Some of Europe’s smaller ecosystems have been among the fastest growing in 2022. Topping this list is Austria, which grew 3.1 times as much in the first half of 2022 as in 2021.
While still small in comparison to established hubs like London and Paris, the country’s startup scene has been growing consistently over the last decade. According to Startup Landscape Austria, there are now 2,544 startups in Austria.
“Europe’s tech sector has generally been a bit slower to take off so I think there’s also a bit of catching up with bigger tech ecosystems,” says Birgit Reiter-Braunwieser, director of central and eastern Europe at Austrian Business Agency.
Reiter-Braunwieser adds that a slew of success stories like unicorns Bitpanda and GoStudent have helped the Austrian startup ecosystem grow in the last few years.
But as Austria’s startup ecosystem matures, how is it progressing and what could be better?
A deep talent pool and VC interest
Austria has a large student community which offers both innovative opportunities and a deep talent pool. ASM research found that about 22% of Austrian startups are created as academic spin-offs from universities or research organisations.
“International VCs are slowly but surely understanding that not only are there great deeptech startups and scaleups coming out of Austria, but there is also great technical talent available. And not just technical talent, but paired with the entrepreneurial spirit that founders need to succeed,” says Reiter-Braunwieser.
While VC investment is still catching up with the pace of innovation, Austria made it into the top 10 European countries by VC investment in the first half of 2022. $1.2bn was raised, closely following Ireland and Finland, which raised $1.5bn and $1.4bn respectively. The UK — Europe’s top country by VC investment — raised $20.8bn.
Nevertheless, Oliver Holle, CEO and managing partner of Speedinvest, one of Europe's (and Austria’s) most active VCs, is bullish about Austria’s startup ecosystem, predicting it might soon outperform some of the more established hubs.
We already see an increase in the interest of VC funds in Austria because as the ecosystem has matured, there are very interesting startups that are already beyond the first stages
“All the ingredients are here and now we also have the entrepreneurial ambition to make it happen,” he says.
Reiter-Braunwieser adds that VC interest is maturing alongside the Austrian startups. According to Dealroom, the most active VCs in Austria are seed and Series A investors.
“We already see an increase in the interest of VC funds in Austria because as the ecosystem has matured, there are very interesting startups that are already beyond the first stages,” she says. “They have benefited from public funding and are ready to scale and internationalise, so VCs want to snap them up.”
Public and R&D funding
While VC grows, startups in Austria can apply for a range of public funding, including grants and loans.
For example, Because Animals — a startup relocated in Austria that produced the world's first cultured meat product for pets — is funded in part by international investors and recently received a grant from the Federal Founding agency for R&D relaxed Projects (FFG). The FFG is the largest provider of startup funding in Austria and invests over €70m in startups each year.
“Grants like the FFG and the federal government are hands down the biggest perk of being in Austria,” says Shannon Falconer, its CEO.
Opportunities for research funding are a particular strength of the Austrian ecosystem. For example, Austria offers companies a tax grant of 14% for their R&D expenses.
Grants like the FFG and the federal government are hands down the biggest perk of being in Austria
“The tax incentive together with the public funding available for R&D makes up a good system for startups as well as any research intensive company to utilise and grow,” says Reiter-Braunwieser. “There are a variety of funding opportunities that startups can take advantage of and not just at the federal level but also at a regional level.”
For deeptech Brightmind.ai, funding was one of the reasons for choosing Austria.
“After a detailed analysis, Austria was and still is our first choice as the business location for our tech startup thanks to tangible research benefits (funding, taxes), quick opportunities for networking and short distances,” says Tamara Gerbert, Brightmind.ai’s cofounder, adding a strong talent pool and support from public bodies such as Austrian Business Agency were also draws.
Vienna and gender parity
Reforms making it easier for companies to employ international workers also attract talent into Austria. Organisations like the Austrian Business Agency and the Vienna Business Agency offer comprehensive consulting and other services to support international entrepreneurs starting up in Austria.
“The benefit of relocating the company here is that it is such a wonderful place to live and it's also easy to recruit great people,” says Falconer. “Austria also borders several other countries that have really strong technical scientific training.”
Research by ASM shows that half of the companies founded across Austria are created in Vienna — which is considered a particularly attractive location for founders. Vienna has been cited as one of the best places for female founders in Europe with 42% of all companies being led by a female founder.
The benefit of relocating the company here is that it is such a wonderful place to live and it's also easy to recruit great people
“Every public funding agency has included a female founder bonus — so if you're a female founder, you're able to tap into additional pots of money. There are also influential women on the investor side and on the incubator and accelerator side who are helping,” says Reiter-Braunwieser.
“What is required now are societal changes like better childcare facilities. But there are some good pillars in place already which will drive this change,” she adds.