Why are there no EU tech giants?

Welcome to my blog.

If you’re following me here on LinkedIn, it’s likely I don’t need to introduce myself. Since it’s the first time I’m writing something here, I would like my new readers to feel welcome.

So welcome. This is a space where I will share my thoughts on all matters that are important to me, which are quite diverse.

What moved me to start this blog was a need to find a better place to share. I’m hoping to find that space here, on LinkedIn. Business is changing fast in Europe and the world, and the tech sector, where I have made my home and career, seems to be the center of every conversation. I feel like my voice, as someone who has had the privilege of leading the work of high-impact teams throughout the last decade, could contribute to these debates, and LinkedIn seems to be the place to have them.

As a European, for starters, on why we seem to be trailing behind both China and the US. We have given up our role as leaders and seem happy to trudge along to the beat of others.

Why is that so?

While rich in potential, the EU tech market faces distinct challenges that seem to have caught it unprepared. I thought I’d dedicate my first blog here to exactly that issue.

The Current State of the EU Tech Market

It is important to note that I’m not basing this idea on simply my own perceptions. What separates the strongest US-based tech firms and their EU counterparts is not a gap.

It’s an abyss.

The revenue generated by the so-called Magnificent 7 is closer to two trillion US dollars than one, standing at $1,720 billion. Their European counterparts, on the other hand, have managed only $133 billion. While that’s nothing to scoff at, we are talking about different leagues.

For a while, European tech dreams rode on the startup scene, which seemed to be drawing spectacular investment and growing steadily. That too seems to have stagnated, with 2023 appearing to be a telling year for the EU tech sector. According to Atomico, a leading venture capital firm, there's been a substantial decline in investment, with European companies projected to raise around $42 billion, a sharp decrease from the $85 billion in 2022. This sharp reduction in funding affects startups across all stages, signaling a challenging environment for emerging technologies.

While some may call it a resilient market, to me the headline is that it is “resisting” when it should be trying to catch up.

Mindset matters

I am a firm believer that at some point we have to look at ourselves. We have to put down the Excel sheet and try to figure out what it is about the way we are that is keeping us from reaching our goals.

I do that myself very often. I sit with my notebook and I write, trying to get a clearer perspective of what I need to change about myself and work on. I think this exercise is useful for organizations as well, and maybe even societies.

Europe is afraid to fail. We are afraid to fail as a block, and we are passing that fear down to every institution and every individual out there. If you become as enmeshed in American entrepreneurial culture as I have in the last few years, you will think everyone around is fearless. Failing is natural. It’s part of life as someone that is learning how to start a business. There is no stigma associated with getting it wrong, and the freedom is there to help you get back on your feet in no time.

That fear of failure has ramifications everywhere.

Europe is addicted to regulation

It may seem like I have changed subject abruptly, but I haven’t. Have you ever heard of the Brussels Effect? EU law can be so complicated and difficult to get right that corporations all over the world often choose to just apply EU rules to their entire global operations.

Why?

Because there are so many rules that if it’s good in Europe, it’s probably good everywhere else too, and you don’t have to make adaptations.

This fun little anecdote has a very damaging downside, though. The EU’s paralyzing fear of harm, in any way, shape, or form, has led it to create a stranglehold of regulation that only large corporations with armies of lawyers and compliance officers can hope to successfully navigate. If you are a startup, part of your business is breaking things. Innovation is difficult. You cannot make something new if you are afraid of the unknown.

American companies are often the ones to get hit with major lawsuits under EU regulation because they are the only ones large enough to matter. If they had been founded in the EU, they probably wouldn’t exist by now.

MiCA may change everything

We have a real chance to effect change now. A real chance for crypto and blockchain tech to become Europe’s answer to the US’s tech supremacy before Asia in general and China in specific become comfortable and make it impossible.

MiCA (Markets in Crypto Assets) is a quality piece of legislation that does what legislation should do: it provides certainty while streamlining processes. Europe will be the first large market and region with a clear framework to operate. Europe has a real chance to lead over the US on crypto.

Next time, I’ll write about what I believe we must do to take advantage of this opportunity.

Sanja