The location of one’s business is key when mapping a business plan and developing a long-term strategy. It affects the financial and talent-based aspects of a business. Furthermore, it decides how or with whom a business can scale.
With a new wave of entrepreneurs looking to go global, countries around Europe have begun to cater to their needs hoping that they will become the haven for future business giants — much like Silicon Valley. This shortlist looks at five European countries that are entrepreneur-friendly and have great hubs for startups.
- Great Britain: London has long been seen as the startup epicenter of the world outside Silicon Valley. But depending on the sector, your startup might also be well located in other UK cities like Manchester, Birmingham, or Edinburgh – which are also more affordable options when it comes to office space and hiring.
The difference in setting up shop in London is that from day one you will have more access to venture capitalists than in any other city in Europe. So yes, the general costs to maintain a business are higher there, but as a compensation, you are “closer to the money”.
About 30% of the European venture capitalists are based in the UK. Startups there raised between €4.5 and 5 billion from venture capital all over the UK in 2017 in the tech sector.
Companies pay a 19% corporate tax and there are intentions and talks to decrease that to 17% in 2020, as a measure to fight companies’ exodus after Brexit. Also, in case your startup will have less than £85,000 taxable turnover, it will not have to register for VAT (value-added tax). On a slightly negative note, we expect Brexit, in whichever way it will come, to have a negative impact on the UK economy and its attractiveness for startups.
- Estonia: With Estonia declaring access to the internet a human right in 2000, it’s no surprise the country has been nicknamed ‘E-stonia’. There’s widespread free public WiFi in cities, including the capital Tallinn, which is also home to a science and technology park called Tehnopol, helping support approximately 180 companies.
The electronic residence program makes it very easy to establish a business in Estonia. At age 15, citizens get Estonian e-identities – granting them online access to an estimated 4,000 services, including banking, contracts, business registry, and tax services. As of last October, the government moved to allow non-nationals to access e-identities, too.
Taxes are also a breeze in Estonia. According to the Tax Foundation’s 2014 International Tax Competitiveness Index, Estonia has the most competitive tax regime in the developed world. It doesn’t charge a corporate tax in the traditional sense. Instead, it taxes distributed corporate profit at the capital gains rate of 21 percent. Should a company invest its profits back into the business, it would face no tax expense. Estonia additionally provides a 100 percent exemption on all foreign-earned income, in what’s known as a ‘territorial’ tax system.
- Switzerland: Switzerland is known as a serene peaceful paradise with stunning lakes, glaciers, and mountains among other attractions. However, beauty doesn’t stop it from disrupting the European tech startup ecosystem. Switzerland has occupied the 20th rank in terms of the maximum number of entrepreneurs in the continent. Eventually, it is home to several successful tech companies such as Beekeeper, Frontify, Once, etc.
Berlin is the main city when we talk about startup life in Germany. Not only will you find a highly educated and multinational workforce whose second language is English, but you will also find a top-notch infrastructure (transportation, internet, telecommunications, social services) combined with local government incentives for creating your startup to the city.
Companies like Zalando, SoundCloud, Freighthub, and Penta are representatives of the German success in this field. As far as taxes are concerned, the corporation tax is at 15% in Germany. Companies also are subject to commercialization taxes, but businesses with a taxable turnover of less than €50,000 do not need to register for and pay VAT.
On a side note, there is a growing belief that after Great Britain leaves the European Union, the number of startups will rise in Germany as a whole. Some German organizations are trying to take advantage of that by advertising in the UK about the German infrastructure and welcoming environment for UK based startups.
- Lithuania: As with it it’s neighbor Estonia, Lithuania is fast becoming a Mecca for tech startups. According to Startup Lithuania, there were at least 320 active tech startups in the country at the end of 2016. In the ten years from 2006 to 2015, Lithuanian startups had raised a total of €165.3m, compared to €103.3m in Latvia and €280.6m in Estonia. It’s no surprise a country is a great place for the tech sector. Businesses starting up in Lithuania have access to an amazing pool of talented young graduates. The country, being the first in CEE for mathematics, science, and technology graduates per capita, is able to offer a highly qualified IT talent pool. And according to Statista, 97 percent of working-age Lithuanians (aged 25-64) know at least one foreign language. The country also has the fastest public WiFi in the world. According to Rotten WiFi, a testing service that evaluates public WiFi networks based on speed and customer satisfaction, Lithuania dominates the competition when it comes to the average download and upload speeds found on public WiFi networks.
There’s plenty of support for startups and small businesses, too, with numerous entrepreneurial events held every year, including Silicon Valley comes to the Baltics, with more than 1,500 participants, Game Jams and hackathons mostly organized by Startup Lithuania. Finally, Lithuania benefits from its location on the crossroads of three lucrative markets (Western Europe, Scandinavia, Russia, and CIS region), and is the largest market out of all Baltic countries.