Europe remains a hotbed for entrepreneurial potential – untapped at times, but then clogged again by multiple regulations. It’s tough; not only was EU funding down by 18% year-on-year at the start of 2023, but US funding is under threat too. French startups saw a major drop in US VC investment, falling from 40% in 2022 to 5% in Q1 2023. Europe’s current infrastructure just isn’t built to accommodate fast-moving innovation, despite being abundant with diverse talent.
Is Europe at risk of losing its talent?
It should be no secret that Europe is at risk of seeing its wealth of talent leave the continent for foreign shores, with the European Investment Bank estimating that around 75% of European high-tech companies in their late-stage development are acquired by non-European firms.
Take Parkwind, Belgium’s biggest offshore wind platform in the renewable energy sector which was acquired by Japanese utility company JERA last year for €1.55bn, or Metaco, the Swiss cryptocurrency custody startup acquired by US-based currency exchange platform Ripple, for $250 million in cash. This flood of investment from outside Europe could lead to workers moving out, too.
It’s compounded by the issue of a drastic reduction in available capital. Companies that successfully fundraised in 2021-22 and received high valuations may struggle moving forward if they want to access further capital. It’s not looking good, as many VCs anticipate that valuations will continue to drop. In some cases, companies could be more liable to crash as investors either look to get back their funds or reduce the volume they’re prepared to invest. All of this means it’s harder for those companies to attract and keep that crucial talent that could otherwise be enticed away to Silicon Valley.
To stop at-risk startups and their staff from looking elsewhere, Europe has some catching up to do. Markets such as the US and Asia create greater growth opportunities by being unified. Meanwhile, Europe, by nature of its number of countries, is fragmented much more by different languages and cultures and, of course, heavy regulation.
Speaking to Silicon Republic, Glory Eromosele, a senior associate at global startup network Techstars, even claimed a “culture of risk aversion” in Europe is leading to an absence of late-stage funding. This is creating a situation where Europe is rearing its startups, only for bigger, more practised markets such as the US to snap them up later and take workers with them. Still, despite this, I am optimistic that European entrepreneurs can create more opportunities for themselves, and help better the ecosystem its talent deserves.
Community on the road to support and success
It’s estimated that startups are most likely to fail in the first two to five years, and the longer the delay in establishing an effective support network, the more businesses, and brilliant ideas, will fail to get off the ground. Accelerator programmes are typically useful for providing support to younger founders, creating a dynamic ecosystem that helps them tap into communities for the first time, but there needs to be more opportunities in Europe than just these.
As the co-founder of a European tech startup, and just the second unicorn company to come out of Spain, I am passionate about the opportunities we give those startups on our doorstep. Europe’s startup infrastructure has long been flawed; in fact, it was the catalyst behind Glovo wanting to help the next generation of entrepreneurs through capital and access to networks.
Such networks help to connect founders to investors and those who’ve already successfully done it, bringing invaluable expertise, prestigious connections and resources. Want proof? The 2023 Startup Genome Scaleup Report found that scaleup rates increase when founders have up to 10 connections to local investors, vs when they have below five.
We formalised this concept through Glovo House, which exists to help the next generation of entrepreneurs. Startups should prioritise building these communities and learning from their peers to find the hidden routes to success they might not be aware of. Since Glovo House was created, nearly 50 startups have been founded by ex-employees, and together have raised over €130 million in equity and debt, valuing these companies over €550 million. Role model behaviour can contribute to the overall health and reputation of the entrepreneurial community, all while giving a young startup an especially competitive advantage.
The power of positive impact
Building the right networks and implementing eco-friendly practices encourages others to follow suit and adopt positive habits; it shows that founders are listening to and acting on the concerns of consumers and society. But that isn’t all that a positive impact should mean.
Non-market-related initiatives are important, but they must be as closely integrated into the core model of the business as possible – much like Glovo’s Impact Fund, an initiative to donate a part of each order to Impact & Sustainability projects, like reducing carbon emissions, supporting our Women in Tech programme or helping SMEs digitise their business.
If businesses focus on the impact they wish to have first, they risk setting themselves up for failure, and investors are less likely to see a credible business. It’s therefore important to think about growing the company first.
And don’t forget, by hiring more people you are positively impacting their lives and enabling them to feed into the wider economy and ecosystem. The stronger your business, the more positive impact you can have on a much grander scale.
Strength in ecosystems
Startup success is often intrinsically tied to the relationships they build. Hence, founders should carefully consider the partners they align with, ensuring they share similar values, goals, and a commitment to mutual success.
Europe already has a strong history of this, where entire ecosystems have been built around industries to spur growth, such as in the mobile connectivity industry in the Nordics in the late nineties and early part of this century, this created the foundation for a vast amount of tech entrepreneurs and companies coming out the region, even today.
It is in Europe’s best interest to acknowledge at last the development and growth that an entrepreneurial ecosystem could bring. We have a huge talent pool on our doorstep, and it’s high time we start empowering it to succeed. Though while we wait for Europe to catch up, startups themselves must make headway by seizing on the opportunities they have to bring their businesses to life. Then, it’s just a matter of sustaining it.
Read the orginal article: https://www.eu-startups.com/2024/02/the-eus-startup-landscape-is-ripe-with-opportunity-its-about-knowing-where-to-look/
