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Why doesn't Europe have more Unicorns?🦄

Why doesn't Europe have more Unicorns?🦄

Understanding the complexity that companies need to navigate to find success across Europe

Catalin Modorcea
December 03, 2024

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For macroeconomic purposes, it’s not uncommon for analysts to look at how Europe as a region fares compared to leading world powers such as the US and China - even though the latter are countries and Europe is a continent spanning 44 countries.

But analysing European indicators of economic health and comparing them to leading single markets like the US and China does yield valuable insights.

To understand why, look no further than the table below highlighting the GDP and population of the USA, China, and Europe.

As a side note, even though Russia is technically a part of Europe as well, I have excluded it from the statistics below. In other words, the numbers relate to Europe’s remaining 43 countries.

Indicator	USA	Europe	China
Latest GDP	$27.36 trillion	$20.5 trillion	$17.79 trillion
GDP per Capita	$81.6k usd	$34,5k usd	$12.6k usd
% of global economy	25.95%	25%	16.88%
Population	356m	600m	1,412m
# of unicorns (privately-held startups valued at over $1 billion)	1001	139	369

Europe is neither a country nor a single market, but it’s divided into so many small countries that you end up getting meaningful macroeconomic insights by analysing the region as a whole.

The table above also illustrates why unity and collaboration across Europe is so important for its collective economic growth and continued relevance on the global stage.

That’s why the EU tries very hard to function as a single market. But even though EU nations benefit immeasurably from this bloc, it isn’t quite a single market in the same way in which the US, for instance, is a single market.

This is the reality and the complexity that all European businesses have to contend with and navigate.

In Europe, there are 49 official languages spanning its 43/44 countries. Even inside of the EU’s single market (which spans 27 European countries), companies still need to navigate a very different cultural, corporate, legal, and political reality from one country to the next. Here are some of the complexities to successful scaling across Europe:

Legislation, taxation, and social policies can vary quite broadly from one country to the next, even across EU members.
Language barriers alone can create significant challenges with scaling. They add to increased headcount requirements for translations, proofreading, design, packaging etc.
Language and cultural differences can also make it harder for business people in one country to understand and predict how their business may fare in another.
Competition can differ quite significantly from one country to the next. For example, US readers may be surprised to know that even though Amazon is huge in the UK, it doesn’t have a very big presence in many other European countries and in some, it is actually all but absent.
Regarding Supply Chain, the EU benefits greatly from ease of travel but again, only 27 of the region’s 43 nations are a part of the EU.

All of this complexity makes it difficult not only to predict how a business will fare across Europe, but it makes it harder to manage a business at that scale.

The EU is doing what it can (and it helps enormously) to enable its member states to thrive across its borders, but that’s not enough to level the playing field with a market like the US.

As a result of this reality pared with the fact that the US has maintained historically strong ties with Europeans, it’s no surprise that a significant number of growing European startups decide to move their business to the US when they get to a point where they want to aim for global scale.

Those kinds of moves can yield great benefits for the startups in question, as well as for the US economy. Let’s look at some numbers:

Between 2010 and 2020, the number of foreign companies, including European firms, conducting initial public offerings (IPOs) in the U.S. increased steadily, reaching a record 87 in 2018.

Data between 2020-2024 is more limited, but according to one source, foreign IPOs accounted for more than half (56%) of total US IPOs in 2023.

Now this was all fine and good for the past few decades, but the reality of Europe heading into 2025 is that the US’ political leadership is a lot more isolationist in its foreign policy than it has been in a very long time.

Therefore, Europe’s reliance on the US for everything from security to economic growth is quickly becoming a major weakness for the region.

In order to stay competitive, maintain economic growth and boost innovation in a world in which the US plays a more passive role, Europe will have to improve its potential for scale within the region.

Whether that goal can be aided by political means remains to be seen, but current indicators are not painting a pretty picture.

But what about the private sector? Could it step in and help make scaling businesses across Europe more accessible?

My personal opinion is that there could be a market for that in terms of B2B services designed to help growing companies operate across European markets in a consistent, largely centralised way.

I certainly hope there is. If scaling a business across European markets becomes easier in the future, then perhaps Europe will have more unicorns. As with everything, time will tell.