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International Cities with Venture Capital Momentum, and Emerging Hubs

By Christopher Steiner  •  Sep 8, 2016

FundersClub reviews thousands of technology startups every year, and as a VC, has backed a global portfolio of top startup founders. Our insights come from our network of top startup founders and startup investors, and from our own experiences. Christopher Steiner was a co-founder at Aisle50, YC S2011, acquired by Groupon in early 2015.

Cities outside the United States continue to make gains within the startup/venture capital world. In 2015, international cities garnered more than 40% of the placed venture capital—their highest share ever—up from less than 10% just 10 years earlier.

The money is going to places one might expect—London, Beijing—but other cities have managed to nose into the mix as well. And there exist very encouraging signs from up-and-coming tech hubs in South America and Africa.

Going off of data we’ve gathered from several sources, including CB Insights and Atomico, we’ve put together a list of the cities that have been leaders in venture capital and startups across the world, as well as cities that could make large leaps soon.

Seventy-five of 236 global unicorns call the Bay Area home, according to Atomico, a venture capital firm founded by Niklas Zennström, a co-founder of Skype. Atomico is focused on investing everywhere but the United States, which has 128 unicorns in total. Aside from that remarkable hoard in California, only Beijing, with 28 unicorns, has a comparable number of outsized successes.

Putting the United States aside, several cities, including Beijing, have emerged from the pack globally as bustling centers of startup activity with good supplies of capital, talent and innovative ideas.

Cities with momentum:

  • London
  • Berlin
  • Beijing
  • Stockholm
  • Bangalore


London has been a leader, having produced 10 unicorns, among them Zoopla and TransferWise, and has drawn considerable venture capital investment, including 2015 totals of 266 investments for a total of $3.04 billion. Dollar wise, the city accounts for 66% of all venture capital investment in the U.K.

London has the built-in advantages of being a large city in a prosperous country, as well as being the financial capital of Europe. But that latter status probably hasn't been as important as has London's continued ability to attract talent from everywhere around the world in a way that few other cities do.

Brexit, as has been pontificated by many around the venture space, could shake up the order of things in Europe, making it harder for a non-U.K. citizen to work there, and perhaps encumbering London startups who expect unfettered access to markets on the continent. The construct of how the U.K. will remove itself from the European Union and what agreements get struck will certainly affect its status as the startup hub of Europe.

"No matter how they end up pushing this through, it’s going to change things no matter what business you're in," says William McQuillan, a London-based partner for Frontline Ventures, a European venture firm.

One issue that many overlook, explains McQuillan, is that the EU itself supplies capital to startups through the European Investment Fund. It invests in VC funds and all kinds of tech initiatives focused on Europe. The EIF, in fact, is the largest LP in many European venture funds. Naturally, the funds that draw money from the EIF are focused on the EU. If Britain follows through on Brexit and officially exits the Union, London startups will no longer draw money from VC funds backed by the EIF.

The EIF has become so important, McQuillan says, because of Europe's dearth of university endowments, which supply large hunks of capital to major venture capital firms in the United States.

Money in Europe also tends to be older and more removed from its entrepreneurial roots, if it had any to begin with. In large family offices that manage wealth in Europe, there might be five to seven generations of separation from the people who made the money to the family members currently managing it. This leads to a focus on capital preservation rather than capital building.

In the United States, there are usually just one or two separations between the people in family offices and the people who made the money. This naturally engenders U.S. wealth managers to put more capital into riskier, more entrepreneurial vehicles such as venture capital.


If Brexit leads London to falter, Berlin may be in the best shape to step up as the tech hub of Europe. Germany is the largest economy in Europe, and the healthiest, and Berlin has become Germany’s tech capital. Berlin didn't have the advantages of London as a financial hub, as Frankfurt still holds that title in Germany, but Berlin’s cheap living expenses and concentration of art and culture have made it an attractive destination to young entrepreneurs from across Europe.

Of Germany's nine software unicorns, eight of them are in Berlin, putting the city just behind London in that category. In 2015, Berlin drew $1.93 billion in venture capital across 123 deals.

"Berlin is becoming the Silicon Valley of Europe," asserts Alexis Sheehy, who runs marketing for Klara, a secure messaging platform for healthcare communications.

Klara's Berlin headquarters is full of employees from across the world, from Germany to India to Australia.  This city, like London, has drawn on its appeal to people from everywhere.

Sheehy credits the progressive culture of Berlin as being one of its major draws that allows Klara to select applicants from a diverse international pool of talent. The company also has offices in New York, but it tries to make most of its science and tech hires in Berlin to keep costs lower.

Philip Rooke, CEO of Spreadshirt, an ecommerce outlet for custom t-shirts with offices in Germany and three in the United States, thinks Berlin has exactly the right kind of people who do well at startups: young, creative and educated. But Rooke he says it's harder to recruit Berliners who will stay at your company long-term, making it not dissimilar from San Francisco, where job-hopping has become part of the culture.


This metropolis on the Baltic Sea has been among the tech vanguard for some time, as its first unicorn, Skype, changed how the world communicates. The city has since produced four more companies with values north of $1 billion, including Mojang, which created the ubiquitous game Minecraft.

The country of Sweden drew $906 million in traditional venture capital investment in 2015, an impressive number considering that it’s only home to 9.6 million people. Companies in Stockholm received 83.5% of that money across 40 different investments, for a total of $757 million.

“Stockholm punches way above its weight,” says McQuillan.

The investor attributes that city’s continued success to a culture of entrepreneurship that owes some of its roots to Sweden’s comprehensive social safety netting that can minimize the risk of starting a company. That fact, plus having the early success of a major consumer-facing application like Skype in the city, has created an awareness and an ecosystem that few cities can match.

Stockholm has also benefitted from many of its founders’ preferences to not sell early in their companies’ lifecycles. When the city produces a hit, the founders have historically been loath to sell, perhaps going back to some of the mindset that comes from having such a thorough social system in place. That fact has allowed Stockholm’s leading tech startups to keep growing and reach unicorn status before reaching an exit.

Maria De La Croix, co-founder and CEO of Wheelys Café, which is headquartered in Stockholm and has licensed its organic coffee and snack carts in 68 countries, thinks Stockholm’s success is as much about Sweden as it is about Stockholm. “The education is free, you don't need to have a job to get your health care and it is not that hard to get a grant for your early startup idea,” she says. “Also, the Swedish school is a lot about encouraging students to think critically and find solutions, which plays into entrepreneurial thinking.”

Wheelys spent a cycle at Y Combinator, so De La Croix has seen the intensity of the startup environment in the Bay Area. She thinks Malmö, another Swedish city, has the right kind of entrepreneurial environment, with low costs and concentrations of young people, to perhaps be part of the global tech elite.

The Spotify co-founders, Daniel Ek and Martin Lorentzon, recently published an open letter arguing that Stockholm, with the fastest-appreciating housing market in the EU, has become less attractive for startup founders. The two point out that New York, Singapore and London—all famously expensive—offer housing markets with more flexible and simple solutions.

De La Croix thinks that’s one of the reasons that Malmö could have the edge on Stockholm in the future.


Being in the capital of the country with the largest online population is a boon for startups—as evinced by the city’s 28 unicorns, accounting for 53% of those in China. In 2015, Beijing attracted $15.7 billion of venture capital, more than half of China’s total.

Many of the Chinese tech stalwarts have built parallel applications to those that exist elsewhere. But their access to the giant Chinese market, one that outsiders have a hard time parsing, serves as an accelerant for these companies.

The question for Chinese startups: while their home market offers incredible opportunity, will they be able to find success abroad under their own banners? The government has been diligent in giving Chinese firms advantages at home, but even Alibaba has had issues getting more traction outside of China. In its fiscal 2016, only 9% of its revenue came from outside of China, compared with 24% in 2012.

But Chinese companies can grow giant without crossing the country's border, which is why American venture capital firms and their related entities have been investing in China for years. Sequoia Capital China was the most active VC investor in China during 2015, with 56 investments. No. 2 was Matrix Partners China, which is affiliated with Palo Alto's Matrix Partners, and made 37 Chinese investments in 2015.

Beijing, being the educational and bureaucratic hub of China, also benefits from an influx of engineering talent that the country produces on an annual basis - 1,000,000 engineers a year, by some reports.


India has seized on its advantage of having a deep well of highly-educated English speakers to become something of a giant development shop where all manners of companies turn to for help in creating new applications. At some point, many of these sharp developers struck out on their own, with their own ideas—and the unicorns and venture cash have followed.

Bangalore has become the tech capital of a country that will soon be home to more developers than any other, as it’s poised to pass the United States in that category in 2017.  Amazingly for its size—1.25 billion people—India will be the youngest country in the world by 2020, with an average age of just 29. Google already plans to train 2 million Indian developers on how to build and work within Android applications.

With such demographic factors on its side, India, like China before it, will churn out unicorns that simply capitalize on the size of its market. India has already seen an influx of venture capital—$7.8 billion in 2015—with Bangalore receiving 30%, or $2.36 billion, of that.

Bangalore has three of India’s seven unicorns and with the attention it has drawn from VCs, it has good odds of producing more. The city has become something of a melting pot for Indians, and many arrive here far from home and are prepared to take risks and shoot for the moon, says Greg Moran, co-founder and CEO of Zoomcar, a car rental service based in Bangalore.

“Bangalore has a very strong support system of past entrepreneurs, angel investors, etc.,” Moran says. “People have been there, done that before and this attitude certainly helps for earlier stage startups.”

Bangalore’s colleges produce more engineers every year than any other Indian city and living costs here are moderately less—10% or so—than in New Delhi or Mumbai. Just as with most of India, some of Bangalore’s challenges center on infrastructure, as data, voice and even electricity can go through outage cycles.

Emerging Hubs

São Paulo

As the largest city in the largest economy in the Southern Hemisphere, Sao Paulo has a head start on other cities. Of the $595 million of venture capital invested in Brazil in 2015, 39% of it, or $234 million, went to startups in São Paulo.

Despite being in the wealthiest state in Brazil, Sao Paulo by global standards is still cheap, points out Antonio Carlos Soares, co-founder and CEO of, which makes workflow management software and has drawn funding from 500Startups.

“It’s easy to find a small place for your business and simply focus on work,” Soares says. “On the other hand, you can easily rent entire buildings here if your startups takes off.”

Brazil has a low density of startups, compared with the United States—about 20 per 1 million people, compared with the U.S. rate of 322 per 1 million—but that also means that there is a lot of room for growth in a country that is graduating 74,500 new engineers every year.

Further support comes from the entrepreneurial mindset of the country, where 24.4% of people aged 18-64 intend to start a business within three years, according to a study by Monashees, a venture firm in São Paulo.

Some drawbacks in São Paulo and Brazil in general, points out Soares, are arcane labor laws and relatively high tax rates.


The capital of Kenya has become a destination in Africa for tech companies looking for dependable infrastructure, high-speed access to the web, and a growing base of developers, artists and workers with the skills necessary to grow a startup.

The entire continent of Africa drew only $93.8 million in traditional VC funding during 2015, according to CB Insights, but 37% of that total, or $34.6 million, went to companies operating out of Nairobi.

The GDP of Kenya has been increasing at a rate of nearly 6% for the last several years, roughly 5x the rate of U.S. GDP growth during the same period. This fact, combined with a growing emphasis on tech in Kenya’s capital, has led global forces to take notice.

Google has partnered with iHub, a Nairobi technology innovation community, to support iHub as a gathering place where entrepreneurs, developers and marketers can create products. There exists a Google Business Group and a Google Developer Community around iHub in Nairobi. Google’s commitment includes technical training, mentoring and financial support.

Nairobi is also home to the Savannah Fund, which is focused on investing $25,000 to $500,000 at a time in sub-Saharan tech companies. The fund also has an accelerator, which offers startups $25,000 for 12% of equity. The accelerator takes five companies at a time for three months. One of its goals is to graduate its companies to 500 Startups, with whom it partners. Cardplanet was the first company to make that leap.

This is not an exhaustive list

We’ve covered some of the highlights here, some of the cities that have outperformed to this point. But there are dozens of cities whose tech scenes have greatly matured during the last several years. This makes for a fun conversation and research topic to periodically revisit because things can and do change—and it’s something that we will continue to monitor.

The potential unleashed by the web and software has been transformative for more than one major metropolitan area across the world. In the past, there’s been a dearth of activity outside of hubs, but that continues to change as more and more cities and countries becomes centers of startup activity in and of themselves.