Daniel Ek, founder and CEO of Spotify, announced that he plans to invest € 1 billion of his own money over the next decade in tech startups in Europe.
A public listing on the Stock Exchange. Values. New York Stocks and a market valuation of $ 43 billion.
Very few European tech companies make it onto the world stage. The entire continent has a single technology company valued at more than $ 100 billion: the venerable enterprise software company SAP. In recent years, Europe has produced a growing number of venture capital-backed companies with valuations in excess of $ 1 billion; Last year there were a total of 99, according to a report by venture capital firm Atomico, compared to less than 50 in just two years. earlier.
But the truth is that Europe remains far behind the United States and Asia in their ability to produce independent technology companies with global impact. In 2019 in the US, 78 company-backed startups crossed the $ 1 billion valuation threshold in just those 12 months. It remains true that many of Europe’s most promising tech companies end up being acquired by American or Asian tech giants or relocated to the United States for better access to both investors and clients.
Not all money is the same
While wealthy individuals and family offices have played a larger role as limited partners in venture funds in recent decades, the vast majority of venture capital funds in the U.S. come from pension funds and endowments. . . philanthropic and university. Just one giant pension fund in the US, the California Employee Retirement System (Calpers), had about $ 550 million committed to venture capital at the end of 2019, according to the Venture Capital Journal.
Meanwhile, in Europe, many pension funds, especially those affiliated with the government, have been banned from investing in venture capital because it was considered too high risk. This is beginning to change. Approximately 62% of European pension funds have created some type of private equity investment program and currently represent approximately 30% of funds committed to European private equity. But that compares to the north of 50% in the US.
The need for pensions to start supporting venture capital is even more acute in Europe because another large investor in American hedge funds – university and philanthropic donations – is almost completely absent in Europe, where these institutions are heavily funded. measured with public funds and have no significant private donations to draw from. in.
Startup bugs
Then there’s the other problem Ek pointed out: the lack of “inspiration” from the European founders. Somehow that problem is being fixed only thanks to people like Ek. While young European graduates once aspired to nothing more than nice and comfortable jobs in large established corporations with five weeks of vacation a year and the prospect of early retirement and retirement, many have now been bitten by the startup virus. It’s not difficult these days to find young entrepreneurs in Europe who want to grow big companies and get rich like Ek himself.
But it is not a fact that that kind of ambition produces tech giants that surpass the world. What the European founders seem to lack, to quote former US President George H.W. Bush, is “the question of vision.”
It is rare to find a European entrepreneur speaking about his company in the messianic “world-changing” language common among his brothers (and most of them are brothers) in Silicon Valley. The best you get from the founders of Europe is a promise to radically transform a particular industry. But a higher consciousness through software, saving souls download by download, Europe does not do that.
