Business

Why Europe has Never Produced its Own Facebook, Google or Amazon

Dec 4 2019 By Diwakar R.

Europe is one of the most advanced continents.

Even known as Peninsula of Peninsulas, Europe consists of countries from UK and France, Germany, Finland, etc.

These countries dictate strong economy in the whole world.

It seems obscure to consider that there is not a single company with valuation of over $30 billion.

The disparity is notable given that the EU’s $17 trillion economy is comparable in size with the US’s and bigger than China’s.

While the region is giving rise to more renowned technological companies, surprisingly, most of them are from US and China.

For now, there is no such startups or business equivalent to Ant Financial or Uber in Europe.

Even if you look at most promising companies from Europe like Spotify and Zalando, they only have a combined market value of around $42 billion, according to data from GP Bullhound.

Comparatively, Alibaba’s $480 billion valuation and Facebook’s market cap $550 billion is far from even.

Let’s look at the reason for Europe’s failure in producing its own Facebook, Google or Amazon.

 

Funding

Why Europe has Never Produced its Own Facebook, Google or Amazon

One of the most important aspect of Europe’s failure can certainly be lack of funding and their sere size.

Funding gives a head start to the potential multi billion-dollar companies.

Biggest American and Asian technology companies formed since 2000 has raised total sum of about $7.3 billion.

With respect to these firms, European companies was only equivalent to $1.6 billion.

Some claims about the startup reveal even bigger threats to their development. “Without an increase in mega rounds Europe will never catch up with its American and Asian competitors.”

There are signs that they are picking up the funding.

Only last year, Over Nine companies raised $200 million from Europe.

However, there were only two companies that raised that much in 2013.

 

Paying System

Mainly, technological empire is deeply connected with Silicon Valley.

Furthermore, its network of potential investors and capitalists, encourages newly emerging startups and business.

Maria Scott, CEO of TAINA Technology, says the mentorship, support, and advice from veteran tech entrepreneurs in the Valley is “palpable—it’s like walking into an oasis.”

Network of strong mentors and investors in Silicon Valley helps startups to get a grasp of their current condition.

This condition may include, their financial requirement, required support and lowering their functions.

Just like Scott said, these network of support and mentor ship is insufficient in Europe.

More than that, there is no such established culture of such networks which can assist them.

Moreover, in micro level, people always look to their options when starting any company.

When these networks like Silicon Valley are absent in Europe, it gets demotivating.

They would either stop their idea without even starting or they would move to places like Silicon Valley for better opportunities.

Situation in Europe can change for startups and companies requiring financial support.

It may not be fast as it was for Facebook, Google and Amazon but you can tell European startups are opening doors for each other.

Only in 2014, Europe had over 49 startup companies that had reached up to valuation of one billion dollars.

Although, it does not match up to the standard of the tech companies in Silicon Valley, but they are certainly emerging from their previous situation.

 

Share the risk and reward

Further looking at the characteristics of Silicon Valley, you can understand the difference in their growing phase of Startups.

One of such characteristics is employee ownership through stock option grants, which help tiny startups attract top-tier talent.

If companies in Europe can also get these types of accommodation there, then their chances of saving their startups are looking good.

Opportunities like these creates a cycle of introduce, observe and publicize.

When these network of potential investors and startups look towards the progress of these eco-system, they try to get the maximum benefit from these risks.

Besides motivating young coders to work hard, it also encourages them to stick around the company long enough to reap the rewards

 

GAFA Issue

Why Europe has Never Produced its Own Facebook, Google or Amazon

GAFA stands for the Google, Amazon, Facebook and Amazon.

For a couple of years now, a lot has been heard about how the European Union was sanctioning both Tech giants from the Silicon Valley and European Union member states.

European Union tried to compel these companies to pay their overdue taxes but failed.

European Union has been targeting these multinational technology companies.

It is doing so to sanction them for not agreeing to terms of European Union.

While these companies are complaining about the unequal treatment that is being given to them, other companies beside US are facing no sanctioning.

Situations like these also demotivate startups to continue their company in Europe due to these allegations.

They may think that the present context could haunt them in the future when they reach same level as those tech companies.

 

Final Words

 

While the companies in Europe are certainly doing their best in rising out front heir ashes, they should have been at the same level as GAFA.

Since they both started as similar time, European companies have faced critical difficulties regarding the funding and investors.

Potential companies repeating the success of GAFA are still on the development level; while the GAFA have already reached to unprecedented level of success.

You may also think tjhat people always want best products at affordable rates.

When the companies such as Google, Amazon, Apple and Facebook already provide similar services as those provided by European companies, they are opted to choose the experienced companies to do their bidding.

European companies must come up with new and innovative ideas to give them a competitive advantage over GAFA.

This can certainly increase their demand even in USA.


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