This article is written by Nicolai Strøm-Olsen and Maria Amelie, authors of the book, Startup Migrants.

The economic downturn following the Covid-19 pandemic will lead to increased unemployment globally, as the International Monetary Fund (IMF) has recently acknowledged. Those most likely to lose their jobs are people with lower education, and especially migrants, women and youth.

For many, entrepreneurship will be the way out. Many will be more likely to start their own companies out of necessity. The challenging task will be to make these companies sustainable and profitable in the long term so they can create jobs in return.

By enabling and supporting local entrepreneurs, especially migrants, cities and communities will be able to recover faster from this recession.

About us

In 2017 we started on our quest for knowledge on the topic of migrant founders.

During the last three years, we have collected and analysed data to help cities to solve their challenges, and done more than 200 in-depth interviews with policymakers, entrepreneurs, NGOs and migrant founders. We wrote a book and ended up founding a startup ourselves. We are still figuring out what our scalable product will be, but in the meantime, we continue to talk to innovators and analyse the labour market, especially now.

Nine out of ten unicorn companies in the United Kingdom have at least one migrant, or child of a migrant, on their founding team

One striking observation is that cities with strong economic growth in the UK, Germany and Sweden also have a high level of migrant founders compared to the migrant population. To give some of the most spectacular examples: In 2018, 42 per cent of all limited companies in Malmö, Sweden were started by migrants — in Düsseldorf in Germany the number was 38 per cent, and in Berlin, it has been close to 50 per cent for the last 4 years. These cities all have a good talent pipeline to help necessity founders get access to knowledge, network and eventually some capital.

In this article, we highlight three ways of achieving this pipeline.

Acknowledge necessity entrepreneurs

For the past decade, European cities have been building an ecosystem supporting high-growth companies — also known as scale-ups — as they lead to the creation of high-productivity jobs.

However, migrant founders and entrepreneurs who start their own business out of necessity, for example, because they have lost their job, are barred from this ecosystem.

At the same time, job and welfare centres have often been left unaware of the existing start-up ecosystems in their regions. There is a need to connect the dots and support regions to make the most of the potential offered by this synergy.

This can be done by learning from best practice, and encouraging regions across the EU to create a coherent talent pipeline for entrepreneurs which needs to bring together a variety of stakeholders ranging from job and welfare centres, schools and NGOs to social entrepreneurs, chambers of commerce and the start-up ecosystem.

The pipeline should also include courses in basic entrepreneurship, accounting and insights into the local start-up ecosystems. This will empower all entrepreneurs, but migrant entrepreneurs in particular.

Acknowledge migrant entrepreneurs

When we look at national statistics, in most European countries, like Germany, UK and Norway, migrants are more entrepreneurial than non-migrants.

They become entrepreneurs out of necessity, rather than out of opportunity. Even so, they manage to succeed. Nine out of ten unicorns companies in the United Kingdom have at least one migrant, or child of a migrant, on their founding team. In Germany, migrant founders in family-owned businesses earn more than migrants with regular jobs.

Something as simple as having a multilingual guide on “How to start a company” in each EU Member State would make a big difference and create a pathway for migrant entrepreneurs to succeed

In Sweden, they have helped create 250.000 jobs, hiring an average of 3.3 people per company. Migrants in Germany have created 1.3 million jobs, which corresponds to 1.8 employees per company. What if migrants all over Europe were as successful as the ones in Sweden?

Resilience and willingness to take risks are among the main reasons for their success. They have to work twice as hard to build a new life in a new city. Rafael Bermejo, the founder of The Swedish foundation Internationalla Företagere Sverige (IFS) pointed out in our book, Startup Migrants, that for many economic security is an important driver. They hire more diverse teams than local non-migrant entrepreneurs and they usually have a broader international network and diaspora ties. This enables them to scale in other countries.

However, they tend to struggle with bureaucracy and business regulations. The EU guidebook to promote migrant entrepreneurship shows that most European countries don't have a proper country strategy for migrant entrepreneurship, in spite of their entrepreneurial spirit. In Sweden, Germany, the Netherlands and the UK social entrepreneurs help migrants get access to business ecosystems instead.

Something as simple as having a multilingual guide on “How to start a company” in each EU Member State would make a big difference and create a pathway for migrant entrepreneurs to succeed. The EU could support this effort and take a public stance on migrant entrepreneurship as a source of new business talent, which, in turn, would contribute to a more nuanced and positive perception of migrants.

Creating a European Limited Company

Our findings show that countries where migrants typically succeed have two things in common: they offer easy and affordable ways to start a limited company, which lowers the risk of hiring and expanding, and they provide ecosystems with readily available advice for entrepreneurs before, during and after the establishment of their companies.

Countries where migrants succeed are also countries with supportive ecosystems for necessity entrepreneurs

Finding countries that meet these requirements is not always simple. Germany has a great wide-spread ecosystem of job and welcome centres focusing on business creation. However, the costs of starting a company are much higher than in the UK for example.

Countries where migrants succeed are also countries with supportive ecosystems for necessity entrepreneurs. This is why governments need to acknowledge the importance of supporting small businesses, not just high-growth tech-businesses.

In turn, the EU could make it easier to start limited companies all over Europe by creating a European limited company (E-ltd), as a non-public alternative to SE(a public limited-liability company). That way migrants and non-migrant entrepreneurs with scaling ambitions would be able to establish themselves in different countries with fewer hurdles.

We believe that the main reason that this has not happened earlier is that the EU realised the potential of international SMEs later than the United States. This has led to different regulations on this in the EU, and they prioritised creating the SE for listed companies instead.

It’s high time to put necessity entrepreneurship on the European agenda and unlock the entrepreneurial talent that lies within the EU. — Nicolai Strøm-Olsen and Maria Amelie

This article was written for Ashoka’s Hello Europe policy initiative.

Startup Migrants is a book project turned into a startup based in Berlin and Oslo. We help cities to boost job creation. We are passionate about collecting and analysing data that can help cities to solve their challenges. Our data is collected from 15 countries, 45 cities and over 200 in-depth interviews with policymakers, entrepreneurs, NGOs and migrant founders.

(Picture credit: Unsplash)