In order to position themselves for success, startups should take advantage of the European startup ecosystem, which has myriad actors whose purpose is to support startups at their varying levels of maturity. Incubators, business angels, startup programs, accelerators, venture capitalists, and startup studios (also known as venture studios) are the major players in the European startup ecosystem. Each of these actors aim to help startups with specific needs at different points in their lifecycle, which consist of the following steps.
- Define a solution to a need
- MVP development
- Find product market fit
But when should an entrepreneur reach out to an actor, and what can entrepreneurs expect from fellow members of the startup ecosystem?
To help you navigate the European startup ecosystem, we’ve broken down the types of startup ecosystem actors and examples of trusted organizations in each category.
Incubators cater to very early stage startups who are developing their idea or business plan and/or their product prior to a seed funding round.
Incubators’ perks vary widely, but membership generally includes office space and mentoring or networking opportunities. The selection of other services depends on the incubator’s specialty, but can also include training, access to equipment, and the possibility of investment.
However, the best incubators have competitive application processes. Entrepreneurs should also check if the incubator has a time commitment, as some require startups to commit for as long as a year.
One of the most famous incubators in Europe is Station F, a large campus based in Paris offering office space and extensive services. For early stage tech startups, Utrechtinc has a 10-week program to develop the startup business plan. There are also online incubators, like the Italy-based Startup Geeks.
In a startup program, a company offers support to a startup in the form of credits for their service or product. Startup programs span a number of services and products, so startups should check with companies individually to find out if they have a program and what the requirements are.
Scaleway launched its startup program in 2020 to help early and growth stage startups build a scalable technical infrastructure. Scaleway provides cloud credits and technical support so a startup’s infrastructure is a help, not a hindrance, to its business.
Since its launch, the program has helped over 350 startups, half of which are based outside of France. More than 90% of the startups in the Scaleway for Startups program continued to work with us after graduating the program thanks in large part to the quality service provided.
In addition to the cloud credits, technical support, and visibility, Scaleway’s startup program also offers robust community support and masterclasses in diverse topics.
You can find out more information about Scaleway for Startups here.
Many Software-as-a-Service businesses have similar programs or even product discounts exclusive to startups. Entrepreneurs should read the fine print though, as companies sometimes create high switching costs.
Startup Studios/Venture Studios
Startup studio, also called a venture studio, is an organization that helps entrepreneurs build their product and company in exchange for equity.
If other actors in the startup ecosystem give support to startups, a startup studio goes far beyond. The startup studio team will not simply advise the founders but actually build the business alongside them.
Though founders benefit from the experience and process of the startup studio, they also give up a significant amount of control, and not just from the loss of equity. Creating a startup within a startup studio is a collaboration-heavy process. Key decisions normally made between startups are instead made with the startup studio team.
Accelerators target significant milestones like time to a fundraising round, acquisition of the startup, and expanding the client list. An intensive learning environment enables founders to reduce the time needed to reach these milestones.
At the end of an accelerator program, startups present their product or services in a Demo Day, which is attended by investors. Startups usually have the chance to receive funding from the accelerator itself in exchange for equity.
One of the cons of an accelerator can be the time required from entrepreneurs, not to mention the loss of equity if the accelerator invests.
There are many great accelerator options for tech startups in Europe, like Germany-based Founders Foundation. Founders Foundation has a structured curriculum to help founders scale. In Italy, accelerator B4i gives a 30,000 investment and helps startups find product-market fit.
When a startup needs a first infusion of cash, a business angel (BA) is a common place for founders to find funding.
BAs contribute less funding than a venture capital (VC) fund would (VC rounds generally begin at €1 million, while BAs usually contribute €200,000 or less).
There are a few advantages of accepting funding from a BA. BAs usually advise the startup in addition to giving funds, and the process is more casual than raising funding from organizations.
However, it can be difficult to find a suitable BA, and the startup cedes equity in exchange for the investment. Plus, if the startup and the BA can fail to establish the correct balance in their relationship. The BA can either be too distant or too present in the startup’s day-to-day.
And when it comes to business angels, the big question is: Where do you find the right one?
Before looking for a business angel, startups should take a step back and think of their business’s strategic needs. Once the startup has decided what areas in which they need expert advice (like product dev, IT, marketing, etc.), they can begin the search.
Though services like FundersClub and AngelList exist, networking at entrepreneurial events and on LinkedIn is a great place to start.
Startups should solicit funding from VCs when they need a large infusion of cash to begin scaling rapidly and are willing to accept a loss of equity in exchange.
VCs expect a startup to perform well quickly, and often look at metrics that show potential for growth and efficiency of cash spend.
In addition to money, VCs offer an array of services in recruiting, marketing, and business development. Entrepreneurs should take into account this aspect of the relationship, as it means having a good fit between startup and VC is important. Not to mention, investment from a VC comes with an increase in oversight, including a board of directors.
Community makes all the difference for startups
Startups face myriad challenges as they build their products and scale. And in the current economic climate, having multiple sources of support is key to survival.
That’s why being an active member of the startup community is key for startup leadership. Entrepreneurs who contribute to the startup ecosystem by sharing knowledge about opportunities cultivate goodwill and relationships. In short, a contributing, active member of a community reaps the greatest rewards.