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Why Amazon’s courting start-ups around the world

Amazon opened the doors to its new working space near the heart of one of London's start-up hubs as it looks to strike up business for its cloud service.

The Amazon Loft is a seven-week pop-up space and is the first international version of the project after the e-commerce giant opened one in San Francisco and New York.

Amazon's cloud unit – Amazon Web Services (AWS) – runs the space which offers services such as technical sessions on its platform and bootcamps for start-ups.

"Start-ups will know about different cloud providers, but we would like to know what we can do for them," Zubin Chagpar, venture capital business development head for EMEA at AWS, told CNBC in an interview.

"We would like to show that if there are two guys looking to do a start-up, they can start with Amazon Web Services and when they become a one-, two, 10-thousand person company and they get that $10 billion valuation they can still use AWS. They can grow with us."


London hub

Amazon broke out the figures for its rapidly growing AWS business for the first time this year. Sales from the segment rose 81 percent in three months ending June 30 to $1.8 billion, from just $1 billion the same time last year. Netflix is among AWS's many customers

Amazon

But the cloud market is heating up with Microsoft, Google and Alibaba all trying to gain market share. As such, companies are all trying to get new business, particularly start-ups that rely on cloud computing to run their business.

The U.K. and London in particular is one of Europe's most vibrant start-up hubs, with a strong pick of financial technology – or "fintech" -- firms. Chagpar said that it "doesn't hurt" that fintech is a strong in London, but the diversity of start-ups in different sectors is what made the U.K. capital AWS Loft's first destination outside of the U.S.

"Healthcare is jumping …and you've seen great universities where new concepts are coming from too, including fashion which is very strong with some of the e-commerce start-ups too," Chagpar told CNBC.

"So I don't think there is any one particular industry but the fact that finance is doing well, makes it a very desirable place for everybody to be in too."


Funding problems?

The AWS Loft is located in between the London's financial center, the City, and Shoreditch – the home to a large number of tech start-ups. Chagpar said that an AWS Loft will also be popping up in Berlin, another start-up center in Europe.


Europe's ability to develop bigger start-ups is improving with the amount of unicorns – or companies with a $1 billion or more valuation –growing this year. While Chagpar said that venture capital funding and public markets remain strong in London which could help propel some companies to even higher valuations, the same is not true across Europe.

Last year, VC funding in Germany and the U.K. combined hit $5.5 billion dollars, but this was substantially below the Bay Area in the U.S. which saw over $24.7 billion of funding, according to EY.

"You might be able to get the seed and the series A, but what do you do when you need to get the two to five million? And right now there are few places around Europe where you can get that type of funding," Chagpar said.