Southern Europe is growing as an innovation centre

NewsFromThePlatform | November 7th, 2019

Innovation is traveling south. The first signs of the strengthening of this trend are two events: the South Summit in Madrid at the beginning of October and the Web Summit in Lisbon at the beginning of November. These are two of the most important conferences in Europe and have reached their eighth and ninth editions, respectively.

The South Summit was founded in 2012 by Spain Startup together with IE Business School. While the sovereign debt crisis hit hard in the Pigs (Portugal, Italy, Greece and Spain) they understood that entrepreneurs had what it takes to boost the economy. Today, the South Summit is a global platform that acts as a joining link among investors, start-ups and corporations.

The Web Summit was first organised in Dublin and then moved for good to Portugal in 2016. This year’s edition saw 70.000 participants, 15.000 companies and 1.200 speakers from more than 160 countries, 11.000 CEOs, 21 conferences, satellite activities for around 250 million Euros. In a few words, it’s the most important technological event in Europe, where start-ups, investors, and international leaders meet to discuss and build relationships.

In the Top 15 ranking of the biggest start-up hubs in Europe, Barcelona and Madrid are fifth and sixth respectively. The ranking is based on the number of registered start-ups in each city according to CrunchBase and AngelList data.

More data: a 2018 report by the European Commission shows that Lisbon has reached the fifth place in the Startup City Index, which ranks the best cities where you can start an entrepreneurial activity. And the Portuguese ecosystem is growing at twice the European average rate (according to the Startup Europe Partnership report).

What’s fostering this growth? According to the European Commission, factors such as: high work quality combined with low workers cost, especially in the ICT sector (a German junior developer costs 2.5 times more than a Portuguese one, a British one 3 times more and a Swiss one 4 times more!). The real estate market, despite its recent growth, also has competitive prices: an office in Berlin would cost 150% more than one on Lisbon, in London six times more. Moreover, the Portuguese city has many facilitating measures for start-ups, from taxation to streamlined procedures for foreign companies that want to establish their headquarters in Lisbon and its surroundings.

A further validation: the numbers of fundraising

We have already talked about the flourishing of the Southern European ecosystem, this trend has been clear to us for some years, however today we see the first signs of its consolidation. Starting from fundraising: according to Invest Europe, at the end of 2018, southern Europe raised 5.6 billion Euros, a slight increase over 2017 (5.4 billion) but well above the 4.5 billion Euros of year 2016 and the 3.7 billion Euros of year 2015.

It is worth emphasizing that, in 2018, 12% of European venture capital investments were directed to the Mediterranean area, just 8% to Nordic countries and 13% to the Dach area (Germany, Austria and Switzerland). Moreover, the amount of investments in southern European start-ups was 0.5 billion Euros, divided among 407 start-ups, compared to 400 million Euros for 261 Nordic start-ups. What stands out is that investments for growth amounted to 1.9 billion Euros in the Mediterranean area, exactly the same as the Dach area and not so far from the 3 billion Euros of the United Kingdom and Ireland (while France and Benelux stood at 4.1 billion, Nordic countries just 400 million Euros). Another interesting fact is that, with the same amount of funding, the Mediterranean area has financed the growth of 159 companies, versus 421 companies in the Dach area and over 100 in France. And on average, our scale-ups are finally reaching the size of UK ones – UK having financed 3 billion Euros to 372 companies.

If we intersect these data with those measuring the impact of VC on national GDP (which for Spain and Italy is in the order of 0.00%), the area’s unexpressed potential becomes manifest.

Milan, the heart of the Italian Venture Capital

Italy, and Milan in particular, can be a leader in this evolution. Finally, our ecosystem is growing: 592 million Euros were invested in Italian start-ups and start-ups founded by Italian entrepreneurs, just in the first 9 months of 2019 – as pointed out by StartupItalia! in their observatory. This number tells us that this year’s total value could potentially double last year’s one of 480 million Euros (data from our third Report on the trends of venture capital in Italy, collected in collaboration with BeBeez).

However, it’s not just a matter of size: at the beginning of 2018 Fondazione Politecnico and Tsinghua University in Beijing signed an agreement to create the European hub of Chinese innovation in Milan. And the Milan Fintech District – the first urban area that was designed to attract start-ups, entrepreneurs and companies offering innovative financial services based on new technologies – is now already two years old. In short, we are ready to drive the advance of Southern Europe.