European start-ups struggle to keep pace with venture financing

By: | Published: December 31, 2014 12:33 AM

Working from converted warehouses in East London and start-up lofts in trendy Berlin, Europe’s tech companies are always eager...

Working from converted warehouses in East London and start-up lofts in trendy Berlin, Europe’s tech companies are always eager to prove that they can compete with their American counterparts.

Yet start-ups in London and Berlin — two of Europe’s fastest-growing start-up hubs — still have a hard time raising money compared with companies based in New York and Silicon Valley.

Silicon Valley still dominates the flow of venture money, with tech companies in the region securing $22 billion in 2014, more than double the year before.

But a fairer comparison for Europe’s fledgling tech centres is New York. Start-ups in New York, like those in London and Berlin, rely heavily on ties to existing industries, like the local fashion and financial services sectors.

But even in a dollar-for-dollar comparison, New York out-muscles its European rivals when it comes to venture funding.

Tech companies in New York raised $4.5 billion in 2014, a 44% jump from 2013, according to the research company CB Insights. In contrast, London tech companies raised roughly one-third that amount, or $1.4 billion.

The figure still represents roughly double what London start-ups raised in 2013, as investors backed a number of local tech companies including the peer-to-peer lending company Funding Circle, which raised $65 million this year, and the online fashion company FarFetch, which secured $66 million in new funding. Berlin — home to SoundCloud also could not compete with New York’s venture capital figures, though apartment rents,  salaries for engineers in the German capital are significantly less.

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