Alariss Insights

Europe Has a Thriving Tech Scene and Can Expand into the U.S.

November 22, 2021

Europe has built up its tech ecosystem substantially over the past several years, and that has created opportunities for European startups to expand into the U.S.

If you’re building a European startup, expanding into the U.S. will give you access to a larger market, as well as more venture capital and a highly skilled workforce.

Europe’s top tech companies include Spotify and Skype in Sweden, Trivago and HelloFresh in Germany, Deliveroo and Shazam in the United Kingdom, Criteo in France, Rovio in Finland, Adyen in the Netherlands, and Bolt in Estonia.

The United Kingdom is the epicenter of the tech ecosystem in Europe, hosting 32 percent of all top European startups, according to a recent report by McKinsey. Germany, France, Sweden, Switzerland, the Netherlands, Spain, Ireland, Denmark, Finland, Belgium, and Italy also have a number of top European startups. 61 percent of top European startups are in the United Kingdom, Germany, or France. London, Berlin, and Stockholm are thriving startup hubs in Europe.

The top industries for European startups are biotech and healthcare, B2B SaaS, and fintech, according to McKinsey. There also are a number of European startups in e-commerce and consumer tech, hardware, marketplaces, media and content, mobility, and AI.

More than $200 billion has been invested in VC-backed European startups since 2015, according to CB Insights. European startups received $59 billion in funding in the first half of 2021 alone, according to Crunchbase. That is 20 percent of all global venture capital, up from 13 to 14 percent since the first half of 2019.

There are currently more than 100 private European unicorns, or startups worth more than $1 billion, according to Crunchbase.

U.S. venture capital funding of European startups has continued to rise and break new records, according to Sifted. U.S. investors invested more in European startups in the first half of 2021 than they did in all of 2020. This is because European startups have continued to grow in quality and startup valuations in Europe are generally lower than in the U.S.

Sequoia Capital plans to open an office in London and has been building its investment team in Europe. “The interest is to find important market leaders. And more and more, we’re starting to see them come out of Europe,” Doug Leone, a partner at Sequoia Capital, told Forbes.

Index Ventures found that European startups are now delaying their expansion into the U.S. until they’re further along in funding, customers, and headcount. European startups ranked access to customers as their top reason for expanding into the U.S.

Index Ventures also found that mostly large European startups have an operational presence in the U.S.; Series A, B, and C European startups have almost no employees in the U.S., while Series E and F European startups have 32 percent of their employees in the U.S. Traditionally, only the most well-funded companies with deep pockets could afford U.S. expansion due to the high cost and complexity. Today, Alariss makes it much easier to expand into the U.S. through our Employer of Record (EOR) platform.

B2B startups make up a large share of European startups, and the U.S. is a great market to expand to as a B2B startup. U.S. companies spend more than twice as much as European companies on business software, according to Index Ventures.

The European tech companies Collibra, Adyen, Criteo, Typeform, and Zendesk provide archetypes for European B2B companies expanding into the U.S., and King, Farfetch, and Spotify provide archetypes for European B2C companies expanding into the U.S. You can read about them in Index Ventures’ report on opportunities for U.S. expansion for European startups here.

If you’re building a European tech startup, now is a great time to expand into the U.S. The U.S. is the world’s largest economy and has millions of potential customers. And through the comprehensive Alariss platform, not only can companies source and recruit top local talent, they can also legally hire them and build their American go-to-market team without having to delay during the typical legal entity setup period, because Alariss serves as the Employer of Record (EOR). Given the ease and efficiency of building global teams through Alariss, companies even at the earliest stages can hire in the U.S. and do not have to wait until Series E or F funding.

To learn more, you can contact us here.

London. Photo source.

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