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Launching Diaspora in Berlin
European Straits #114
This week marks my firm The Family’s 6th birthday! We’re having a festive banquet in our Paris office on Thursday night to celebrate many accomplishments while reflecting on all the work that’s ahead of us.
We are now firmly present in 4 European cities: Paris 🇫🇷, 🇬🇧, Berlin 🇩🇪, and Brussels 🇧🇪. Our portfolio includes 255 active European startups spanning over a wide breadth of industries—businesses with a total valuation of €2B+. Meanwhile we’re working at building a pan-European startup community through our 300+ events a year and the ongoing European Tour that will soon bring our team to Bucharest 🇷🇴 on April 3 and Lisbon 🇵🇹 on April 24.
Also thanks to the backing of our strategic investor , we’re now working at expanding and diversifying our business from a financial perspective. Expect more news over the coming months!
Attracting foreign entrepreneurs is one of the few key marks of a healthy startup ecosystem.
One reason (what economists would call ex post) is that entrepreneurs flocking in are a validation of the simple fact that the ecosystem works. If entrepreneurs are numerous and competition is harsh, it’s difficult and expensive to found a startup in such an ecosystem. But the health of the ecosystem all but guarantees that the cost of joining it will be compensated for by much higher returns. For example, it might cost several times as much to launch your startup in Silicon Valley, but the probability of success is so much higher that if you can afford it, it’s really a no-brainer—at least in certain industries.
Another reason why foreign entrepreneurs matter (this time it’s ex ante) is that their arrival contributes to making the ecosystem even healthier. By bursting into the local community and competing with local players, entrepreneurs coming from the outside force everyone to constantly up their game. Rather than reaching maturity and the inevitable stasis that follows, the ecosystem remains in a state of constant evolution thanks to the pressure imposed by those who arrive from the outside. It only helps that, coming from a foreign country, they have more grit and bring a different perspective to things.
Where does Europe stand when it comes to attracting foreign entrepreneurs? Well, the situation is not good at all. Thanks to the European Union and the Schengen Agreement, people are moving more freely across the continent. But people from outside Europe have a harder time entering it and settling in to explore the local startup community and then found a company. That’s because Europe, for most of the past 40 years, has been deliberately closing itself off to immigration flows from beyond its borders. This started right after the economic crisis in the 1970s. Obviously it got way worse following the 2008 financial crisis and the coming to power of populist, anti-immigrant governments across the continent.
Another problem that we have in Europe is that people moving around don’t decide on their destination based on the health of the startup ecosystem. Rather, like in the cases of Berlin and Lisbon, people are often looking for a cheaper cost of living. Only London stands as the exception: a more expensive place that nonetheless attracts entrepreneurs because it actually makes a difference for startup founders. A key long-term factor is the English language and the powerful agglomeration that it has triggered across industries as diverse as media, higher education, and financial services.
As for Paris, let me be blunt: it’s not that attractive for foreign entrepreneurs. Sure, everyone loves the food and the culture. But if you want to live in Paris and found a startup, you’ll have to tackle many challenges. It’s nearly impossible to rent an apartment if you’re an entrepreneur, let alone a foreign one, because landlords prefer to let to civil servants or well-paid corporate managers. The cost of living is expensive, and it’s rising now that UK-based French people are fleeing back to Paris. The French language is a problem. You need to speak it for everyday life, and if you bring your spouse and your kids, they’ll have to learn the language if they want to find their place in the professional world and the school system. As for formalities, well, let’s say they’re complex, difficult to decipher from the outside—and all in French anyway. (It’s all the same in Germany, but at least housing is still affordable there.)
To be fair, every European country is trying hard to reverse the trend, because more and more people have become convinced that attracting foreign entrepreneurs is critical to success. But most of the efforts are focused on facilitating the obtention of visas, without European governments realizing that attracting foreign entrepreneurs depends on much more than visas: It’s about the language, the housing market, healthcare, the school system, the hiring practices...and the health of the startup ecosystem.
Meanwhile, the US is closing down its borders. Restrictions to immigration remain the most contentious issue between the tech industry and the Trump administration. That’s because for years the majority of Silicon Valley-based startups have been founded by foreign-born entrepreneurs. Talent can be accessed elsewhere, and you see more and more US tech companies locating remote engineering teams in foreign countries. But for entrepreneurs themselves, it’s a very different story: If they can’t settle in the US, the successful companies they found will create and capture value for the benefit of non-US ecosystems.
In this context of Europe trying hard while the US is out of the game, we at The Family have spotted an opportunity: Reposition Berlin as an immigration hub for ambitious entrepreneurs from outside Europe. This is why we’re launching a new platform, Diaspora. Here’s what you should know:
Diaspora was born out of our mixed assessment of Berlin as a startup hub. There are many resources in the German capital, such as the talent pool drawn from Eastern Europe and the still-cheap cost of living (although it’s rising fast!). But we’ve been underwhelmed by the startup scene there, which we find lacking in both cohesion and ambition. Here’s what my colleague Hugo Amsellem, who manages The Family’s office in Berlin, wrote to dispel false ideas about startups in Berlin: 3 Myths from the Berlin Tech Ecosystem.
All that being said, Berlin still has a lot to offer: (1) full-stack talent and a competitive fundraising market, (2) a reasonable cost of living, (3) a very open visa policy and (4) English as a common language (unlike Paris). The idea, therefore, is to attract ambitious entrepreneurs from developing economies, an underserved group that we call the “Diaspora of the Ambitious”. They have the grit and intensity that many European entrepreneurs still lack. What they don’t have is the right environment to build successful startups in their home country. Read my colleague Mathias Pastor’s initial article: Making Berlin a Home for the Diaspora of the Ambitious.
We’re partnering with an exceptional team to launch Diaspora in Berlin: Gagan Bhatia, a seasoned angel investor and former senior manager at Uber (his last position there was as Regional General Manager of UberEATS in Central and South America), and Akshay BD, also previously at Uber, where he had various positions in the public policy sphere. Both are from India and bring a refreshing non-European perspective to our European game, and both are now part of the coming-of-age “Uber mafia” that’s about to fuel tech’s next wave over several continents. Needless to say we’re very much looking forward to working with them!
In many respects, European tech is at a turning point. There’s something we’re convinced of: Entrepreneurs move to a city not because of simpler visa procedures or a low cost of living, but because they’re attracted to a vibrant startup community. Too many people in Europe have been passive, waiting for this community to emerge in a continent that’s still suffering from a lack of density. Our credo at The Family is that passivity is not an option, because what the past 6 years have taught us is that you can hasten the rise of a startup community. Diaspora is the community we’ll build in Berlin to make it the prime destination for every ambitious entrepreneur in need of a healthy ecosystem.
Please stay tuned for the imminent launch of Diaspora 🚀🤗!
🇩🇪 Diaspora isn’t the only thing we’re launching in Berlin: With my colleague Marine Sorato, we’re proud to present Goldup, a program made by feminist entrepreneurs, for women willing to build profitable, sustainable and fulfilling online businesses. You can still apply HERE.
🎙️ Listen to this 30-minute conversation I recorded last week in Singapore 🇸🇬 about startups in Silicon Valley, Europe and Asia + my book Hedge, about inventing a new Safety Net: Nicolas Colin : A Greater Safety Net for the Entrepreneurial Age. Thanks Nikolaj Groeneweg & French Tech Singapore!
⚠️ Don’t miss this article I published a few days ago about 10+ startups showing that inventing the new Safety Net is about entrepreneurship more than policymaking: 10 Startups Coming to Save the Social Safety Net. It was featured in this week’s Exponential View. A series of additional articles on verticals such as housing, healthcare, insurance, and consumer finance is on the way.
🇵🇱 Next week I’ll spend 36 hours in Warsaw, Poland, to speak at the European Executive Forum. If you’re around and would like to connect, please send me an email!
🇺🇸 Then I’ll be on my way to the Bay Area for various talks and meetings, mostly around my book Hedge. You can attend an event we’re hosting with One Degree and the New America Foundation at the James Irvine Foundation in San Francisco. It’s on April 11 at 12pm, and here are the details 👀.
More readings on entrepreneurship and immigration
Immigrants start small businesses at twice the rate of the native-born (Matthew Yglesias, Vox, June 2015)
Why Are Immigrants More Entrepreneurial? (Peter Vandor & Nikolaus Franke, Harvard Business Review, October 2016)
Four Nations Are Winning the Global War for Talent (Adam Creighton, The Wall Street Journal, October 2016)
How Immigrants Have Contributed to American Inventiveness (Alana Semuels, The Atlantic, February 2017)
African countries are seeing a “brain gain” as young elite graduates give up on the West (Chidinma Irene Nwoye, Quartz, November 2017)
How New Labour made Britain into a migration state (Erica Consterdine, The Conversation, December 2017)
Democrats Want To Shutdown The Government To Protect DREAMers--Here's An Economic Case For Doing So (Ian Hathaway, Forbes, December 2017)
Almost half of Fortune 500 companies were founded by American immigrants or their children (Ian Hathaway, Brookings Institution, December 2017)
Give me your tired, your poor…and they will create jobs for us (Dany Bahar, Brookings Institution, December 2017)
Immigrant entrepreneurs are vital to American prosperity (John Dearie & Ian Hathaway, The Hill, December 2017)
Busting Europe’s Migration Myths (Mark Gilbert, Bloomberg, June 2018)
Startups Move to The Bay Area for Good Reason, but That Advantage May Be Waning (Ian Hathaway, Startup Revolution, August 2018)
America Is Losing Its Edge for Startups (Richard Florida, CityLab, October 2018)
The Gift of Global Talent (Ian Hathaway, November 2018)