Study: The Most Startup-Friendly Cities in Europe

• Paris is the most attractive city for startups, offering a low level of bureaucracy and low fees, as well as liberal conditions for running a business.
• By way of comparison, establishing a business in Germany is more time-consuming, bureaucratic, and expensive. On average, authorities require €2,865 to register a new company here.
• Essen is the most startup-friendly city in Germany.

Berlin, 12 July 2022 – Paris is Europe's most startup-friendly city. This was the conclusion of an extensive study undertaken by payment service provider Unzer. Data analysis was used to assess and compare the conditions for startups in 85 cities across 28 European countries.

Small and mid-sized enterprises (SMEs) are the economic foundations of any national economy and a key driver of growing prosperity. Cities and municipalities, in the form of legislators and authorities, would therefore be well advised to keep official requirements to a minimum as a way of promoting entrepreneurial spirit and business activity amongst the population.

As part of this survey, the startup-friendly nature of cities was assessed on the basis of the following criteria:

• Few bureaucratic steps in setting up a company
• Fast official processing during company foundation
• Low fees for registering a company
• Easy access to lines of credit assuming a good credit rating
• A low corporation tax rate
• Less bureaucratic accounting requirements
• Liberal opening times
• Fast legal processes in the case of breaches of contract
• Many SMEs based in the city

All of these criteria were assessed and made comparable using data from credible sources. This data analysis led to the following ranking list of the most startup-friendly cities in Europe.

The results, all criteria, and detailed information on the methodology used in this study are available here.

Founding a business in Germany is more time-consuming, bureaucratic, and expensive

After analysing the data and comparing it with other countries in Europe, we can conclude that there are many obstacles to establishing a company in Germany. Indeed, an average of eight days and 6.5 bureaucratic steps are required in order to officially register a new company. The authorities also charge an average of €2,865 in fees for this work, whereas the European average is just €1,631. In Slovenia, entrepreneurs can actually register a new business free of charge. With its corporation tax rate of 16 percent, Germany can certainly be considered startup-friendly in terms of taxation. However, the requisite accounting procedures are comparatively bureaucratic. Companies must spend an average of 218 hours per year on accounting work to satisfy the authorities. The European average is just 195 hours here.

The top 5 most startup-friendly cities in Germany

Comparing the German cities with one another, we see that Essen is the country's most startup-friendly city. In the European ranking, on the other hand, Essen only takes 16th place. The great diversity, comprising around 283 small and medium-sized companies per 100,000 residents, suggests that Essen offers a rather startup-friendly climate. Essen is then followed by Düsseldorf (23rd place), Stuttgart (27th place), Duisburg (32nd place), and Dortmund (34th place) as the top 5 most startup-friendly cities in Germany.

Paris is the most startup-friendly city in Europe

Based on an assessment of characteristics in 85 European cities, the French capital of Paris is considered the most startup-friendly city in Europe. A company registration can be completed in just under four days in Paris, requiring on average only 0.7 bureaucratic steps to be overcome and costing around €257. Paris therefore scores highly thanks to comparatively unbureaucratic and low threshold conditions for business startups. Based on the criteria investigated, managing a business in Paris can also be considered attractive. Accounting work requires less time than the European average at just 139 hours per year, while opening times are comparably liberal. Only the corporation tax rate, which is set at 31% throughout France, is comparatively high.

Sebastian Wenzel, Vice President of Marketing at Unzer: "In our experience, small and medium-sized enterprises display unparalleled agility and flexibility, especially when it comes to adapting at short notice to changes in customer wishes and market requirements or reacting to fluctuating trends. They are the economic backbone of cities and communities. For this reason, legislators and authorities should offer support in all areas to those with the necessary courage to set up shop, assume the associated corporate and financial risks, and engage in economic activity."

In our experience, small and medium-sized enterprises display unparalleled agility and flexibility, especially when it comes to adapting at short notice to changes in customer wishes and market requirements or reacting to fluctuating trends.

Sebastian Wenzel, VP of Marketing at Unzer

Methodology and sources: Data from reputable sources, such as the World Bank, and from all EU member states was taken into account for this survey. You can find a detailed presentation of the methodology employed, together with all sources, here.

Additional insights:

• Registering a new company in France, Norway, Denmark, Estonia, the Netherlands, and Greece only takes around four days. Poland is the country with the longest official company registration process, taking an average of 37 days.
• Officially registering a company in Italy costs an average of €4,143. Expensive fees such as these also represent a disproportionately high hurdle for those looking to set up their own company and serve to hamper entrepreneurial spirit amongst the population. No other country charges such high fees for setting up a company as Italy. People looking to set up a business in the neighbouring country of Slovenia, on the other hand, do not pay any fees at all. This promotes entrepreneurial activity, while also driving innovation and representing an important building block for growing prosperity.
• Assuming a good creidt rating, access to loans is good in all of the countries investigated – with the exception of Luxembourg, where loans are difficult to arrange.
• A large number of bureaucratic stipulations make accounting a major cost and time factor. Requiring an average of 441 hour per hour, accounting in Bulgaria appears to be particularly compley and involved, which has a negative impact on business friendliness. Startups in Estonia, on the other hand, only spend an average of 50 hours per year on accounting. As such, they spend four times fewer hours on accounting than SMEs in Germany, which spend an average of 218 hours per year on accounting.

About Unzer:

Unzer is one of the leading payment companies in Europe. More than 70,000 merchants rely on the company's end-to-end solutions for greater growth – online, mobile, and at the point of sale. From international payment processing and risk management to analysis of customer behaviour, merchants can combine Unzer’s data-driven services on a modular basis. This means that merchants only need a single partner to make their payment systems flexible, innovative, and future-proof. Thanks to numerous strategic acquisitions in the last few years, Unzer has developed into one of the fastest growing fintech companies in Europe. Today, over 750 payment experts and tech enthusiasts work on helping merchants achieve sustainable growth in a dynamic market.