibrant start-up hub model of its own.
