Will Europe overtake the US for Tech?
Unsurprisingly, US companies form the largest contingent of top tech companies, with Apple (1st), Microsoft (3rd), Alphabet [think Google] (4th) followed by the likes of IBM, Dell, Cisco, Intel, Facebook etc. Indeed, 8 out of the top 10 are from the US. Amazon was excluded from the list as the bulk of its revenues (but not earnings) come from commerce. Highest non US is Samsung with the other top 10 finisher being Hitachi.
Not a single European company in sight. The best independent European tech company, in terms of market value, is Spotify, valued at around $20bn, given that the likes of ARM are now not viewed as European owned. But even Spotify or ARM would need to be some 6X larger to make it into the top 10.
So what’s the problem with Europe? The US and Europe have roughly the same GDP, around €18.9 trillion for the EU and €18.3 trillion for the U.S. It’s not resource limitations either as the EU has a larger population, 507 million citizens versus 319 million.
Last month, an insightful report from Atomico concluded that Europe has thriving tech hubs in major cities, with record new funding, experienced entrepreneurs and a growing base of technical talent. Atomico is influential partly because it has some of the largest tech funds in Europe but also because Its founder and CEO is Niklas Zennström, the serial entrepreneur who co-founded Skype.
Atomico is bullish about Europe’s tech prospects, particularly for the “super unicorn” (i.e. value >£10bn) companies. Tom Wehmeier, Atomico's head of research who authored the report, commented that "The probability that the next industry-defining company could come from Europe - and become one of the world’s most valuable companies - has never been higher."
Dealroom, Europe’s largest fund tracking database reckons that capital invested in European tech companies is on track to reach a record this year, with $19.1 billion in funding projected through the end of 2017 - up 33 percent over 2016.
But there are headwinds. European tech startups need to offer employees more stock if they're going to scale to the size of companies like Google, Apple, and Amazon, according to research from venture capital firm Index Ventures. The Index report said employees in successful, later-stage European tech start-ups receive around 10 percent of capital, compared with 20 percent ownership in Silicon Valley firms. Yet their options are taxed twice as much.
And here’s the dilemma. European governments all want their tech sectors to thrive but as soon as tech companies grow significantly and way before they have levelled off at maturity, they start to get strangled by regulation and tax. Which is a shame as they’d have so much more to offer – to employees, customers, investors and even tax authorities – if they were allowed to properly grow up.
It’s not as if we don’t know what over-fishing leads to.
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