One of the things I loved in my days as a financial reporter was parachuting into stories about startup businesses.
For instance, in the early 2000s I did a story on a couple of entrepreneurs building tricked-out $1,500 gaming PCs in a warehouse in Miami.
There wasn’t much to the operation at the time — a handful of guys not long out of college casually hand-installing dual high-speed cooling fans, cables and chipsets inside a few dozen cool-looking custom-painted PC cabinets.
The name of the firm was Alienware. In 2006, Dell bought the company for an undisclosed sum — turning those “college bro” founders into instant multimillionaires.
Big things often have small beginnings.
And judging from my observations about Europe these days, I believe there’s a big thing just getting started there too — a great sign for investors in the region.
Newly elected French President Emmanuel Macron received a lot of press for his recent statement calling on France to become a “country of unicorns.” (In tech-speak, a unicorn is a startup company with a value of $1 billion or more.)
But those are just words. Money and action speak louder.
Yet that’s exactly what’s happening in Europe, where venture capital money — les fonds de démarrage in French — is flowing as it’s never flowed before.
According to startup tracker Atomico, Europe’s tech entrepreneurs attracted a record-setting $13.6 billion in venture capital funding last year — compared to just $2.8 billion in 2011.
Likewise, old-school European companies used to be disdainful of investing shareholder money into startups (as opposed to the likes of Intel and other Silicon Valley heavies that invest in promising young businesses in order to get an early leg up on new, disruptive technologies).
Yet, as Germany’s Handelsblatt business newspaper notes, these days “two-thirds of Europe’s largest corporations have made a direct investment in a tech company. One-third of those companies have acquired a tech firm since the beginning of 2015.”
Unicorn Sampler of Europe
How should investors exploit this trend?
As you can see from the accompanying table (by no means comprehensive), Europe has already fostered its share of highly successful unicorns. More are coming. For the lowest-risk approach, investors can start by looking for established European companies actively seeking out tech startups. (I have one such EU-based business in the Total Wealth Insider portfolio that’s up a solid 15% in three months.)
Ultimately, Europe is finally learning to do business the Silicon Valley way — embrace risk, welcome failure and disrupt your own business before someone else disrupts it for you.
Jeff L. Yastine
Editor, Total Wealth Insider