After years of being overlooked in favour of its more prominent neighbours, Vienna is now emerging as a European start-up hub.
In recent years, the city has seen its reputation rise, aided by the growth of prominent tech companies and an influx of venture funding. More than 2,600 start-ups have been founded in Austria since 2009, according to the latest Austrian Startup Monitor report, half of them in Vienna, with the number growing by about 15 per cent a year.
And Vienna is not alone; other Austrian cities are also gaining a reputation and rising in global rankings of start-up hubs. Linz rose 173 places year-on-year in SeedBlink’s 2021 Global Ecosystem Report, to 307th place overall, while Graz jumped 18 places to 202. Vienna is currently ranked 85th in the world.
“Vienna and Linz have both experienced a change of narrative in the last decade, turning into more technologically focused hubs with key verticals like biotechnology, digital health, educational technology, industrial automation and green-tech,” says Kambis Kohansal Vajargah, head of start-up services at the Austrian Federal Economic Chamber.
In 2020, €234m was invested in Austrian start-ups, according to Florian Kandler, editor-in-chief of Startup Report Austria — almost triple the amount raised in 2016.
But that number will be significantly higher for full-year 2021, with the country seeing its first tech unicorns — companies valued at more than $1bn — in the form of Vienna-based cryptocurrency trading platform Bitpanda and online education platform GoStudent. They both raised over €200m this year alone.
“I think it’s good for the ecosystem to have these kinds of north stars, because this leads to others wanting to achieve that and see what is possible,” says Felix Ohswald, co-founder and chief executive of GoStudent. “We need more of these big success stories that drive the ecosystem.”
Attitudes towards working for a start-up are also changing, he adds. “Until very recently, Austria had the feeling, when you tell people on the streets, or your friends and family, that you work in a start-up, everyone is super sceptical. You can really feel this change. Now, you can be proud of working in a young, fast-growing company rather than old-school corporates.”
Some believe that Vienna has the potential to become a bigger player on the European tech scene, bringing in talent from abroad while also retaining entrepreneurial Austrians who, in previous years, might have relocated to more established hubs.
“The quality of life is good, and if you have great start-ups that are playing on the international stage, there’s not a lot of reason to move away,” says Oliver Holle, co-founder and managing partner at Vienna-based venture capital fund Speedinvest.
Holle adds that, where funding for early stage start-ups was harder to come by in the past, over the past three years, a wave of smaller funds are now actively investing. At the same time, he says, the country needs to do more to bring in talent from abroad. “It still takes weeks or months to get a start-up visa, which for top talent is not acceptable.”
Those operating in smaller cities are also seeing the emergence of a more well-rounded tech ecosystem.
“Five years ago, there was nothing here — I think we would have probably moved to Vienna back then,” says Florian Wimmer, chief executive and co-founder of Blockpit, which was founded in Linz in 2017. “Now, it’s different.” His company develops legally compliant and audited tax reports for the treatment of crypto assets and, in July, raised $10m in Series A funding.
Wimmer points to the city’s proximity to the University of Applied Sciences Upper Austria, one of the country’s top tech universities; its location a reasonably short drive from Munich, Prague and Vienna, and the renovation of Tabakfabrik, an old tobacco factory, which houses many of the city’s start-ups. “There are over 1,000 people working in the building, which is a protected monument,” he says.
Yet most acknowledge that Austrian cities will need to develop in order to rival some of their larger neighbours.
“In cities like Berlin, if you look at the successful start-ups that were founded in the last 24 months, a lot were founded by people who have worked in other start-ups before,” says GoStudent’s Ohswald. “We need more people who work in the start-up ecosystem, who then build their own companies.”
More universities fostering and nurturing talent are also needed, he adds.
Vajargah, from the Austrian Federal Economic Chamber, predicts a strong increase in the number of start-ups operating in Austria in the coming years — easily outpacing the current increase of around 15 per cent a year.
The fact that there are now more than 10 scale-up businesses that all have a couple of hundred people in Vienna should be a key driver of future growth, adds Speedinvest’s Holle.
“This is where the next generation of really interesting start-ups are bred from. There will be spin-offs, there will be people leaving, going on to start their own company, and they will have learned from working in very successful international-focused scale ups.”