From Atlantic divide to democratising venture

Earlier this week I was going through one of those good ol' intellectual rants with my dear friend Paulo about crypto, capitalism, the world's bio capacity, and any other topics.

But one of the topics we ended up conversing quite a bit about, and which stayed in my mind, was that of Europe's Brain Drain. Companies like Stripe, UiPath, Databricks, and many other, all founder (or at least co-founded) by Europeans, are considered some of the fastest growing tech successes, and extremely valuable companies, of the USA ??♂?.

Many driven and successful Europeans are creating extremely valuable companies in the USA. I argue that this reflects one of the largest brain drains we've ever witnessed, and that we are loosing valuable innovations.

Immigrants born in Europe (...) are more than five times as likely as the average native-born US citizen to have created an innovation in America

Information Technology & Innovation Foundations

In fact, there is an almost 50/50 chance that successful European tech companies are acquired by American companies. Meaning, that American companies acquire almost as many companies as European companies do.

Why is this even worth discussing? Well, because acquisitions by American companies mean that the original shares of the companies are bought and are now part of company skewed towards maximising the value for its (American) shareholders.

All of this made me recall an article I wrote earlier this year for a leading newspaper in my home country, Portugal, which I repurpose (and translate) below.

Europe ("Portugal" in the original version) needs innovative companies

Innovations of the Fourth Industrial Revolution, namely new technologies such as AI, 5G, robotics, nanotechnology, and others, have the potential of responding to social, economic and environmental challenges of this century. Fortunately, the paradigm has been changing. We've been witnessing greater and greater propensity of markets and society in general to adopt new technologies.

We can, and must, be optimistic. Not only for the technologies that are now arriving in our daily lives, but also for what is to come. But we can't kid ourselves. Technology brings concerns at the level of competition, privacy, security, even democracy itself, among many others. The impact of technology is tremendous and global, with repercussions at the geopolitcal level.

World powers (a term once reserved for countries but now applying to a handful of corporations) use technology to exert power and political influence. We are witnessing the high point of the power of technologies over (freedom of) expression. Regardless of whether we may agree, or disagree, with this particular statement, it makes us think. It is, without a doubt, a new world, the one we live in.

Different approaches, and cultures, to technological development, and particularly to the use of data, can threaten the fragile geopolitical balances in which we live. The race between the USA and China over 5G is a clear example of this. But, more worryingly, it is an example of how Europe cannot be left behind in the race for technological development.

"If you can't invent the future, the next best thing is to fund it"

Despite the potential of the European Single Market, our startups find it difficult to grow to the same extent and scale as their American counterparts. The availability of capital is one of the main catalysts for the development of innovation and technological development ecosystems. The VC industry in Europe has less capital and continues to have a harder time attracting it. On average, venture funds in the USA are 2 to 3 times larger than those in Europe. What's more, there are still many barriers to cross-border investments. But Europe needs innovative companies, capable of growing and developing solutions at scale.

How can we then, in Europe, tackle this Atlantic divide in terms of technological development?

Now is the time for European Venture Capital

European VC is an unrivalled investment opportunity and it’s up for grabs for those with access. Europe remains the world’s largest single market with an open economy, stable political system, a proud history of innovation and a highly educated workforce. Many of its leading firms have lived through multiple economic cycles and know the US markets well. Europe is a rich ecosystem, with European VCs fully equipped to grow start-ups into global leaders.?

Europe has produced 72 new unicorns in 2021 — more than 3x that of China’s 22. Europe is also the fastest-growing region for VC investment globally, having attracted €49bn of investments so far in 2021 — exceeding China, the USA and all of Asia.?

European Venture is outperforming?USA

According to European Investment Fund (EIF) data, returns on European VC investments are on a healthy upward trend.?As the world transitions to an evermore tech-based economy, VC stands to reap the lion's share, with the best fund managers showering investors with returns.

The real opportunity isn't getting more money into Venture Capital, it's broadening the breadth of venture as an asset class

This is the vision we are pioneering at The European VC and, the reasoning behind the launch The Emerging VC - the newsletter and investment club that gives you access to the hottest Emerging VCs in Europe. At radically lower tickets than ever before.

It's time to democratize VC in Europe!