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Germany tops the list of the best investment destination in Europe for startups looking to expand, owing to its vast market size and great socio-economic structure.

The United Kingdom is in second place but may soon fall behind due to uncertainties because of the dual impact of Covid and Brexit.

Following closely behind is the Netherlands, which may soon climb up the ladder in the near future due to having one of the best foreign investment climates in the world, world-class infrastructure, and its economic transformation readiness to face uncertainties like Covid.

Executive Summary

SECTION 1: GTM Strategy Explained

SECTION 2: Case Study- Why Go Global?

SECTION 3: Factors determining the best European Destinations for Start-ups in Israel

SECTION 4: Top 10 European destinations for start-ups to expand

4.1. Germany
4.2. The United Kingdom
4.3. The Netherlands
4.4. France
4.5. Switzerland
4.6. Spain
4.7. Italy
4.8. Denmark
4.9. Finland
4.10. Sweden

CONCLUSION

Executive Summary

The Covid 19 pandemic has changed the world forever. For businesses, the pandemic has pushed a Global Reset button. While it has been a big drawback for large enterprises, it has opened a window of opportunity for start-ups as agility has become the prime objective for every enterprise.

The explosion in virtual selling and the rapidly changing business climate has opened up countless prospects for small businesses, entrepreneurs and family offices. Now, they can compete in the same space as occupied by large enterprises, both locally and internationally. The playing field has been somewhat levelled by technology.

Start-ups have the opportunity to compete for the same audience, mindshare and wallet-share, as the established brands. The modus operandi for businesses now necessitates that they creatively leverage a firm’s unique value proposition. For start-ups, due to their agility, small size and creative dexterity, it is the best time for seizing the opportunity for rapid growth.

That is not to say that there are no challenges. The challenges are more daunting than ever before. The most critical challenge facing start-ups is Scaling up their business with their limited resources. Costs, time and employees are all resources that need to be masterfully manoeuvred to attain rapid business growth. They also have to creatively find ways of reducing unnecessary risks due to their resource limitations.

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For sustainable business growth, start-ups have to build and market their product quickly. Therefore, the most vital cog for successfully scaling up a business is the Go-To-Market strategy. A GTM strategy serves as an action plan for a new product release. It ensures that the offering addresses the user’s pain points and that a proper distribution plan is in place.

The foundation for start-ups to get ahead and stay ahead in their GTM strategy is through Global expansion. For start-ups, international markets provide new clients, increased revenue, spread risk, give access to high-value business, open up the scope for innovation, and provide access to top talent.

Specifically for Israel, quick expansion into the Global market is a necessity and norm owing to its small market size. Traditionally the Israeli start-up market has looked at the United States as the number 1 destination for expansion. There is no doubt that the US market, due to its scale of the market, the availability of venture capital, a well-developed start-up eco-system, and the Israel-US connection, is the most appealing location for Israeli startups.

However, Covid 19 has taught businesses some vital lessons which should be taken into account while startups consider expanding into a new market. During Covid 19, it has been seen that businesses can operate remotely, engaging into remote selling using a seamless online model, thanks to the steep rise in online communication technology. Covid 19 also has made entrepreneurs wary of remaining away from families and their nation for long, if possible. Thus, the possibility of choosing a market closer to home is highly appealing to a great many business owners.

On paper, Europe has all of the ingredients needed for digital companies to develop and expand, so entrepreneurs should look closer to home before crossing the Atlantic in search of success. The European market is large, it is closer to Israel, and it has a comparable time zone, making it a highly appealing choice for Israeli start-ups. For investors, the European market is less overheated and therefore more appealing than the US market, as well as less “difficult” than other big markets like China, India, or Brazil.

Due to the exponential growth in video technology and virtual presentation mediums as a result of COVID 19, business owners no longer need to remain in the hub permanently. Start-up founders may fly to Europe in 4-5 hours and manage a fully functioning staff remotely, gaining access to the massive European market.

This proximity makes it easier to take the initial steps and expand into Europe, aids in staff relocation, and, most importantly, it means that the time difference is small. Because of the same time zones, it is much easier to provide services and be accessible to prospective and current customers, even if one is not physically in Europe.

The travel cost to and from Europe is, on average, 10 times cheaper from Israel as compared to the US, which makes the European market highly attractive, especially after the Covid 19 and with the rapid rise of online business models. Europe has a massive single market of 500 million people, which has eased commerce between countries to a great extent, and governments have attempted to encourage entrepreneurship by investing significant amounts of money to boost innovation and R&D.

This comprehensive report is a deep dive into GTM strategy for start-ups in Israel to expand in Europe. The report digs deep into data from the most credible sources like World Economic Forum, Digital Economy and Society Index (DESI), Deloitte, PwC, Forbes and World Intellectual Property Organization (WIPO) to build a propriety methodology through collaboration with worldwide experts and experienced specialists from the Start-up space.

TOP 10 EUROPEAN DESTINATIONS FOR STARTUPS TO EXPAND: Expansion

The purpose of the report is to help start-ups scale their businesses up. It is a “How-to” guide for small businesses, entrepreneurs and pioneers, who want to expand their businesses in Europe. This report provides captivating insights into the GTM strategies of start-ups and how they scale up their business through Global Expansion, choose the right destination to strategically drive business, overcome challenges that they face when operating across borders, and drive overseas growth.

After deep research into the various indices, we narrowed it down to 13 determining factors that should be taken into consideration while a start-up is expanding.

Each factor is critical while selecting a global hub for expansion. The data is all directly taken from reputed sources that have international credibility. These include the World Bank, World Economic Forum, World Intellectual Property Organization (WIPO), World Health Organization (WHO), Institute of Management Development (IMD), Freedom House, FDI Intelligence, EF Education, and Political and Economic Intelligence Bureau.

These 13 factors that determine the best European destinations for start-ups are:

1. Openness to Foreign Investment Index
2. Corruption Perception Index
3. Intellectual Property Rights Index
4. Legal and Regulatory Systems Index
5. Human Capital Index
6. Global Innovation Index
7. Quality of Life Index
8. Economic Transformation Readiness Index
9. Business Language Proficiency Index
10. Digital Competitiveness Index
11. Global VC Investment Index
12. Travel Cost/ Visit from Israel
13. Market Size Multiplier

Considering the composite score of the first 12 factors and adding a multiplier based on market size, there are great insights into the top 10 European destinations for start-ups to expand to.

Germany is the top destination for start-ups expanding into Europe, as per our comprehensive research. It is the biggest economic force in Europe with huge market size. It’s GDP of 3806 million USD, is more than 40% higher than the next biggest GDP in Europe. It also does consistently well in all other factors. It does especially well in the Intellectual property rights Index. With-class infrastructure and excellent business climate, Germany is the number 1 destination for start-ups looking to expand from Israel into Europe.

The United Kingdom is ranked second for start-ups in Israel to expand in Europe. The United Kingdom has the second-largest GDP after Germany and has the second biggest market size in Europe. At present, UK is the most preferred destination for Startups from Israel to invest in. With high rankings in factors like Foreign Investment Index, Global Innovation Index and Business Language Proficiency Index, the UK justifies its 2nd position in our rankings. However, with Brexit comes a lot of future uncertainties, which may be a deterrent while choosing the UK as a preferred destination in the coming years. For start-ups from Israel, UK is likely to remain an important destination to expand due to it’s existing base and trade relationships.

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At number 3 in our rankings is the Netherlands. The Netherlands is among the best investment destinations globally, owing to its excellent social and economic climate. The Netherlands has one of the best English proficiencies, which eases business communication. It has the best foreign Investment Index. It also scores highly in factors such as Human Capital Index, Global Innovation Index, Economic Transformation Index and Digital Competitive Index.

France, with the third biggest market size, high scores in foreign Investment Index and consistently ranks in other factors, is at number 4 in our rankings.

Switzerland completes the top 5, with top scores in Global Innovation Index, Quality of Life and Global VC Investment Index.

Spain, Italy, Denmark, Finland, and Sweden rounds-up the top 10 destinations for start-ups from Israel to expand into Europe.

SECTION 1: GTM Strategy Explained

#1.1. Why develop Go-To-Market Strategies for Businesses?

For start-ups in the early stage of their development, success is not just about having an exceptional idea or a unique product; it’s also not just about securing financing. Although these factors are crucial, an essential criterion for success in start-ups is how they effectively create a process to enhance awareness and get the customers to buy the offerings.

Launching a new product in the market needs extensive planning, foresight and a solid Go-To-Market strategy. GTM Strategies are based on a thorough understanding of who the customer is, what problem you solve for them, how you create awareness, how you make the purchasing process hassle-free for your customers and lastly, how you plan to scale up your business for sustainable growth.

A thoughtful, well-researched GTM Strategy helps start-ups make clear, focused decisions about marketing, sales, and allocating resources.

Here are the critical questions that a GTM Strategy must answer:

  • Who is your customer?

A start-up must have a clear understanding of who its customer is. This includes know-how of customer demographics, their pain points and knowing what their incentive for buying is.

Businesses need to classify customer personas to identify patterns of customer behaviour and their buying patterns. This helps businesses gain insights into how they can drive business through repeat orders and helps you connect with your customer deeply.

  • What problem do you solve for your customer?

In start-ups, the founders often have an idea, a solution, or a business model they try to fit in. This is great, but most successful start-ups have one thing in common: they solve a very specific problem for their customer.

Solving your customer’s pain point requires having detailed conversations with your customer personas to precisely understand their pain points. Customers are not just buying a product; what they are really buying is a solution to their problems.

Another way of looking at this is from the customer point of view. What job is the customer trying to get done using your product or service?

To identify and understand customers persona, interviews, ride along, observations, and informal mass interviews can be done. The focus should be on quality and not quantity. It should not be in the form of a closed-ended questionnaire or surveys. It should be a form of open-ended probes and questions, without preconceived biases of the business owners. The focus should be on what the customer does rather than what the customer says.

  • How customers are influenced, and what are their buying habits?

How do your customers learn about your products and solutions, where do they learn them, and how do they buy?

As a start-up, you want to know how your customers learn about solutions so you can determine how and when to introduce your solution into the purchasing process.

The first step is to map the customer’s purchasing path. The customer journey in today’s multichannel environment is anything but linear. A client will search for answers online, read suggestions and comments, eliminate choices, and purchase additional options. Sellers, on the other hand, present products and services, may it be through virtual presentations or video meetings. It’s a frantic, disorganized procedure.

Customer interviews, once again, are critical to understanding this process. It is also crucial to comprehend who is engaged in the process. Is it a solitary customer making their own choice? Is it a group? Is it a business that employs a large number of people? Understanding the purchasing journey is critical for determining where you may participate in the process.

  • How will you drive Sales?

In start-ups, the go-to-market strategies must emphasize sales and marketing to raise awareness, communicate a promise, and entice consumers to purchase.

A business with a pull-based go-to-market strategy will concentrate on levers such as paid, owned and earned media, a variety of sales experience tools such as SEM/SEO, social, and PR, and an emphasis on the brand promise, packaging, and customer experience.

A more push-based go-to-market strategy will rely on marketing for lead generation, with key choices about internal or outside sales, remuneration, channels and alliances, and post-sale customer care.

The scarcity principle in the ‘fear of missing out‘ marketing is when opportunities are scarce, they appear more valuable to us. Start-ups must define and use both pull and push-based GTM Strategies to drive their sales.

  • How will you scale up?

Scaling up is akin to the take-off of an aeroplane for a start-up. Once the initial priorities of understanding the customer, customers problems and mapping the customer journey are done, the next priority is scaling up the business.

Scaling a business entails laying the groundwork for your company’s development. It entails being able to develop without being hindered. It requires preparation, some money, and the appropriate systems, personnel, procedures, technology, and partners. Here a solid GTM strategy sets the stage for ramping up your business. It helps to prioritize resource allocation and is the foundation on which business is established.

The modern business environment is exceptionally agile; therefore, the GTM Strategy must also evolve and modify constantly to meet the changing customer needs.

The business environment has changed drastically due to Covid 19. This has given rise to a plethora of technological development in the past year due to social distancing forcing customers and marketers alike to find new ways to engage with each other. In the following section, we will look at the impact of COVID-19 on GTM Strategies of start-ups.

#1.2. The Impact of Covid 19 on GTM Strategy

The COVID-19 pandemic has made it critical for business executives to implement GTM strategies that allow business continuity, customer stability, and revenue development at an unexpected and unprecedented period in history. COVID-19 has altered the way the economy will operate in the near future.

During the pandemic, the following reasons have led to a shift in developing GTM Strategies for businesses:

  • Substantially decreased marketing expenditures:

Marketing budgets have been significantly cut in these times of financial preservation. Under considerably tighter budget restrictions, business owners are forced to achieve ongoing customer acquisition and revenue development.

  • Rapidly changing marketing mix and messaging:

The pandemic has added additional complexity as well as limitations to the marketing mix. It is tough to break through the internet congestion due to a cautious customer attitude and a digital environment saturated with an avalanche of news. As buyers remain at home, out-of-home marketing becomes outdated, and important events are postponed or pushed into a virtual environment. In such a scenario, a solid digital strategy is critical. Furthermore, marketers must be attentive to the present economic situation and adapt their marketing messages to ensure that the broader context of COVID-19 is considered.

  • Increased focus on brand perception:

People are paying careful attention to how companies are reacting to and behaving after the COVID-19 issue. Listening to, reporting on, and promptly responding to customer complaints is critical to preserving brand feeling and image. Furthermore, customers no longer have simple access to their own networks or support eco-systems, resulting in overburdened contact centres that risk not meeting demand. Managing customer connections digitally with subtlety, empathy, and awareness through social media, forums, chat, and in-product features may assist manage brand reputation during these times of isolation.

  • Increased need to comprehend and use technology:

As businesses shift to a virtual customer and virtual sales experience paradigm, marketing executives must continue to embrace technology. Successfully implementing technology that delivers a consistent digital-purchasing experience will be the difference between marketing companies that flourish and those that are always in triage. Furthermore, the capacity to monitor and publish data across customer touchpoints will become critical for demonstrating marketing effectiveness during a churn period.

#1.3. GTM Strategy in times of COVID-19

A solid GTM Strategy would mean that Businesses must boldly incorporate strategies according to the needs of the hour mentioned in the section above.

The following are the main areas in which start-ups should focus their GTM strategies to cope up and leverage the Covid situation:

  • Improve customer service:

A robust customer service solution allows businesses to monitor and react to customers across various digital channels actively. This may help you promote 1:1 interaction via channels customers chooses while also augmenting contact centres cost-effectively and in real-time. These customer interactions may then be analyzed and shared across departments, providing insights that can be used to improve the customer experience.

Furthermore, a strong customer support and escalation-management programme allow businesses to identify and handle unfavourable customer events quickly and efficiently, with a team of specialists doing root-cause investigations and distributing/publishing stakeholder messages.

  • Manage brand and reputation:

Start-ups may monitor the digital environment for compelling brand and keyword mentions using sophisticated listening technologies and customized social-listening dashboards. As a result, insights and suggestions regarding brand sentiment and reputation management, including opportunities and possible areas of risk, are provided.

  • Acquire new customers efficiently:

As prospective customers traverse their online purchasing experience, it is critical to create a fully quantifiable bridge between marketing and sales throughout the digital eco-system.

A good GTM Strategy allows for demand creation, campaign management, customer acquisition, and customer nurturing. It offers everything from marketing communications strategy and marketing automation implementation to content strategy/production, virtual presentation and media buying/management.

  • Enable and optimize remote teams:

By using GTM Strategies, businesses can not only keep the lights on but also sustain productivity and push the business ahead. Businesses must prioritize the five remote services listed below:

  1. Increasing online engagement and sales,
  2. Shortening campaign time to market,
  3. Tools and Services for Internal Collaboration,
  4. Workflow Optimization, and
  5. Content Management (make less, use more, convert more).

So far, we have looked at why GTM Strategies are important, how the pandemic has affected GTM Strategy and what can start-ups do to overcome these challenges.

In the next section, let’s look at what are the components of a winning GTM strategy.

#1.4. Components of a winning GTM Strategy

By using GTM Strategies, businesses can not only keep the lights on but also sustain productivity and push the business ahead. Businesses must prioritize the five remote services listed below:

1. Product-related parameters
2. Research & development
3. Business Development & Marketing
4. Sales
5. Distribution & other Operations
6. Financial

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1. Product-related Parameters in GTM Strategy

The product-related parameters of GTM Strategy include the following points:

  • Creating Product Roadmap:

What is the purpose of the product? What problem does the product solve?

These questions should have objective answers. So, for developing a product, a clear roadmap from the beginning till the end of the product lifecycle should be charted. It’s the plan on how the product develops and evolves over time.

A clear product roadmap helps to activate the intended trajectory of a product when new features are added or when enhancements or revisions are made.

  • Determining the revenue model:

How will the product make money? How much margin do you expect?

This step is critical. Many start-ups are unable to scale up their businesses because they do not have a good revenue model. It’s okay to not have a clear revenue model, to begin with, but when you want to scale up, having a revenue model is critical.

  • Pricing Strategy:

A pricing strategy differs from a revenue model. Pricing strategy depends on how much your customer is willing to pay for your product or service. To help in determining the pricing, businesses use various strategies like benchmarking price based on competitor pricing, market conditions, supply and demand considerations.

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  • Charting Customer Journey:

The customer journey is the story of the customer’s experience while buying your product. It’s about how a business is able to influence each stage of the buying process through its unique selling proposition.

It’s about businesses being there for the customer at the right time and the right place to guide the customer throughout the buying process. Businesses must deeply analyze and understand the customer journey to have a crucial understanding of the market.

2. Research & Development

The GTM Strategy must be defined on the basis of the end result a business wants to achieve. Research and development on customer personas, analysis of competitors and product testing are critical components of a solid GTM Strategy.

  • Market Research:

Who are your target customers? How do they engage in the buying process?

Market research is a critical component in finding reliable and relevant data points on consumer behaviour. It gives the business rich dividends when executed in a proper manner.

  • Creating customer Persona:

Creating a customer persona reveals key points about the buyer. It helps a business understand the psychology of the customer. It helps the business to categorize ideal users of the product.

Developing customer personas is a great way to delve deeper into the buying habits of the customer and provides reasons on why they are most likely to develop an affinity towards your brand.

  • Competitor Analysis:

What options does your customer have? What features do your competitors provide?

This is a critical step as it provides insights into where your product offering stands in comparison to your competitors. It provides businesses with actionable points of improvement and ideas of how to build a strong sales funnel.

  • Real-time Product Testing:

Often businesses launch the product without proper testing. This can be a colossal mistake and break the trust of your target customer if the product contains multiple bugs and performance issues.

Hence it is critical that Products should be tested and feedback received from focus groups should be incorporated. This resolves product performance issues and helps businesses launch their product with confidence.

3. Business Development and Marketing Strategy

Successfully entering a market requires having a great business development and marketing plan. Some important components of having such a plan are:

  • Branding:

Branding isn’t about just having a unique name, or logo, or tagline. It’s the feeling that businesses want to illicit in their customers that is important to the brand.

A compelling brand focuses on this feeling that it wants to convey to its customers and which the customer will remember you by.

  • Business Development Plan:

A business development plan is a foundation for sales. Where are your customers located? How will you target them?

In developing a plan, a business must focus on quality over quantity of the sales pipeline. Each phase of the customer journey must be focused upon.

  • Social Media and Content Strategy:

Content is king. Without powerful content and a clear strategy on LinkedIn, YouTube, Twitter, Instagram, businesses will struggle to build their business in today’s times.

Perspective of creating content is the main connecting point that adds value to the customer and builds trust. Mastering Social Media such as Facebook or Linkedin prospecting is a critical marketing strategy that businesses have to focus on. Having a set plan and continuously monitoring and tinkering with the strategy will improve engagement and give long-term results for the businesses.Pers

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  • Advertising Strategy:

To make your marketing strategy work, having a great advertising strategy is key. Advertising can be organic or be paid and sometimes, word-of-mouth marketing also works for businesses. Ideally, businesses must employ both techniques simultaneously but should focus mainly on organic traffic.

Organic traffic is the true guide on how well your content strategy is working, and the quality of leads through organic traffic is much more authentic and trustworthy.

4. Sales Strategy

The steps described above are all set up to this particular step, i.e. Sales. Focus on Sales Function is imperative as it is the only revenue-generating function in the organization, the rest all being cost centres.

Here are the focus areas in a Sales Strategy:

  • Reaching Out:

How will the customer know about you? How will they buy it?

Ultimately for any business, the most important thing is making a sale. Engaging and reaching out to prospective buyers using online and offline modes is an important sales strategy.

  • Enabling Sales:

Through the combination of sales training, technology enablement, and hiring, businesses have to chart out a plan for Sales Enablement.

Businesses have to create processes so that leads do not go to waste. They have to ensure that a step by step sales process and strategy is in place to ensure the best customer experience.

  • Sales Cycle:

A sales cycle is the time from the lead to the order closure. It is important that businesses invest a sufficient amount of energy in making the sales cycle efficient. It means businesses have to make the sales process iterative with a focus on upselling, repeat selling and cross-selling.

Reducing the sales cycle time and making it efficient is a key area for business growth.

  • Customer Retention Strategy:

How do you plan to retain your customer once you have acquired them? Why should the customer remain with you?

It is crucial that businesses have a vibrant customer retention plan. The cost of acquiring a new customer can be 5 to 10 times higher than keeping a customer.

Engaging with acquired customers and providing a personalized customer experience through hyper-personalization are great strategies for customer retention.

5. Distribution & other Operations

Having streamlined distribution and operations are one of the pillars of a successful business. Even if you have the best sales team but if your distribution channel is faulty, then it will lead to poor customer experience and will affect sustainable growth.

Here are the points that start-ups must keep in mind while designing a successful GTM Strategy in Distribution and Operations:

  • Distribution Model:

How will you distribute your product? How will you optimize delivery time? What channels would you use?

A good distribution model is a complex system of channels that flow along smoothly and provide the best possible customer experience using the least amount of resources. Ensure that you have given sufficient thought to your distribution model, as it is a critical aspect before you enter the market.

  • Operations:

How will you adapt your marketing plan to make it efficient in a current business environment? How will you make the processes seamless and automated? How will you serve your customers?

Operations are extremely critical as the customer thinks of it as a hygiene factor. How efficiently your supply chain functions and how it adds value are important aspects that businesses have to invest energy in.

Customer service and return policies are also part of the operations, which contribute a great deal to customer satisfaction if managed well. Thus having an operations strategy in the GTM Strategy is crucial for businesses.

6. Financial Strategy

Financial strategy is the backbone on which the rest of the components of GTM Strategy are based.

The financial strategy includes:

  • Scaling up plan:

How does your business plan to grow, and how fast? What’s your budget? Where will you expand?

A clear and transparent financial plan requires a clearly charted scale-up plan. A scale-up plan requires budgeting and proper resource allocation as per a set plan.

Resources are limited, and developing new markets need investment. Thus, the scale-up is probably the most crucial part of the GTM Strategy.

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  • Re-investment Plan:

How do you plan to use your profits?

Would you like to invest profits back into the business, or would you keep the profits? These things must be sorted out as it helps in proper financial planning in start-ups.

  • Resource Allocation:

Resource allocation should be based on the goals and priorities of an organization. Maintaining a balance in resource allocation with emphasis on all important aspects is extremely critical in determining success for a start-up.

Oftentimes, in start-ups, business owners invest too much in a single aspect like sales or technology while investing very little in operations and other aspects. This can be suicidal for businesses.

Thus, having a proper resource allocation is critical for successfully driving a successful GTM Strategy.

These are the six components of a successful GTM Strategy on which businesses need to have a clear, actionable plan. On the basis of this plan, start-ups must base their scale-up plan.

Scaling -up is the biggest obstacle that start-ups face. In the following section, we will tackle the issue of scaling-up in detail through the example of start-ups in Israel.

SECTION 2: Case Study of Israel – Why Go Global?

#2.1. Israel: the start-up Nation

Over the past two decades, Israel has grown its reputation in innovation and entrepreneurship. It has become a world leader in the field of business and technology. Israel has one start-up per 1400 people, which is the highest per capita among all countries in the world.

The World Intellectual Property Organization’s (WIPO), Global Innovation Index (GII), and the World Economic Forum’s (WEF) Global Competitiveness Report regularly place Israel at the top of international rankings and publications. Israel also has the highest number of engineers per capita and the world’s second-highest R&D spending rate.

Israel ranks first in many measures in the Global Innovation Index, including researchers per million people, gross R&D spending as a percent of GDP, and research talent in commercial organizations. It has an unusually large risk capital pool, ranking second in the world in terms of venture capital (VC) availability. This prevalence of risk capital has been boosted by the recent establishment of hundreds of local R&D centres by multinational corporations (MNCs) that seek to benefit from the profusion of technological innovation that Israeli entrepreneurs are generating.

So, why is Israel home to one of the world’s most dynamic tech start-up clusters?

There are several factors that contribute to this. According to research, military R&D had an early role in the development of the nation’s tech sector, just as it did in the United States. At almost 4% of GDP, Israel spends more on R&D — public and private — than any other nation on the planet. In addition, the government took more active steps to promote the tech industry. It supported venture financing, incubators, university R&D, and technology transfer initiatives in the 1990s.

TOP 10 EUROPEAN DESTINATIONS FOR STARTUPS TO EXPAND: Startup

In their book, Start-Up Nation, Daniel Senor and Saul Singer provide further reasons. They believe that obligatory military service help in the development of entrepreneurial culture. “You have little direction from the top and are expected to innovate, even if this involves violating certain rules,” they write.

Senor and Singer also credit Israel’s start-up success to immigration policies. Good ties with the United States have also certainly aided Israeli businesses by linking them to investors and a big market.

The third reason for Israel’s entrepreneurial vigour is based on the logic of innovation clusters: Early success begets continuing success. When a large number of engineers and entrepreneurs congregate in one place, that place becomes a magnet for venture investors and more talent. Israel’s early embrace of tech and venture capital is paying dividends.

The last and probably the most unique reason is the famous chutzpah of the Israeli people. It’s that spirit of innovation, of never giving up, and of taking risks that are ingrained in the mindset of Israeli culture, which makes it unique.

Against all obstacles, Israel has created an innovative eco-system for start-ups. In terms of the number of businesses listed on NASDAQ, Israel is the third most-represented country. Despite this shining statistic, there was a less fortunate truth: although Israel has succeeded at establishing game-changing start-ups and life-changing technologies, it has struggled in the past to create well-known global companies. Many people were perplexed by the absence of industrial maturity in a highly innovative country with thriving venture capital and entrepreneurial culture.

#2.2. The challenge of scaling up

The early success of many local start-ups had created what is known in Israel as an “exit culture,” in which entrepreneurs begin their work with the goal of building a company that will be purchased as soon as possible by a much larger international company, rather than becoming a global, publicly-traded, industry-leading company.

Over the last decade, the financial worth of Israeli high-tech exits has exceeded US$70 billion, equal to almost 20% of the country’s annual GDP. Proponents of the exiting culture claimed that the money pouring into Israel from these billion-dollar deals acts as a growth engine for establishing new early-stage companies and enticing global organizations to build or expand R&D centres in Israel.

However, there is an often-overlooked disadvantage to this method. In the long term, a private sector made up exclusively of small, technologically sophisticated companies looking for an exit is harmful to the Israeli economy because it exports the country’s most important know-how and stifles the growth of big local companies.

Most people agree that Israel’s small population of just nine million people is to blame and that the local market simply isn’t big enough to support the development and sustainability of industry-leading publicly traded companies. Some argue that geopolitical difficulties make it difficult for Israeli start-ups to develop into mature, independent companies capable of operating internationally.

Yossi Vardi, a successful technology entrepreneur who has invested in 75 Israeli companies, proposed decades ago that Israeli entrepreneurs should pursue fast exit possibilities via global businesses interested in purchasing a window into Israeli talent and technology. This thesis is no longer applicable today. For the first time in history, Israeli businesses are effectively scaling up as global market leaders, and the eco-system is changing to accommodate them. So, what has changed that Israel is now being touted as “the Scale-up Nation”?

#2.3. How Israel’s start-ups are overcoming the challenge of scaling -up

1. Going Global soon

Despite having a thriving start-up environment, Israel is just too small for entrepreneurs looking to build large companies locally. As a consequence, Israeli businesses must begin thinking outside of Israel very soon. The typical strategy is to incubate the company locally in Israel with a small development team, demonstrate early product/market fit, and then build a sales and marketing department overseas. In the past, many Israeli executive teams would hire a vice president of sales in the foreign land to help with the local go-to-market strategy. Recently, Israeli entrepreneurs have begun to relocate to build a satellite office and to personally supervise the recruitment and management of executives to lead sales and marketing activities.

However, waiting until the late-stage go-to-market phase to move to a foreign land may be too late. The geographical barrier between Israel and the foreign land exacerbates all of the dangers involved in starting a business. Hiring talent and collecting consumer input is much more difficult when teams are geographically separated, and this isolation may make it difficult to build culture, forge alliances, and raise money.

So, how early should the founders pack their belongings and sail off? According to our research, the conventional opinion has moved toward a straightforward answer: as early as feasible. A relocation enables the company to get closer to the consumer, learn about their problem areas, and react appropriately. Understanding the market and determining product/market fit are important seed-stage milestones.

The second reason to move early is to hire the finest sales and marketing talent available. The most difficult challenge for entrepreneurs and investors time and again is recruiting and keeping outstanding talent, a problem compounded by geographical and cultural distance. The difficulty of expanding is mainly in recruiting on the sales and marketing front. Companies should add local talent to their Israeli management teams who understand how to identify the market, sell into it, and collect feedback. Furthermore, companies need certain executives to act as the main point of contact between the sales and marketing team in the foreign land and the development team in Israel.

2. Big Vision and being ‘In’ for the long haul

Israeli entrepreneurs are well-known for their tenacity and eagerness to take on difficult technical and business problems. Previously, though, Israeli entrepreneurs grew excessively focused on the product and core technology. This focus resulted in a short-term perspective of the venture’s ability to expand beyond the current product range. Even after establishing product/market fit, previous businesses focused too much on the product at the cost of developing a comprehensive vision for growth.

Earlier, entrepreneurs were primarily concerned with using technology to establish a company rather than with disrupting large markets via the use of technology. This minor distinction risked and restricted the breadth of possibilities available to Israeli entrepreneurs.

That has altered in recent years as a result of experience and success in scaling up. Israeli start-ups now have a road map to success.

Scaling up starts with thinking about how to construct a larger narrative and a larger vision as the business grows. The main concept is to conceive of yourself as a prospective industry leader rather than a single-product business. Consider where you want to go in five years and start thinking about a product pipeline to get there.

When a company begins to expand, its founders must address long-term strategic concerns such as, “How can I promote human capital growth? How can I increase my market share via acquisitions and innovation? How can I demonstrate the unit economics in order to justify financing a growth round that will allow me to expand more quickly?”

In the past few years, Israeli entrepreneurs have cracked this code of thinking big and having a broad vision and thus have shifted the perspective to scaling up their businesses successfully.

3. Financing from Foreign VC’s

Israeli entrepreneurs are increasingly focused on attracting foreign venture capital partners early in the process to help them explore possibilities from the start. Foreign VCs have a far larger network and may help a business scale by gaining access to managerial talent, data, partners, and consumers. Foreign VCs consider scale from the start since their huge fund sizes require higher returns. They devote more time to planning, marketing, company growth, and finance.

According to research data, foreign investors have a significant effect on the growth of Israeli companies, as measured by yearly revenue and staff count. Israeli companies funded exclusively by foreign investors grew faster than those funded by both Israeli and foreign venture capitalists and considerably faster than companies funded purely by Israeli investors.

As a result, deciding when to bring in a foreign VC is a critical and strategic choice.

This trend of having foreign VCs has been one of the major reasons for Israeli start-ups to be able to scale up their businesses in recent years.

Remote Selling: Extract Maximum Benefits

#2.4. The Key Lessons from successful start-ups of Israel: Go Global

In the previous section, we have seen that going global has to be the Go-to mantra for Israeli start-ups from the very onset. The significant points that are in favour of going global are:

1. Small internal market size: Israel has a population of around 9 million, which is 0.1% of the world’s population. The internal market size is much smaller compared to most other countries in the world. This creates a necessity to target foreign markets from the very beginning.

2. Business Growth and Scale: Going Global is necessary for scaling up the business. You cannot scale up by having a few clients. For scaling up, you need a big market and the potential of having numerous clients. Going Global provides access to huge markets across the globe.

3. Improve efficiency: The cost of acquisition of clients plays a huge role in improving efficiency. In a highly competitive market like Israel, improving efficiency can be a challenge. Going Global into markets where competition for products is comparatively lower significantly increases the efficiency of acquiring new clients.

4. Spreading risk: Successful Startups spread their risks in different markets. They spread it in different geographical regions and continents. Often, Israeli start-ups just focus on the US market. This restricts their potential. Start-ups that spread risks across North America, Europe and Asia are much better placed to absorb shocks due to various reasons.

5. Access to talent and ideas from diverse Workforce: Going Global provides start-ups with access to diverse talent groups and mindsets. For any organization to truly scale up, they need to have a diverse workforce. This way, businesses are better able to empathize with customer mindsets and thus build trust with customers.

Remote Selling: Dynamic and Flexible

6. Reduce Cost: Going Global also reduces the overall cost of operations in the long run. Rather than travelling to and fro, having a team is much more cost-effective. When seen in line with revenue generated in the global location vis-à-vis cost, it’s clear that having a global footprint reduces cost quite significantly.

7. Flexibility & Agility: An added advantage of Going Global is the flexibility and agility it provides the start-up. A start-up is a continually evolving creature. Oftentimes in Global markets, opportunities arise which start-ups can capitalize for growth. It provides start-ups with the most critical asset, the asset of agility.

8. Strategic Advantage: Start-ups which have just one office are unlikely to attract further funding. On the other hand, multiple offices give a start-up the brand image of a truly global firm who are serious about expanding and scaling up. This gives such businesses a big strategic advantage compared to firms that just have one office in Israel.

9. Access to high-value business: Most importantly, going Global gives start-ups access to high-value customers. The products start-ups are selling in Israel for “X” can easily be sold at “2X” to “5X”, the amount in Europe as per research. This is incentive enough for Startups to move to greener pastures Globally.

So far in the first two sections, we have looked at

  • What constitutes a solid GTM Strategy, and why is it needed
  • How Israeli Start-ups have overcome the challenge of Scaling up by going Global

In the following sections, we will focus on:

  • Why Europe is a great alternative to the traditional US Market?
  • How to choose the right destination in Europe. What factors should you carefully consider while selecting the right destination for your start-up?
  • Ranking the best European destinations for start-ups

SECTION 3: Factors determining the best European Destinations for Start-ups in Israel

#3.1. Why Europe is a great alternative to the United States to expand for Startups in Israel

The primary goal of most Israeli start-ups is to expand and integrate into the American market. There is no question that due to the scale of the market, the availability of venture capital, a well-developed start-up ecosystem, and the Israel-US connection, it is the most appealing location for Israeli startups.

However, due to strong competition and overheating in the US market, Europe has emerged as a fantastic alternative for Israeli start-ups looking to expand internationally. The European market is large, it is closer to Israel, and it has a comparable time zone, making it a highly appealing choice for Israeli start-ups. Europe has all of the ingredients needed for digital companies to develop and expand, so entrepreneurs should look closer to home before crossing the Atlantic in search of success. For investors, the European market is less overheated and therefore more appealing than the US market, as well as less “difficult” than China, India, or Brazil.

Because of the exponential growth in video prospecting and communication mediums as a result of COVID 19, start-up leaders no longer need to remain in the hub permanently. Start-up founders may fly to Europe in 4-5 hours and manage a fully functioning staff remotely, gaining access to the massive European market.

This proximity makes it easier to take the initial steps and expand into Europe, aids in staff relocation, and, most importantly, it means that the time difference is small. Because of the same time zones, it is much easier to provide services and be accessible to prospective and current customers, even if you are not physically in Europe.

Europe benefits from geographical proximity: it is easy to go from one nation to another in a matter of hours by plane or rail. It has a massive single market of 500 million people, which has eased commerce between countries to some extent, and governments have attempted to encourage entrepreneurship by investing significant amounts of money to boost innovation and R&D.

Europe’s companies received a staggering €48 billion in investment, almost three times the money received in the same period last year. Europe contributed 18 percent of total global startup investment, its highest proportion ever. With its massive market, geographical closeness to Israel, and comparable time zones making it easier to establish a presence on the continent, it should come as no surprise that Israeli IT companies currently employ 24,223 Europeans. According to a recent study attempting to shed light on the extent of Israeli startups’ activities in the European market, 912 companies now operate in 28 countries throughout Europe.

One may establish a company or an activity in one place and have “basically access” to more than 20 additional EU markets. Another advantage of the EU is its sophisticated laws on ecologically friendly technology. Because, as compared to New York, employing anybody, whether engineers or salesmen, is much less expensive.

The fact that certain Israeli companies have embraced EU technical standards rather than international norms for goods demonstrates Israel’s strong economic relations with Europe. Israeli-European collaborations are fruitful and beneficial for both parties and the global market due to friendly connections and similar innovation objectives between Israel and Europe.

International expansion is a critical objective for Israeli entrepreneurs since Israel has intrinsic constraints, such as a scarcity of raw resources and energy sources, as well as a limited Israeli market. So, what makes European countries, in particular, a good choice for Israeli company expansion?

Europe has several appealing characteristics for Israeli companies seeking to expand internationally, including:

#1. Stability in politics: According to World Bank statistics, the average political stability index rating — which runs from -2.5 points for the most unstable to 2.5 points for the most stable — for Asia is -0.4 and for the Middle East and North Africa (MENA) area is -0.94. Europe, on the other hand, has an average rating of 0.59, with several countries receiving scores far over 1 point.

#2. Market size: The sheer magnitude of the European market makes it an excellent option for Israeli businesses looking to expand their reach. Companies in Israel have little development potential. By expanding into Europe, they will be able to interact with other companies and customers in the countries where they have a presence as well as across the continent as a whole, since most of Europe operates as a unified market.

#3. Proximity: Some Israeli companies opt to expand to the United States, which may be a wise decision. However, Europe has the advantage of being geographically closer. Even London, the most distant European commercial centre from Israel, is just a five-hour flight away. Proximity also makes working in comparable time zones, making it easier to do business between Israel and European countries and be accessible during the same business hours.

#4. Cultural adaptability: Despite cultural differences, Israeli companies are acquainted with European culture and are at ease adjusting to that cultural environment. It’s also worth noting that many Israelis speak English as a second language, and English is widely used as a lingua franca across most of Europe.

#5. R&D collaborations and grants: The research and development (R&D) and innovation relationships Israel has with Europe is a significant benefit for IT companies. Israel became the first non-European nation to join the EU’s Framework Programme for Research and Technological Development in 1996, less than a decade after it was established. The Israel-Europe R&D Directorate (ISERD) is responsible for the administration of many bilateral agreements between Israel and European countries and regions. These programmes also include research grants, which support about 100 new initiatives each year.

#3.2. Factors determining the top destinations to expand in Europe for startups

We have taken and collated data directly from the best sources to make this research the most comprehensive and unbiased one available. These include data and rankings from the most respected names globally.

These are:

  • World Bank
  • World Economic Forum
  • World Intellectual Property Organization (WIPO)
  • World Health Organization (WHO)
  • Institute of Management Development (IMD)
  • Freedom House
  • FDI Intelligence
  • EF Education
  • Political and Economic Intelligence Bureau

Also, to make the study the most comprehensive one in the world, we have not taken any single index to study the best European destinations for start-ups to expand.

We have taken 13 factors that, through research, we found are the most valuable one’s for start-ups while looking to expand globally.

Let’s look at the snapshot of all the 13 factors.

  • Market Size Multiplier
  • Openness to Foreign Investment Index
  • Corruption Perception Index
  • Intellectual Property Rights Index
  • Legal and Regulatory Systems Index
  • Human Capital Index
  • Global Innovation Index
  • Quality of Life Index
  • Economic Transformation Readiness Index
  • Business Language Proficiency Index
  • Digital Competitiveness Index
  • Global VC Investment Index
  • Travel Cost/Visit from Israel

Together these 13 factors determine the best European destinations for start-ups to expand.

Hyper-personalization based on data

Now, let’s look at each factor in detail, along with the rankings of the top 10 performing countries for each Index.

#3.2.1. Factor 1: Openness to Foreign Investment

For start-ups, a countries openness to foreign Investment is a critical factor while considering to expand.

Enabling local policies towards foreign direct investment and the availability of venture capitalists are two of the most important factors that determine Openness to Foreign Investment. These two factors help in fostering a homegrown start-up ecosystem and attract greenfield investment from foreign start-ups.

Openness to Foreign Investment is also dependent on how well connected the country’s infrastructure is with start-up ecosystems globally. The extent to which local founders have relationships and partnerships with other top ecosystems across the globe leads to foreign Investment, attracts capital, talent and know-how and generates a global-first mindset in the country.

Countries that excel in Openness to foreign Investment have a clear strategy to attract start-ups. They focus on providing a business-friendly regulatory environment. They prioritize providing an open data policy that makes most data available to the public and free to use for start-ups. These countries focus on helping new companies integrate into the ecosystem quickly.

Calculating Openness to foreign Investment is based on Investor friendliness and Investor sentiment index. The cumulative score of both determines a countries openness to foreign Investment.

Top 10 European Countries with Openness to Foreign Investment

RankCountryInvestor Friendliness IndexInvestor Sentiments Index
1Netherlands95.9595.42
2France95.5695.2
3United Kingdom95.1994.95
4Switzerland94.7194.51
5Luxembourg94.5494.49
6Germany93.993.22
7Ireland93.5692.44
8Poland92.9691.84
9Portugal92.3791.55
10Denmark9291.26

In Europe, the Netherlands tops the list for Openness to Foreign Investment. Traditionally known for its start-up friendly ecosystem backed by excellent policies and availability of venture capital the Netherlands is definitely the go to location as per Openness to Foreign Direct Investment is concerned.

France and the United Kingdom are ranked 2nd and 3rd respectively with big market size and government policies that focus on providing Investor friendly conditions. However, With UK and Brexit, Openness to foreign Investment has taken a body blow, which will undoubtedly affect its ranking in the future.

For start-ups in Israel, the USA has always been the go-to place for global expansion, but Europe is the biggest market which attracts more than 45% of the Global FDI flows. Therefore, start-ups would be wise to have a base in the bigger trade market, i.e. countries in the European Union.

Therefore, the Netherlands, France and Switzerland are turning out to be hot destinations for Start-ups when it comes to Openness to foreign Investment with a plethora of investor-friendly opportunities.

#3.2.2. Factor 2: Corruption Perceptions Index

While deciding to expand, corruption continues to be a big hurdle for start-ups in Israel. The impact of corruption has far-reaching effects on the smooth functioning of a start-up, especially when they are starting in a new country. The economies of a start-up could be severely affected due to fraud and the necessity to pay bribes to get work done. Hence due diligence on a countries Corruption Perception Index should be a top priority for start-ups looking to expand globally.

The corruption Perception Index is a widely used index that is respected globally. It refers to an index that scores countries on the perceived levels of government corruption. The Corruption Perception Index has been published annually by Transparency International, a non-profit organization that aims to end corruption, since 1995.

A study in 2012 found a highly significant correlation between the corruption perception index and two other factors, namely, Black Market activity and an overabundance of regulatory policies.

Transparency International takes data from reputed data sets to rank the countries on Corruption perception. These data sets include:

  • Bertelsmann Foundation
  • Economist Intelligence Unit
  • Freedom House
  • Global Insight
  • International Institute for Management Development
  • Political and Economic Risk Consultancy
  • The PRS Group, Inc.,
  • World Economic Forum
  • World Bank
  • World Justice Project

Ranking the top 10 European Countries with regards to Corruption Perception Index

RankNation2020
Score
1Denmark88
2Finland85
2Sweden85
2Switzerland85
5Norway84
6Netherlands82
7Germany80
7Luxembourg80
9United Kingdom77
10Austria76
10Belgium76

Denmark is at the first spot in the rankings in Europe. The second spot is shared by Finland, Sweden and Switzerland. Norway, the Netherlands and Germany occupy the next ranks with high scores.

Countries from Europe dominate the top 10 Globally. The likes Sweden, Switzerland, Norway, the Netherlands, the United Kingdom and Germany all feature in the top 10 in Global Rankings.

Remarkably the United States of America scores just 67/100 in the Corruption Perception Index scoring chart, which is their lowest score since the Index’s inception in 1995.

Another interesting fact is that only four countries have consistently been ranked in the top 10 of the Corruption Perception Index since its inception in 1995. These are the Netherlands, Switzerland, Denmark and Sweden.

Government officials’ abuse of entrusted power for private gains is a massive barrier for start-ups looking to expand globally. Start-ups should carefully analyze Corruption Index scores before deciding to expand in a particular country.

Countries in Europe that have access to complete European markets like Denmark, the Netherlands, Switzerland, Finland, Norway, Germany and Belgium, have consistently ranked high are great options for start-ups looking to expand globally.

#3.2.3. Factor 3: Intellectual Property Rights Index

For start-ups in Israel looking to expand in Europe, Intellectual property protection is critical to fostering innovation. Without concept protection, the company would not enjoy the full advantages of its innovations and would concentrate less on R&D.

Intellectual property rights (IPR) are the rights granted to business owners for works resulting from human intellectual activity.

They include:

  • Patents for new inventions: A patent is an exclusive right granted for a new, inventive, & useful product. It can take the form of a new product, process or technical improvement to an existing invention.
  • Registered designs for the design of products: Trademarks differentiate goods and services: Trademarks are owned by local companies, international corporations, and charitable organizations. A trademark is any sign that identifies you as the owner of your goods or services, making it evident that they are yours. It is the symbol that consumers use to locate your goods or services in the marketplace. The owner of a trademark holds exclusive ownership of that sign. Once in use, your Business’s trading reputation and goodwill will be linked to your trademarks, making them some of your most valuable assets.
  • Creative works have the following copyright: Copyright is one of the most common kinds of intellectual property rights. It grants a person ownership over the things they produce in the same way that actual objects may be owned. It enables the copyright owner to prevent others from duplicating or reproducing their work.
  • A registered design:  protects a product’s or item’s visual appearance and grants you exclusive rights to that look to the degree that, if required, you have a legal right to prevent an unauthorized party from manufacturing or utilizing your design.

The World Intellectual Property Indicators (WIPO) Report suggests a high Correlation between business growth and the Number of Intellectual Property Applications filed by a country.

Start-ups expanding globally must, therefore, closely look at how well their innovative ideas are protected.

Ranking the top 10 European Countries in Intellectual Property Rights Index

RankCountryNumber of Intellectual Property Applications filed
1Germany1642
2Switzerland1634
3Finland1127
4Denmark1128
5Sweden1130
6Netherlands927
7Austria881
8France78611
9Luxembourg765
10Russian Federation599

When it comes to Intellectual Property rights, Germany leads the pack in Europe. Germany, with its manufacturing nous, has been a global powerhouse in the Intellectual Property applications field. Closely following Germany is Switzerland at number 2. Finland, Denmark and Sweden round up the top 5 countries in Europe when it comes to Intellectual Property Rights Index.

Among the bigger economies in Europe, the Netherlands at rank 6, France at rank 8 and Russia at rank 10 all feature in the top 10 best destinations when it comes to Intellectual Property Rights.

#3.2.4. Factor 4: Legal and Regulatory Systems Index

The Legal and Regulatory System of a country is vital for a start-up planning to expand Globally. One of the more challenging aspects of doing Business globally is dealing with vast differences in legal and regulatory environments. Countries with solid legal and regulatory systems establish a set of laws and regulations that provide direction to businesses operating within their borders. Companies doing international Business often face many inconsistent laws and regulations. To navigate this, countries with strong Legal and regulatory systems create specific systems for businesspeople who must follow laws and regulations of both nations in which they operate.

Businesses depend on legal and regulatory systems to regulate debtor and creditor interactions. If financial issues do not proceed as planned, the legal and regulatory framework enables businesses to seek bankruptcy protection from creditors via the judicial system. This will allow businesses to safeguard their property against creditor repossessions or foreclosures while also putting their finances back on track.

The Legal and Regulatory Systems provide the ground rules for conducting Business. It establishes a stable atmosphere in which plans can be formed, the property can be safeguarded, expectations can be established, complaints can be lodged, and rights can be maintained. Penalties may be imposed for breaking the law. The legal and regulatory systems safeguard businesses, protect consumers from harmful business practices, and restrict the government’s abusive behaviour against businesses.

Despite all the gains due to Legal and regulatory systems, many sectors of the business world have long complained about government regulation. Corporations often denounce government rules as irrational impediments to profits, economic efficiency, and job creation. Unsurprisingly, many firms use loopholes and violate antitrust laws as they attempt to deal with regulations.

In reality, businesses both prospered and suffered due to an ever-increasing number of rules and a complicated tax code in various counties across the globe. The relationship between firms and the government can be either collaborative or adversarial. The critical factor for start-ups to consider is how a countries legal and regulatory system balances the interests of businesses while also maintaining a strong Legal and Regulatory system.

Ranking the top 10 European Countries with regards to Legal and Regulatory Systems

RankNation2020 Score
1Denmark90
2Norway89
3Finland87
4Sweden86
5Netherlands84
6Germany82
7Austria81
8Estonia80
9United Kingdom78
10Belgium77

Eight of the ten top-ranked countries in the globe belong to Europe when it comes to the Legal and regulatory systems index. It’s unsurprising because Europe has solid yet flexible Legal and Regulatory systems.

In Europe, Denmark leads the way, followed by Norway and Finland in the top three. Sweden and the Netherlands have consistently been ranked in the top 10 and maintain their spots in the top 5.

Germany at rank 6, The United Kingdom at rank 9 and Belgium at rank 10 are the other bigger economies that do well in the Legal and Regulatory Systems Index.

#3.2.5. Factor 5: Human Capital Index

One of the main reasons for start-ups expanding globally is access to a talented workforce with diverse ideas. The access to talent and ideas while expanding globally can be measured with a high degree of correlation with a single index:  The Human Capital Index.

The World Bank publishes the Human Capital Index. The Index determines which countries are the most effective at maximizing their people’ economic and professional potential. The Index calculates how much capital a nation loses due to a lack of education and health care. The Index was first released in October 2018 and rated 157 countries.

The Human Capital Index is the product of years of debate among economists on how to create a workforce that is talented, disciplined, competent, and healthy.

Adam Smith was one of the most famous authors to argue that people’s productive skills should be seen as a kind of capital, one that is fixed and realized inside individuals.

The phrase “human capital” did not become widespread until the late 1950s. At the time, Chicago School economists started utilizing it systematically to analyze a variety of labour-related issues. These included income distribution inequalities, macroeconomic growth, unemployment rates, workplace leadership styles, and workforce education. The concept of health as a component of human capital gained momentum in the early 1970s and has since been a standard in health economics courses.

Human Capital Index is one of the elements that is often neglected by start-ups seeking to grow internationally, yet it is one of the most important factors for a company’s long-term success.

The Human Capital Indicator is a unique index that predicts how much potential economic production may go unfulfilled across the globe owing to inadequate labour force health and education. The Index takes into account three aspects of people’s lives that are thought to limit their productivity. These include child mortality, a lack of education, and poor health. The Human Capital Index score is calculated by combining the Index’s three major components.

Ranking the Top 10 European Countries Human Capital Index Scores

RankCountryScore (% of potential reached)
1Finland0.8
2Sweden0.8
3Ireland0.79
4Netherlands0.79
5United Kingdom0.78
6Estonia0.78
7Slovenia0.77
8Norway0.77
9Portugal0.77
10France0.76

The Nordic countries lead the way when it comes to Human Capital Index in Europe. Finland is the top-ranked country, followed closely by Sweden at rank 2. Ireland, the Netherland and the United Kingdom round up the top 5 best countries in Human Capital Index rankings.

Other notable big countries to expand when it comes to human capital index entries for start-ups from Israel to consider are Portugal at rank 9 and France at rank 10.

#3.2.6. Factor 6: Global Innovation Index 

A key metric during Global expansion for start-ups to consider is the Global Innovation Index. The Global Innovation Index (GII) takes the pulse of the most recent global innovation trends. It ranks the innovation ecosystem performance of economies around the globe each year while highlighting innovation strengths and weaknesses and particular gaps in innovation metrics.

The Global Innovation Index (GII) ranks nations based on their innovation performance and capability. The World Intellectual Property Organization publishes it once a year (WIPO). The Global Innovation Index is based on subjective and objective data gathered from a variety of sources, including the World Bank, the International Telecommunication Union, and the World Economic Forum.

The Global Innovation Index is computed by taking a simple average of the scores in two sub-indices, the Innovation Output Index and the Innovation Input Index, which have five and two pillars, respectively. Each of these pillars discusses a different element of Innovation and contains up to five indicators, with the weighted average method used to get their score.

During the pandemic, Innovation has been the main driving force towards the revival of economies. For start-ups, an environment conducive to Innovation has always been important, but with the global pandemic shaking the foundations of most businesses, Innovation has taken the front seat. Smaller but agile organizations have left behind businesses that failed to adjust and adapt.

An enabling environment that supports Innovation will be crucial for start-ups moving forward to expand globally.

Ranking the top 10 European Countries by Global Innovation Index

RankingCountryScore
1Switzerland66.08
2Sweden62.47
3United Kingdom59.78
4Netherlands58.76
5Denmark57.53
6Finland57.02
7Germany56.55
8France53.66
9Ireland53.05
10Austria50.13

In terms of innovation scores and ranks, the innovation divide is evident across the GII—existing between income groups and across all GII pillars, from Institutions to Creative outputs.

High-income economies dominate the top 10, with quick policy changes and relief packages to support Innovation and R&D investment during the pandemic. Switzerland tops the ranking for the second consecutive year. Sweden and the United Kingdom round-up the top 3.

The Netherlands continues its impressive performance in the Global Innovation Index, claiming the 4th spot.

Finland, Denmark, Germany and France are other big economies that find a place in the top 10 European countries on Global Innovation Index.

#3.2.7. Factor 7: Quality of Life Index 

The pandemic has shown us how fragile life is. It has also shown us the importance of having a good quality of life, with amenities like education and health as top priorities. For business owners, whatever their purpose in life, one thing always drives them, i.e., to have a good quality of life. So, obviously, for global expansion, a quintessential parameter has to be Quality of Life.

According to Britannica, quality of life (QOL) is the degree to which a person is comfortable, healthy and able to participate in or enjoy life events.

The World Health Organization (WHO) defines QOL as “an individual’s assessment of their place in life in relation to their objectives, aspirations, standards, and concerns in the context of the culture and value systems in which they live.”

Standard indicators of quality of life include the Health Care Index, Cost of Living, Purchasing Power Index, Safety Index, Property Price to Income Ratio, Traffic Commute Time Index, Pollution Index, and Climate Index because one’s quality of life is associated with the extent to which they are able to meet their needs, wants, and aspirations.

So, the Quality-of-Life Index is essentially a composite index, each of which is significant in itself to be considered as a key parameter to be considered by start-ups while expanding globally. Therefore, the Weightage given to Quality-of-Life Index has to be on the higher side while considering expanding globally.

Ranking the top 10 European countries with respect to Quality-of-life Index

RankCountryQuality of Life IndexPurchasing Power IndexSafety IndexHealth Care IndexCost of Living IndexProperty Price to Income RatioTraffic Commute Time IndexPollution IndexClimate Index
1Switzerland188.4102.878.3874.081258.1828.6719.8680.05
2Denmark186.386.4373.7879.7988.53728.6921.2981.8
3Netherlands180.376.6572.8475.2878.937.2827.6425.3987
4Finland17980.1172.4176.1976.358.5728.9111.9956.64
5Iceland177.667.376.2565.8599.676.1119.915.9768.81
6Austria176.468.6974.4676.9874.8710.9125.6720.4277.15
7Germany175.289.8664.2173.4967.858.8831.2227.8182.82
8Luxembourg171.887.7665.8772.9285.31331.7923.2782.62
9Norway171.773.5566.2875.59103.68.0926.9318.0968.68
10Estonia171.256.5876.2972.6853.779.3724.4419.7264.28

Switzerland tops the Quality-of-Life Index, scoring especially high on Purchasing Power Index and Cost of living Index. Denmark claims the second spot, again scoring high on purchasing Power Index. The Netherlands maintains the third spot with high scores across all the parameters.

Finland, Iceland, Austria and Germany are other countries from Europe that dominate the top 10 rankings for Quality of Life.

#3.2.8. Factor 8: Economic Transformation Readiness Index

Covid 19 has been a Black Swan event that has disrupted the global economic scenario. Economies need to be flexible and adapt quickly to the changing economic needs of the time. Hence the World Economic Forums’ Economic Transformation Readiness Index’ is perhaps the most important metric for Startups to consider while looking to expand globally.

The study outlines 11 key objectives for nations to accomplish economic transformation over the next five years, including complete integration of social, environmental, and institutional aims within their economic systems. It aims to provide a comprehensive evaluation of nations’ progress toward sustainable and equitable prosperity, with an emphasis on new aspects of economic change.

An initial set of ideas was developed as part of the Economic Transformation Readiness Index to further break down the 11 objectives, indicators benchmarked against them were then identified, and data were ultimately gathered.

The Economic Transformation Readiness Index has three goals. First, it maps priority areas against existing data points in an attempt to better identify the activities and policies required to “build back better” economies that are productive, sustainable, and inclusive. Second, it offers a picture of each country’s present position, evaluating the degree to which countries are now on the path to changing their economies. Third, it identifies important data gaps in assessing existing national policies and performance.

The 11 Priorities used to calculate the Economic Transformation Readiness Index’s composite score are as follows:

#1. Ensure that public institutions incorporate solid governance principles and a long-term vision and that they earn people’ confidence by serving them:

Future-oriented institutions must not only be transparent and efficient, but they must also develop to provide more fair results and increase people’s confidence in them.

Governments will also be expected to convey a longer-term vision, predict trend development, and create institutions that will allow for nimble responses to future shocks and fast technology change.

#2. Improve infrastructure to hasten the energy transition and expand access to power and ICT:

Significant infrastructure investments, particularly the expansion of digital networks, will be required to support the transition to a greener and more inclusive economy. Greening the economy will need the updating of energy infrastructure and transportation networks and pledges from both the public and commercial sectors to extend and uphold international environmental accords.

In terms of inclusion, infrastructure improvements should include the expansion of digital capabilities in order to combine the benefits of digitization with universal access to opportunities.

TOP 10 EUROPEAN DESTINATIONS FOR STARTUPS TO EXPAND: Improve infrastructure

#3. Shift to more progressive taxation, reconsidering how companies, wealth, and labour are taxed at the national and international levels:

Over the past twenty years, the tax burden in a number of high-income countries has changed to reinforce current income division trends, owing in part to globalization and job automation. Middle-income earners’ tax burden has increased, whereas high-income earners and capital owners’ tax burden has decreased. Simultaneously, in the aftermath of the COVID-19 epidemic, pressure on public finances has reached new heights, with countries relying on public resources to keep economies afloat and economic activity reviving.

As a result, new needs for financing the transition to recovery will emerge. An aggregate measure of the progressivity of corporate, personal, and value-added tax; a tax productivity indicator (taxes collected relative to the tax base); an inheritance tax indicator; and a metric that measures the impact of taxation on inequality are used to assess countries’ readiness on this priority.

#4. The education curriculum should be updated and expanded. Investing in the skills required for employment and “markets of the future”:

Reskilling, upskilling, and curriculum upgrades are critical for preparing employees and achieving equitable prosperity. Participation in formal schooling is no longer enough to provide job possibilities and human capital. Instead, education systems should be improved to offer digital and critical thinking skills via schools and universities and continuous learning and skilling through public and private life-long learning programmes.

#5. Rethink labour laws and social protection in light of the new economy and worker needs:

Adequate and adaptable social safety nets are a key component of strategies to reduce inequality and manage the workforce’s technological and recession-related changes. While this is already the case in several progressive countries, it is often focused on income assistance. Instead, forward-thinking methods could better combine income assistance with labour law adaptation and extend the social protection level, including easing access to education, sales coaching, and health to promote people’ complete human capital development. This strategy should be successful in preserving and rewarding employees rather than jobs—and using technology to facilitate workers with shifts is critical.

#6. Increase infrastructure, access, and Innovation in eldercare, childcare, and healthcare for the benefit of people and the economy:

Universal access to childcare, eldercare and healthcare is critical for creating a more equitable society and strengthening human capital. Adopting new technologies and increasing investments in this area may assist in meeting this priority.

#7. Increase financial incentives for long-term investments, improve stability, and broaden inclusion:

A thriving financial industry should direct resources toward long-term real-economy investments rather than maximizing short-term earnings or supporting financial markets. The increasing significance of ESG (environmental, social, and governance) criteria for Investment bodes well for the financial system’s ability to proceed in this direction.

More effective and stringent measures on executive compensation, cash holdings, dividends, share buybacks, and financial investments by non-financial corporations could also help channel resources toward investments that increase productivity, protect people, and the environment, while avoiding practises that aim for short-term market valuation increases. Finally, accounting standards may be changed to value companies’ resilience investments.

#8. Rethink the competition and antitrust frameworks required for the Fourth Industrial Revolution while also guaranteeing market access both locally and globally:

While market concentration has grown over the last decade, contemporary strategies to restore competition will need to address new market concentration causes (e.g. intangible assets, digital platforms) and adapt their toolset appropriately. A thriving, levelled business climate would need deliberate measures to facilitate entrance by new firms, as well as updates to antitrust frameworks that take into account new sources of market power (particularly data holdings) and consumer damage beyond price rises.

Future policies should consider how to preserve the benefits of international trade while limiting internal divides between regions where world-class companies are located and supporting areas and segments of the population that suffer as a result of globalization.

#9. Facilitate the creation of “future markets,” particularly in areas requiring public-private collaboration:

Future-oriented policies will need to mix push-and-pull tactics, such as encouraging demand and R&D investments to produce more sustainable and inclusive products, services, and technologies. A number of factors may increase path dependence in particular markets, preventing widespread adoption of new products and technologies, even if they offer better features.

Simultaneously, barriers in the spread of breakthrough technologies from a specialized frontier to the rest of the economy should be eliminated. Governments have a number of sales experience tools at their disposal to direct market outcomes. Firms and consumers may be given tax breaks if they use products and technologies that fall within certain performance standards. Public procurement may also be a strong instrument for providing an initial market for new technologies that are still in the research and development stage.

Reorienting supply chains to match consumer preferences or to boost efficiency might help the private sector influence the market. Countries’ readiness can be assessed by using publicly available data that have been adjusted for the size of the domestic market in terms of purchasing power parity (PPP). Data for these characteristics include normalized trade-adjusted emission levels to provide a measure of the overall sustainability of consumption patterns within the country, along with buyer sophistication, the role of the public sector in stimulating demand for new technologies, and consumer acceptance of new technologies.

#10. Encourage and increase patient investments in research, Innovation, and invention that may lead to the creation of new “future markets“:

To transform economies, the potential of human curiosity and creativity must be unlocked in order to create breakthrough technologies and new products, services, and markets that rely on them. To measure these aspects, data on factors such as investments in long-term science and research projects, the availability of patient capital for targeted development of new technologies, governments’ capacity to act as de facto venture capitalists, research time horizons, and the amount of development spending across countries would be required.

#11. Encourage firms to embrace diversity, equity, and inclusion in order to boost creativity:

Diversity, equity, and inclusion must be included in an innovation-driven economic transformation plan. Companies must fully capitalize on the creative potential of various sectors of the population. Access to possibilities created by Innovation should be extended through, for example, enabling inclusion in ownership of new innovative companies, employment in research positions, and career advancement in expanding markets.

These comprehensive indicators are extremely crucial for start-ups to consider while considering moving to go global.

Ranking the Top 10 European Countries with regards to Economic Transformation Readiness Index

RankingCountryScore
1Finland69.9
2Sweden68.5
3Denmark66.5
4Netherlands66.3
5Belgium63.6
6Germany62.9
7France62.7
8Switzerland62.5
9United Kingdom61.4
10Estonia61

The Nordic model the WEF report finds is the best equipped to face any kind of Economic disruption. Finland, Sweden and Denmark are the top 3 ranked countries not only in Europe but globally, scoring well in all the 11 parameters.

The Netherlands is ranked fourth in Europe and in the world, with high scores across all parameters and scoring especially well on the most critical of the 11 parameters. i.e., “Facilitating the creation of markets for tomorrow”.

The European Union has six countries in the top 10 globally, again proving that Europe is the best-prepared place to face any Economic Calamity. In case you are wondering, the USA is ranked 18th in the Global rankings.

Belgium, Germany, France, Switzerland, and the United Kingdom are other big economies that find a place in the top 10 European countries in Economic Transformation Index rankings.

#3.2.9. Factor 9: Business English Proficiency Index

For start-ups looking to expand globally, an essential criterion that they should consider is the level of proficiency in Business English. English is the common language of Business worldwide.

According to studies, exports per capita, GNP per capita, and Innovation all correlate favourably with English proficiency. As a result, it’s no surprise that these countries are among the top locations for companies looking to grow internationally.

But, in terms of English competence, what are the other excellent alternatives for start-ups? The EF English Proficiency Index (EF EPI) aims to rank nations based on the equality of English language abilities among individuals who have taken the EF exam. It is the creation of EF Education First, an international education business, and it derives its findings from data gathered through free online English exams. The Index is a 2011 online poll based on test results from 1.7 million test-takers. The ninth edition was published in November 2020.

The English proficiency levels by gender, age group, and area within nations are included in the 2020 report, as are certain English proficiency ratings by city. The study consists of a nation ranking table, many pages of research with graphs connecting various economic and social variables with English competence, and an analysis of each area or continent. The website contains excerpts from the study and an examination of English abilities in a variety of nations and regions.

Ranking the top 10 European countries by Proficiency in Business English

2020 RankCountry2020 Score2020 Proficiency Band
1United Kingdom720Very High Proficiency
2Netherlands652Very High Proficiency
3Denmark632Very High Proficiency
4Finland631Very High Proficiency
5Sweden625Very High Proficiency
6Norway624Very High Proficiency
7Austria623Very High Proficiency
8Portugal618Very High Proficiency
9Germany616Very High Proficiency
10Belgium612Very High Proficiency

The key findings of the report are:

  1. Exports per capita, Gross National Income per capita and Innovation all correlate positively with English proficiency.
  2. English proficiency levels are evolving at different rates in different countries, including a few countries with declining English skills.
  3. Europe as a whole has the highest proficiency in English, while the Middle East averages the lowest.
  4. Women speak English better than men on average.

Unsurprisingly, the United Kingdom tops the Business Language proficiency index.

The Netherlands is second in the rankings with very high proficiency in Business English.

The other countries in the top 5 include Denmark, Finland and Sweden.

Other notable big economies with high proficiency in business English who make it into the top 10 are Austria, Germany and Belgium.

#3.2.10. Factor 10: Digital Competitiveness Index

The expertise in digital technology in the post-pandemic era is a prerequisite for start-ups seeking to expand globally. Thus, the Digital competitive Index is of the vital factors that companies have to consider while expanding globally.

IMD World Competitiveness Center’s report on the Digital Competitiveness measures the countries’ capabilities to adopt and explore digital technologies to transform government practices.

Researchers found patterns in each nation on the list based on the effective use of digital talent, which is a reflection of having the technical infrastructure in place and using the technologies available. Researchers think that how economies handle digital change now may foretell their destiny and that COVID-19 was a litmus test for the globe.

Setting ambitious national goals, such as digitizing public services, provides a dynamic process in which the private sector may grow by servicing ambitious procurement initiatives. According to the study, the worldwide recovery after the epidemic would be dependent on it.

Countries that were assessed by the Institute for Management Development is based on three criteria:

  1. Talent, sales training and education, and scientific focus are all examples of knowledge.
  2. The technology consists of three components: a regulatory framework, money, and a technical foundation.
  3. Adaptive mindsets, company agility, and IT integration are all required for future preparedness.

Ranking the top 10 European countries based on IMD’s Digital Competitive Index

Overall RankCountryScore
1Sweden95.18
2Denmark95.15
3Switzerland94.9
4Netherlands93.3
5Norway91.2
6Finland90.14
7United Kingdom85.8
8Austria80.7
9Germany79.33
10Ireland15

The top 10 economies remain the same as in 2019. In Europe, Sweden tops the rankings for the Digital Competitive index. Denmark and Switzerland round up the top 3 spots in the rankings.

The Netherlands is in 4th place with the United Kingdom at 7th, and Germany at 9th place.

At the factor level, Sweden reaches its highest ranking in knowledge which is driven by its performance in training and education (2nd).

Denmark exceeds the future readiness factor. The latter ranks 1st in IT integration, 2nd in adaptive attitudes, and 5th in business agility. At the indicator level, Denmark ranks 1st in attitudes toward globalization and e-government, 3rd in the effectiveness of companies’ response to opportunities and threats, and knowledge transfer between companies and universities.

The slight drop experienced by Switzerland this year results from declines in both the knowledge and technology factors. In knowledge, the most significant change is in scientific concentration in which Switzerland moves from 7th to 9th, mainly due to a somewhat stagnant performance in the percentage of female researchers’ indicator (34th) and R&D productivity by publication (38th).

The Netherlands is steady in the overall digital competitiveness ranking as a result of steadiness across all factors. In the talent factor, its performance improves in the management of cities, the availability of digital/technological skills, and total public expenditure on education. Within the technology factor, the Netherlands sees a steady increase in the effectiveness of immigration laws and the efficiency of the banking and financial services. Under the future readiness factor, e-participation, companies’ agility, and their use of big data and analytics also experience an upturn in the Netherlands.

#3.2.11. Factor 11: Global VC Investment Index

For start-ups, the chances of going wrong while following the money trail of venture capitalists is meagre. Among all the factors discussed while determining the best destinations for start-ups to expand globally, the Global VC Investment Index is the most important, with the highest Weightage allotted. Hence it is one of the most accurate indexes for selecting a country for global expansion.

An investor cannot make reasonable international VC and PE allocation choices unless they are acquainted with the socio-economic situation in each host country. Before investing in a certain nation, investors overcome possible knowledge gaps and collect data to evaluate the variables they consider essential.

A thriving VC and PE market infrastructure and investment climate require a number of socio-economic and institutional conditions. Several developing markets are not yet developed enough in terms of socio-economic development to sustain the VC and PE business models. Too early entry into such markets does not seem to be a profitable strategy for entrepreneurs. As a result, investors should pay closer attention to international markets and identify excellent timing for capital allocation.

Top-down approaches are used by investors to solve this issue. They assess nations based on socio-economic factors for international VC and PE investment. In the first case, these criteria evaluate the determination of local demand for VC and PE, and in the second instance, the anticipation of an effective deal-making environment that enables matching with the provided capital. At various stages of the allocation process, specific fund management teams are chosen. As a result, before committing to an available partner, investors examine the general partners’ skills, track records, and other criteria as part of their fund due diligence.

The attractiveness of a nation to VC/PE investors is affected by the condition of its economy. The size and employment levels of an economy are indicators of prosperity, the quantity and variety of companies, general entrepreneurial activity, and, as a result, anticipated VC and PE deal flow. Economic growth prospects need investments and offer justification for investing in many developing markets.

Economic prosperity and growth encourage entrepreneurship by allowing for a greater accumulation of money for riskier ventures. The number of new enterprises that qualify for VC funding is linked to societal wealth, not just because of greater access to finance in general but also because prospective consumers in the home market have more income. Economic size and growth are key factors in determining anticipated transaction possibilities and a country’s appeal to VC/PE investors.

The condition of a country’s capital market has an obvious impact on its VC and PE activities. The listed capital market, banking activity, and the unquoted sector are all inextricably linked. For transaction finance and credit facilities, banks are needed. The size of the IPO market shows the possibility for the chosen exit route, and IPOs also encourage entrepreneurial spirit by rewarding entrepreneurs. This is comparable to the size of the M&A market, which incentivizes entrepreneurial management and provides the second preferred VC/PE divestiture route and deals sourcing possibilities. As a result, the liquidities of the M&A, banking, and public capital markets serve as excellent proxies for the VC and PE segments, as they evaluate the strength of the VC and PE deal-making infrastructure. Professional institutions such as investment banks, accountants, attorneys, M&A boutiques, or consultants are considered to be important for effective VC and PE deal-making in nations with a robust public capital market, M&A, and banking activity.

Overall, the factors that affect VC’s decision to invest in a country or not are based on seven variables, namely:

  1. Number of Start-ups
  2. Skills and talent availability
  3. Entrepreneurship Culture
  4. Technological readiness
  5. Economic Growth
  6. Social, Political and Economic Stability
  7. Investment Environment

The composite score of these factors determines the Global Investment Index.

Ranking the top 10 European countries based on Global Investment Index

RankCountriesStartupsSkillsEntrepreneurshipTech ReadinessEconomic GrowthStabilityInvestment Env.Total Score
1Sweden644847188-7187933
2Switzerland701876479-6177932
3Finland443866480-6158132
4Denmark354866883-6178132
5Germany2,107846770-8237831
6Netherlands908857076-8237931
7Norway272846283-6168331
8Belgium556795967-7277330
9Luxembourg66796378-5197730
10UK5,356826573-10388229

Sweden was rated as the best nation for venture capitalists to invest in, with a total index score of 33 out of a possible 35. Sweden was rated the third most technologically ready nation, in addition to placing in the top ten for skills and stability. Sweden’s economic growth projection for 2020 was negative, as was that of many other European nations, although it was a lesser drop than in many other countries. Sweden rated in the top ten in the world in terms of investment environment, which considered how safe and accessible investments are in each nation.

It was a tight race among the top five, with Switzerland, Finland, and Denmark all vying for second place, all having a total GVCII score of 32.

Germany, the Netherlands, and the United Kingdom do well across the spectrum of variables being in 5th, 6th and 10th place, respectively.

#3.2.12. Factor 12: Cost of travel/visit from Israel

A crisis causes not only a slew of temporary changes, primarily short-term shifts in demand, but also some long-term ones. The 2003 SARS outbreak in China is widely regarded as hastening a structural shift to e-commerce, paving the way for the rise of Alibaba and other digital behemoths. Digital communication and digital business models have been tested and proven successful during the current Covid 19 pandemic. As Satya Nadella explained, “2 years’ worth of Digital Transformation occurred in 2 months.”

The Covid-19 pandemic has caused significant disruption in global consumption, forcing people to unlearn old habits and adopt new ones. According to one study on habit formation, the average time for a new habit to form is 66 days, with a minimum of 21 days.  The lockdown has lasted long enough in many countries to significantly alter habits that had previously served as the foundation of demand and supply. Companies that want to come out of the crisis stronger must develop a systematic understanding of changing habits. For many businesses, this will necessitate the development of a new process for detecting and assessing shifts before they become obvious to all.

The explosion of virtual sales and the rapidly changing business environment has created a plethora of opportunities for small businesses, entrepreneurs, and family offices. They can now compete in the same market as large corporations, both locally and globally. Technology has helped to level the playing field. Start-ups have the same opportunity as established brands to compete for the same audience. Businesses’ operating procedures now require them to creatively leverage a firm’s unique value proposition.

Because of the exponential growth in video technology and communication mediums as a result of COVID 19, business owners are no longer required to stay in the hub indefinitely. Business owners can easily outsource sales teams and travel up and down the country to oversee operations remotely. Covid 19 has also made entrepreneurs wary of staying away from their families and their country for an extended period of time, if at all possible. They can travel to the expansion hub to set up operations and assemble a team. They can then return to Israel and oversee operations remotely from here, perhaps only travelling once a month.

referral selling: selling statistics

As a result, the cost of travel to and from Israel to the Global Hub is an important factor for startups to consider.

Travelling to Europe is ten times less expensive than travelling to the US. As a result, Europe is an exciting destination for Israeli startups to consider. Furthermore, travelling to Europe takes no longer than 5 hours. The time difference is also negligible. Europe’s market size is enormous and relatively less challenging, with all basic infrastructure in place.

The cost of travel consists of Cost of flight, Cost of Lodging and food, and Intra-city travel cost. Another important point is to consider the travel time for intra-city travel.

Each of the four factors have to be taken into account while considering cost of travel from Israel to various cities in Europe.

Some cities like Moscow, Bern, Dublin, Stockholm and Copenhagen have very expensive flight fares from Israel. While some cities like London, Paris, Bern and Dublin have very expensive Lodging and food options. So, it is important to look at travel to these cities from an average cost perspective.

We thoroughly researched the travel costs/visits from Israel to various European cities and developed three Tiers to simplify travel costs/visits.

Here is a list of countries organised according to average cost/ Visit from Israel considering Flight fare, Cost of Lodging and Food, Intra-city Travel cost and travel time:

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Tier 1 comprises of Amsterdam, Berlin, Brussels, Rome and Warsaw. These cities are relatively inexpensive considering all four factors. The flight costs are quite moderate for these cities, the food and lodging costs too are relatively cheaper compared to other European cities and Intra-city travel costs and time is also lower.

The Tier 2 cities comprise of Barcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin and Paris. Barcelona, Lisbon has relatively inexpensive flight fares but have higher travel time and lodging costs. Similarly, Tallinn, Helsinki, Copenhagen, Dublin have higher flight costs but are relatively inexpensive to stay.

The Tier 3 cities are the most expensive considering all above-mentioned factors. Even though flight cost to London may be relatively inexpensive, the food, lodging and taxi fares are really expensive. Bern is the most expensive place among the European cities while considering all four factors.

#3.2.13. Factor 13: Market Size

One of the most important tasks an entrepreneur has is calculating the size of their market and the potential value that the market has for their startup business. Without this information, you cannot develop a viable business plan or be taken seriously when approaching potential investors. The market must be in the billions. Otherwise, even if you have the perfect team and product, potential investors will see limited returns, making your investment opportunity less appealing.

In short, Market size is the primary motivation of startups to expand globally. The bigger the market size, the more are opportunities to sell, as simple as that. That is the reason why we have taken multipliers to distinguish it from other factors in our overall rankings. The importance of market size far exceeds all other factors put together. For our rankings, we used a combination of two metrics to assess the market size of European countries. Gross Domestic Product (GDP) and GDP per capita are the two metrics.

Gross domestic product (GDP) is an estimate of the total value of finished goods and services produced within a country’s borders over a given time period, usually a year. GDP is a widely used metric for estimating the size of a country’s economy. The expenditure method is most commonly used to calculate GDP, which adds up spending on new consumer goods, new investment spending, government spending, and the value of net exports (exports minus imports).

Throughout most of the world, GDPs fluctuate with the phases of different economic cycles against a backdrop of longer-term economic growth over time. However, despite these ups and downs, the top economies as measured by GDP do not budge easily from their positions.

The COVID-19 pandemic has had a significant impact on economies around the world. Countries have seen record-breaking GDP declines as a result of slashed energy prices, slowed tourism, reduced trade volumes, and shuttered stores due to quarantines. While many economies began to recover in the third quarter of 2020, most have yet to return to pre-pandemic GDP levels.

GDP: This is the most basic and widely used method of measuring and comparing GDP across countries, based on local prices and currencies converted into US dollars using currency market exchange rates. This is the number that was used to determine the order of the countries on our list.

GDP per capita: This is the nominal GDP divided by the number of people in a country. GDP per capita measures how much a country’s economy produces per person rather than in total. This can also be used as a rough estimate of a country’s income or standard of living.

Ranking the top 20 European countries by Market Size

  GDPGDP/Capita 
RankCountry2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
1Germany3806USD Billion45065USD3
2United Kingdom2708USD Billion39103USD3
3France2603USD Billion40521USD2.5
4Italy1886USD Billion32902USD2.5
5Spain1281USD Billion29600USD2.5
6Netherlands912USD Billion53081USD2
7Switzerland748USD Billion80132USD2
8Russia1484USD Billion11787USD1.5
9Turkey720USD Billion15226USD1
10Poland594USD Billion16945USD1
11Sweden538USD Billion56068USD1.5
12Belgium515USD Billion44361USD1.5
13Austria429USD Billion47009USD1.5
14Ireland419USD Billion81297USD1.5
15Norway362USD Billion90885USD1.5
16Denmark352USD Billion63880USD1.5
17Finland271USD Billion47864USD1.5
18Romania249USD Billion11665USD1
19Czech Republic244USD Billion22843USD1
20Portugal231USD Billion22770USD1

Germany has the biggest market size in Europe, thus making it one of the most attractive destinations for startups to expand to. Germany also boasts of a pretty high GDP/Capita, which indicates a high quality of life and spending power of the country’s people.

At number 2 is the United Kingdom, which means it has the second biggest market in Europe. It also has a high GDP/Capita, making it a highly attractive investment destination.

France is the third biggest economy in Europe, followed by Italy and Spain. The Netherlands and Switzerland have the 6th and 7th highest GDP’s but boast of higher GDP/Capita than the countries in the top 5, making them attractive destinations for foreign investment.

Germany has the biggest market size in Europe, thus making it one of the most attractive destinations for startups to expand to. Germany also boasts of a pretty high GDP/Capita, which indicates a high quality of life and spending power of the country’s people.

At number 2 is the United Kingdom, which means it has the second biggest market in Europe. It also has a high GDP/Capita, making it a highly attractive investment destination.

France is the third biggest economy in Europe, followed by Italy and Spain. The Netherlands and Switzerland have the 6th and 7th highest GDP’s but boast of higher GDP/Capita than the countries in the top 5, making them attractive destinations for foreign investment.

In Section 3, we have comprehensively looked at all the 13 factors. In the final section, we will have a look at the whole picture and see which are top-performing countries when all 13 factors are taken into consideration in totality.

We will discuss the top 10 European destinations for start-ups to expand globally.

SECTION 4: Top 10 European Destinations for Start-ups to Expand

Rank 1: Germany

Germany tops the list of the best European destinations for startups to expand their market.

Below is the table highlighting Germany’s global performance in each of the 11 parameters plus the GDP numbers. On top of it, Germany is the biggest market in Europe, with excellent infrastructure to aid startups. Travelling from Israel to Germany is also quite cheap, placing it in Tier 1, which consists of countries that are the cheapest to travel from Israel.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Germany3806USD Billion45065USD3

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Germany, as Europe’s biggest economy, is a significant destination for foreign direct investment (FDI) and has amassed a sizable stock of FDI throughout time. Germany is regularly rated as one of the most appealing investment locations due to its dependable infrastructure, highly trained workforce, good social atmosphere, stable legal framework, and world-class R&D.

The United States is Germany’s primary source of non-European foreign investment. Other European nations, the United States, and Japan are the primary sources of foreign investment in Germany. FDI from developing countries (including China) increased steadily from 2015 to 2018, although from low levels.

In response to an increasing number of high-risk purchases of German businesses by foreign investors in recent years, especially from China, the German government continues to tighten measures for national security screening inbound investment. The German government firmly supports the European Union framework for coordinating Member State screening of foreign investments, which went into effect in April 2019 and is presently adopting relevant legislation.

In 2018, the government reduced the bar for screening investments, enabling authorities to review purchases of at least 10% of voting rights in German businesses that run or supply services linked to vital infrastructure by foreign organizations. Media firms were also added to the list of sensitive enterprises as a result of the change.

Furthermore, acquisitions by foreign government-owned or financed companies will now be subject to review, and the healthcare industry will be designated as a sensitive area subject to the tougher 10% requirement. The Federal Ministry of Economic Affairs and Energy stated that a further amendment would be drafted later in 2020, which would include a list of sensitive technologies (similar to the current list of critical infrastructure) such as artificial intelligence, robotics, semiconductors, biotechnology, and quantum technology.

Foreign investors seeking to acquire at least 10% of the ownership rights in a German business in one of these areas would be obliged to inform the government and may face an investment review. Germany is implementing the 2019 EU Screening Regulation with these drafts and proposed changes.

Legal, regulatory, and accounting procedures in Germany may be complicated and onerous, but they are usually transparent and in line with developed-market standards. Businesses operate in a highly regulated, though expensive, environment. When it comes to investment incentives or the creation and protection of real and intellectual property, foreign and local investors are treated equally. Foreign investors may depend on the German legal system to enforce laws and contracts; nevertheless, this system necessitates those investors carefully monitor their legal responsibilities.

New investors should make certain that they have the required legal knowledge, either in-house or through outside counsel, to comply with all national and EU laws.

The German government is dedicated to combating money laundering and corruption. The government encourages responsible business practices, and German SMEs are aware of the need for due diligence.

Rank 2: United Kingdom

The United Kingdom is ranked 2nd in our list of Best European destinations for startups in Israel to expand to. Being the second biggest economy of Europe with aggressive FDI policies, the UK remains a hugely attractive destination for Startups in Israel. On the downside the UK falls in Tier 3 when it comes to travelling to and fro from Israel, making travelling to the UK among the most expensive destinations in Europe.

On a global level too, the UK does well in most of the 11 critical parameters, as shown in the table below:

The United Kingdom is ranked 2nd in our list of Best European destinations for startups in Israel to expand to. Being the second biggest economy of Europe with aggressive FDI policies, the UK remains a hugely attractive destination for Startups in Israel. On the downside the UK falls in Tier 3 when it comes to travelling to and fro from Israel, making travelling to the UK among the most expensive destinations in Europe.

On a global level too, the UK does well in most of the 11 critical parameters, as shown in the table below:

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
United Kingdom2708USD Billion39103USD3

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

The UK is the second biggest market in Europe and traditionally one of the top destinations for startups from Israel to expand to.

Foreign direct investment (FDI) is aggressively encouraged in the United Kingdom (UK) (FDI). The United Kingdom has minimal restrictions on foreign ownership and has been Europe’s leading receiver of FDI over the last decade. In its annual inward investment report, the UK government offers detailed data on FDI:

As a result of Covid 19, economic growth, investment, trade, and employment have all dropped precipitously. HMG has launched a number of programmes to minimise the economic impact of the lockdown. The Coronavirus Job Retention Scheme (CJRS) pays up to 80% of a furloughed worker’s monthly salary, up to £2,500 ($ 3,100), and various programmes have been created in collaboration with the Bank of England to offer HMG-backed bridge finance loans for firms experiencing cash flow problems.

On June 23, 2016, the United Kingdom (UK) conducted a referendum on its ongoing membership in the European Union (EU), which resulted in a vote to exit. The United Kingdom officially exited the EU’s political institutions on January 31, 2020, while remaining a de facto member of the bloc’s economic and trade organisations during a transition period set to conclude on December 31, 2020.

The details of the UK’s future relationship with the EU are still being negotiated, but trade between the UK and the EU is generally anticipated to be more difficult after the UK’s departure from the single market. Currently, the UK has virtually unrestricted access to the markets of the other 27 EU member states, equivalent to about 450 million customers and $15 trillion in GDP. Prolonged COVID and Brexit-related uncertainty may continue to erode the UK’s overall appeal as an investment destination for companies from Israel and elsewhere.

The UK is strongly backed by sophisticated financial and professional services sectors, and it has a clear tax structure in which both domestic and foreign-owned companies are taxed equally. The British pound is a freely floating currency with no limitations on transfer or conversion. There are no exchange restrictions that limit the transfer of money connected with an investment into or out of the UK.

The legal, regulatory, and accounting systems of the United Kingdom are open and conform to international norms. The legal system in the United Kingdom offers a high degree of protection. Private ownership is legally protected and closely regulated for anti-competitive conduct.

Post-Brexit, there are early indications of increasing protectionism towards foreign investment. HM Treasury announced a unilateral digital services tax that would go into effect in April 2020, taxing some digital firms—such as social media platforms, search engines, and marketplaces—by 2% of their income produced in the UK.

Companies operating in the United Kingdom must adhere to the EU’s General Data Protection Regulation (GDPR). The GDPR regulations have been integrated into UK domestic law via the Data Protection Act of 2018. After leaving the EU, the UK will need to apply to the EU for an adequacy determination in order to continue existing data flows.

Rank 3: The Netherlands

In our comprehensive rankings, the Netherlands takes 3rd place in the list of best European countries for start-ups to expand to.

The Netherlands is the sixth-largest economy in Europe but is ranked among the best destinations globally for startups due to a highly conducive investment climate backed by all-round development in all the important parameters for startups.

This is reflected in the Netherlands performance in the Global rankings in each of the 11 defining factors, as shown in the table below.

The Netherlands also is among the least costly destinations from Israel to travel to, placing it in Tier 1 among the countries in Europe.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Netherlands912USD Billion53081USD2

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

The Netherlands is regularly ranked as one of the world’s most competitive industrialized economies. It maintains a favourable business and investment environment and is a desirable destination for corporate investment.

The Dutch economy’s strengths include a stable political and macroeconomic environment, a highly developed financial sector, a strategic position, a well-educated and productive labour population, and a high-quality physical and communications infrastructure. Investors in the Netherlands benefit from the country’s highly competitive logistics, which is anchored by Europe’s largest seaport and fourth-largest airport. In terms of telecommunications, the Netherlands has one of the highest internet penetration rates in the European Union (EU), at 96 per cent, and is home to the Amsterdam Internet Exchange, one of the world’s largest data transit hubs.

The Netherlands is one of the world’s largest receivers and providers of foreign direct investment (FDI), as well as one of the most historically significant beneficiaries of direct investment. This may be ascribed to the Netherlands’ competitive economy, traditionally business-friendly tax environment, and many investment treaties with investor safeguards. Foreign direct investment in the Dutch economy is important in a variety of industries, including logistics, information technology, and manufacturing. Dutch tax policy continues to evolve in response to EU efforts to unify tax policy across member states.

The Netherlands is the world’s seventeenth-largest economy and the fifth-largest in the European Union, with a GDP of more than $910 billion (€812 billion). According to the International Monetary Fund (IMF), the Netherlands is regularly one of the world’s top three source and recipient economies for foreign direct investment (FDI), despite the fact that the Netherlands is not the final destination for the vast majority of this investment. The Dutch government maintains liberal policies toward FDI, has established itself as a platform for third-country investment with approximately 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant treaties. The Netherlands receives 8% of all FDI inflows into the EU.

The Dutch tax authorities offer excellent customer service to foreign investors, aiming to provide clear, accurate tax advice that makes long-term tax liabilities more predictable. Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are assurances provided by local tax inspectors about long-term tax commitments for a specific purchase or Greenfield investment. The Dutch tax policy is evolving as the EU tries to unify tax measures among member states.

The Dutch government places a great emphasis on maintaining an investment-friendly image, and the Netherlands Foreign Investment Agency offers public information and institutional support to potential investors (NFIA). With rare exceptions, the Netherlands does not discriminate between national and foreign people when it comes to the formation and operation of private businesses. Although the government has sold its entire ownership of several public utilities, private investment – including foreign investment – may be subject to restrictions or requirements in a number of key industries. Transportation, energy, military and security, banking, postal services, public broadcasting, and media are among them.

Following the global financial crisis a decade ago, the Dutch government undertook major policy changes in important policy sectors such as the labour market, housing sector, energy market, pension system, and health care. Dutch reform initiatives were developed in close collaboration with major stakeholders, including business groupings, labour unions, and civil society organizations. This collaborative method, known as the Dutch “polder model,” is how Dutch policy is usually created.

Prior to the coronavirus crisis, years of recovery and accompanying “catch-up” economic development had put the Dutch economy in a very strong position, with consecutive years of a budget surplus, public debt that is well under 50% of GDP and record-low unemployment of 3.5 percent. This has provided the Dutch government with considerable budgetary flexibility to undertake coronavirus alleviation measures targeted at particular business sectors as well as the overall economy.

Prior to the coronavirus crisis, the Netherlands Bureau for Economic Policy Analysis (CPB) predicted steady but modest growth for the next several years, with annual GDP growth of about 1.5 percent. The CPB has now revised its forecast lower, with several scenarios of economic loss and recovery depending on the length of coronavirus-related mitigation measures. The CPB estimated four scenarios in late March, all of which predict a recession, and the Netherlands is preparing itself for an overall economic downturn, the full implications of which are not yet reflected in CPB models.

In the best-case scenario, including three months of mitigation measures, the Dutch economy declines 1.2 percent in 2020, with unemployment around 4%, then rises 3.5 percent in 2021, with unemployment around 4.5 percent. Scenario two entails six months of mitigation measures, during which the economy falls by 5% in 2020 and rises by 3.8 percent in 2021. Scenario three includes six months of mitigation measures, with the economy shrinking 7.7 percent in 2020 and growing 2% in 2021. In the worst-case scenario, which involves 12 months of mitigation measures as well as additional problems in the Dutch financial sector and from abroad, the Dutch economy shrinks 7.3 percent in 2020, with unemployment around 6.1 percent, and shrinks 2.7 percent in 2021, with unemployment around 9.4 percent. In the worst-case scenario, the government’s debt would reach 73.6 percent of GDP by the end of 2021.

Rank 4: France

At number 4 in our rankings for the top European destinations for start-ups from Israel to expand to is France.

France is the third biggest economy in Europe with one of the highest foreign investments in the Globe.

On a Global level too, France does quite well on a number of parameters, as shown in the table below.

France too, is comparatively cheaper to travel to from Israel, falling in Tier 2 as shown in the table here, making it an attractive destination for startups in Israel.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
France2603USD Billion40521USD2.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

France welcomes foreign investment and offers a stable economic environment that draws investors from all over the globe. Through legislative incentives, marketing, overseas trade promotion offices, and investor support systems, the French government invests heavily in luring foreign investment. France boasts a well-educated populace, world-class colleges, and a skilled workforce. It boasts a contemporary corporate culture, sophisticated financial markets, a robust intellectual property rights system, and forward-thinking company executives.

The nation is well-known for its world-class infrastructure, which includes high-speed passenger rail, marine ports, vast highway networks, public transit, and effective intermodal linkages. High-speed (3G/4G) telecommunications is almost universal.

With a total stock of foreign direct investment (FDI) of more than $87 billion in 2019, the United States was the largest foreign investor in France in 2019. Over 4,500 American companies operate in France, providing approximately 500,000 employment.

Following French President Emmanuel Macron’s victory in May 2017, the French government enacted substantial labour market and tax changes. Macron has boosted the ease of doing business in France by easing restrictions on hiring and firing workers and providing investment incentives. However, owing to more urgent worries over the COVID-19 issue, Macron is likely to postpone or cancel the second part of his planned changes for unemployment benefits and pensions.

Business France, the French government’s investment promotion agency, has launched an English-language website to assist potential companies contemplating investments in the French market.

Recent changes have expanded the Competition Authority’s investigation and decision-making capabilities. On April 11, 2019, France adopted the European Competition Network or ECN Directive, enabling the French Competition Authority to impose higher penalties (beyond €3 million / $3.3 million) and interim measures to avoid a violation that may cause damage.

On December 31, 2019, the government published a national security order that reduced the threshold for State screening of foreign investment from outside Europe from 33 to 25 percent and strengthened government-imposed restrictions and penalties in instances of noncompliance. The decree also established a framework to coordinate the national security assessment of foreign direct investments with the European Union (EU Regulation 2019/452). The new regulations will go into effect on April 1, 2020.

The list of strategic sectors has also been expanded to include the activities listed in EU Regulation 2019/452: agricultural products, when such products contribute to national food supply security; the editing, printing, or distribution of press publications related to politics or general matters; and R&D activities relating to quantum technologies and energy storage technologies.

On April 29, 2020, Economy and Finance Minister Bruno Le Maire stated that France will strengthen its control over foreign investments by adding biotechnologies in the key sectors subject to FDI screening, starting May 1, 2020, and lasting until the end of the year. This includes reducing the government permission threshold for non-European investment in French businesses from 25% to 10%, which was established in response to the COVID-19 crisis to prevent predatory purchases of troubled assets and is effective at least through the end of 2020.

France enacted a digital services tax in 2019. The 2019 tax legislation lowers corporation tax on earnings above €500,000 ($550,000) to 31 percent in 2019, 28 percent in 2020, 26.5 percent in 2021, and 25 percent in 2022.

The COVID-19 pandemic will have a significant effect on France’s socioeconomic prospects in 2020. GDP fell 5.8 percent in the first quarter of 2020 compared to the previous quarter, the worst economic decline since 1949. The official statistics office in France, INSEE, ascribed the drop to the government’s limitations on economic activity caused by the pandemic. The Q1 result is the second consecutive quarter of economic contraction, after a 0.1 percent decline in the fourth quarter, indicating that France has officially entered a technical recession. Economic activity is set to fall by 8% in 2021, the public deficit to climb to 9% of GDP, and debt to reach 115% of GDP.

In March 2020, the government announced a €410 billion ($447 billion) emergency budgetary plan in response to the economic effects of the pandemic. The majority of the package is designed to help companies by providing loan guarantees and deferring tax and social security payments. The rest is earmarked for household and demand stabilisation, mostly via the €24 billion ($26 billion) temporary unemployment programme, which enables employees to stay at home while still receiving a part of their salaries.

Despite the fact that France’s emergency reserve is sizable (16 percent of GDP), it is insufficient to absorb the entire economic effect of the pandemic. The following are the key issues to watch are: 1) the extent to which COVID-19 continues to agitate the macroeconomic environment in future; and 2) the size and scope of recovery measures, including additional fiscal support from the French government, a broader EU rescue package, and the European Central Bank’s monetary response.

Rank 5: Switzerland

In 5th position in our rankings for top European destinations for start-ups is Switzerland. Switzerland is the sixth-largest economy in Europe, with one of the highest GDP/Capita numbers in the world.

The travel cost though from Israel to Switzerland is on the expensive side, though, which becomes a limiting factor for business owners who have to travel multiple times to and from Israel.

In the Global rankings for critical variables for start-ups to consider, Switzerland does extremely well on multiple fronts, as visible from the table below:

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Switzerland748USD Billion80132USD2

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Switzerland welcomes foreign investors and has a favourable overall investment environment. The federal government of Switzerland enacts laws and regulations regulating business structure, the financial system, and immigration, as well as signing international trade and investment treaties. However, Switzerland’s 26 cantons and biggest municipalities have considerable autonomy in shaping investment policy, including incentives to attract investment.

This federal model has enabled the Swiss to preserve long-term economic and political stability, a clear legal system, vast and dependable infrastructure, efficient financial markets, and an outstanding quality of life for the country’s 8.4 million residents. Many companies have established European or regional headquarters in Switzerland, attracted by the country’s low corporate tax rates, productive and multilingual workforce, and well-maintained infrastructure and transportation networks. Companies from across the world also use Switzerland as a gateway to markets in Eastern Europe, the Middle East, and beyond. Furthermore, businesses choose Switzerland because recruiting and firing procedures are less stringent than in other European countries and because a qualified workforce is available.

Switzerland was named the world’s fifth most competitive economy by the World Economic Forum in 2019. This high ranking reflects the country’s strong institutional framework as well as its high levels of technical and scientific research and development. Switzerland, with very few exceptions, welcomes international investment, grants national treatment, and does not impose, assist, or tolerate trade obstacles.

According to the OECD, Swiss public administration ranks first in the world in terms of production efficiency and has the greatest level of public trust of any OECD country. Switzerland has the shortest trial duration of any of the OECD’s 37 member nations. According to the Swiss National Bank, the country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.3 trillion in 2018 (latest available figures), though nearly half of this amount is invested in regional hubs or headquarters that further invest in other countries.

Many cantons in Switzerland have utilized tax breaks to encourage investment, including tax breaks for new businesses for up to 10 years in certain instances. However, in response to complaints from the European Union – Switzerland’s main trade partner – this practice was severely limited by new legislation enacted in 2019. On January 1, 2020, the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) went into effect, requiring cantons to provide the same corporate tax rates to both Swiss and international businesses.

However, the legislation enables cantons to continue setting their own cantonal rates and providing incentives for business investment via deductions and preferential tax treatment, such as revenue from patents or expenditures linked to research and development.

Individual and business tax rates vary greatly across cantons in Switzerland. Zurich had a total corporation tax rate of 21.15 percent in 2019, which included municipal, cantonal, and federal taxes. According to PricewaterhouseCoopers, the effective tax rate in Zurich is projected to decrease to 19.7 percent in 2020.

IT, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building are among the key industries that have drawn considerable investment in Switzerland. Switzerland is home to a large number of start-ups, as well as a sizable ecosystem for businesses working on blockchain and distributed ledger technology.

Switzerland has a highly creative economy with excellent intellectual property protection generally. Switzerland efficiently protects intellectual property rights associated with patents and trademarks, and recent changes to the country’s Copyright Act to enhance online copyright enforcement resulted in Switzerland’s removal from the USTR’s Special 301 Watch List in 2020.

Despite partial or complete privatization, several previously public Swiss monopolies maintain market dominance. As a consequence, international investors may find it difficult to join certain markets at times (e.g. telecommunications, certain types of public transportation, postal services, alcohol and spirits, aerospace and defence, certain types of insurances and banking services, and salt). The Swiss agricultural industry is still highly supported and protected, with direct subsidy payments accounting for two-thirds of an average farm’s earnings.

Rank 6: Spain

At number 6th for the top European destinations for startups from Israel to expand to is Spain.

Spain is the fifth-largest economy in Europe.

Travelling cost from Israel to Spain is also moderately cheap, placing it in Tier 2, which means it is among the moderately expensive destinations from Israel to travel to.

On a global level, though, Spain doesn’t feature too much in the top 20 of top global destinations for start-ups while considering the critical factors. But owing to the market size and good relationship between Spain and Israel, Spain clinches sixth place in our rankings in top European destinations for Israeli Startups.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Spain1281USD Billion29600USD2.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Spain welcomes foreign investment and is aggressively seeking more investment. Spain had at least three percent economic growth from 2015 to 2017, prompting experts to proclaim the country’s recovery from the previous decade’s property and financial crises. Although growth slowed in 2018 and 2019, Spain maintained strong growth rates of at least 2.0 percent, surpassing the majority of EU member countries.

In 2019, Spanish GDP increased by 2.0 percent, public debt decreased to 95.5 percent of GDP, and unemployment fell to 13.8 percent, the lowest level since 2008. However, as a result of the COVID-19 epidemic, Spain’s economy fell significantly in 2020. Although a significant economic recovery is anticipated in 2021, it will take many years for Spain’s economy to return to pre-crisis GDP levels.

Service-based businesses, especially tourism-related industries, are particularly susceptible to the economic downturn. As a result of the crisis, the Spanish government’s budgetary situation will worsen as it implements fiscal stimulus, increases unemployment compensation, and collects fewer tax revenues. Spain’s main economic concerns include high public debt levels, rising pension expenses for an ageing population, and labour market dualism.

Despite the economic shock caused by COVID-19 and the resulting increase in Spain’s already high unemployment rate, Spain’s excellent infrastructure, large domestic market and access to the European Common Market, well-educated workforce, and robust export opportunities remain attractive to foreign investors. Foreign ownership in investments is permitted up to 100 percent under Spanish law, and capital flows are fully liberalised. According to Spanish statistics, foreign direct investment into Spain totalled EUR 22.4 billion in 2019, representing a 54.8 percent decrease from 2018. Foreign investment is focused in the areas of energy, real estate, banking and insurance, engineering, and construction.

Spain’s access to cheap funding from international financial markets has grown since the 2008 financial crisis and subsequent fiscal and financial reforms, which has strengthened Spain’s reputation and solvency, creating greater investor confidence. Spain’s credit ratings were upgraded in 2018 and 2019, and Spanish public debt issuances were oversubscribed, indicating significant investor investment in investing in Spain.

However, small and medium-sized companies (SMEs), which represent more than 99 percent of Spanish businesses, continue to suffer financing challenges and are expected to encounter further challenges as a result of the COVID-19 epidemic. Defaults on loans to small companies and individuals are expected to increase after dropping gradually since their 2014 high.

Rank 7: Italy

Italy is ranked 7th in our rankings for top European destinations for Startups from Israel to expand to.

Italy is the fourth-largest economy in Europe and eighth in the globe.

Travelling from Israel to Italy too is quite inexpensive, placing it in Tier 1, which consists of the cheapest countries for travelling to Europe.

Like Spain, Italy does not feature too much in the Global Rankings but owing to its huge market size, Italy is ranked 7th in our ranking.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Italy1886USD Billion32902USD2.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Italy’s economy, the world’s eighth biggest, is completely diversified and dominated by small and medium-sized enterprises (SMEs), which account for 99.9 percent of all Italian companies. Nonetheless, Italy continues to attract less foreign direct investment than many other European industrialised countries.

Italy’s slow economic growth, unpredictable tax regime, multi-layered bureaucracy, and time-consuming and often inconsistent legal and regulatory procedures have all hampered the government’s efforts to implement new investment promotion policies in order to position Italy as a desirable investment destination.

Several significant investment-related policy developments occurred in 2019, including the enactment of a digital services tax (DST) that primarily targets tech firms and media companies; the extension of the Italian government’s Golden Power investment screening authority to the procurement of 5G-related goods and services from non-EU suppliers; and the government’s March 2019 signing of a memorandum of understanding (MOU) with China to endorse partnership with the Belt and Road Initiative (BRI). While the Memorandum of Understanding is not a treaty nor an agreement, Italy’s signing indicated the Italian government’s strong interest in luring Chinese investment in its infrastructure.

Many investors continue to be drawn to Italy’s relatively wealthy domestic market, access to the European Common Market, closeness to developing economies in North Africa and the Middle East, and many centres of excellence in scientific and information technology research. The government remains open to foreign investment in Italian businesses’ shares and continues to make information accessible to potential investors online. Tourism, pharmaceuticals, furniture, industrial equipment and machine tools, electrical appliances, cars and auto parts, food and wine, and textiles/fashion are all significant sources of foreign income. Telecommunications, transportation, energy, and pharmaceuticals are among the industries that have drawn significant foreign investment.

Italy is a founding member of the Eurozone, a group of 19 countries. Italy’s most significant trade partners are Germany, France, the United States, the United Kingdom, Spain, and Switzerland, with China gaining momentum. Italy’s economy exceeded expectations in 2019, with moderate GDP growth of 0.3 percent (exceeding consensus forecasts of 0.2 percent), a government budget deficit of 1.6 percent of GDP, the lowest level since 2009, and an unchanged public debt-to-GDP ratio of 134.8 percent. Another encouraging development was that government borrowing decreased from 2.2 percent of GDP in 2018 to 1.6 percent of GDP in 2019. The significant reduction in debt service expenses mirrored the fall in Italian government bond rates in 2019.

Rank 8: Denmark

Occupying the 8th position in our European Expansion hubs for start-ups is Denmark.

Denmark is the 16th largest economy in Europe but boasts a great GDP/Capita. Denmark features heavily in the Global Rankings on a number of parameters, as seen in the table below.

Travelling from Israel to Denmark is also relatively expensive, placing it in Tier 2 when it comes to travel costs.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Denmark352USD Billion63880USD1.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Many independent analysts consider Denmark as one of the world’s most appealing business environments, with political, economic, and regulatory stability. It is a member of the European Union (EU), and Danish laws and regulations adhere to EU norms in almost every area. It follows a fixed exchange rate regime, with the Danish Krone tightly tied to the Euro.

Denmark is a social welfare state with a fully contemporary market economy that is largely reliant on commodities and services trade. Exports contribute about 55% of GDP. Economic circumstances in Denmark’s main trade partners – Germany, the United States, Sweden, and the United Kingdom – have a significant effect on its national accounts.

Denmark is a net exporter of food, fossil fuels, chemicals, and wind power, but its industrial industry is reliant on raw material imports. Denmark is a staunch proponent of free trade policies inside the EU. Transparency International consistently rates Denmark as having one of the lowest levels of perceived public sector corruption in the world.

Denmark’s fundamental macroeconomic circumstances are solid, as is the investment environment. Denmark is ideally located between continental Europe and the Nordic and Baltic nations. Infrastructure for transportation and communication is efficient. Denmark is a global leader in high-tech sectors such as information technology, life sciences, renewable energy, and shipping.

Denmark pledged up to 18 percent of GDP in fiscal stimulus in mid-March 2020 to mitigate the worst of the economic impact from the COVID-19 pandemic. A long-term recovery is expected, and some industry leaders are asking for longer-term policies to encourage inbound investment and assist the export sector.

The entrepreneurial environment is favourable, particularly for female-led ventures. Denmark plans to implement a Foreign Investment Screening system in the autumn of 2020 to protect vital infrastructure.

Rank 9: Finland

Finland occupies the 9th spot in our rankings of top 10 European markets for startups to expand to. Finland does really well when it comes to Global Rankings on a number of important parameters, but owing to its relatively small market size, Finland takes 9th place in our Rankings.

Travelling from Israel to Finland is also quite expensive, placing it in Tier 3, which are the most expensive destinations for travelling to and from Israel.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Finland271USD Billion47864USD1.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Finland is a Nordic nation situated north of the Baltic States that borders Russia, Sweden, and Norway. It has a stable and modern economy as well as a world-class investment environment. It is a member of the European Union and a participant in the eurozone. The workforce in the nation is highly competent, educated, and bilingual, with significant competence in information and communications technology (ICT), shipbuilding, forestry, and renewable energy.

A rigid labour market and bureaucratic red tape in starting certain businesses are key challenges for foreign investors, though the government enacted a Competitiveness Pact in June 2016 that aims to reduce labour costs, increase hours worked, and introduce more flexibility into the wage bargaining system. The two urgent problems that may restrict Finland’s development prospects are an ageing population and a decreasing working-age population.

At the end of 2018, the overall value of foreign direct investment (FDI) was USD 71 billion, with equity accounting for USD 64.6 billion and loan capital accounting for USD 6.5 billion. Sweden contributes 32% of Finland’s FDI, Luxembourg for 19%, the Netherlands for 17%, Denmark for 5%, and Germany for 4%. Approximately 90% of Finland’s FDI comes from EU member countries.

According to Ernst & Young’s Nordics Attractiveness Survey 2019, Finland received a record number of 194 FDI projects in 2018, more than all other Nordic nations combined. The 2019 study marked Finland’s eighth consecutive year as the Nordic leader in new FDI projects, with Sweden-based companies accounting for the biggest category (53), followed by UK-based businesses (19), the US (18), Germany (15), Norway (13), and China (13).

To encourage investment, the Government of Finland (GOF) reduced the corporation tax rate from 24.5 percent to 20 percent in 2014, streamlined residency permit processes for foreign experts, and established Business Finland, a one-stop shop for international investors.

Finland boasts thriving industries such as telecommunications, energy, and biotechnology, as well as Arctic knowledge. Finland is a growing transportation centre, with good transit connections to the Nordic-Baltic area and Russia.

Finpro, the Finnish trade promotion agency, and Tekes, the Finnish Funding Agency for Innovation, merged on January 1, 2018, to become Business Finland, which is now the sole operator facilitating foreign direct investment in Finland. Business Finland is the Finnish government’s agency for financing innovation and promoting commerce, tourism, and investment.

Rank 10: Sweden

Sweden occupies the tenth and final spot in our overall rankings for the top 10 European destinations for startups to expand their business.

On a Global Level, Sweden does great on a number of factors which can be observed in the table below.

But due to its relatively smaller market size and expensive travelling cost of travelling from Israel to Sweden, it occupies the number 10 rank in our top 10 European destinations to expand to for Israeli startups.

 GDPGDP/ Capita
Country2021Unit2021UnitCombined Multiplier based on GDP & GDP/ Capita
Sweden538USD Billion56068USD1.5

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

Sweden is often regarded as an excellent investment location. Sweden has a highly competitive, open economy that allows for the introduction of new goods, technologies, skills, and innovations. Sweden also boasts a well-educated labour population, excellent communication infrastructure, and a stable political climate, making it an attractive location for international businesses. Low corporation tax rates, the lack of dividend withholding tax, and a favorable holding company system are further advantages for conducting business in Sweden.

Sweden’s allure as an investment location is tempered by a few structural and commercial difficulties. High personal and VAT taxes are among them. Furthermore, the high cost of labour, strict labour laws and regulations, a chronic housing scarcity, and the overall high cost of living in Sweden may create difficulties for new companies entering Sweden in terms of recruiting, employing, and retaining talent. Telecommunications, information technology, healthcare, energy, and public transportation have historically drawn the greatest international investment. However, industrial, wholesale, and retail commerce have lately seen a rise in foreign investment.

Overall, investment conditions continue to be good. Sweden ranked in tenth place in the World Bank’s 2020 Doing Business Report. Sweden was ranked eighth out of 138 nations in total competitiveness and productivity in the World Economic Forum’s 2019 Competitiveness Report. The report emphasized Sweden’s assets, including human capital (population health, education level, and skills), macroeconomic stability, and technological and physical infrastructure.

Sweden was ranked fifth among the most inventive countries on the planet by Bloomberg’s 2020 Innovation Index, a trend that is supported by Sweden being ranked first on the European Commission’s 2019 European Innovation Scorecard and second on the WIPO/INSEAD 2019 Global Innovation Index. Transparency International also ranked Sweden as one of the least corrupt nations in the world in 2019 — fourth out of 180. Sweden is seen as a creative country with cutting-edge research and technology. With a strong IT infrastructure, it is well prepared to embrace the Fourth Industrial Revolution and is seen as a forerunner in embracing new technologies and establishing new consumer trends.

With this, we have come to the conclusion of the top 10 destinations for start-ups to expand in Europe.

Conclusion

The premise of this report is that due to Covid 19 and the proliferation of virtual technology and the fast-changing business environment, a plethora of opportunities for small businesses and entrepreneurs have been created. They may now compete in the same market as huge corporations, both locally and globally. Technology has helped to level the playing field.

Start-ups have the same opportunity as established companies to compete for the same audience, mindshare, and wallet-share. Businesses’ operating procedures now need them to creatively use a firm’s distinctive value offer. It is the perfect time for start-ups to seize the opportunity for quick development because of their agility, small size, and creative skill.

Because of its small market size, rapid growth into the global market is a necessity and a standard practice in Israel. Traditionally, the Israeli start-up market has seen the United States as the best place to expand. There is no question that the US market is the most enticing place for Israeli entrepreneurs owing to its market, the availability of venture capital, a well-developed start-up eco-system, and the Israel-US relationship.

Covid 19, on the other hand, has taught businesses some critical lessons. Due to the rapid advancement of online communication technology during Covid 19, businesses worked remotely utilising a seamless online model. Covid 19 has also made entrepreneurs hesitant of being away from their family and their country for an extended period of time, if at all feasible. As a result, the option of targeting a market closer to home is tempting to a large number of start-up owners.

Europe has all of the components required for digital enterprises to flourish and expand, so entrepreneurs should look closer to home for success before crossing the Atlantic. The European market is huge, it is closer to Israel, and it has a similar time zone, making it a tempting option for Israeli start-ups.

For investors, the European market is less overheated and hence more tempting than the American market, as well as less “challenging” than other major markets such as China, India, and Brazil.

Because of the exponential expansion of video prospecting and communication channels as a consequence of COVID 19, business owners are no longer need to stay in the hub indefinitely. Startup owners may travel to Europe in 4-5 hours and manage a fully functional team remotely, giving them access to the enormous European market.

This closeness makes it easier to take the first steps and expand into Europe, facilitates personnel migration, and, most crucially, it means that the time difference is small. Because the time zones are the same, it is much easier to offer services and be available to new and present consumers, even if one is not physically in Europe. Travel to and from Europe is, on average, ten times cheaper from Israel than it is from the United States, making the European market more appealing, particularly following the Covid 19 and with the fast expansion of online business models.

Europe has a vast 500 million-person single market, which has greatly facilitated cross-border trade, and governments have endeavoured to stimulate entrepreneurship by spending considerable amounts of money on innovation and R&D.

In this comprehensive guide on Top 10 European Hubs for start-ups in Israel to expand, we wanted to answer 5 questions for small businesses, entrepreneurs and pioneers to help their start-ups scale their businesses up.

These questions are:

  • What constitutes a solid GTM Strategy, and why is it needed to succeed?
  • How do Startups overcome the challenge of Scaling up by going Global?
  • How to choose the right destination for going global, and what factors should you consider carefully while selecting the right global destination for your start-up?
  • Why Europe is a great alternative to the United States for start-ups in Israel to expand to?
  • Which are the top 10 European destinations you should consider while taking your start-up Global?

Each of these questions has been covered in detail in the 4 sections of the Report.

We reduced it down to 13 deciding variables that should be taken into account when a start-up is growing internationally after an extensive study into the different indexes.

When deciding on a global centre for growth, each of these 13 aspects is important for a start-up. All of the information in this comprehensive study has been obtained straight from trustworthy sources with a worldwide reputation. These include The World Bank, World Economic Forum, World Intellectual Property Organization (WIPO), World Health Organization (WHO), Institute of Management Development (IMD), Freedom House, FDI Intelligence, EF Education, African Development Bank, and Political and Economic Intelligence Bureau.

These 11 Indexes are the Foreign Investment Openness Index, Corruption Perception Index, Intellectual Property Rights Index, Legal and Regulatory Systems Index, Human Capital Index, Global Innovation Index, Quality of Life Index, Economic Transformation Readiness Index, Business Language Proficiency Index, Digital Competitiveness Index and Global Venture Capital Investment Index.

Apart from the 11 indices, we have included travel cost ‘to and from Israel’ as a critical factor for Israeli Startups to consider.

Last but not least, we have included a market size multiplier, as it is the most important criterion while going global.

Here is the snapshot of the top 10 European destinations for each of the 13 factors below:

Average Travel Cost from Israel ( Flight+ Lodging & Food+ Intracity Travel time & Cost)
Tier 1Less ExpensiveAmsterdam, Brussels, Berlin, Rome, Warsaw
Tier 2Moderately ExpensiveBarcelona, Lisbon, Tallinn, Helsinki, Copenhagen, Oslo, Luxembourg, Stockholm, Dublin, Paris
Tier 3Very ExpensiveMoscow, Bern, London

  GDPGDP/Capita
RankCountry2021Unit2021Unit Combined Multiplier based on GDP & GDP/ Capita
1Germany3806USD Billion45065USD3
2United Kingdom2708USD Billion39103USD3
3France2603USD Billion40521USD2.5
4Italy1886USD Billion32902USD2.5
5Spain1281USD Billion29600USD2.5
6Netherlands912USD Billion53081USD2
7Switzerland748USD Billion80132USD2
8Russia1484USD Billion11787USD1.5
9Turkey720USD Billion15226USD1
10Poland594USD Billion16945USD1
11Sweden538USD Billion56068USD1.5
12Belgium515USD Billion44361USD1.5
13Austria429USD Billion47009USD1.5
14Ireland419USD Billion81297USD1.5
15Norway362USD Billion90885USD1.5
16Denmark352USD Billion63880USD1.5
17Finland271USD Billion47864USD1.5
18Romania249USD Billion11665USD1
19Czech Republic244USD Billion22843USD1
20Portugal231USD Billion22770USD1

When all variables are considered, there are some fascinating insights about the top 10 European destinations for start-ups to expand to.

Below is a table of top 10 European destinations along with their overall score of all 13 factors:

RankCountryTotal Score
1Germany2655
2United Kingdom2455
3Netherlands2060
4France1875
5Switzerland1830
6Spain1625
7Italy1600
8Denmark1500
9Finland1488
10Sweden1455

Germany is the best European country for startups, according to our extensive research. We looked at data from the World Bank, the World Economic Forum, and UNESCO, among other publicly available sources. Then, based on metrics like GDP per capita, growth, daily business costs, regulatory burdens, and other factors, we assigned ratings to each candidate country. Germany excelled in all of the categories evaluated, including economic health, business costs, overall business environment, and labour quality. The German economy is the world’s fourth largest, supporting the country’s thriving startup culture. Germany has a reputation for being one of Europe’s most progressive and productive economies. Germany was named one of the top ten most innovative countries in the world in the 2020 Global Innovation Index.

Germany also wields significant influence over the rest of the eurozone. Berlin has established itself as a global tech hub, with a thriving startup community. Trust in the judicial system, startup capital availability, regulatory burdens, and the dominance of large corporations were all factors considered in our research. Germany has one of the least burdensome regulatory regimes in Europe. German startups can expect easy access to venture capital funds and monopolies, as well as a low level of market dominance among large corporations. In major German cities such as Berlin, Munich, Hamburg, and Frankfurt, startup scenes are thriving. In general, Germany has a reliable infrastructure, an open, progressive business culture, low entry barriers in most markets, and a regulatory and legal environment that is largely supportive.

The United Kingdom is ranked second, despite low GDP growth expectations. This is due to the availability of venture capital and the relative ease of doing business. Startups in the United Kingdom though have higher business costs and cost of skilled workers. When compared to many other European countries, lower corporate tax rates (19%) are undeniably appealing. Finally, there are numerous startup support organisations available to help entrepreneurs as needed.

The biggest issue with the United Kingdom though is the uncertainty that has arisen as a result of Brexit. The future success of the United Kingdom will be determined by the future of trade relationships with European Union members. Businesses are already looking for alternatives in Europe to avoid the risk of Brexit.

The Netherlands is ranked third in our list of the best European rankings for startups to expand to. The Netherlands rose to the top of the list due to a number of factors, including the country’s strong economic health and favourable business climate. The Netherlands has Europe’s second-healthiest economy, with a GDP of more than $909 billion. Due to excellent vocational and staff sales training, it was also determined to have the fifth highest labour force quality.

The Netherlands has an extremely well-educated population, with many graduates being able to communicate in three or four languages, as well as nearly unrivalled connectivity. The Netherlands, in addition to having some of Europe’s fastest internet speeds, is also directly connected by train to the United Kingdom, Germany, and Belgium, and is home to Schiphol, one of the world’s busiest airports. It has also proven to be an ideal location for relocation following Brexit – and could be the great alternative location for businesses from Israel. With an English fluency rate of more than 90%, it has also proven to be a great choice for relocation.

France is ranked fourth among the best European startup destinations. France encourages foreign investment and maintains a stable economic environment that attracts international investors. Through legislative incentives, marketing, overseas trade promotion offices, and investor support systems, the French government invests heavily in attracting foreign investment. France boasts a highly educated population, world-class universities, and a highly skilled workforce. It has a cutting-edge corporate culture, sophisticated financial markets, a robust intellectual property rights system, and forward-thinking CEOs. High-speed passenger rail, marine ports, extensive highway networks, public transportation, and efficient intermodal linkages are all part of the country’s world-class infrastructure. The use of high-speed (3G/4G) telecommunications is nearly universal.

Switzerland is ranked fifth in our list of the best European startup destinations. Switzerland has risen to the top 5 of the rankings as a result of its first-place finishes in two categories: business climate and labour force quality. In comparison to other European countries, businesses report the least regulatory burden, with Switzerland having the best market. Switzerland has the highest level of staff training and the highest quality vocational training, as well as the second highest percentage of people with a tertiary education (38.6 percent ). Switzerland, on the other hand, is one of the more expensive places to start a business due to high living costs and salary expectations, and it has one of the lowest GDP growth expectations, making it easier for new market entrants and contributing to their strong Business Climate score.

Spain is at number 6 in our rankings. Spain welcomes foreign investment and is actively seeking more. From 2015 to 2017, Spain saw at least 3% economic growth, prompting analysts to declare the country’s recovery from the previous decade’s housing and banking crises. Despite a slowing in growth in 2018 and 2019, Spain maintained robust growth rates of at least 2.0 percent, outpacing the bulk of EU member countries. However, the COVID-19 epidemic caused a severe drop in Spain’s GDP in 2020. Although a considerable economic rebound is expected in 2021, Spain’s economy will take many years to return to pre-crisis GDP levels. Despite the economic shock created by COVID-19, which increased Spain’s already high unemployment rate, Spain’s strong infrastructure, big domestic market and access to the European Common Market, well-educated workforce, and solid export potential remain appealing to foreign investors.

At number 7 in our rankings of Top European destinations for startups is Italy. Italy’s economy, the world’s eighth largest, is very diverse and dominated by small and medium-sized enterprises (SMEs), which account for 99.9% of all Italian businesses. Nonetheless, Italy continues to attract lower levels of foreign direct investment than many other European industrialised countries. Slow economic growth in Italy, an unpredictable tax regime, a multi-layered bureaucracy, and time-consuming and frequently inconsistent legal and regulatory procedures have all hampered the government’s efforts to implement new investment promotion policies in order to position Italy as a desirable investment destination. Many investors are still drawn to Italy because of its relatively wealthy domestic market, access to the European Common Market, proximity to rising economies in North Africa and the Middle East, and numerous centres of excellence in scientific and information technology research.

At number 8 in our rankings is Denmark. Many independent observers see Denmark as one of the most enticing business environments in the world, owing to its political, economic, and regulatory stability. Denmark is a social welfare state with a fully modern market economy that relies heavily on commodity and service trade. Exports account for around 55% of GDP. Denmark’s underlying macroeconomic circumstances, as well as the investment environment, are strong. Denmark is strategically placed between continental Europe and the Nordic and Baltic countries. The transportation and communication infrastructure is efficient. Denmark leads the world in high-tech industries such as information technology, life sciences, renewable energy, and shipping. It features a contemporary and stable economy, as well as a world-class investment climate.

At the 9th position in our rankings is Finland. It features a contemporary and stable economy, as well as a world-class investment climate. It is a member of the European Union as well as a member of the eurozone. The country’s workforce is highly skilled, educated, and bilingual, with particular expertise in information and communications technology (ICT), shipbuilding, forestry, and renewable energy.

Taking the 10th and final position in Top 10 European destinations for startups is Sweden. Sweden is frequently recognised as an attractive investment destination. Sweden’s economy is highly competitive and open, allowing for the entrance of new commodities, technology, talents, and innovations. Sweden also has a well-educated labour force, great communication infrastructure, and a stable political climate, which makes it an appealing location for foreign firms. Low corporate tax rates, no dividend with-holding tax, and a favourable holding company system are further benefits of doing business in Sweden.

Rankings of top 10 European destinations for startups Global Innovation Index Quality of Life Index Economic transformation Readiness Index Business Language Proficiency Index Digital Competitiveness Index Global VC Investment Index
1 Switzerland Switzerland Finland United Kingdom Sweden Sweden
2 Sweden Denmark Sweden Netherlands Denmark Switzerland
3 United Kingdom Netherlands Denmark Denmark Switzerland Finland
4 Netherlands Finland Netherlands Finland Netherlands Denmark
5 Denmark Iceland Belgium Sweden Norway Germany
6 Finland Austria Germany Norway Finland Netherlands
7 Germany Germany France Austria United Kingdom Norway
8 France Luxembourg Switzerland Portugal Austria Belgium
9 Ireland Norway United Kingdom Germany Germany Luxembourg
10 Austria Estonia Estonia Belgium Ireland United Kingdom

RankingForeign Investment IndexCorruption Perception IndexIntellectual Property Rights IndexLegal and Regulatory system indexHuman Capital IndexGlobal Innovation IndexQuality of Life IndexEconomic transformation Readiness IndexBusiness Language Proficiency IndexDigital Competitiveness IndexGlobal VC Investment Index

Top Global Destinations for startups on 11 defining factors
1 United States Denmark China Denmark Singapore Switzerland Switzerland Finland United States United States Sweden
2 Singapore New Zealand United States Norway Hong Kong Sweden Denmark Sweden United Kingdom Singapore Singapore
3 Netherlands Finland Japan Finland Japan United States Netherlands Denmark Australia Denmark Switzerland
4 France Singapore South Korea Sweden South Korea Netherlands Finland Netherlands New Zealand Sweden Finland
5 India Sweden Germany Netherlands Canada United Kingdom Australia China Netherlands Hong Kong Denmark
6 United Kingdom Switzerland France Germany Finland Finland Iceland Canada Denmark Switzerland Germany
7 Australia Norway United Kingdom New Zealand Macao Denmark Austria New Zealand Finland Netherlands Australia
8 British Virgin Islands Netherlands Switzerland Austria Sweden Singapore Germany Belgium Sweden South Korea Netherlands
9 Switzerland Germany Sweden Canada Ireland Germany New Zealand Germany Norway Norway Japan
10 Luxembourg Luxembourg Netherlands Estonia Netherlands Israel Luxembourg Israel Austria Finland Norway
11 Brazil Australia Austria Australia United Kingdom France Norway France Portugal Taiwan United States
12 Taiwan Canada Canada Singapore Estonia China Estonia United States Germany Canada Canada
13 Germany Hong Kong Luxembourg United Kingdom New Zealand Japan Sweden Switzerland Belgium United Kingdom China
14 Mexico United Kingdom Russian Federation Belgium Slovenia Hong Kong Oman Australia Singapore UAE Belgium
15 Ireland Austria India Japan Norway Israel Slovenia Estonia Luxembourg Australia South Korea
16 Hong Kong Belgium Belgium Hong Kong Australia Canada Japan Japan Nigeria China New Zealand
17 Canada Estonia Italy South Korea Portugal Iceland United States South Korea South Africa Austria Luxembourg
18 Poland Iceland Norway Czech Republic France Austria Spain United Kingdom Croatia Germany United Kingdom
19 United Arab Emirates Japan Ukraine Spain Belgium Ireland Lithuania Ireland Hungary Israel Israel
20 Portugal Ireland Israel France Switzerland Norway Portugal Austria Serbia Ireland UAE

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Top 10 European destinations for startups to expand

119 min