Most European migrating startups stay rooted in Europe, according to new research

Most European migrating startups stay rooted in Europe, according to new research

A new study finds that almost all of Europe's high-potential startups migrating abroad, especially to the United States, continue to maintain significant operations in Europe, and their home-country operations enjoy more rapid sales and labour productivity growth than those of comparable but non-migrating startups.

The research, conducted by Professor Massimo Colombo of POLIMI Graduate School of Management, his co-authors Professor Anita Quas (University of Milan) and Bogdan Tofan (Politecnico di Milano), and the European Commission's Joint Research Centre (JRC) in Seville, examines the scale, patterns and impact of startup relocations from Europe and sets out policy recommendations to help retain innovation, talent and high-value activities across the continent.

The study finds that only 3.3% of European venture capital-backed startups moved their headquarters abroad. High-potential but non-VC-backed startups have an almost 10 times smaller migration rate.

Moreover, even though migrating startups are the largest and fastest-growing group, most migrations are partial. More than 90% of relocating startups maintain substantial operations in their home countries up to 5 years after relocating. They also frequently maintain strategic capabilities in the home countries. 40% of CEOs of migrating startups remain in their home countries the year after migration, and 25% never move. Home-country hires account for 24% of post-migration managerial hires in operations and finance, and 21% in R&D. Altogether, 15% of the newly hired staff are based in the migrating startups’ home countries.

The United States is the main destination for European startups, particularly hubs such as San Francisco, Boston and New York. Companies are primarily attracted by access to venture capital, the opportunity to exit through acquisition, and favourable legal frameworks. Accordingly, startups migrating to the United States are more likely to receive follow-on venture capital rounds from more investors than comparable non-migrating startups. The amounts they raise are around 75% higher. They are also twice as likely to be acquired.

Startups’ operations in the home country also benefit from migration to the United States. Sales growth is 110 percentage points higher than that of comparable non-migrating startups. As to labour productivity growth, the migration premium is around 34 percentage points. Moreover, migration does not affect the likelihood of closing home operations, nor does it negatively impact home-country employment levels.

The report also highlights differences across Europe. Startups from larger countries with more established ecosystems such as Germany and France, are less likely to relocate than those from emerging ecosystems, such as Romania and Bulgaria. Manufacturing and deep-tech companies are also less likely to move than digital and life science businesses.

"Our findings challenge the perception of a widespread 'startup exodus' from Europe," said Professor Massimo Colombo, POLIMI Graduate School of Management. "Most migrating startups expand internationally while maintaining substantial operations in their home countries. The priority for policymakers should be to make Europe an even better place to start, grow, and scale innovative companies. Improving access to scale-up finance, making the acquisition market more transparent and competitive, simplifying regulation, and strengthening the Single Market will help startups grow globally while keeping high-value activities in Europe."

The study concludes that the impact of relocation depends less on where a company is legally based and more on where it makes strategic decisions, carries out research, and creates skilled jobs. Partial migration can help companies access global markets and scale-up finance, while keeping high-value activities in Europe.

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For more information or a copy of the study, please contact: olivia@bluesky-pr.com