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(Ad-)Venture seeks capital! Growth of Startups thwarted by lack of capital


A study by MODUL University Vienna analysed the financial situation of startups in Vienna. Eight tangible recommendations show the way to international success.

On average, startup companies in Europe have access to ten times more private investment capital than startup companies in Vienna (as a percentage of GNP). This is just one of many aspects of the capital situation faced by technology startups in Vienna recently revealed in a study conducted by MODUL University Vienna and supported by the Vienna Chamber of Commerce. Overall, the study highlights pragmatic and concrete ways in which Vienna could catch up with the world's 20 leading locations for establishing a startup.

Regardless of whether in Silicon Valley or Vienna, only sustainable investment over an extended development period guarantees a real chance of success. According to a current study by the Department of Public Governance and Sustainable Development at MODUL University Vienna, optimising the range of financing options is a key factor in fully exploiting Vienna's great potential as a startup ecosystem, as well as improving the level of networking and coordination. Smart provision of public money, tax incentives for investment and the dismantling of bureaucratic obstacles for international investors would enable Vienna to compete with the most attractive startup locations around the globe.

Serious lack of investment

"We analysed many statistics relevant to Austria and abroad", explains Dr. Harvey Goldstein, Professor Emeritus in the department, who headed up the project. "This showed that the value of Austrian venture capital investment in Austria amounted to just 0.03 percent, i.e. just 0.003 percent of the gross national product – ten times less than the European average." To gain a better understanding of the reasons for this low value and investor motivation in general, the authors of the study conducted several interviews with important players in the Austrian financial world who provide private investment capital for technology-oriented startups. In doing so, they discovered that business angels are among the most active sources of finance and form a very important bridge between the initial backers among the startup team's family and friends and the venture capitalists who become involved at a later stage. As the study also shows, this function makes the small Viennese investment scene particularly dynamic and resilient – a real advantage for Vienna.

Capable of making decisions

Interestingly, the study also shows that different types of investors base their decisions on fairly similar investment criteria: marketability and potential for growth, business plan, prototypes and market overview are all relevant. Venture capitalists place even more importance on the startup team's skills when they make their decisions (complementary skills, ability to work as a team, resilience to stress).

Information & money flow

Co-author Dr. Sabine Sedlacek, head of the department and Vice President for Research, points to other findings arising from the study, the data for which was collected and analysed in the last 24 months: "The information flows within the startup community are also interesting – while venture capitalists tend to respond to insider information from their own networks, business angels are more open in their communication. They often share information with one another and are also happy to be contacted directly by startup teams." The authors of the study believe that these different communication flows have the potential to optimise synergies between various investors in Vienna in the future and also make specific recommendations for such cooperation in their study.

Vienna, Berlin, Amsterdam & Tel Aviv

A large part of the study focused on comparing Vienna as a startup ecosystem with a number of other cities around the world, all of which have managed to reach the top 20 of global startup centres within a short space of time: Tel Aviv, Berlin and Amsterdam. Thanks to this first-ever benchmarking process of its kind, the authors were able to identify three key factors that have contributed to the success of the three international cities. The first is better prioritisation of entrepreneurship by the political and business community, which is also reflected in joint grant schemes for startups. Moreover, each of the three cities has at least one major investment initiative for providing grants to startups from the seed stage to the late growth phase. The third factor was a coordinated process that created a supportive environment of investment, infrastructure and further training for startups.

This third point in particular coincides closely with one aspect that numerous interviewees mentioned in the study: the lack of a vision or strategy on the part of policy makers or business leaders in Vienna, which could help to remove the bureaucratic and regulatory obstacles to investment. There is no doubt that such obstacles lead to reluctance on the part of international investors when it comes to investing in Vienna. The unanimous opinion was that the examples of foreign investors who have co-invested in Viennese startups did so on the basis of their networks and not because Vienna had caught their attention as a location to do business.

The way forward...

Based on their comprehensive analysis of the financing environment for technology-oriented startup companies in Vienna, the authors of the study came to quite definite conclusions which led to eight recommendations for policy makers and the business community. These are:

1.Set up a platform to agree shared objectives for supporting the startup scene in Vienna2.Establish a EUR 100 million fund to support the startup development phase by matching private investment with public grants3.Set up a one-stop shop to advise and support startups 4.Pool business angel investments via funds and platforms5.Provide tax incentives and state guarantees to make venture capital investments more attractive6.Reduce the administrative cost for foreign investment7.Add "entrepreneurship" as a subject to school curricula and study programmes8.Introduce an active application system for Vienna as a dynamic startup ecosystem

The study, which has now been completed by the four authors, Prof. Harvey Goldstein, Dr. Dimitris Christopoulos, Dr. Verena Radinger-Peer and Dr. Sabine Sedlacek, represents a seamless continuation of an earlier study on obstacles to university startups in Vienna. This was also conducted at the MODUL University Vienna and once again proves the practical relevance of the university's focus on actively researching "startup ecosystems".

Original study: Making Vienna a Leading Startup Center of Europe. Authors: Harvey Goldstein, Dimitris Christopoulos, Verena Radinger-Peer, Sabine Sedlacek.

About MODUL University Vienna (status February 2017)

MODUL University Vienna is an international private university in Austria and is owned by the Vienna Chamber of Commerce. It offers study programs (BBA, BSc, MSc, MBA and PhD programs) in the areas of international business and management, new media technology, public governance and sustainable development, as well as tourism and hospitality management ( The study programs meet strict accreditation guidelines and, due to their international focus, are conducted in English. The university campus is located at Kahlenberg, in Vienna's 19th district. The research program at the Institute for Public Governance and Sustainable Development focuses on issues that deal with the main political challenges of the 21st century, such as the development and role of university institutions, changes in democratic processes and the sustainable use of resources.


Andreas Eder, MA
Head of Marketing and Communication
MODUL University Vienna
Am Kahlenberg 1
1190 Vienna, Austria
T +43 / 1 / 3203555 104
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Article published on 16.02.2017

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