The tech scene is a fast-paced, dynamic ecosystem wherein new companies keep popping up all the time. However, analysis of trends helps us better understand in which direction the sector is headed and how to make the best of it. Helping founders better understand current trends in the European tech scene is Index Ventures, a European venture capital firm. It has launched its latest playbook for European founders, which claims to help them navigate through the evolving transatlantic ecosystem.
Europe offers increasing talent and funding for founders
For its latest report, Index Ventures analysed the transatlantic expansion strategies of over 275 European startups over the last decade, and it also conducted an in-depth survey of over 100 firms. Their findings reveal that European tech firm founders are finding success by not relocating to the US.
Merely one in five, or 50 out of 275, firms chose to relocate their engineering base to the US. This is apparently since most founders now favour a small US R&D footprint. In addition, companies expanding to the US from Europe, before raising series A funding, have also reportedly fallen from 59% to 33% since 2018. The research attributes these trends to the increasing availability of talent and funding in Europe.
European tech ecosystem maturing
The European tech ecosystem seems to be maturing and strengthening, the report suggests. This is reiterated in the figures, which state that about 59% of European start-ups expanded, or moved entirely, to the US ahead of Series A funding rounds between 2008 and 2014. However, this number decreased to a third or by about 33% between 2015-2019.
Quoting data from StackOverflow, Index Venture says there are over 6 million developers in Europe. In comparison, there are 4.3 million in the US. This means founders don’t need to move to the US to access funding or talent. The matured tech ecosystem in Europe is also said to be pulling substantial investments. As per the report, investments in European tech companies have also increased from €13.06B to €29.3B over the past four years. In the same period, unicorns backed by European VCs also increased by a notable 200%.
“Fifteen years ago, building a major tech business in Europe was extremely difficult. With small talent pools and little available capital, founders were often forced to relocate their businesses to the US in the very early stages. Today, conditions are very different,” says Danny Rimer, Partner at Index Ventures.
“While for some founders, and certainly once a business reaches certain milestones, establishing a US base is a good decision, it is becoming increasingly costly and challenging. Meanwhile, Europe has many success stories, including businesses like Adyen and Spotify, which both hit $50bn valuations this summer,” he adds.