Closing the gap: Europe’s path to eight-figure exits

Over the last decade, European technology companies have managed to ascend to the dizzying heights of Silicon Valley, with firms like Spotify, Klarna, Adyen, and Revolut leading the charge towards mega-valuations upwards of $45 billion. The past ten years have shown the world that Europe has no shortage of tech talent, and yet when it comes to keeping these unicorns close to home, Europe has got a clear retention problem. Since 2014, there have been no European technology acquisitions crossing €1 billion, as tech companies flock across the pond in search of global exits. In 2023, European private equity fundraising totaled €92 billion—less than half of the €200 billion raised in the US – and no French software company has ever achieved a strategic exit exceeding €5 billion. European stock exchanges simply do not offer the liquidity and investor confidence found in markets like Nasdaq and the NYSE. The region lacks the network of buyers necessary to drive large-scale acquisitions.

This disparity between Europe and its competition is the focus of Mario Draghi’s recent ‘competitiveness’ report on behalf of the European Commission. In it, he paints an urgent picture of the current state of EU industry: ‘this is an existential challenge…the only way to become more productive is for Europe to radically change.’ Notably, Draghi cites ‘the tech sector’ as the largest cause of the ‘productivity gap between the EU and the US’. The movement of capital out of Europe through these mega US exits undoubtedly contributes to this widening divide, as the potential trickle-down effect of that funding on local innovation is lost. What is required, then, is a reinvigoration of European tech funding: unlocking these €20+ billion exits will be the long-term solution necessary to invigorate the ecosystem, retain talent, and secure Europe’s place on the world stage. 

Europe now
The Europe of today stands at a crossroads. So far, the EU has taken bold strides in levelling the global tech playing field, most recently with a crackdown on Apple’s unpaid Irish taxes. The EU has worked admirably to promote this legislative fairness, holding tech behemoths to account. As a result, Europe is faced with a clear opportunity: to monopolise on this even footing and confront the obstacles separating them and the ‘Magnificent Seven’. 

The Financial Times’ recent article on Draghi’s report, ‘Why Europe will never catch up with the US’, responds to this exact question. Throughout, author Janan Ganesh names fundamental differences between the two regions – language, funding, US oil and gas production – as the cause of the competitive chasm between the EU and US. The article reflects a growing fatalistic attitude towards the current state of Europe. Yet, whilst Ganesh is not wrong to suggest that these imbalances are deep-seated, we can afford to be more optimistic. Though only 9/23 European broader peers in high-growth sectors could currently complete a €5 billion acquisition, current firepower analysis suggests that this could rise to 19/23 by 2027. It is this sense of sober optimism that underpins the urgency of Draghi’s report: Europe has the potential to dominate in the new digital age provided the right structures are put in place. 

Where Europe needs to be
It is time for Europe to start playing offence. Overcoming the structural differences hindering EU competitiveness will require more than preventing anti-competitive practice. Governments can encourage large-scale acquisitions through incentives and streamlined regulations, while post-IPO support like analyst coverage and investor relations sustains company growth. European tech leaders should engage global buyers to navigate regulatory challenges, with only 17% of large acquisitions and 11% by top tech firms involving European companies in the past decade. Building specialised teams for mega-deals, fostering consortiums to share risks, and simplifying regulatory approvals are essential. But rather than imitating the US, Europe can look eastward for inspiration. Malaysia’s KL20 initiative, for example, uses aggressive government-backed incentives, subsidies, and tax concessions to attract global expertise and investment. Balancing oversight with innovation and offering tax incentives for domestic M&A can help retain tech assets within Europe. The EU’s Digital Markets Act has gone some way in facilitating Pan-European growth, but regulators can do more. To this end, Draghi advises offering impressive start-ups a legal statute known as the ‘Innovative European Company’, providing them with a single digital identity recognised by all EU member states. This is not to encourage corporate dependence on state and regulatory institutions, but rather to look towards them as a means of kickstarting an autonomous tech ecosystem. 

It is equally imperative that Europe exploit its strengths. The EU is second only to China in its public investment in quantum technology, and can accelerate its lead by further leveraging Europe’s world leading research institutions. Draghi suggests a ‘Tech Skills Acquisition Programme’, which should encourage ICT training beyond higher education. Similarly, the report encourages the development of vertical AI use cases: as Draghi noted in his address to the European Parliament, ‘we need to shift our orientation from trying to restrain this technology to understanding how to benefit from it’. Remaining at the cusp of innovation will position Europe and its investors for stronger strategic exits. 

Conclusion
The time for Europe’s rise to tech domination is now, but, as the EU report urges, we must act quickly. The path forward demands coordinated action and visionary leadership, ensuring that Europe’s tech titans have the platforms and partnerships they need to reach their full potential. Regulators must tackle these issues head-on, in order to enable eight, or even nine, figure exits. The EU’s collaboration with the US remains necessary, as the transatlantic market promises its own unique space for growth and innovation. But Europe must find a way to become more than exclusively a supplier of technology talent: to both sow and harvest the fruits of its labour. And then – crucially – to reinvest. 

Last Thursday, for the 22nd year, GP Bullhound hosted the Allstars event, celebrating the vibrant pulse of the technology sector – including founders, investors, and leading voices – to honour another year of remarkable achievements. From Ben Richmond of CUBE, who was honoured as Entrepreneur of the Year, to PSG Equity, recognized for the Exit of the Year with their successful exit of Nalanda, the awards showcased the breadth of talent and forward-thinking vision within European technology today. Other standout winners include Hg Capital for Growth & Buyout Fund of the Year, and Eileen Burbidge of Passion Capital, who was named Investor of the Year. The evening also featured a keynote address delivered by tennis champion, entrepreneur, and best-selling author Venus Williams.These leaders are proof that Europe’s talent pool is deep and diverse, offering every reason to believe that the continent can dominate the global tech landscape. By continuing to channel this momentum, Europe can secure a future in which unicorns are not only born but thrive and stay, creating a lasting impact on the global stage.