Europe’s startup economy tends to be overlooked in favor of North America’s, especially on the western side of the Atlantic. As seasoned observers of the global tech industry know, that’s not really a fair position to take, but hey: Life isn’t always fair.
There’s a lot that individual European startups and early-stage funders can do to make their industries competitive with their US counterparts. Forward-thinking venture capital firms like Target Global have been highly supportive of the European ecosystem for years. From providing the necessary capital and resources for startups to thrive to leveraging their networks, expertise and experience, VC firms play a pivotal role in enabling European startups to scale rapidly and compete on a global level and will no doubt continue to do so.
However, the true work begins even earlier, with a detailed understanding of Europe’s competitive advantages. This understanding is essential for those who wish to convince funders and founders — within Europe and especially beyond its shores — that the continent holds more promise than most realize.
Here’s why Europe’s startup economy is underrated right now.
Europe Has a Broad and Deep Talent Pool
North America might be seen as the “shining city on the hill” for global tech talent, but Europe’s talent pool — and attractive power — is nothing to sneeze at.
In fact, as we’ll see, Europe benefits from both transitory and structural factors that make it an appealing destination for entrepreneurs, engineers, and other ambitious professionals born and raised elsewhere. For startups based on the continent, it’s just a matter of locating and tapping these reserves hiding in plain sight.
The Cost of Living Is Flat or Declining Relative to North America
Europe’s reputation as a high cost-of-living region is quickly growing outdated. Although certain western European countries remain quite expensive by global standards, the Iberian Peninsula and much of central and eastern europe stand out as bargains.
Even countries like Germany, Italy, and the U.K. are increasingly cost-competitive with the United States and Canada, thanks in part to a strong U.S. dollar and declining European housing and energy prices. This is great news for European recruiters hoping to attract talent from abroad.
Government Regulation Is a Tailwind for New, Forward-Looking Industries
Some founders take issue with Europe’s aggressive stance toward AI regulation, and they have a point. However, regulation has proved to be a tailwind for certain European “industries of the future,” especially those related to infrastructure and clean energy. For startups focused on these high-growth sectors, Europe is the best place in the world to build a business.
The Financing Ecosystem Is Maturing (And Decoupling)
For a long time, many European founders sought financing abroad, often from North America. This is quickly changing, however, with homegrown venture capital and private equity firms actively seeking deals in their own backyards. As interest rates fall on the continent in the next 12 to 24 months, funding activity could pick up.
Serial Founders Are Giving Back (And Staying Put)
A strong tech economy depends on the willingness of seasoned founders and financing partners to “give back” and support the next generation. Famously, this is how Silicon Valley works, and it’s happening before our eyes in Europe. Even better, the trend looks likely to continue as exit rates improve and the continent’s startup ecosystem matures.
A Turning Point for European Startups?
Slowly, quietly, the European startup economy is gaining the recognition it has always deserved. Is this a true turning point, or one more false dawn for those of us who believe in the continent’s potential?
It’s too early to tell, but one thing is certain: The more positive stories we hear about ambitious founders launching and keeping high-growth companies in Europe, the more likely it is that we’ll see a durable shift in the narrative. And that would be a great thing for the countless European entrepreneurs and professionals who want to realize their dreams closer to home.
