Quartz has figured out why Europe, in the presence of many promising firms, cannot boast of the presence of technological giants. There are no Ant Financial or Uber analogues in the region – but this is not unreasonable. The editors of AIN.UA provide an adapted translation of the material.
The two largest European companies – the Swedish Spotify and the German Zalando – have a total capitalization of about $ 42 billion. For comparison, the Chinese Alibaba is estimated at approximately $ 480 billion, and Facebook – at $ 550 billion. According to GP Bullhound, European technology companies compared between regions. , founded since 2000, are much inferior to competitors.
And this is especially striking when you consider that the volume of the EU economy is $ 17 trillion. This is comparable to US rates and more Chinese statistics. There is also no shortage of talent in Europe. What is the reason?
Manish Madwani, GP Bullhound Managing Partner, points to modest funding – there are significantly fewer fundraising rounds. But it is precisely generous investments from investors that help companies quickly master all the elements of a business in order to succeed.
The largest American and Asian technology companies, founded since 2000, attracted about $ 7.3 billion on average. In Europe, this figure is $ 1.6 billion.
But there are hints of a change in the situation. Nine companies, including fintech startups TransferWise and Klarna, raised $ 200 million or more last year. In 2013, there were only two investments of the same scale – and one of the rounds was Spotify. Given this, GP Bullhound names 5 European candidate firms whose capitalization could exceed $ 50 billion. These are Spotify, Zalando, Yandex, Delivery Hero and Just Eat.
Maria Scott, CEO of TAINA Technology, believes Silicon Valley’s special culture is even more important than access to investor money. She compares the ease with which you can get mentoring advice, help or advice from industry veterans with an “oasis” for entrepreneurs.
The startup ecosystem is especially important when business irreversibly takes a bad turn, and the founder is forced to sell the business or significantly underestimate his ambitions. A seasoned consultant can give the young leader the necessary advice so that he continues to struggle, says Scott: “You can easily get this from people who have happened to this many times.”
There are already serious attempts in London and Paris to recreate such a community. The same TAINA Technology is a resident of the Level39 technology hub, based in the Canary Wharf business district of London. Scott says such programs have a serious effect, but cultural change takes time.
Madwani from GP Bullhound says that initially there wasn’t a mentality in Europe that he describes with the “pay in advance” formula. But now the spirit of such a “gift” is becoming increasingly popular under the influence of superstar entrepreneurs from the Valley. The manager also points out that startups can be more open by the increased number of “unicorns” – companies valued above $ 1 billion. Now there are 69 of them in Europe (the UK is leading), and in 2014 there were half as much.
Risk and reward sharing
The venture company Index Ventures began its work more than 20 years ago and during that time invested in startups on both sides of the Atlantic. According to the observations of its leaders, one of the “key ingredients” of the Valley’s success is the tradition of giving options to employees, which allows modest startups to attract talents of the highest level.
This positive effect is looping – the success of millionaires from Google has helped to attract more bright minds into the ecosystem. In addition to the motivation to work harder, it also encourages coders not to leave the company in order to achieve a decent reward. Index Ventures even published a book that helps European founders navigate the confusing conditions of issuing options in 30 European markets.
The Paris Criteo platform has faced these features after expanding in the US and hiring employees. In Europe, this simply did not take root in the culture:
Job seekers in Paris asked us about free food, not stock options.
However, the company supported the idea of sharing the award and adopted such a practice. More than 50 of its employees became millionaires after the company entered the Nasdaq stock exchange in 2013.
Quartz also notes that we need to think about whether Europe really needs technological titans. Why are they? Facebook and Google, in the end, have almost become monopolies (if you look at the right angle) and governments do not fully understand how to regulate them. For the EU, this is not a new cause for concern – the Union tightens data protection laws and puts pressure on US companies.
Manish Madwani agrees that a number of Brussels officials would probably prefer that technology giants do not exist at all. But since the growth of such companies is inevitable, European regulators will be better off if key players are of appropriate origin.