Europe and Israel have an average of five tech start-ups for every venture-backed firm valued at $1 billion or more, according to one study. new report From venture capital firm Accel.
Citing Deal Room data, Axel said 221 of the 353 “unicorn” companies in the region have turned to technology as employees at those companies left to start their own businesses. It said it spun out 1,171 startups that it leveraged.
A similar report released by the company last year found that out of 344 VC-backed unicorns, 201 led to 1,018 new startups.
Some of the biggest examples of former talent starting new companies include Spotify, which spawned 32 new companies, Delivery Hero, which spawned 32 new companies, and Criteo, which spawned 31 new startups.
Such companies are called “mafias” in the startup world. No, they’re not like the mobs in Italian-American gangster movies. The startup mafia has been around for decades. These “mafias” were companies founded by employees of other technology companies and historically led to the creation of some of the largest technology companies known today.
For example, Elon Musk, who worked at US fintech giant PayPal, founded electric car maker Tesla and space exploration company SpaceX, and Peter Thiel co-founded the big data company Palantir, now Valar Ventures.・Prominent investor in the & Founders Fund. VC firm.
Venture capital investors say these entrepreneurs hail from Silicon Valley’s risk-taking culture, which hasn’t existed in the same way in Europe for many years. It began to take shape with the emergence of mature internet platforms like Skype. Niklas Zenstrom launched his VC fund Atomico from there, and Tavett his Hinrichs co-founded the fintech giant. wise.
“When I started volleyball about 30 years ago, I did it in Palo Alto on the West Coast. When I came back to Holland, my friends and my parents said, ‘Why are you doing this? Why? Shell. Or work for Unilever? That’s what’s holding Europe back,” Accel partner Harry Nellis told CNBC.
“By the way, unless you graduated from college and studied exactly the same way I did, and then went straight into a startup, it’s not like a raw startup, you can learn a trade, and then you’re already a career. It’s like an established startup that is building a ‘ — I think this kind of new philosophy will help Europe in the long run and it has helped the ecosystem. “
Today, Spotify, Deliver Hero, Klarna, Wise, and others are founding factories in their own right.
The largest group of newly established startup mafia comes from fintech, with nearly 20% of European startups spun out from unicorns operating in this space.
According to Axel, employees at European and Israeli start-ups tend to prefer their cities to launch new businesses, with more than half of start-ups being founded in the same cities as exited unicorns. It says.
Axel says Tel Aviv is the single largest production base for startup factories, with 127 new companies being spun out from 33 unicorn companies. Within Europe, London hosted the most start-up factories in a single city, with her 27 unicorns and 185 start-ups. Meanwhile, Berlin followed suit with her 25 founding factories and 165 startup spinouts.
More than 59% of startups from the so-called startup mafia have already successfully raised funds from VCs, 45% have collected about $1 million to $10 million investment, and 30% have received more than $10 million. there is
This data also provides insight into the journey people take to become founders.
Axel says it takes an average of 28 months for second-generation founders to build their startups, and the average age of these entrepreneurs is 33.
Three-quarters of the second-generation founders had higher education, and 60% had a master’s degree.
Over 59% of startups from the so-called startup mafia have already successfully raised VC funding, with 45% raising about $1-10 million and 30% receiving more than $10 million.
Axel said the average time it takes for a startup to achieve unicorn status in Europe is currently just seven years.
the outlook darkens
Nonetheless, the prospects for broader tech start-ups are bleak as higher interest rates put pressure on valuations, especially of late-stage companies. Market values of companies like Klarna have fallen as investors reassess the tech sector.
Last year, more than $400 billion It has erased the value of Europe’s technology industry, according to data from venture capital firm Atomico.
Job cuts are also plaguing the industry. Music streaming platform Spotify laid off 6% of its workforce, “buy now, pay later” company Klarna announced a 10% job cut, and remittance unicorn Zepz recently laid off 26% of its workforce.
An Accel spokesperson said the impact of the layoffs on the new generation of startups was not included in the report.
But despite the bleak outlook for the tech industry, Nellis said he is hopeful for the future.
He said the figures show Europe’s tech industry has matured to a level where employees are brave enough to stand up and retire to start their own new companies. .
We now have a large pool of talent, and our employees feel they have the skills and experience to turn their ideas into full-fledged businesses.
“While our founders and their teams navigate a challenging macroeconomic environment, the European and Israeli tech ecosystems are in a much stronger position than they were during the 2008/9 financial crisis due to the compounding effect of re-entrepreneurship. Yes,” Nellis told CNBC.
“With over 350 venture-backed unicorns across the continent, we believe there is a strong foundation of talent and success that will be passed on to the next generation of ambitious entrepreneurs. .”
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