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–based mostly VC—coined the time period that captured the imaginations first of founders and buyers, after which prime ministers and presidents. However these legendary beasts are additionally uncommon: only one % 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 world champion. Champions are these corporations that mix each the promise of untapped progress and the basic metrics that reveal sturdy and sustainable buyer demand.
Till lately, Silicon Valley has been seen because the world’s undisputed unicorn manufacturing facility. However Europe’s innovation ecosystem has matured to some extent the place it’s constantly producing corporations with each the imaginative and prescient to vary 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 corporations are headquartered in what we name New Palo Alto: not a singular location, however a community of interconnected ecosystems inside a five-hour prepare trip of London. After the Bay Space, that is the world’s second most efficient 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 house to corporations akin to low-cost pc maker Raspberry Pi, whose expertise was invented and developed in Cambridge, manufactured in Pencoed, South Wales, and offered worldwide. Raspberry Pi lately topped over a decade of progress with a list 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 gives mobile-first banking to SMEs, in addition to fast-growing corporations akin to 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 respected tech corporations based after 1990 have emerged from New Palo Alto: Reserving.com and Adyen from Amsterdam; Clever, 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 larger 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 assist innovation and tech corporations, 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 assist extra scale-up capital.
However no innovation cluster ever turned nice due to coverage alone. Success happens when buyers totally perceive the funding alternative. Now that now we have almost 1,000 venture-backed corporations in EMEA with revenues of greater than $25m, serving to this ecosystem to realize its full potential is not about fixing a coverage problem. It’s about recognizing an enormous funding alternative.
For this reason 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 buyers within the UK and in France will convey billions of {dollars} of funding to again non-public corporations.
The brand new British Prime Minister’s house 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 % of youngsters obtain free faculty meals, 70 % of residents obtain social care, and adults dwell 20 years fewer than in leafy Highgate, solely 20 minutes up the street.
Because the tech trade faces elevated scrutiny, now we have a chance to supply an alternate mannequin of innovation. By constructing thoroughbreds to be sustainable, clear corporations 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 longer term.
This text first appeared within the November/December 2024 version of WIRED UK.
