2018-08-29 - Széchenyi Tőkealap-kezelő - CEE news

Is the Carpathian Basin the next Sillicon Valley? – Central Europe lags behind?

In the past 20 years, the European Investment Fund (EIF) has been the leading public provider of capital to young and innovative European startups. Venture capital is essential for startups to achieve growth and create value through innovation. Although it should not be seen as a substitute for traditional banking finance (since it serves only a specific and restricted group of firms), research has shown that the economy as a whole reaps the returns of a thriving venture capital ecosystem in terms of innovation and productivity.

EIF examined the geographic distribution of 2,934 startups in which it invested over the 1996-2014 period. The data about the location of firm-level headquarters provided a number of interesting results. One unmistakable finding was that the headquarters of EIF-backed firms are concentrated in a few key areas, which reflects the features of the European venture capital market. EIF focused on identifying the key locations (hubs) attracting the largest share of EIF-backed investment. This resulted in a list of 20 European cities that collectively attracted about 40% of all EIF-backed investments and 83% of all invested amounts up to 2014.

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Geographical dispersion of EIF-backed firms between 1996 and 2014:

  1. London
  2. Paris
  3. Cambridge
  4. Berlin
  5. Munich
  6. Dublin
  7. Milan
  8. Stockholm
  9. Amsterdam
  10. Copenhagen
  11. Vienna
  12. Hamburg
  13. Madrid
  14. Barcelona
  15. Helsinki
  16. Espoo (Finland)
  17. Leuven
  18. Gothenburg
  19. Sofia
  20. Vilnius

Instead of being concentrated in one region, like in the US, the European venture capital sector is widely spread, which can easily become an asset. On a different note, the JEREMIE funds had only just begun to take effect in Central and Eastern Europe in the years in question. This might explain why there are only two former Soviet bloc cities on the list. Analyzing the same list in a few years’ time could yield interesting results, as the European Investment Fund is providing another €97 million worth of capital in Central and Eastern Europe. As a matter of fact, the region is experiencing an influx of funds at the moment, although it still lacks innovative firms ready for investment.