For over a decade, the tech industry has been chasing unicorns – elusive startups valued at over $1 billion. The obsession began in 2013, when Palo Alto-based VC Aileen Lee coined a term that captured the imagination first of founders and investors, and then of prime ministers and presidents. But these mythical beasts are also occasional: only 1 percent of VC-backed startups achieve this status.
As society moves into the era of artificial intelligence and financial markets re-value the fundamentals of business, our understanding of what makes a technology company successful is evolving. Promise alone does not make a national, regional or global champion. The champions are those companies that combine the promise of untapped growth with fundamental metrics that indicate forceful and sustainable customer demand.
Until recently, Silicon Valley was considered the world’s undisputed unicorn factory. However, Europe’s innovation ecosystem has matured to the point where it is consistently producing companies that have both the vision to change the world and the foundations to sustain that change. Leading the pack is a cohort of over 507 “thoroughbreds” – start-ups with annual revenues of at least $100 million.
More than a third of these high-potential companies are based in what is known as Recent Palo Alto: not a single location, but a network of interconnected ecosystems within a five-hour train ride of London. After the Bay Area, it is the second most productive innovation cluster in the world, encompassing cities with industrial heritage such as Glasgow, Eindhoven and Manchester, as well as world-renowned cultural, political and academia capitals such as Amsterdam, Cambridge, Edinburgh and London, Oxford and Paris.
It is home to companies such as the low-cost computer manufacturer Raspberry Pi, whose technology was invented and developed in Cambridge, manufactured in Pencoed in south Wales and sold around the world. Raspberry Pi recently culminated over a decade of development with a listing on the London Stock Exchange. At the time of listing, it had revenue of $265 million and gross operating profit of $66 million.
Other Recent Palo Alto thoroughbreds include fintechs Monzo, Revolut and Tide, which provide mobile-first banking to SMEs, as well as fast-growing companies such as iPhone challenger Nothing and London-founded Cleo, a conversational AI pioneer, that helps adolescent American consumers manage their finances.
Seven of the ten most valuable European technology companies founded after 1990 emerged from Recent Palo Alto: Booking.com and Adyen from Amsterdam; Wise, Revolut and Monzo from London; ASML from Eindhoven; and Arm from Cambridge. They are all products of this interconnected ecosystem.
Yet for all its promise, Recent Palo Alto remains an underinvested region. Although early-stage funding is currently higher than in the Bay Area, Thoroughbreds face a staggering $30 billion funding gap at the crucial scale-up stage compared to their Bay Area counterparts.
The governments of Recent Palo Alto’s leading economies – the UK and France – have provided a progressive policy framework to support innovation and technology companies, including investment in research and development, talent programs and visas. They are also implementing policies including the UK’s Mansion House Compact and France’s Tibi to support greater scale-up capital.
However, no innovation cluster has ever become great through policy alone. Success comes when investors fully understand investment opportunities. Now that we have nearly 1,000 venture-backed companies in EMEA with revenues exceeding $25 million, helping this ecosystem reach its full potential is no longer about solving political problems. It’s about recognizing a huge investment opportunity.
That’s why the amount of venture capital flowing into the region has increased ninefold over the past decade, and why gigantic institutional investors in the UK and France will inject billions of dollars in investment to support private companies over the next decade.
The modern British prime minister’s constituency includes Somers Town, an area near St Pancras station, close to Google and Meta’s huge European headquarters. But despite all the shiny towers, too many Recent Palo Alto neighborhoods have been left behind by technology. In Somers Town, 50 per cent of children receive free school meals, 70 per cent of residents are on social care and adults live 20 years less than in leafy Highgate, just 20 minutes away.
As the technology industry comes under increasing scrutiny, we have an opportunity to offer an alternative model for innovation. By building thoroughbred companies that become sustainable and see-through companies, we can begin to work towards sharing the benefits of innovation more equally.
Just as some of America’s most eminent cities take their names from archaic European cities—Recent York and Recent Orleans—Recent Palo Alto pays respect to its namesake while signaling a thoughtful choice for the future.
This article first appeared in the November/December 2024 issue of WIRED UK.