It utilized to be the case that in order to scale internationally, European companies needed to invest big on releasing in the U.S. to attain the kind of growth they desired. This suggests European start-ups are dedicating much less of their team and resources to a U.S. launch, however still getting good outcomes. That said, European startups will still look to the U.S. for exits, as European corporates stay laggards in innovation.
New research study by Index Ventures today reveals that less than 1 in 5 (50 out of 275) European tech firms are picking to relocate their engineering base as they expand to the U.S., in stark contrast with the general method 10 years earlier. Instead, states Index, Europe’s top tech start-ups are managing to get the growth gains they require out of the U.S. with a much smaller “on the ground” footprint.
The survey of 275 European startups over the last decade (including an in-depth survey of more than 100 firms) suggests that producing U.S.-based engineering, tech, and R&D teams has actually fallen out of favor, and they are staying in Europe for longer, making the most of Europe’s much-improved availability of talent and funding.
In Between 2008-2014, almost two-thirds (59%) of European startups expanded, or moved entirely, to the U.S. ahead of Series A financing rounds. Between 2015-2019, this number reduced to a 3rd (33%).
This chimes with research study from StackOverflow, which has actually found that the European tech scene has actually raised, with more than 6 million expert developers residing in Europe, compared to simply 4.3 million in the U.S. Tightened U.S. immigration rules, and need overtaking supply, have inflated U.S. tech wages, which are 42%greater in San Francisco compared to London, making it more pricey and less cost-effective for European start-ups to double down in the U.S.– particularly when they can achieve comparable growth from home.
European founders are also now raising more, with rounds growing from $153 billion to $343 billion over the past four years.
Danny Rimer, partner at Index Ventures, stated in a statement: “While for some creators, and definitely as soon as a business reaches certain turning points, establishing a US base is a good decision, it is ending up being progressively pricey and challenging.”
At the exact same time, however, Index discovered that European corporates invest three-quarters (76%) less than their U.S. equivalents on software, and this is usually on compliance rather than innovation. This means European startups are most likely to continue to want to the U.S. for exits to corporates.
The research study findings are revealed in Broadening to the United States, Index Ventures’ 3rd handbook for tech creators seeking domestic and international growth. It likewise includes a “character test” for startups to figure out at what phase they need to get ready for a U.S. launch.
As well as analysis of 353 European (275) and Israeli (78) VC-backed startups that have actually broadened into the U.S. over the last 10 years it includes U.S. growth methods and interviews with creators who’ve done it.