A unicorn is a tech start-up valued at over $1B, and tracking the population of these vanishingly rare creatures is considered one way to measure the tech boom. By that standard, there’s both good news and bad for Europe today. The good news: a new study reported in The Financial Times shows that there are now more unicorns than ever in Europe, at 13.
The bad news is that if you dig below the triumphal reporting of the recent increase, you’ll see that in absolute terms, Europe is still lagging badly behind. Quartz:
That brings the total number of billion-dollar startups incubated in Europe up to 40, a respectable number for a continent constantly worried about being left behind by Silicon Valley.
Yet those worries remain legitimate. In the same 12-month period, the United States produced 22 billion-dollar startups. And America’s tech companies remain far more highly valued than Europe’s. Airbnb’s $20-billion value is worth more than than all four of Germany’s unicorns. At $40 billion, Uber alone is worth as much as every billion-dollar tech company in Britain (of which there are 17). Facebook’s market cap, at $275 billion, is more than twice the $120 billion value of every European unicorn put together.
Moreover, three European companies lost their $1 billion valuations over the past year, dropping out of the “unicorn club” (making them un-unicorns? un-icorns? horses?). The three are boohoo.com, an online retailer; eDreams, a travel company; and Monitise, a payments firm.
The information revolution is as transformational with regard to what came before as the Industrial Revolution was. Unfortunately, in Europe the commanding heights of the economy are often held by established companies—ironically, in many cases the most successful of those that emerged out of the Industrial Revolution— who use their close ties with government to box out new competitors. Economic revolutions usually manifest themselves through the creation of new companies; this is why the Hansom Cab Company does not make today’s taxis. But right now Europe’s de facto plan, given its culture and regulatory environment, is to stick with the old guard. While the odd established company may be able to innovate in some important way, blocking the creation of new companies is systematically not very promising for harnessing the power of the information revolution.
The lack of something like a European Google—to take just one example from Silicon Valley—is worrying. While Americans compete economically with Europe, we also want to see it prosperous. The “Old Continent” with its democratic free-market was the best foreign policy achievement of the U.S. in the past century, and, outside of our own country, it is our best advertisement to others around the world. We have a strong interest in seeing Europe successfully turn the corner to the next century, and a functioning tech scene will be necessary to do so.
Three cheers for the European unicorns that have made it, therefore—but hopefully policy makers in Brussels and Berlin are thinking long and hard about why their herd is so small.