A year ago we launched the European Digital City Index (EDCi), a ranking intended to measure how well different cities across Europe support startups and scale-ups in digital industries.
Today, as part of Global Entrepreneurship Week, we are launching the 2016 version of the EDCi, which again describes the ‘fertility’ or attractiveness of different European cities for digital entrepreneurs. As before, this is not a simple count of the number of new firms or capital flows, but a composite measure of the varied factors which matter to founders and young firms.
One change that will be apparent is that we have expanded the number of cities from 35 to 60. These all remain EU-focused, for now.
Less apparent will be the methodological improvements. Over the past year we have worked closely with the Joint Research Centre’s Composite Indicator Research Group to make the EDCi as robust as possible. As a result, we have made small changes to the standardisation and weighting of some variables, as well as the way we combine these. We also had to find new data sources to replace a handful which became unavailable.
One thing that has not affected the EDCi is Brexit. Almost all of the data which makes up the Index relates to the pre-vote period, so one should not make any inference about its effect on the position of UK cities. We must wait to see what, if any, effect this has on British startups and scale-ups.
As with last year, we find that London leads for both startups and scale-ups – probably not a huge surprise, given the city’s number of ‘Unicorns’.
However, the rankings are very close, especially towards the top, with a fraction of a percentage point separating London from close contender Stockholm. Stockholm performs extremely well for its size, with superb digital infrastructure and a highly digitally skilled population; companies like Skype, Spotify, Klarna, King and Mojang are the result.
The highest new entrant is Bristol, which joins the list in 13th place, and scores particularly well due to its receptive entrepreneurial culture and local business environment. It was also, incidentally, part of a cluster highlighted in the 2016 TechCity/Nesta TechNation report.
As before, we find a significant divide between North-West and South-East Europe, which is particularly visible when it comes to different cultural attitudes towards entrepreneurship, the availability of capital, and mentoring or managerial assistance.
We have also included new visualizations which more readily show how cities group. From these, we see that clusters have formed: the top 5, which are really very competitive; a middle group, including cities such as Barcelona, Vienna and Cambridge; and those where substantial progress needs to be made.
One thing that was clear from our 2015 EDCi is that indices are provocative, for better and for worse.
The positive feature of rankings is that they can attract attention and harness competitive spirits. This was the original intention: to direct energy to the hugely important role that local conditions can play in encouraging the entrepreneurship and scaling that Europe desperately needs.
Their negative side is that some people obsess over rank, leading to ultimately insoluble arguments whether City A is really better than City B. Which brings us to our second learning:
“All models are wrong, but some are useful”
All composite indices are, in some sense, wrong. All necessarily conceal multiple subjective assessments under a cloak of objectivity.
However, this does not mean that indices are not useful – on the contrary, like many models, they can be a very helpful way of summarising a set of complex factors into a more manageable form. However, they are necessarily a simplification, multiple dimensions compressed into one.
As such, there really is no single ‘right’ answer – just as there is no single formula for a startup. This is why we included the ‘customiser tool’ and have tried to be transparent about the methodology and weighting of variables. Users can thus re-weight factors according to what matters to them (as well as downloading the source data, if desired, to play with this directly).
Because of the above, the argument of whether, say, Paris really deserves to be above Berlin, will always be contentious. A more productive conversation is to ask what cities can learn from each other, and what each can do to improve the local conditions for startups and scale-ups in their vicinity.
For that reason, we are also launching today an ‘Idea Bank’ to accompany the 2016 Index. This is a guide which draws together examples from all over the world of policies and initiatives that support startups, especially digital startups, in an effort to provide inspiration and options to European policymakers.
The guide is intended to complement the EDCi, following the same ten themes (together with an eleventh, cross-cutting theme relating to the process of policymaking). It concludes with some tools to assist in choosing, developing and implementing these policies. We commend both the guide and the EDCi to policymakers, and hope that they will help in creating better conditions for digital entrepreneurs across Europe, to everyone's benefit.