investor favorites Berlin Loses Top Spot as Europe's Startup Capital

Germany's capital has been dethroned as Europe's top startup city, according to a recent study, which sees Berlin being trumped by three other European cities last year.
Berlin lost its leading position as Europe's investor favorite for startups.

In 2015, Berlin topped a list of European cities that attract the most startup investment. But it couldn't defend the title. Now London has overtaken Berlin as Europe's number one startup capital, according to a study by consulting company Ernst & Young.

And it didn't just fall one place. Young entrepeneurs collected €2.2 billion ($2.36 billion) in investment capital last year in London, making it Europe's new startup capital, followed by Paris (€1.3 billion) and Stockholm (€1.2 billion). Berlin only came in fourth place with investors spending €1.07 billion in 2016, compared to €2.24 billion in 2015.

At the time, the investments made by Rocket Internet, the Berlin-based startup incubator, after its IPO in 2014 had led to a massive increase of investments in Germany's young startup scene.

But the decline of investment volume in Berlin by about half in 2016 is not worrying, Peter Lennarz, a partner at Ernst & Young, said in a press release. "In 2015 one-time effects led to record numbers - in 2016 more companies were able to profit from venture capital," he said.

Whether London can hold the title this year is another question. Many expect that Brexit could drive businesses to other E.U. hubs. That includes Berlin.

Daniel Tost is an editor with Handelsblatt Global. To contact the author: [email protected]