For over a decade, the tech trade has been chasing unicorns—these elusive startups valued at over $1 billion. The obsession started in 2013, when Aileen Lee—a Palo Alto–primarily based VC—coined the time period that captured the imaginations first of founders and traders, after which prime ministers and presidents. However these legendary beasts are additionally uncommon: just one p.c of VC-backed startups ever attain this standing.
As society enters the age of AI, and monetary markets put renewed worth on enterprise fundamentals, our understanding of what makes a profitable tech firm is evolving. Promise alone would not make a nationwide, regional or international champion. Champions are these firms that mix each the promise of untapped development and the elemental metrics that exhibit sturdy and sustainable buyer demand.
Till not too long ago, Silicon Valley has been seen because the world’s undisputed unicorn manufacturing unit. However Europe’s innovation ecosystem has matured to a degree the place it’s constantly producing firms with each the imaginative and prescient to alter the world and the basics to maintain that change. Main the pack is a cohort of greater than 507 “thoroughbreds”—startups with annual revenues of at the very least $100 million.
Greater than a 3rd of those high-potential firms are headquartered in what we name New Palo Alto: not a singular location, however a community of interconnected ecosystems inside a five-hour practice experience of London. After the Bay Space, that is the world’s second best innovation cluster and consists of cities with industrial heritage like Glasgow, Eindhoven, and Manchester, in addition to world-renowned capitals of tradition, coverage, and academia like Amsterdam, Cambridge, Edinburgh, London, Oxford, and Paris.
They’re residence to firms reminiscent of low-cost pc maker Raspberry Pi, whose expertise was invented and developed in Cambridge, manufactured in Pencoed, South Wales, and offered worldwide. Raspberry Pi not too long ago topped over a decade of development with an inventory on the London Inventory Alternate. On the time of itemizing, it had income of $265 million and $66 million in gross working income.
Different New Palo Alto thoroughbreds embrace fintechs Monzo, Revolut, and Tide, which offers mobile-first banking to SMEs, in addition to fast-growing firms reminiscent of iPhone challenger Nothing and London-founded Cleo, the conversational AI pioneer that helps younger US shoppers handle their funds.
Seven of Europe’s ten Most worthy tech firms based after 1990 have emerged from New Palo Alto: Reserving.com and Adyen from Amsterdam; Sensible, Revolut, and Monzo from London; ASML from Eindhoven; and Arm from Cambridge. All are merchandise of this interconnected ecosystem.
But, for all its promise, New Palo Alto stays an underinvested area. Whereas early-stage funding is now increased than the Bay Space, thoroughbreds face a staggering $30 billion hole in funding on the essential scale-up stage in comparison with their Bay Space counterparts.
Governments of the main economies in New Palo Alto—Britain and France—have delivered progressive coverage frameworks to help innovation and tech firms, together with funding in R&D, expertise, and visa applications. They’re additionally putting in insurance policies together with the UK’s Mansion Home Compact and France’s Tibi, to help extra scale-up capital.
However no innovation cluster ever turned nice due to coverage alone. Success happens when traders totally perceive the funding alternative. Now that we’ve practically 1,000 venture-backed firms in EMEA with revenues of greater than $25m, serving to this ecosystem to attain its full potential is now not about fixing a coverage problem. It’s about recognizing an enormous funding alternative.
Because of this within the final decade, the quantity of enterprise capital coming into the area has elevated 9 occasions, and why within the subsequent decade, giant institutional traders within the UK and in France will deliver billions of {dollars} of funding to again personal firms.
The brand new British Prime Minister’s residence constituency consists of Somers City, an space near St Pancras station and within reach of Google and Meta’s large European headquarters. But for all of the gleaming towers, too many neighborhoods in New Palo Alto have been left behind by expertise. In Somers City, 50 p.c of youngsters obtain free faculty meals, 70 p.c of residents obtain social care, and adults reside 20 years fewer than in leafy Highgate, solely 20 minutes up the street.
Because the tech trade faces elevated scrutiny, we’ve a chance to supply another mannequin of innovation. By constructing thoroughbreds to be sustainable, clear firms we are able to start the work of sharing the advantages of innovation extra equally.
Simply as a few of the most iconic US cities take their names from the traditional cities of Europe—New York and New Orleans—New Palo Alto pays respect to its namesake whereas additionally signaling a deliberate alternative for the long run.
This text first appeared within the November/December 2024 version of WIRED UK.
