Brain Drain: How Europe is fighting back

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Brain drain Europe

Editorial

To reach their full potential, the most innovative European start-ups often have no choice but to let American giants buy them. But this is changing. Click on the picture to read more

Where have all the start-ups gone?

America is all too attractive for Europe’s innovative technology, but there are ways to stop the haemorrhage. 

Europe’s politicians have been so focused on Brexit and the migration crisis that most will have failed to notice an upcoming and perhaps even more damaging hit to the EU’s economic prowess: the ongoing loss of technological know-how and intellectual property to the United States. It’s a threat that has crept up quietly, under the radar. But there is no doubting that when a European technology start-up is put on the block there is a strong chance it will be acquired by an American company. Silicon Valley’s finest – Google, Microsoft and Facebook – are leading the pack in buying up Europe’s innovators. How this may change, if at all, under the nascent Trump administration is anybody’s guess. But for the moment the numbers speak for themselves. In an analysis of tech acquisitions in 2014, market researcher Tech.eu found that 122 (or almost 37%) of the 332 European companies sold that year were snapped up by US-based firms. The next largest acquirers were Germany (40 firms), the UK (33) and France (30).

Over the years, though, the US tech haul in Europe has been even higher. In a detailed analysis of acquisitions from 2012 to 2016, the European Commission-backed Startup Europe Partnership, which connects innovators with major European corporations in a bid to improve the prospects for nascent tech firms, found that an incredible 44% of European start-ups were bought by American interests.

Does it matter in a globalised world? Well, yes – because whole new areas of emerging technology are at risk of being plucked out of Europe and developed under US control instead. To get a grip on just what it all means, and the high cost to Europe’s intellectual capital, you need only glance at the attrition this ongoing US shopping spree has had on one promising area of endeavour: artificial intelligence, a field currently led outside the US by the UK and Israel. From mid-2015 to early 2016, at least five super-innovative British AI start-ups were snapped up by US firms:


DeepMind
, the deep neural networking pioneer – whose technology famously beat the world Go champion – was acquired by Google for almost $500 million;

Swiftkey, a maker of predictive, swipe-based touchscreen keyboards, went to Microsoft for $250 million;

Magic Pony Technology, which develops computer vision and image clean-up algorithms, was sold to Twitter for $150 million;

PredictionIO, which has engineered an open-source machine learning platform, was bought by cloud computing platform Salesforce for an undisclosed sum;

VocalIQ, maker of a high-fidelity speech recognition AI, was purchased by Apple for more than $50 million.

Multiply this AI activity across all technological domains and the know-how losses could be profound. Across Europe, just five American firms – Amazon, Apple, Alphabet (Google), Microsoft and Facebook – accounted for the acquisitions of no fewer than 52 firms between 2011 and 2016. Other major league American buys included Microsoft snapping up Skype for $8.5 billion in 2011. Skype for Business is now an essential component of Microsoft’s teleconferencing and HoloLens products. Knocking that deal well into touch, however, was US-based mobile phone chip maker Qualcomm’s $47 billion acquisition of NXP Semiconductors of Eindhoven in October 2016. A maker of automotive and secure-payment card microchips, NXP was a European corporate champion, having previously been the semiconductor division of Philips.

It is not a situation that Europe can allow to continue unabated. After all, observers ask, what is the point of EU universities teaching and developing engineering talent and generating valuable patents only to have the revenues, profits and jobs that stem from such EU-nurtured technology benefitting American interests? On the plus side, some bright minds of Europe’s top technology-creating universities are addressing the issue by putting forward new ideas, including ambitious tax plans and changes to the patent system. But it will take much more than a few incentives to create a European Google, Facebook or Amazon. What’s needed, say many experts, is a change of culture and attitudes. Not only venture capitalists but major institutions like the European Investment Bank and the European Commission should confidently back youthful entrepreneurs, be far less risk-averse and shed their hostility to rapidly earned wealth. “What Europe needs are more fertile conditions for tech-driven entrepreneurship which will not only help to keep European inventions in European hands, but also attract more non-European entrepreneurs”, says Georges Romme, chair of entrepreneurship and innovation at the Technical University of Eindhoven (TU/e). At the Technical University of Munich, Ann-Kristin Achleitner, a professor specialising in entrepreneurial finance and technology transfer, agrees that addressing the loss of European start-ups to the US is crucial. “These trade sales to the United States are too common”, she warns. “We have quite a lot backed up in the technology pipeline and we clearly need to better leverage the transfer of that technology to create start-ups that stay in Europe. If you move ownership of companies abroad, you also move control of jobs.”

No profitability without a huge market

So, what can be done? Just what is the attraction of the US? It will help to go back to basics. Starting a business is all about hard work: entrepreneurs have to dream big, define their unique selling point, ram it home, revise that idea multiple times in the face of user feedback (known as “iterating” in start-up jargon), obtain initial seed funding and then get the firm off the ground.

It’s when a company begins to succeed that predators begin circling. This is when the start-up needs further investment, and possibly a complete buyout, so that it can hire more people and scale up into a bigger company (simply known as “scaling”). And it is worth remembering that the point of running a company is not to grab headlines in Wired or Handelsblatt with your cool gadgets but, ultimately, to make money.

“The ideal long-term metric is profitability”, says Rashid Mansoor, a London-based tech entrepreneur:

“Becoming profitable requires scale in a large market, and frankly the US is a single huge market, while the EU is much more fragmented.”

As there are many more mature tech companies in the US, with deeper pockets and a greater appetite for technology, it follows that there will be a higher probability that a start-up is bought by a US-based giant. And that is particularly the case when there are major synergies between the buyer’s tech and the target’s – as with Google’s extensive AI research and that of DeepMind.

Unfortunately, America’s success at buying EU start-ups seems to breed still more success. “Since there have been fewer large exits [sales of companies] in the EU, the ecosystem is less well-geared for large exits or acquisitions”, Mansoor explains. “Successful EU companies are more likely to be bought out all the sooner by US-based giants.” This in turn means that the likelihood of a giant – like Google, Microsoft or Apple – emerging in Europe is diminished.

The EU’s Startup Europe Partnership acknowledges that “continental Europe currently does not create new growth businesses as well as other parts of the world, Silicon Valley in particular”. And it is also attempting to plug start-ups into Europe’s major corporations – heavyweight industrial firms like Unilever, Telefonica, and Orange – in a bid to try to keep innovators thinking European when they seek investors.

But there is another level to all this, and it goes to the heart of the difference between America’s “go-for-it” approach and Europe’s staider view. The fact is, say some commentators, the European establishment has a deep-seated attitude problem when it comes to accepting the leaps of faith necessary for deep innovation to flourish.

 

Expert Ann-Kristin Achleitner believes that Europe needs to better leverage technology to create start-ups that stay on the continent.

Searching for European hotspots

Other cultural factors are at play, too, says Dominique Foray, an expert in the economics of innovation at École Polytechnique Fédérale de Lausanne. “There’s a paternalistic management culture that emphasizes control over local empowerment and delegation and that is incompatible with fast growth firms”, he says. On top of that, a fear of the stigma of failure and a general lack of recognition of entrepreneurs leaves Europe behind in the hard-nosed business stakes. “There are many obstacles to emerging firms in Europe and this generates an incentive to move and find a better location.”

That said, attitude is beginning to improve as innovation hubs take off. “Some of these obstacles are slowly being removed thanks to the development of rich and powerful start-up ecosystems”, says Foray. He has a point: Berlin, for instance, has become a major tech hub. TechCrunch, a venture capital tracking site, says one start-up was being founded there every 20 minutes last summer, after the UK’s Brexit vote.

Like Foray, TU/e’s Romme sees innovation hubs as crucial and wants to see many more of them, perhaps in towns and cities laid waste by the departure of legacy industries. “I’m talking about places that can model themselves after rustbelt cities,

such as Akron and Detroit, that are now leading hotspots for tech-driven entrepreneurship. These regions are much more important for the current US economy than Silicon Valley”, Romme says. “There are a few European hotspots, such as Dresden, Berlin and Eindhoven, but Europe needs many more. The EU therefore needs to grow the number of smart locations if it wants to keep the best entrepreneurs in Europe.” Scandinavian countries like Sweden or Denmark could lead the way with early encouragement of entrepreneurial culture. “Schools, including primary schools, and universities have put innovation and entrepreneurship on their curricula”, says Søren Salomo, professor of Management Engineering at the Technical University of Denmark. “For example, computer games simulating start-up challenges have been introduced to new students. This action alone can’t explain increased start-up intentions, but together with other measures these countries have achieved sufficient critical mass to establish a sound environment nurturing more start-ups.” The results are encouraging: Sweden has the second highest number of unicorns in Europe, while the World Bank has listed Denmark amongst the best countries for entrepreneurs.

Mansoor, the London entrepreneur, has experience raising investment for start-ups at multiple stages: he founded AdBrain, which uses agile software to track e-commerce customers’ buying preferences across their devices, and he is now CEO of Hadean, which has written impressive software that cuts the time of writing computer algorithms by months – and the costs by millions of dollars. He has just closed a round of financing for Hadean in which he successfully sought European investors with “risk appetites similar to Silicon Valley investors”. He wanted them to be in it for the long term. “This is generally an atypical approach for EU investors who favour lower risk and shorter-term exits”, Mansoor says. However, for his next round of financing he will be approaching US investors as well. Perhaps Mansoor has hit on the right answer: using a mix of European and US investors with the right attitudes to long-termism and risk. At the same time, TUM’s Achleitner says Germany’s large corporations are tuning in to the innovation that can be brought in by acquiring a start-up. “Germany is changing. Big companies like Siemens and Bosch and others are looking much more at companies they can buy. They play a key role in the ecosystem and are very important candidates as buyers of innovative start-ups.” Whatever the ultimate answer, doing nothing to improve Europe’s lot is not an option. As James Wise, a partner with Balderton Capital, a London technology venture fund, says: “Unless we look to protect and nurture our technology companies in the same way we would do our energy or defence companies, we run the risk of losing a huge source of economic growth.”

Innovation brains from Tech Universities seek tax clarity and smarter patenting

European start-ups will be better able to innovate and scale up their operations when the EU levies similar corporate taxes across all the member states and when the European Patent Office does more to ensure that patents are granted only for truly novel inventions. So say a number of professors from across the EuroTech Universities Alliance in a discussion paper.

The alliance comprises the Technical University of Munich (TUM), the École Polytechnique Fédérale de Lausanne (EPFL), the Technical University of Denmark (DTU) and Eindhoven University of Technology (TU/e).

The chief idea of the discussion paper is to make Europe a “powerhouse for innovation and economic growth” by 2040 by developing what Georges Romme, an innovation expert at TU/e, calls “more fertile conditions for keeping intellectual property in Europe”.

Reward inventors

Specifically, the experts of the alliance want the EU to standardise tax systems across all member states. Because governmental and EU innovation policies are based on subsidies, tax incentives and collaborative research grants, they believe providing a level playing field on the taxes entrepreneurs will face across the EU bloc will help. Why? Because firms will not get nasty surprises when they scale up and set up operations in different EU countries. In addition, says the group of professors, a fair, single-rate tax system, based on consumption rather than income, would help put a stop to the industrial-scale tax evasion revealed in the Luxembourg Leaks and Panama Papers. Such evasion, according to them, places “an enormous drain” on the resources available for innovation.

Rewarding inventors properly is key, too. The experts recommend to the European Patent Office to modify its “efficient” approach to examining and granting patents in favour of one in which it significantly raises the bar on the claimed “inventive step” needed to gain a patent. Too often, they suggest, companies are getting away with what Americans call “patent trolling” – filing not-very-inventive patents only to deter rivals from investing in their area of endeavour. “This ‘strategic patenting’ is aimed at aggressively blocking business ventures pursued by others and extorting royalties where possible”, says the group of experts.

By Paul Marks @PaulMarks12 


Successful and resolutely European

Not every start-up wants to move to America. Here are four that have remained loyal to their home turf.

Martin Lorentzon co-founded Spotify, the global leader for music streaming services. Despite several offers, the company never left Sweden for the US.

Switzerland the first unicorn

EPFL spinoff MindMaze specialises in combining virtual reality, brain imaging and gaming technologies. Currently offering proprietary neural rehabilitation VR headsets to treat such conditions as strokes, CEO Tej Tadi told The Economic Times: “Our big vision is that five years from now every device should have a MindMaze chip in it.”

In 2012, MindMaze raised $10 million from governments and private investors who valued the company at $100 million. Just four years later, the Swiss company joined the unicorn ($1 billion + valuation) club.

Sweden streaming but not leaving

With 100 million users, Spotify is the world’s leading music streaming service. So, it’s hardly surprising that Martin Lorentzon (@MartinLorentzonand Daniel Ek (@eldsjal), who co-founded the company in Stockholm 10 years ago, have received tempting offers from American suitors.

So far, Spotify remains resolutely independent and Swedish. Even so, Lorentzon and Ek recently penned an open letter threatening to leave the country if certain education, tax and housing issues are not addressed.

France a thriving tech ecosystem

Fred Mazzella co-founded Paris-based ridesharing service BlaBlaCar 11 years ago and “due to the size of the country, which necessitates regular long-distance travel for millions, the French people welcomed us with open arms”. While Mazzella complains that the EU is not truly harmonised for tech businesses, “Paris has been a real asset for BlaBlaCar’s growth”.

He adds: “The city has a blossoming tech ecosystem, filled with top talent and like-minded entrepreneurs, and has also become increasingly attractive to new businesses and investors.”

Denmark: high wages, skilled people

With 500,000 new reviews posted each month, Trustpilot is the website the world visits to post and read customers’ opinions of online businesses. This success is particularly impressive considering the high wages, steep taxes and extensive employee legislation Peter Mühlmann faced in Copenhagen when he started the company in 2007. He cites Europe’s educational levels and work ethic as “an important factor” in Trustpilot’s growth. “We have considered moving our headquarters outside the EU”, he says. “But the environment for people with good ideas is vibrant and very encouraging here.”

By Benjamin Skuse 


Keeping innovators at home

The European commission turns its attention to four key aspects of the problem. 

People — Better connections

The Commission’s 2016 Start-up and Scale-up Initiative tries to make it easier for start-ups to find the right people. Various local and regional communities exist to connect with investors, business partners, universities, new staff and research centres, but efforts are fragmented. This year, the Commission plans to reinforce Startup Europe, which will connect various start-up communities and bring greater coherence to EU initiatives. Meanwhile, Enterprise Europe Network will provide specific advisory services through scale-up advisors, innovation brokers will offer improved access to public procurement, and a number of national, regional and EU-wide schemes will promote and encourage entrepreneurship, management and innovation skills.

Finance — More venture capital

European start-ups are finding seed capital (€1 million or less) more easily, but the big money (€25 million plus) needed to go global remains elusive. In general, US investors spend six times more than their European counterparts. With no Google or Microsoft to fund innovative companies, European governments have filled the void. “The EU is making access to finance easier through loan guarantees, business loans, microfinance and venture capital”, explains Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness at the European Commission. Together with the European Investment Bank Group, the Commission is launching a pan-European Venture Capital Fund-of-Funds, expected to raise a minimum of €1.6 billion for businesses aiming to take on Silicon Valley’s giants.

Culture — Changing attitudes

The American Dream runs deep in Silicon Valley, galvanising entrepreneurs to believe they can accomplish anything if they put their minds to it. The same cannot be said for Europe, where a risk- and failure-averse culture, compounded by draconian insolvency laws, high taxes and complex regulations, generally persists. This stereotype is changing: innovative start-ups are popping up across the continent, new hubs and accelerators are helping businesses grow, and entrepreneurial spirit among young people is rising. According to a recent study, 50% of 18–24-year-olds want to become entrepreneurs. “Today’s European start-ups can become tomorrow’s global success stories”, underlines Katainen. “Our policies aim to provide the platform and support to encourage this growth.”

Regulatory compliance — Improved information

“Information about national and EU rules may often be dispersed and difficult to digest”, says Katainen. “Understanding all the tax, company, labour and other requirements is a real challenge, especially for a start-up.” Add to that the fact that taxes are generally high, 24 official languages are spoken, and each country has its own idiosyncratic labour and other laws, and it is clear that operating in multiple European countries can stifle a company’s growth. In response, the Commission will put forward proposals later this year for a Single Digital Gateway which will offer easier access to information and assistance to navigate regulatory requirements, as well as a new electronic one-stop-shop European Services e-card, which will make it easier for providers to offer services abroad.

By Benjamin Skuse 

 


The tech competition is everywhere

Most governments are eager to attract innovative start-ups because they can be drivers for economic growth. Here are some of the approaches they’re trying.

FRANCE

Increasing visibility

The government launched French Tech in 2013 to designate places that support start-ups. Currently there are 14. French Tech is also a brand that start-ups can be associated with. The goal is to boost France’s international recognition.

Success►In 2016, France had 94 start-ups in the Fast 500 awards, sponsored by consultancy and audit firm Deloitte to reward the fastest-growing innovative companies.


IRELAND

Saying goodbye to taxes

In 2016, the Irish government announced new initiatives, including complete tax exemption for three years. After investing, an entrepreneur can also receive an income tax refund of up to 41% for the six years before the investment.

Success► Ireland is one of the best countries for start-ups, according to a 2016 World Bank report.


DENMARK

Attracting new residents

Since 2015, the Start-up Denmark programme has allowed entrepreneurs to request residence and work permits for people from outside the European Economic Area. The permit is valid for two years, and can be extended for three years at a time.

Success► Denmark is the third-most welcoming country for entrepreneurs, according to a 2016 World Bank report.


GERMANY

Encouraging venture capital

To improve conditions for venture capital, the government has created several funds with a total amount of almost €2 billion. In 2016, the annual funding limit per investor doubled to €500,000.

Success► Berlin alone has nearly 2,500 technology start-ups.


SWITZERLAND

Creating public-private partnerships

Banks, airlines, media and government are among the members of Digitalswitzerland, an organisation created in 2015 to encourage the country’s digital transformation. Thanks to Digitalswitzerland, start-ups can receive coaching sessions and enjoy easier access to funds.

Success►For the past three years the Global Innovation Index of the World Intellectual Property Organization (WIPO) has ranked Switzerland number one.


UNITED STATES

Making billions available

The Small Business Administration, created in 1953, has launched two investment funds of $1 billion each through its Start-up America programme. One is for companies operating in areas experiencing economic hardship, while the other is for businesses in their early stages.

Success► In 2016, the US ranked fourth on WIPO’s Global Innovation Index.


CHILE

Starting up in one day

Aspiring entrepreneurs can create a start-up in one day. Once they decide on the legal entity or the name of the company, a document is sent directly to Chile’s tax authority. The goal is to make entrepreneurship more accessible. Until 2013, entrepreneurs were required to have lawyers draw up their documents, which then needed to be certified by a notary.

Success► A 2015 report from start-up accelerators Gust and Fundacity ranked Chile among the top five countries in the world for start-ups.


 

UNITED ARAB EMIRATES

Building a fintech hub

To attract start-ups in financial technology, the Abu Dhabi government has implemented “sandbox” legislation allowing new companies to set up under flexible conditions.

Success►  The entrepreneurial community Magnitt, active in the Middle East, announced some 20 new fintech start-ups in the country at the end of 2016.


CHINA

Designating a town for start-ups

Dream Town is the name the government of Hangzhou, in eastern China, gave to a neighbourhood created specifically for start-ups in 2014. Entrepreneurs in Dream Town enjoy free premises for three years, as well as government subsidies up to €420,000.

Success► In 2015, the incubator Seedstars ranked China the best country in the world to create a start-up.


SINGAPORE

Financing through credits

The government put in place a microcredit programme allowing businesses to finance their daily operations. Another programme grants loans of up to $10 million for companies purchasing premises or important equipment. Borrowing allows entrepreneurs to raise funds without giving up equity.

Success► Singapore is the best country for start-ups, according to a 2016 World Bank report.

By Julien Calligaro @juliencal │This article was written with the help of Erik Stam, professor of entrepreneurship at the Utrecht University School of Economics 


Europeans who have returned

Home is not just where the heart is – increasingly, it’s also where you find the innovators, the money and the quality of life. 

Italian innovator Stefano Bernardi has been involved with various start-ups in Silicon Valley. Now he wants to start a venture-capital company in Europe.

Italian innovator Stefano Bernardi has been involved with various start-ups in Silicon Valley. Now he wants to start a venture-capital company in Europe. While the dynamic US tech scene remains the epitome of innovation for many ambitious entrepreneurs, some Europeans are choosing to leave it behind.

High-profile returnees include Florian Jourda, the main architect behind content platform Box; Fred Destin, an influential venture investor and start-up mentor; and Lars Fjeldsoe-Nielsen, ex-head of Dropbox, Uber and Whatsapp. And they are just the tip of the iceberg. Roxanne Varza, director of the world’s largest start-up campus, Station F in Paris (opening in June 2017), says Europe is starting to tempt back its digital diaspora. “It feels like the beginning of a wave of people coming back from Silicon Valley”, she says. “Rising prices and the current geopolitical situation mean that it is no longer the ideal place to be.”

Cheap but good engineers

Varza, herself originally from San Francisco, argues that Europe now puts up a convincing argument for founders mulling over a return. First, Silicon Valley’s high costs are becoming prohibitive. “A software engineer’s starting salary in the Valley is like $200,000, whereas in France it’s somewhere between $40,000 and $50,000.” The rise in European investment volumes is also compelling. Varza reports that French start-ups raised €350 million in November 2016, three and a half times the monthly average. Despite uncertainty caused by the Brexit vote, €12 billion was invested in European start-ups in 2016, seemingly small change compared to €58.6 billion in the US, but comparable to 2015’s EU investments, unlike the US’s 20% decline.

“I think overall, the entrepreneur culture is about to take off in Europe. It’s becoming so trendy now. People who want to work in start-ups realise they can actually live that entrepreneurial life in Europe, which wasn’t necessarily the case before.”

Stefano Bernardi made a name for himself in the Valley as co-founder of cash flow start-up Kickpay and later the Mission and Market angel fund. But in 2016 he returned to Italy with his wife, Elena Petrucciano, who is also a serial founder and business developer. Many reasons were behind the move, most relating to family, quality of life and the cost of living in San Francisco, especially for anyone planning a “non-employee-for-life life”. But he says the opportunity to apply everything they had learned from years in the tech forges of San Francisco to new endeavours in Europe also inspired them to return.

Bernardi, who is looking to launch a new venture in 2017, cut his teeth with San Francisco gambling start-up Betable, getting a valuable overview of early-stage growth and the chance to dabble in all areas of the company as it jumped from two to 35 employees. “Going through the seed accelerator Y Combinator and founding my own company were pretty great experiences. Then I tried to learn as much as possible and get a wider view by investing in more than 45 companies over there.”

Now that he’s back, he sees issues around European start-up capital “being solved fast” and contends that the main thing Europe is missing is trickle-down talent in sales and marketing. “Unfortunately, there haven’t been companies like Google, where talent can be trained and then deployed in early stage start-ups, but that’s hopefully going to happen soon.”

Looking backAlmost three years ago, “Battle for the brains” was featured in our very first issue! 

Stay here and expand

Ivo Spigel (@ivospigel), co-founder of Tech.eu, spent five years interviewing founders for his book The European Startup Revolution and sees that “the gap is closing” between Europe and the Valley. “It’s not necessary to go to the US to succeed. You can build a successful global start-up from Europe while staying here and your start-up can have a substantial US presence, such as Soundcloud, or maybe have different strategies of international expansion.”

Bernardi agrees, noting that Europe has talent and diverse, distributed excellence centres aplenty, enough to compete with its American rivals and attract talent on its own terms.

“I think Europe has an enormous potential in terms of innovation, as long as it doesn’t try to copy the Silicon Valley model and instead finds its own way.”

 

The advantages of American cash 

Access to venture capital is becoming easier – but it’s not one-size-fits-all. 

The increase of US investment in European start-ups, alongside growing local capital, is welcomed by Northzone, a European venture capital fund that has raised more than €1 billion. Stockholm-based partner Jessica Nilsson argues that this opens the door for EU companies both to scale faster and to access the US – benefitting local tech hubs in terms of talent and knowledge-sharing without necessarily losing companies to an American acquisition. Says Nilsson: “We think there is benefit to even closer cooperation, which is why we opened our New York office, to help connect the ecosystems and our portfolio companies on both sides of the pond.”

Venture capital is commonly used to rapidly scale start-ups, often in the form of multi-million euro investments in return for shares. While European venture investment is on the rise and the European Union hopes to create a €1.6 billion fund, venture funding is not always suitable. Carlos Espinal, a partner with EU start-up accelerator Seedcamp, argues that the need for such funding in Europe’s fragmented market depends on start-ups having global ambitions. “In a small country like Portugal”, he says, “you could very well just scale it for the Portuguese market with angel funding, whereas you’re going to have to work on a global strategy from day one if you want to scale the company to the point where it justifies a venture capitalist coming in”.

For start-ups with international aspirations, VCs offer the hard cash, growth expertise and networks needed to scale. American firms in particular offer Europeans “very compelling” funding options. “The US has some of the largest funds and the most capital”, says Espinal, “but also a lot of experience from having helped companies like Google, Dropbox and others to scale”.

Despite the increased availability of venture funding, Nilsson believes that successfully scaling European start-ups comes down to making sure they’re ready for the leap. “Investors need to believe that the start-up has a strong chance in generating large returns for the fund”, she says, “which means they’ll need to see a large addressable market and a strong team to take it on”.

By Joe Dodgshun @JDJourno


 

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