Why is capital growth important to investors

Risk seeks capital: growth of Viennese startups due to lack of capital

Start-up companies in Europe have 10 times more private investment capital available on average than in Vienna (as a percentage of GNP). This is just one of many aspects of the capital situation of technology-oriented start-ups in Vienna that have now been found in a study by MODUL University Vienna supported by the Vienna Chamber of Commerce. Overall, the study shows pragmatic and concrete ways in which Vienna could succeed in connecting to the world's 20 leading locations for founding a start-up company.

Whether in Silicon Valley or Vienna: only sustainable investments over longer development periods guarantee a real chance of success. According to a current study by the Department of Public Governance and Sustainable Development at MODUL University Vienna, optimizing the range of financing options is therefore an essential factor in fully exploiting Vienna's great potential as a startup ecosystem. Better networking and coordination could already make a good contribution. But also the smart provision of public funds, tax investment incentives and the dismantling of bureaucratic obstacles for international investors would allow Vienna to compete with the most attractive start-up locations worldwide.

Per mille instead of percent
"We have evaluated numerous statistics from Austria and abroad," says project manager Dr. Harvey Goldstein, Prof. emeritus at the department. "This showed that the value of Austrian venture capital investments in Austria was only 0.03 percent, in other words only 30 per thousand of the gross national product - that is a power of ten less than the European average." To better understand the general motivation of investors, the study authors conducted numerous interviews with key players in the Austrian financial scene for private investment capital for technology-oriented startups. They found, inter alia. found out that business angels are among the most active financiers - and form a very important bridge between the first donors from the circle of family and friends and later venture capitalists. As the study also shows, this function makes Vienna's small investment scene extremely dynamic and resilient. A real plus for Vienna.

Decision-making
Interestingly, the study also shows that different types of investors make decisions based on pretty much the same investment criteria: marketability and growth potential, business plan, prototypes and market overview are relevant. In their decisions, venture capitalists also placed great emphasis on the skills of the startup team (complementary skills, teamwork, resistance to stress).

Information & money flow
One of the study authors Dr. Sabine Sedlacek, Head of the Department and Vice Rector for Research, points to further results of the study, the data of which was collected and evaluated over the last 24 months: “The information flows within the startup scene are also interesting - while venture capitalists tend to rely on inside information react from their own networks, business angels are more open in communication. They often exchange ideas with one another and are also happy to be approached directly by startup teams. ”In fact, the study authors see good potential in these different communication flows to optimize the synergetic cooperation of the various investors in Vienna in the future and also make specific recommendations in their study .

Vienna, Berlin, Amsterdam & Tel Aviv
The comparison of Vienna as a startup ecosystem with internationally comparable cities, all of which have made it into the TOP 20 global startup centers within a short period of time: Tel Aviv, Berlin and Amsterdam, also took up a very important part of the study. Thanks to this benchmarking, which was carried out for the first time, the authors were able to identify three key factors that contributed to the success of the three international cities. This includes a strong prioritization of the topic of entrepreneurship by politics and business, which is also reflected in joint funding for startups. Furthermore, there is at least one large investment initiative in all three cities to support startups from the seed to the late growth phase. Thirdly, a coordinated approach creates a supportive environment made up of investments, infrastructure and further training for startups. This third point in particular coincides closely with an aspect that numerous interviewees in the study addressed: the lack of a vision or strategy on the part of politics and business in Vienna that can help remove bureaucratic and regulatory obstacles to investments. These certainly lead to a reluctance among international investors when it comes to investments in Vienna. The unanimous opinion is that those examples of foreign investors who have co-invested in Viennese startups were added because of networks - not because Vienna as a location had already caught their attention.

The way forward ...
From their comprehensive analysis of the financing environment for technology-oriented start-up companies in Vienna, the study authors then also draw very specific conclusions, which lead to eight recommendations for politics and business. These are:

1. Initiation of a platform for the coordination of common goals for the promotion of the startup scene in Vienna
2. Establishment of a 100M EUR fund to support the development phase of startups by matching private investments with public grants
3. Establishing a one-stop office to advise and support startups
4. Bundling of business angel investments through funds and platforms
5. Tax incentives and government guarantees to make venture capital investments more attractive
6. Reduction of administrative costs for foreign investments
7. Supplementing school and study programs with the subject of "entrepreneurship"
8. Carry out an active application of Vienna as a dynamic startup ecosystem

The now completed study by the four authors Prof. Harvey Goldstein, Dr. Dimitris Christopoulos, Dr. Verena Radinger-Peer and Dr. Sabine Sedlacek is also a seamless continuation of an earlier study on obstacles for university startups in Vienna. This was also carried out at the MODUL University Vienna and once again proves the practical relevance of the active research focus "Startup Ecosystems" there.

Original study: Making Vienna a Leading Startup Center of Europe. Authors: Harvey Goldstein, Dimitris Christopoulos, Verena Radinger-Peer, Sabine Sedlacek.