There are many reasons for Europe's historic slow start out of the gate when compared to its US and even Chinese competitors. First off Europe does not have a history of "American Dream" like, rags to riches bootstrapped startups; traditionally major corporate powers have evolved from previous State owned or semi state bodies. There has been a level of entrepreneurial immaturity and this has often led to European start ups making poor decisions when it came to raising seed capital, organizational structures and dealing with VCs.
However a very interesting trend is beginning to emerge which may indicate that the Europeans have not only gotten their act together but are now beating the Americans at their own game. Not only are European companies now raising money at record levels but newly listed European tech unicorns are experiencing a 20% share price rally in the month following their IPOs compared to 6.7% for their American counterparts. One of the big reasons for this may be that European IPO valuations are averaging half the initial valuations of their transatlantic cousins. European Unicorns seem set on building their values on post IPO results rather than pre IPO blue sky!
However it is likely that there is much more than German conservative opinion or French risk aversion to these results. It is now commonly accepted that the future of "the internet of everything" is going to be mobile platforms; Europe can boast 237K professional mobile developers compared to 186K stateside. But it's not just in numbers that Europe has a competitive edge, in terms of both founders and employees Europe has some strong fundamentals, which are key to helping Startups succeed.
In terms of quality of corporate Founders Europe is developing a robust community of "serial entrepreneurs" with over 62% of founders polled in a recent Slush & Atomico survey responding that their current venture was not the first company they have created and led. Another interesting fact is that it appears that European entrepreneurs are becoming more and more comfortable with risk and failure. Europe is importing US style Chapter 11 laws for the first time, forced debt restructuring on reluctant creditors and debt-to-equity, the demands for all of which indicate that Europe's entrepreneurs are becoming a lot more comfortable with the idea of taking a chance and if it fails, taking another!
Aside from a blossoming community of entrepreneurs Europe's ranks of tech employees have a major advantage over their American contemporaries; the youth of Europe are firmly committed internationalists. Thanks to the Schengen agreement and the emergence of budget airlines Europeans grow up traveling early and then continue to do so frequently. They experience different cultures, are exposed to new ways of thinking and learn to adapt to changing circumstances quickly. All of which makes this crop of European tech stars ideally suited to life working with and for a startup!
This newly found confidence is having a dramatic change in the demographics of the world's tech startup map; 62% of European tech founders now express confidence in setting up and maintaining their corporate residence in Europe with only 12% expressing a need or desire to up sticks and relocate to Silicon Valley. This figure was dramatically different even 12 years ago when European tech stars so little hope of finding funding let alone success anywhere outside of the Santa Clara valley. And this change of perspective is having a dramatic impact on the statistics; for example consider the fact that London alone now has over 71K developers and Silicon Valley is home to 10K more developers.
It's important to examine the trends in education in order to forecast how these numbers will change over the coming decades. Europe is producing TWICE the number of STEM graduates as the US (and have done so consistently over the last 10 years). There is no longer any need for European startups to source highly skilled and experienced managerial or front line resources outside of the continent and MOST importantly these people are graduating in most cases with a FRACTION of the student loan debt as their American counterparts.
All of this has not been lost on the institutional investment and venture capital groups. Deal volume in European startups has doubled over the last five years, with the more telling fact that Series B+ or later stage financing has also doubled in the last two years. The word is out; European Startups have the right resources, proven leadership and a now proven track record of delivering for shareholders! The last remaining barrier for these Euro Unicorns in the making is gaining access to early stage capital on competitive/fair terms. Tune in to my next article where I detail how in this area too Europe is leading the charge!