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This week in Europe: Startup campus – trend or fad?

September 13th | #42
“If you are lucky enough to have lived in Paris as a young man, then wherever you go for the rest of your life it stays with you, for Paris is a moveable feast.” - A Moveable Feast, 1964
That quote comes from A Moveable Feast, one of Ernest Hemingway’s most acclaimed books. In it, Hemingway goes on and on about the importance of Gertrude Stein.

In 1902 she went with her brother Leo — with whom she later fell out — to Paris where she settled into a first-floor apartment in the Rue de Fleurus, just off the Luxembourg Gardens.

The Rue de Fleurus apartment soon became a literary salon and art gallery, a gathering of American expats and various artists, and a center of the emerging avant-garde.

The gatherings in the Stein home "brought together confluences of talent and thinking that would help define modernism in literature and art."

Last week, Finnish startup campus Maria 01 announced that it has begun the expansion of its Helsinki campus to become Europe’s largest startup campus.

The campus will expand from its current 10,000 sq meter space to 70,000 sq meter by 2023 and expects to attract approximately 650 new operators and new jobs for at least 4,000 people.

It'll look like this.

Impressive, right?

Coupled with all the buzz around Station F, startup campuses are all the rage nowadays. In a way, they're the modern version of the 27 Rue de Fleur apartment, but on steroids.

Today we are going to go over why they work, and why they don’t, and whether your city should build one.

A startup campus around the corner

We already covered Maria 01, but that's only one in a long list of startup campus in Europe.

  • Station F. Everyone knows Station F. After all, they advertise themselves as the largest startup facility in the world (and they are). With more than 30 startup programs, 35 public administrations, 40 VC funds, 4 mentorship offices and 600 events per year, STATION F quickly became the center of gravity for the French tech scene.
  • Factory BerlinInspired by Andy Warhol’s famed Factory in New York, Factory Berlin brings together the brightest minds from tech, politics, arts, and science into one place. 
  • Silicon Allee. From the company that operates Factory Berlin, Silicon Alle is a community of international startups based in Berlin’s central tech cluster. The Silicon Allee campus is a 7,500 m2 complex with small to XL offices, apartments, a cafe, a craft beer bar, and event spaces.
  • Factory Portugal. Factory, in collaboration with Portugal and Startup Lisboa, are working on a 12.000 m2 campus for tech companies on Lisbon's riverfront that will open in 2019.
  • Here East. This campus in East London leveraged buildings from the 2012 London Olympics to create one the most relevant communities for entrepreneurs and creatives in the UK. Over 3,800 people are working and studying on site and they get over 50,000 visitors every year.

But why are they popping up like Starbucks? 

The power of being the center of gravity

A startup campus tries to be many things, but most importantly, it aims to be the center of gravity in a community.

Its main purpose is to concentrate talent in one place, and kick-off the Gresham's Talent Law. As written previously, good talent drives more good talent:

Talent follows talent of a similar caliber, and when Good Talent is concentrated on a single geo area, money and opportunities gravitate towards that point as well.

Inversely, when Good Talent starts moving elsewhere, Gresham’s Law is applied: the bad drives out the good, which spirals down an entire organization (or Talent Market) until nothing but bad apples remain.
With that said, the logical conclusion is that a startup campus should be judged by the network effects it produces. 

Why?

With network effects comes support, and most importantly, serendipity. Here's Sam Altman talking about how Silicon Valley works:
“Silicon Valley works because there is such a high density of people working on start-ups and they are inclined to help each other. Other tech hubs have this as well but this is a case of Metcalfe’s law – the utility of a network is proportional to the square of the number of nodes on the network. Silicon Valley has far more nodes in the network than anywhere else.” - Sam Altman

Essentially, you can concentrate what happens city-wide in a place like San Francisco, but at a smaller scale. And by reducing the scale, you reduce the numbers of nodes needed for a network to achieve utility.

On top of that, the infrastructure provided by a startup campus lowers barrier to entry into the network, and lubricates the relationship between the nodes:

  • Office space
  • A powerful internet connection
  • Affordable food and coffee
  • Housing (in some places)
  • Staff
  • Access to investors
  • Access to talent
  • Money in the form of accelerators
  • Knowledge in the form of incubators
In other words, they make it easier-ish to start a startups and build a community around it.

One last, often underlooked reason, for a startup campus to exist is they are an outsized weapon for lobbying. Politicians and law makers like tangible stuff. Stuff they can take smiling pictures with. And there is nothing more tangible than a startup campus the size of the Eiffel Tower laid down.

Macron at Station F
It's impossible to argue that a startup campus isn't a net positive for any startup community. But the real question is – should you replicate it in your city?

Should your city build a startup campus?

If you are a big city like Paris, where you can feel the momentum, but everything is scattered all over the city, with not one identifiable hub where everyone gravitates towards, absolutely.

Not only it promotes network effects but corporates and politicians, which many startups need, like to see tangible stuff. A big ass fancy campus they can take pictures from is tangible enough.

But if you are a smaller city who has lost momentum, then a coworking space with free Nespresso and a bunch of corporate advisors won’t do the trick. 

In an interview with Tyler Cowen, Sam Altman talks about what he’d do with $200 million to resucitate his hometown, St. Louis:

“No, literally what I would do is make a venture capital fund, get really good GPs to do the advice, and fund the companies to come be in St. Louis…. I would just invest in them on the condition they move to St. Louis. We talked earlier about the importance of a network effect. Rather than do this for one or two companies at a time, I would do it for enough at once, get them all in one part of the city to form something like what Y Combinator has done here.” - Sam Altman
I happen to agree.

I’ve written in length about Graham’s Law for talent, and discussed about the power of talent loops. Therefore, the best way to spark the startup flame in an unsuccessful city is to bring enough smart people to the same place. Enough that you can see the change, and sense the energy.

At the end of the day, it all comes down to opportunity cost. You can invest $200 million in a fancy campus with a cool coffee shop, or in 100 hyper-growth startups.

Your move, chief.

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An interesting take on the European society vs. the American society as a whole, not just San Francico. 

Fundraising & Acquisitions 💰

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