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Austria's competitive edge in AI: High living standards and rich talent pool

What makes a good startup location? Austria rivals other popular locations in terms of talent, networking, and funding, and throws in a moderate cost of living for good measure.
Austria's competitive edge in AI: High living standards and rich talent pool

London, Amsterdam, and New York are among the usual suspects when you discuss favorable places for setting up shop. They benefit from a well-educated workforce, a strong funding ecosystem, easy connections with other founders, and an attractive cultural scene.

On the other hand, all three are among the world’s most expensive places to live. For a fledgling company that relies on attracting top talent while not yet being able to pay top salaries, this can quickly turn into a major problem. 

Affordable high standard of living

Enter Austria. The small country in the Alps boasts much of what other startup locations have. E.g., a long history of AI innovation – the foundational research for speech recognition, for instance, was done by Austrian professor Sepp Hochreiter.

The country and its capital are large enough to support a strong startup ecosystem yet small enough to allow for easy and efficient networking. Austria has some nine million inhabitants, Vienna two million. 

What sets Austria apart though is its living standards. Both Austria and the city of Vienna regularly score highly on quality-of-life rankings, in fact, Vienna was once again voted the world's most liveable city in 2023 by the Economist Intelligence Unit’s Global Liveability Index. Combine this with relatively low costs of living and you get an environment that makes it easy to attract top talent. 

In the words of Florian Berger, CEO of Norway-based software provider and license consultant Crayon:

“Austria offers an attractive option for international talents thanks to its central location in Europe and high quality of life.”

Austria attracts AI talent

Clemens Wasner agrees. Wasner founded AI startup EnliteAI in 2017 and is also the co-founder of independent think tank AI Austria. “As a company, we can only ever be as good as the people we employ”, he says. “That is why, for us, Vienna is the place to be. There is a surprising number of highly qualified machine learning engineers and AI practitioners to be found here.” 

Part of this, Wasner says, is the country’s strong research offer — Austria is home to three highly selective research units called ELLIS Units. But lower demand also helps — there are currently no large Google or Microsoft offices in Vienna driving up demand for AI engineers.

The result — Austria’s thriving AI industry comprises more than 270 companies and boasts a 10 percent year-on-year growth rate for AI startups. 70 percent of these receive public funding. The sector benefits from an ecosystem with more than 50 universities and research institutes as well as more than 30 international players operating in Austria. 

AI made in Austria

  • Starting with a smart photo filter app, the former Austrian startup Kaleido evolved into a visual AI platform acquired by the globally operating design platform Canva.

  • Blackshark’s AI-driven technology enabled the Microsoft Flight Simulator to display the world’s entire surface in 3D. Microsoft invested €20 million in

  • Atlas: Using 3D generative AI technology, Atlas creates immersive virtual worlds across gaming, Web3, and entertainment.

A host of incentives

As if these were not sufficient reasons to consider Austria for setting up or relocating an AI startup, Austria’s funding and tax ecosystems further sweeten the pot. Over the course of two years, Austria is gradually reducing the corporate tax level from the original 25 percent to 23 percent in 2024. 

In May 2023, the federal government announced a package of measures for Austria as a startup location to promote entrepreneurial innovations. In the future, the possibilities for employees to participate in the company's success will be expanded with the new company form "flexible corporation".

Furthermore, Austria has developed a particularly attractive funding policy compared to many other nations, directly paying an uncapped research premium of 14 percent of R&D expenditures such as staff costs and much more to research companies. This not only applies to in-house research but also to contract research. In this way, about one billion euros in funding has been paid out in recent years.

“Austria’s public funding schemes are better than in other markets”, says Clemens Wasner. “For early-stage companies, access to non-dilutive equity-free funds is key.” 

At the top of this incentives list, the Austrian Business Agency (ABA) informs, advises, and supports companies and founders on their way to Austria — free of charge.

Events to look out for

Web Summit, November 13 – 16, Lisbon, Portugal

  • Web Summit will bring together more than 70,000 people, and the companies redefining the tech industry. Focusing on visibility, openness, and privacy, the Austria booth at Web Summit 2023 will be the ideal starting point for your business success!

  • For more information click here

Slush, November 30 – December 1, Helsinki, Finland

  • Slush is a not-for-profit building the world’s leading startup event and the largest gathering of VC, bringing together the who’s who in the ecosystem.

  • Look out for the master class "Green solutions made in Austria“!

  • For more information on the side events of Slush and registering click here

Lead image via the Austrian Business Agency - Photo: Eugenio Marongiu

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