Is Europe the new promised land of technology?
For more than 40 years, Silicon Valley have been the epicenter of digital innovation, while Europe have been forced to play catch-up as new technologies and markets have emerged. However, the recent U.S. immigration ban and the rising entrepreneurial activity and improving capital market in Europe might be weak signals indicating that Europe is emerging as the new technology powerhouse.
While capital markets in Europe are improving, the U.S. is slowing down
The European tech ecosystem is evolving rapidly, and both money and talent are flowing to the European tech industry. According to the London-based VC firm Atomico, there has never been a better time to be a European entrepreneur. In their report The State of European Tech 2016, tech investments in Europa in 2016 totalled at $13.6 bn, which is almost five times higher than in 2011. The amount of venture capital invested in Europe is still far below the $58.6 bn invested in the U.S last year, but while investments in the U.S. are dropping, Europe is seeing an increase in capital investments. Q4’16 resulted in a 17% decline in total funding in the U.S. from the previous quarter, while funding in Europe jumped by 22% during the same period (Money TreeTM Report, Q4 and Full-year 2016, PwC/CB Insights).
Entrepreneurs are returning from the U.S., boosting entrepreneurial activity in multiple tech hubs
Over the last couple of years, many European tech offspring have returned to their home continent. Among the most noteworthy are Lars Fjeldsoe-Nielsen and Florian Jourda. Fjeldsoe-Nielsen is one of the pioneers of mobile business development, and has held senior positions in Dropbox, WhatsApp and Uber Technologies. He is now based in London, working with investments focused on European start-ups. Jourda left his role as principal architect in California-based Box to mentor entrepreneurs in his home country, France.
The improved capital markets are fueling start-up activity in numerous European cities. Beyond London, Berlin and Stockholm, new tech hubs are emerging. Munich, Zurich, Lisbon, Madrid and Copenhagen are all cities to look out for in the future. Paris is emerging as one of the new hotbeds, with Facebook-backed Station F, the world’s biggest start-up campus, set to open in April, and venture investments approaching the level of Berlin and London.
European regulators are working to create a more entrepreneur-friendly environment
Historically, one of the European tech industry’s main challenges has been the complex regulatory environment, which hinders companies’ ability to both be profitable and to scale. While this is still a significant challenge, regulators are now taking steps to facilitate growth. In November 2016, the European Commission announced its Start-up and Scale-up Initiative, which aims to remove barriers that impede start-ups from scaling and improve the access to funding by boosting venture capital investments. In addition, several countries are also taking steps to fuel innovation. France recently announced its plans to launch the French Tech Visa, a visa that aims to attract entrepreneurs, engineers and investors.
Political turbulence is creating uncertainty in Silicon Valley
On the other side of the Atlantic, the new political reality is creating uncertainty. The recent 7-nation immigration ban led tech companies to scramble to call back employees form overseas and to provide legal advice and assistance. It is reported that more than 100 Google employees were affected by the order. In the wake of the ban, Uber CEO Travis Kalanick withdrew from President Trump’s business advisory council, and Amazon initiated talks with lawmakers and state officials to explore legal options to counter the executive order.
Will Europe’s ambitions materialize?
Europe is still far behind the U.S., both in terms of capital markets and in their ability to produce dominant tech companies. However, if the recent development continues, the situation might look different in the future. The current tailwind has raised the ambition level in Europe, and European entrepreneurs are now looking to take on their American counterparts. It remains to be seen if the ambitions will materialize.