For more than a decade, the tech industry has been chasing unicorns: elusive startups valued at more than $1 billion. The obsession began in 2013, when Aileen Lee – a venture capital fund based in Palo Alto – coined the term that first captured the imagination of founders and investors, and then prime ministers and presidents. But these mythical beasts are also rare: Only 1 percent of venture-backed startups ever reach this status.
As society enters the age of AI and financial markets place renewed value on business fundamentals, our understanding of what makes a successful technology company is evolving. A promise alone does not make a national, regional or global champion. Champions are those companies that combine both the promise of untapped growth and the fundamental metrics that demonstrate strong and sustainable customer demand.
Until recently, Silicon Valley was seen as the world's undisputed unicorn factory. But Europe's innovation ecosystem has matured to the point where it consistently produces companies with both the vision to change the world and the foundations to sustain that change. It is led by a cohort of more than 507 'thoroughbreds': startups with an annual turnover of at least 100 million dollars.
More than a third of these high-potential companies are headquartered in what we call New Palo Alto: not a unique location, but a network of interconnected ecosystems within a five-hour train ride from London. After the Bay Area, this is the second most productive innovation cluster in the world and includes industrial heritage cities such as Glasgow, Eindhoven and Manchester, as well as world-renowned cultural, policy and academic capitals such as Amsterdam, Cambridge, Edinburgh and London. , Oxford and Paris.
They are home to companies such as low-cost computer manufacturer Raspberry Pi, whose technology was invented and developed in Cambridge, manufactured in Pencoed, South Wales, and sold worldwide. Raspberry Pi recently crowned more than a decade of growth with a listing on the London Stock Exchange. At the time of listing, it had revenues of $265 million and $66 million in gross operating profit.
Other new arrivals from Palo Alto include fintechs Monzo, Revolut and Tide, which offer mobile-first banking to SMEs, as well as fast-growing companies such as iPhone challenger Nothing and London-founded Cleo, the conversational AI pioneer that Helps American consumers manage their finances.
Seven of Europe's ten most valuable technology companies, founded after 1990, emerged from New Palo Alto: Booking.com and Adyen from Amsterdam; Wise, Revolut and Monzo from London; ASML from Eindhoven; and Arm from Cambridge. They are all products of this interconnected ecosystem.
Yet, despite all its promises, New Palo Alto remains a region with little investment. Although early-stage funding is now higher than in the Bay Area, Thoroughbreds face a staggering $30 billion funding gap in the crucial scale-up phase compared to their Bay Area counterparts.
Governments of New Palo Alto's leading economies – Britain and France – have developed progressive policy frameworks to support innovation and technology companies, including investments in R&D, talent and visa programs. They are also introducing policies, including the UK Mansion House Compact and France's Tibi, to support more scale-up capital.
But no innovation cluster has ever grown thanks to policy alone. Success comes when investors fully understand the investment opportunities. Now that we have nearly a thousand venture-backed companies in EMEA with revenues of more than $25 million, helping this ecosystem realize its full potential is no longer about solving a policy challenge. It's about recognizing a huge investment opportunity.
This is why the amount of venture capital entering the region has increased ninefold in the past decade, and why major institutional investors in Britain and France will bring billions of dollars of investment to back private companies over the next decade.
The new British Prime Minister's constituency includes Somers Town, an area close to St. Pancras station and within sight of the huge European headquarters of Google and Meta. But despite all the shiny towers, too many New Palo Alto neighborhoods have been left behind by technology. In Somers Town, 50 percent of children receive free school meals, 70 percent of residents receive social care and adults live twenty years less than in leafy Highgate, just twenty minutes away.
As the technology industry comes under increasing scrutiny, we have an opportunity to offer an alternative innovation model. By turning thoroughbreds into sustainable, transparent companies, we can begin to share the benefits of innovation more fairly.
Just as some of the most iconic American cities take their names from the ancient cities of Europe – New York and New Orleans – New Palo Alto pays respect to its namesake while signaling a conscious choice for the future.
This article first appeared in the November/December 2024 edition of WIRED UK.
