Europe’s unicorn steeplechase: race is on for first $10bn tech firm

22 Jun 2016125 Shares

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Sweden is the European country with the second-highest number of billion-dollar tech companies. Stockholm image via Kalin Eftimov / Shutterstock.com

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In the past year, Europe’s tech sector has produced a further 10 unicorns – tech start-ups valued at more than $1bn – bringing the total number of European unicorns to 47, with a combined value of $130bn.

Only time will reveal if these tech firms will go the distance or end up as mythical as their “unicorn” title suggests, but Europe has, so far, fewer so-called unicorns than the US, which has 200 or more unicorns with a cumulative value of $609bn, according to CBInsights.

However, what Europe may lack in quantity, it more than makes up for in terms of quality, according to a new report.

The European data from tech investment bank GP Bullhound reveals the UK has maintained its dominance within Europe as the home of the unicorn. 18 of Europe’s 47 Unicorns are based in the UK, with new entries to the ‘unicorn club’ such as Blippar and Anaplan consolidating this mantle.

‘We are seeing a remarkable resilience in European technology markets’
– MANISH MADHVANI, GP BULLHOUND

Sweden is the country with the second-highest number of billion-dollar tech companies (7), including Spotify, Europe’s most valuable unicorn. Germany is third with six and France follows with three.

Israel, though not in Europe, is included in this analysis and is also home to three unicorns.

Three countries have produced their first tech unicorns in the last 12 months – Luxembourg, Switzerland and Finland.

Ireland actually makes the list thanks to Dublin-based fleet-tracking company Fleetmatics, which recently announced 75 R&D jobs, achieving a $1.6bn valuation on the GP Bullhound list. The country’s only other nearest claim to unicorn status – the Collison brothers’ Stripe – is actually a company that was founded in San Francisco and is valued at around $5bn.

Quality over quantity

 

gp_bullhound_european_unicorn_league_table

“There has never been a better time to operate within the European market,” explained Manish Madhvani, managing partner at GP Bullhound.

“I believe that the ecosystem exists for one of our unicorns to push forward and reach a $10bn or $100bn valuation in the next five years.”

In fact, the Bullhound boss is so bullish that he claims Europe’s tech unicorns are starting to outperform their American counterparts.

He said that while American unicorns still raised nearly twice the amount of capital as their European counterparts, the average revenue generation for a European unicorn ($355.3m) was almost three times greater than in the US ($128.8m).

He said valuations in the US were, on average, 46-times the size of revenue generated, while in Europe they were 18-times higher, which demonstrates the more cautious European investment arena, resulting in healthier valuations.

At the same time, 60pc of European unicorns were profitable.

“Europe has yet to reach the dizzying heights of American giants such as Facebook and Google, but when you look at businesses in the $1bn to $3bn range, what we lack in quantity we more than make up for in terms of quality.

“All the data points towards a stable, maturing market that has avoided the excesses of the US in favour of sustainable growth. We are seeing a remarkable resilience in European technology markets.”

GP Bullhound said that while 2014/15 was defined by the success of fintech companies, the last 12 months have seen a rapid increase in software businesses.

Some 57pc of new unicorns are software companies, of which a fifth (20pc) are augmented or virtual reality models.

Stockholm image via Kalin Eftimov / Shutterstock.com

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com