As the European tech ecosystems continue to mature, the US has seemingly lost its relocation shine, and local tech startups are no longer hellbent on expanding their R&D ops across the Atlantic.
That is the main conclusion of new research done by international investment firm Index Ventures, which has surveyed more than 100 European startups and analysed the transatlantic expansion strategies of more than 275 companies in total.
Today, less than 1 in 5 European tech companies choose to relocate their engineering base as they expand to the US, opting instead to keep their tech operations on this side of the pond, according to the study.
That’s not to say European tech startups are not interested in the US as a market anymore, and there’s still a healthy amount of sales and marketing teams being installed overseas.
But, clearly, European startups are staying focused on the local market(s) longer than they used to, and the appetite for building tech teams in the US has much waned in recent years. That is evidently a result of the increased availability of both capital and talent in this part of the world, and other factors.
The research findings are featured today in ‘Expanding to the US’, a new playbook developed by Index Ventures to guide founders through the evolving transatlantic ecosystem as they pursue global growth.
“Fifteen years ago, building a major tech business in Europe was extremely difficult,” Danny Rimer, Partner at Index Ventures comments. “With small talent pools and little available capital, founders were often forced to relocate their businesses to the US in the very early stages. Today, conditions are very different.”
“While for some founders, and certainly once a business reaches certain milestones, establishing a US base is a good decision, it is becoming increasingly costly and challenging,” he added.
The bad part?
The research also shows that European corporates are lagging behind when it comes to backing innovation, investing 76% less than their US counterparts on software; and when they do, it is too often focused on compliance rather than on business transformation.
Notably, the Index Ventures research shows that Europe’s most successful software companies have 78% more sales and marketing employees in the US than in Europe.
“A conservative culture among European corporates is stifling the region’s potential – driving software firms overseas to find customers who are ready and willing to invest in innovation. Until this changes, we will continue to see entrepreneurs crossing the Atlantic to scale and to list their companies. And the global competitiveness of European corporates will continue to suffer,” concludes Jan Hammer, a partner at the investment firm.
Featured image credit: Iulian Ursache / Pixabay