The European Investment Bank estimates that around 75% of European high-tech companies in their late-stage development are acquired by non-European firms.
Europe’s tech startups often lack the sufficient capital to compete on a global scale and are pushed to relocate overseas. So how do we keep investment and all of the R&D and innovation of scaleups and late-stage startups firmly in Europe?
The European Champions Alliance (ECA) is a non-profit initiative for strengthening Europe's startup landscape. I spoke to Andrea Vaugan from the ECA to learn more.
ECA was founded in 2020 by over 50 European members and over 20 European ecosystem partners, such as La French Tech in France and TeleTrusT in Germany, creating a community of seasoned experts, including entrepreneurs, suppliers, corporates, and partners.
Members include Tehtris and Docaposte from France and Ionos and Infineon from Germany.
It's worth stressing that this is no funded endeavour. People are volunteering their time and knowledge.
The Alliance empowers European startups to take the lead in future technologies while remaining under European ownership to support and protect its citizens and industries in the digital age.
The problem of Fragmentation
Part of the challenge is that Europe as a whole consists of smaller countries, regions and ecosystems. Each comes with its own specific language, culture, local legislation and regulations.
"We have many fragmented ecosystems in Europe, and not enough bridges between those ecosystems to make it easy for companies to go from one country to the other and to really build their European footprint."
This makes it challenging for startups and scaleups to determine the important people in the desired ecosystem – necessary things for breaking into a new market.
Know the key stakeholders
The ECA can assist with introductions to corporations, such as connecting a founder to Deutsche Telekom. But startups and scaleups need to run with this.
Vaugan advises, "If you get a warm intro, that's great. But then you have to take this small little plant in your hands and make it grow into a tree."
Think bigger and travel
Vaugan asserts that many think too small, failing to get on the ground where they want to expand their markets:
"You have to open your ears and your eyes from day one and do small things like going to international events. I tell startups that going from Paris to Frankfurt is a three-hour train ride, so go explore another country.
When you talk to founders, and they say, 'okay, I don't know, it's not working in Germany.' I ask, when have you been there for the last time? If you want to develop the German market, you have to be there every month, at least for several days."
Learn and accommodate cultural difference
Furthermore, understanding cultural differences is a key part of scaling. Vaughan notices a big difference in potential client expectations between French and German companies in terms of data privacy and documentation, and the level of technical detail in a pitch.
"As a founder, you need the ability to adapt to the person in front of you and how to work with them."
A German company typically "wants to have a lot of information before engaging commercially with a company." They want full certainty before signing a contract.
In France, it's more 'Okay, I get your problem, I get your product, I get who you are, where you're coming from, you're coming out of this university and have funding by this VC'.
So you get this inherent trust, and they say, 'Let's go for a project, and figure the rest out afterwards.'*
Vaugan also recommends connecting with local startups in your target region because "No VC or advisor can really explain the market to a founder like a founder can."
Traditional industries need to take a risk
At the same time as startups and scales up look for expansion, Vaugan shared that large corporations are looking to understand how other European companies work together with startups.
European corporations need to be risk-takers. For example, taking a chance on a small cybersecurity firm from France: "And that's the problem. Because there's a saying that says no one has ever been shot for choosing IBM."
Build a strong cross-European network
Members of the alliance gain skills that help forge stronger connections here in Europe as well as access to events, coaching sessions, and a network of like-minded tech companies, corporates, and experts.
Vaugan cites the example of connecting a small German space tech company to one in the French space tech scene. The German founder took the intro and ran with it, collaborating with the ECA and French German Business Club to organise a webinar about European Space tech.
What followed was a partnership between the companies, which included working on projects and serving customers together, opportunities which would have been lost if the German founder decided to automatically focus on the US.
Sovereignty is a key focus as the ECA believes the migration of critical technologies such as cybersecurity, cloud computing, smart industry, and climate tech to foreign investment puts the strategic sovereignty of Europe in key industries at risk.
This further the region's ability to drive innovation and secure its long-term economic growth.
While the ECA has largely focused on France, Germany and neighbouring regions, due to the limitation of time, they welcome involvement from other locations wanting to use its platform or tools.
The Alliance welcomes all types of members headquartered in Europe and wants to see a unified and strong European startup ecosystem.
The ECA is hosting its first large physical event, the European Champions Day 2023, on May 11th, uniting all facets of the European Deeptech ecosystem for a collaborative exchange of growth strategies, success stories, hurdles, and challenges.
Lead image: Animesh Bhargava.