For more than a decade, the tech industry has been chasing unicorns: those elusive startups valued at more than $1 billion. The obsession began in 2013, when Aileen Lee, a Palo Alto-based venture capitalist, coined the term that captured the imagination first of founders and investors, and then prime ministers and presidents. But these mythical beasts are also rare: Only 1 percent of venture capital-backed startups achieve this status.
As society enters the age of AI and financial markets place renewed value on business fundamentals, our understanding of what makes a technology company successful is evolving. Promise alone does not make a national, regional or world champion. Champions are those companies that combine both the promise of untapped growth and the fundamental metrics that demonstrate strong, sustainable customer demand.
Until recently, Silicon Valley was seen as the world’s undisputed unicorn factory. But Europe’s innovation ecosystem has matured to a point where it consistently produces companies with the vision to change the world and the fundamentals to sustain that change. Leading the pack is a cohort of more than 507 “thoroughbreds,” startups with annual revenues of at least $100 million.
More than a third of these high-potential companies are based in what we call New Palo Alto: not a singular location, but a network of interconnected ecosystems a five-hour train ride from London. After the Bay Area, this is the second most productive innovation cluster in the world and includes industrial heritage cities such as Glasgow, Eindhoven and Manchester, as well as world-renowned cultural, political and academic capitals such as Amsterdam, Cambridge, Edinburgh and London . , Oxford and Paris.
They are home to companies such as low-cost computer maker Raspberry Pi, whose technology was invented and developed in Cambridge, manufactured in Pencoed, South Wales, and sold around the world. Raspberry Pi recently capped more than a decade of growth with a listing on the London Stock Exchange. At the time of going public, it had revenues of $265 million and $66 million in gross operating profits.
Other New Palo Alto thoroughbreds include fintechs Monzo, Revolut and Tide, which offers mobile banking services to SMEs, as well as fast-growing companies such as iPhone rival Nothing and London-founded Cleo, the conversational AI pioneer that helps young US consumers manage their finances.
Seven of Europe’s ten most valuable tech companies founded after 1990 emerged from New Palo Alto: Amsterdam’s Booking.com and Adyen; Wise, Revolut and Monzo of London; ASML Eindhoven; and Arm of Cambridge. They are all products of this interconnected ecosystem.
Yet for all its promises, New Palo Alto remains an underinvested region. While early-stage funding is now larger than in the Bay Area, Thoroughbreds face a staggering $30 billion gap in funding in the crucial scale-up stage compared to their Bay Area counterparts.
The governments of New Palo Alto’s major economies (Great Britain and France) have created progressive policy frameworks to support innovation and technology companies, including investment in R&D, talent and visa programs. They are also implementing policies, including the UK’s Mansion House Compact and France’s Tibi, to support further capital expansion.
But no innovation group ever became great thanks to policies alone. Success occurs when investors fully understand the investment opportunity. Now that we have almost 1,000 venture-backed companies in EMEA with revenues of over $25 million, helping this ecosystem reach its full potential is no longer about solving a political challenge. It’s about recognizing a huge investment opportunity.
This is why in the last decade, the amount of venture capital coming into the region has increased nine-fold, and why in the next decade, large institutional investors in the UK and France will bring in thousands of millions of dollars of investment to support private companies.
The new British Prime Minister’s constituency includes Somers Town, an area close to St Pancras station and within sight of the huge European headquarters of Google and Meta. Yet despite all the shiny towers, technology has left too many neighborhoods in New Palo Alto behind. In Somers Town, 50 per cent of children receive free school meals, 70 per cent of residents receive social care and adults live 20 years less than in leafy Highgate, just 20 minutes up the road.
As the tech industry faces increased scrutiny, we have an opportunity to offer an alternative model of innovation. By creating purebred companies that are sustainable and transparent companies, we can begin the work of sharing the benefits of innovation more equitably.
Just as some of the most iconic American cities take their names from the ancient cities of Europe (New York and New Orleans), New Palo Alto pays homage to its namesake while also signaling a deliberate choice for the future.
This article first appeared in the November/December 2024 issue of WIRED UK.
