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E 781 — European Venture Capital and the Hub Gap · Blockchain Germany – Web3 Startups, Crypto Innovation & Venture Capital by Startuprad.io™

• 0:00
  Say your company needs something your own city
• 0:04
  does not have. A growth investor who knows your sector,
• 0:08
  a head of sales who has done this, a big customer
• 0:12
  in another country. It exists somewhere in Europe.
• 0:16
  Can you actually use it? Here is one data point that
• 0:20
  should make you ask. When scientists in
• 0:23
  European hubs publish together, The
• 0:26
  European Commission scores Europe's network
• 0:30
  at 0.76. America,
• 0:33
  0.81. Almost level.
• 0:37
  When inventors in different hubs file patents together,
• 0:41
  Europe drops to 0.40.
• 0:45
  America, 0.68.
• 0:49
  That does not tell us everything about how startups scale,
• 0:53
  but it tells us that the connection between Europe's hubs
• 0:57
  gets weaker as research moves toward
• 1:02
  a product. Today, islands of excellence.
• 1:16
  Hello and welcome everybody to episode 781
• 1:20
  of the Startuprad.io franchise. My name is Joe. I'm
• 1:24
  coming to you from Frankfurt am Main, Germany, and this is part 7
• 1:28
  of our series on the European scale-up question.
• 1:31
  Here is what we are looking at today. In the last
• 1:35
  18 months, the EU has published 3
• 1:39
  sets of numbers that belong together: a ranking of
• 1:42
  Europe's most innovative regions, its first startup and
• 1:46
  scale-up index for every member country, and a
• 1:50
  study on how well Europe's innovation hubs
• 1:53
  connect with each other. Put them side by side and you
• 1:57
  get a question every founder in Germany, Austria, Switzerland, and
• 2:01
  beyond runs into sooner or later: when the
• 2:04
  capability you need sits in another hub, what
• 2:07
  stands between you and using it? That is the question for this
• 2:11
  episode. I'll give you the evidence, what it shows, what it
• 2:15
  does not show, and in each of the 5 areas we cover
• 2:19
  the decision I would make as a
• 2:22
  founder. Thesis. Here's the thesis
• 2:26
  I want to state carefully as usual. Europe has
• 2:30
  outstanding innovation regions. What a scaling
• 2:33
  company needs is strong capability at home and the
• 2:37
  ability to reach capital, customers, and
• 2:40
  expertise elsewhere. The evidence suggests that second
• 2:44
  part reaching beyond your home hub is weaker in Europe
• 2:48
  than in the USA. And it suggests
• 2:52
  the gap is widest in the commercial layer, not
• 2:56
  in the lab. That is a hypothesis we will test today,
• 3:00
  not a law of nature. Continuity beat.
• 3:41
  Where does this sit in our series? In
• 3:45
  parts 1 to 5, we looked at the bottlenecks one at a
• 3:48
  time. Fragmentation as a hidden growth tax, capital that
• 3:52
  breaks between funding rounds, public money that funds supply but
• 3:56
  rarely becomes a customer, and experienced operators
• 4:00
  who do not recycle into a new company. In part 6,
• 4:04
  Capital Gravity, we looked at companies moving their parent
• 4:07
  company, their CEO, and their capital relationships to the United
• 4:11
  States. Today's idea is that several of
• 4:15
  these bottlenecks may also be problems of access
• 4:19
  between hubs, not all of them, but several. And
• 4:23
  one correction on the record. In part 5, we cited
• 4:26
  the figure that 56% of startups founded by unicorn
• 4:30
  alumni are started in the same city as the unicorn.
• 4:34
  That figure comes from Dealroom and Accel's 2022 data,
• 4:38
  and it covers Europe and Israel together. We had put it next to
• 4:41
  their 2026 numbers. The figure is real. The year
• 4:45
  and the region matter. Europe already has very strong
• 4:49
  innovation regions. The EU's Regional Innovation
• 4:53
  Ranking for 2025 covers
• 4:56
  241 regions. 38 are rated
• 5:00
  Innovation Leaders and 69 Strong Innovators
• 5:04
  Between 2018 and 2025, performance
• 5:08
  went up in 233
• 5:12
  of the altogether 239 regions
• 5:16
  that could be compared. Number 1 is actually
• 5:20
  Stockholm, then Copenhagen, London,
• 5:24
  Zurich, and Upper Bavaria around Munich.
• 5:28
  One thing to be precise about: this ranks regional innovation
• 5:31
  systems, research, skills, companies investing in
• 5:35
  innovation. It is not a ranking of startup cities,
• 5:39
  but 2 out of the 5 are in our home market,
• 5:42
  Zurich and Munich. Now look at the national
• 5:46
  picture. On the EU's new Startup and Scale-up
• 5:49
  Index, Germany ranks 14th of
• 5:53
  27, at roughly the EU average. That is not a
• 5:57
  contradiction. Big federal countries always have strong
• 6:01
  and weak regions. What it tells you is simply that a region can
• 6:05
  be excellent while the national conditions around it are
• 6:08
  average. They measure different things. And Europe
• 6:12
  overall is moving. The EU Startup and Scale-Up Index
• 6:16
  improved by 13.5 percentage points between
• 6:19
  2020 and 2025. That is an index
• 6:23
  score, not 13.5% more startups.
• 6:26
  The Commission also said the process is
• 6:30
  uneven between countries, and that late-stage money is still
• 6:34
  constrained. So the strong regions exist.
• 6:37
  The question is what it costs a company in one of them
• 6:41
  to use what the others have. The
• 6:45
  framework: local capability and outside access.
• 6:51
  Here is a model for you today. 2 ideas.
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  Ecosystem density is how much startup capability
• 6:58
  sits inside one single hub. Think founders,
• 7:01
  angels, universities, seed funds, early customers.
• 7:06
  Ecosystem connectivity is how easily a company can
• 7:09
  use what sits outside its home hub— an
• 7:13
  investor in Stockholm, an industrial customer in Munich,
• 7:17
  an engineer in Paris, a company Starting out
• 7:21
  mostly needs the first. A company
• 7:23
  scaling needs both, because almost no single
• 7:27
  city has every investor, executive, and customer
• 7:31
  you will need between 50 and 500 employees. The
• 7:35
  balance depends on your sector and your stage. That is the
• 7:39
  lens for the rest of this episode. The evidence—
• 7:43
  what it shows and what it does not. The best
• 7:46
  evidence we have comes from a study of the
• 7:49
  Commission's research department published on June
• 7:53
  25th. The researchers mapped collaboration
• 7:57
  between 168 European and
• 8:01
  144 American urban areas
• 8:04
  from 2000 to 2023. Europe
• 8:08
  here includes the UK, Switzerland, and Norway,
• 8:12
  so it's not just an EU story. For patents, they
• 8:16
  looked at where the investors on international patent applications are
• 8:19
  based. Then they built a benchmark— the links
• 8:23
  you would expect between hubs given how big each
• 8:27
  hub is. The index measures how closely the
• 8:31
  real links follow that benchmark. 1 is a perfect fit,
• 8:35
  0 means no relationship at all, between the real network
• 8:39
  and the expected one. It is not a percentage of links
• 8:42
  achieved. Here is the most important
• 8:46
  comparison in this episode. When European scientists in
• 8:49
  different hubs publish together, Europe's network score is
• 8:53
  0.76 against America's
• 8:56
  0.81. Close. When European
• 8:59
  investors in different hubs patent together, Europe
• 9:03
  falls to 0.4 against America's
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  0.68. And Europe's hubs
• 9:10
  are physically closer to each other than America's. So
• 9:14
  physical distance alone does not explain it. What
• 9:18
  separates Munich from Zurich is not the train ride.
• 9:21
  It is a border, a currency, a tax system, an
• 9:25
  employment law, and separate patent and company registries.
• 9:31
  That last point matters. Boston to San Francisco is a
• 9:35
  flight across the continent, but it happens inside one currency,
• 9:39
  one securities regulator, one patent office, and one
• 9:42
  capital market. Physical distance is small in Europe.
• 9:46
  Institutional distance is large. The study
• 9:50
  also finds that European collaboration clusters
• 9:54
  inside national borders and that the gap with America is
• 9:58
  largest in complex technologies— think AI,
• 10:01
  biotech, and quantum computing. Now, what this idea
• 10:05
  does not show: it measures invention networks,
• 10:09
  not the whole business. An investor can fund a startup in another
• 10:13
  country without any shared patent. A company
• 10:16
  can license a technology or hire someone remotely
• 10:20
  without a shared patent. And a part of the American picture
• 10:24
  may be that More US companies have teams in several hubs
• 10:28
  under one parent company, so the investors in different cities
• 10:32
  show up as links. The study names possible
• 10:36
  causes— national rules, language, different legal and of
• 10:40
  course tax frameworks— but it does not provide which one matters
• 10:44
  most. So I will not tell you this number proves where
• 10:48
  every European bridge breaks. What I will say
• 10:52
  is this: the link between European hubs
• 10:56
  gets weaker as you move from research towards commercial
• 11:00
  invention that is worth testing in the
• 11:03
  parts of company the patent data cannot see.
• 11:08
  Now the other side in its strongest
• 11:12
  form: maybe Europe's real problem is
• 11:16
  too few hubs have enough growth capital, enough large
• 11:19
  customers, and enough experienced leaders. Connecting them more
• 11:23
  will not create resources that are missing everywhere.
• 11:28
  And a founder should choose the best partner for the
• 11:31
  company wherever it is—in your own city, in
• 11:35
  another European hub, or in the US. I think that
• 11:39
  objection is partly right. If the resource does
• 11:42
  not exist anywhere in Europe, no bridge will help you. And the
• 11:46
  evidence today does not settle whether Europe needs a
• 11:50
  few much stronger hubs or just better links
• 11:53
  between many. Probably both, depending a little bit on the
• 11:57
  sector. But here is where I part ways with it.
• 12:01
  When a resource does exist in Europe, the extra costs of
• 12:05
  reaching it across a border is real and is paid by the
• 12:09
  founder. The EU's own research on venture
• 12:13
  and growth capital published in October 2025 describes
• 12:17
  Europe's market as still fragmented and lists
• 12:21
  legal, tax, and market barriers to investing
• 12:25
  across borders and to raising money from pension funds and
• 12:28
  insurers. More money behind the same borders would make
• 12:32
  every hub richer. It would not automatically
• 12:36
  make them easier to reach. So the use for gold is not
• 12:40
  connected. activity for its own sake, but it's building valuable
• 12:43
  capabilities and making them cheaper to reach. We should
• 12:47
  judge the links by what they let a company do.
• 12:55
  So let us get practical. Think of 5 areas where your
• 12:59
  company may need something from outside your home hub:
• 13:03
  capital, people, customers, know-how, and your company
• 13:06
  structure itself. For each, here's what we know, what
• 13:10
  we do not know, and the decision I would take.
• 13:15
  Keep in mind, this is no legal or financial recommendation. Yeah,
• 13:19
  take it at your own risk and do your homework. Capital.
• 13:23
  What we know: the EU's own capital research finds
• 13:27
  barriers to cross-border investments and to fundraising from large
• 13:30
  institutions. What we do not know from public data is how
• 13:34
  Often a good round fails because of a border.
• 13:38
  If I were a founder, before your next round, look beyond
• 13:42
  your home network for investors who understand your sector and
• 13:45
  can back your next stage. Ask
• 13:49
  every fund 2 questions: does your mandate let
• 13:53
  you invest in my country, and how much do you keep in
• 13:56
  reserve for follow-on rounds? A fund that loves you
• 14:00
  but cannot follow you is not your lead. People—
• 14:06
  what we know: Dealroom reported for Europe and Israel in
• 14:09
  2022 that 56% of startups founded by
• 14:13
  unicorn alumni were started in the same city as the
• 14:16
  unicorn. What that does not tell us is how
• 14:20
  far those founders' experience reaches. A founder can stay in
• 14:24
  Berlin and still hire in Stockholm. Raise in London and sell
• 14:28
  in France. Local founding and wide reach can go
• 14:32
  together. If I were a founder: when you hire
• 14:35
  your first leaders for the 50 to 500 employee
• 14:39
  stage, start from the capability gap, not the postcode.
• 14:43
  Search beyond your home hub when the skill is not there, and
• 14:47
  check early what it takes to employ someone and give
• 14:51
  them equity in the countries you are likely to hire from.
• 15:00
  Hey guys, thanks for sticking with us. Let's keep going.
• 15:04
  A quick word on how this show works. Startup
• 15:08
  Radio is funded by partners, and the partners we like best are
• 15:12
  the ones who make things easier to reach across borders. Funds
• 15:16
  that invest across Germany, Austria, and Switzerland, corporates that buy
• 15:19
  from startups in other countries, regions that want
• 15:22
  founders in Berlin, Munich, Vienna, and Zurich to know
• 15:27
  what they offer. If that is you, your listeners
• 15:31
  are the founders and investors we— you are trying to
• 15:34
  reach. Find out how we work together at startuprad.io/become-a-partner.
• 15:42
  Now back to the 5 areas. Customers.
• 15:46
  A German startup should not have to become international
• 15:50
  just because its next big customer is French. In practice,
• 15:54
  it often does. New contract habits, new
• 15:57
  procurement rules, and maybe new language and a new sales
• 16:01
  team. How big is that friction? The IMF estimates
• 16:05
  that barriers inside Europe work like a tariff of around
• 16:09
  44% on goods and
• 16:12
  110% on services. The IMF
• 16:15
  itself calls that an upper bound, and other
• 16:19
  economists dispute it. It is a model of trade
• 16:22
  costs, not a bill— not a bill your company pays, but
• 16:26
  it tells you the friction is not imaginary.
• 16:31
  Here's a decision I would make in your second market:
• 16:35
  choose it where you have the strongest evidence of customer demand
• 16:39
  and a credible way to sell, not where the train is shortest.
• 16:43
  A nearby market like Austria or Switzerland can be a cheap place
• 16:47
  to learn, to win a pilot customer and test your sales process.
• 16:52
  But do not mistake Germany and Austria and Switzerland for scale.
• 16:55
  Together, they're still smaller than the market an American
• 16:58
  competitor gets at home. You use the corridor to
• 17:02
  learn, then go where the demand is.
• 17:06
  Know-how. This is where Europe could have an advantage.
• 17:11
  No city has to be best at everything.
• 17:15
  Munich, Zurich, Eindhoven, Grenoble, Stockholm, and Cambridge
• 17:19
  can each specialize, but specialization only helps
• 17:23
  if companies can reach it, and the patent data
• 17:26
  suggests I would suggest this is where Europe is weakest. If I were a
• 17:30
  founder in deep tech, identify the capability you
• 17:34
  are missing, then find the best partner to supply it,
• 17:37
  whether that is your own university or a team in another
• 17:41
  country. And when you do partner across a border,
• 17:45
  sort out who owns the resulting IP before the
• 17:49
  work starts, not after. Investors care
• 17:52
  about clean ownership. Of course, your company
• 17:55
  structure. In Part 6, Capital Gravity, we describe
• 17:59
  companies moving their parent company CEOs and listing
• 18:03
  plans to America as they grow. Sometimes
• 18:07
  that follows customers, capital, or the executives they need.
• 18:11
  Sometimes it is a missing European option. From the outside,
• 18:15
  you often cannot tell which. If I were a founder
• 18:19
  Once a year, ask yourself the Capital Gravity questions.
• 18:23
  Where is our parent company? Where does your
• 18:26
  CEO work? Where are your senior commercial hires?
• 18:31
  Where do we expect to list? If the answers are moving
• 18:35
  west, write down why. If the reason
• 18:39
  is that something exists in Europe but costs too much to reach,
• 18:43
  that is exactly the friction this episode is about.
• 18:53
  There's a good idea for making Europe's spread-out map work.
• 18:57
  Dealroom has argued for treating the hubs within a 4-hour
• 19:01
  train ride of London as one supercluster,
• 19:05
  which it calls the New Palo Alto. Global Venturing
• 19:09
  reported that Dealroom Also sketched a second one around Munich
• 19:13
  linking Berlin, Milan, Vienna, and the Swiss
• 19:16
  cantons. Those are proposals. Drawing a circle on a map
• 19:20
  does not mean a company can use what is inside
• 19:25
  it on the same terms. For our listeners, the real
• 19:28
  test case sits across Munich, Vienna, and Zurich,
• 19:32
  2 of Europe's top 5 innovation regions, 3 countries,
• 19:36
  And Switzerland outside the EU. The network test.
• 19:41
  So instead of asking every region to build its own
• 19:44
  Silicon Valley, here's a test you can run on your own company.
• 19:48
  Let's call it the network test. For the next
• 19:52
  capability your company needs, find the best option at home
• 19:56
  and the best option elsewhere. Can you actually use the outside
• 20:00
  option? What extra time costs or
• 20:04
  eligibility rules come with it, and what would
• 20:07
  change for your company if that friction disappeared?
• 20:11
  A few rules so the test means something: only count
• 20:15
  things your company actually needed. A specialist fund
• 20:18
  saying no to a company that does not fit
• 20:22
  is not a border problem. Moving the whole company
• 20:26
  should not be the only way to get access. And count
• 20:30
  the cases where it worked too. To be clear,
• 20:34
  this is a test we are proposing, not
• 20:37
  one we have validated. So here is why I
• 20:41
  ask, if you have run into this around
• 20:45
  a hire, a customer, or partnership that worked or
• 20:49
  failed because it sat in another hub, send it to
• 20:52
  partnerships@startuprad.io. I'll use real cases to
• 20:56
  test this framework in a later episode of this series.
• 21:01
  Investors, briefly.
• 21:05
  if I were running a fund in Germany, Austria, or Switzerland, I
• 21:09
  would build co-investment relationships with funds in other hubs
• 21:13
  early so you have partners for later rounds you cannot
• 21:17
  carry alone. If you are a limited partner
• 21:20
  ask your funds which follow-on rounds they had to pass
• 21:24
  on because of a border. If you are a corporate, the
• 21:28
  cheapest improvement you can make is a buying process that a
• 21:31
  startup from the next country can actually get through.
• 21:35
  EU Inc., the planned
• 21:39
  single company form for startups across Europe, is the most
• 21:43
  direct fix for the company structure problem in this episode. Its supporters
• 21:47
  want the first company founded under it in 2027. My
• 21:51
  on the record, and I first made it in part
• 21:54
  6: no startup will be able to register as an EU
• 21:58
  Inc. in any EU country before January 1st,
• 22:02
  2028. If a registry accepts one before
• 22:06
  that, I was wrong. My reason: a new company form has to
• 22:10
  get through EU governments and the European Parliament
• 22:13
  And then every single national registry, tax office,
• 22:18
  and notary has to be ready to handle it. Each step
• 22:22
  takes time. Confidence: 75%.
• 22:26
  And one more. To be precise, this forecast's
• 22:30
  wording in a report, not the state of the market.
• 22:34
  The next edition of the EU Startup and Scale-Up Index will
• 22:38
  again name late-stage funding As a constraint.
• 22:41
  Confidence: 85%. If
• 22:45
  no new edition appears by the end of 2027, that one
• 22:49
  stays open. Europe has
• 22:53
  spent 2 decades building strong startup and innovation regions.
• 22:57
  In many places, it worked. The next question is a
• 23:01
  different one. When a company needs something that exists
• 23:04
  elsewhere in Europe, How hard is it to use? The data says
• 23:08
  the link between Europe's hubs is close to American levels in
• 23:12
  research and much weaker in commercial invention.
• 23:17
  That does not explain the whole scale-up gap, but it
• 23:20
  points to a cost founders pay every day and one
• 23:24
  that policy can reduce. Europe has its
• 23:28
  islands of excellence. The question is, how cheap it
• 23:31
  becomes to travel between them. There's more to this story. For
• 23:35
  Entrepreneurs Vault members, I go one level deeper. I run the
• 23:39
  network test on the Munich, Vienna, and Zurich corridor area
• 23:43
  by area as a desk assessment. Members get a
• 23:46
  city-by-city table of where unicorn alumni founded their next company,
• 23:50
  what it can and cannot tell you, and a stage-by-stage
• 23:54
  checklist for founders deciding what to reach for outside
• 23:58
  their home hub. The full Entrepreneurs Vault analysis
• 24:02
  is available to members. Join either on YouTube or
• 24:05
  on Substack. Both links are in the show notes. Next week on Startup
• 24:09
  Radio, more interviews and news from Germany,
• 24:13
  Austria, and Switzerland, and the European scale-up question continues.
• 24:17
  This is Startuprad.io. That's all, folks. Find more news, streams,
• 24:20
  events, and interviews at www. Startuprad.io. Remember,
• 24:24
  sharing is caring.