Watch out Silicon Valley, here comes Europe

The thrill of entrepreneurship is that there is no such thing as a level playing field. Ours is an industry of outrageous acts of ambition, of crazy leaps of faith, of countless Davids taking on their own Goliaths and — from time to time — winning.

The same is true for the global landscape of tech. In Europe, many entrepreneurs, politicians and investors — including myself, first at Skype and then at Atomico — have aimed to improve the environment for the next generation of founders. I am convinced that now is the best time in history to be a European technology entrepreneur.

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It is self-evident that Europe will never exhibit the same characteristics as Silicon Valley, which remains one of the most remarkable places on the planet. Nor, for that matter, will China, Japan, Brazil or any of the other countries where entrepreneurship is flourishing.

But an uneven playing field does not necessarily translate into an advantage for one side over the other. Just as a nimble start-up can defeat a large incumbent, turning its focus and speed to its advantage, so too are we seeing that in some respects European entrepreneurs actually have an edge.

The first of these advantages is highly visible: the extraordinary development of Europe’s tech hubs. Each hosts a broad range of different start-ups but has also emerged as a world leader in a particular sector, often linked to their city’s historic industries. If I were to start a mobile gaming company, my first act would be to book a one-way ticket to Helsinki but if I were to take on the financial sector, I would stay exactly where I am in London.

These European cities have become magnets for talent and capital, not by accident but thanks to the examples set by pioneering entrepreneurs who have shown that it can be done. Thanks to leaders such as Ilkka Paananen, the founder of gaming company Supercell, there is a generation of Finnish entrepreneurs who dream of creating not the next Twitter but the next Supercell (maker of Clash of Clans) or Rovio (Angry Birds) — and are acting on that dream. Remarkably, Sweden now has the highest concentration of billion-dollar companies in the world outside Silicon Valley, with 6.3 such companies per million people.

The second advantage is more subtle but no less profound. Its origins are not in Europe but further afield. It can be hard to comprehend the ferocious pace with which the internet has spread across the world, from North America and Europe to Asia, the Middle East, Africa and Latin America. The capacity of mobile broadband networks is increasing while the cost of data is declining, making mobile access affordable for a growing proportion of the population. At the same time, the shrinking cost of smartphones will soon put a supercomputer in 3 billion pockets. These pockets have money in them too; China became the world’s largest ecommerce market back in 2013, according to consultants Bain.

The combination of these forces dramatically increases the market for hyper-growth companies, and changes how they compete too. When companies are battling for users in every continent, where you come from suddenly matters much less than where you are scaling into. Relative to the size of the opportunity, domestic markets diminish in importance. Today even the great Chinese titans Alibaba and Tencent are entering international waters.

And here we find the second edge for European entrepreneurs. When we founded Skype, our aim was never to build the best peer-to-peer communication service in Sweden. Likewise, Daniel Ek and Martin Lorentzon did not set out to build Sweden’s best music service with Spotify, nor did Riccardo Zacconi and his co-founders at King aim to build amazing games for Swedes to play with. Without the luxury of a huge domestic market, we were forced to think internationally from day one — to solve global problems, to work across borders, and to move fast in doing so.

For the first time, we have data to support this. The vast majority of billion-dollar internet companies founded since 2003 went international before crossing that valuation threshold. Atomico’s research shows that entrepreneurs from countries with a population of less than 50 million people took an average of 1.4 years to go international — less than half the time of larger countries. And remarkably, 15 billion-dollar companies have emerged from these smaller nations since 2013.

In short, we are seeing the emergence of a remarkable cohort of new businesses: start-ups that begin in some of the world’s smallest domestic markets but are able, thanks to their highly international approach, to reach global scale in record time. In time, I believe, this will be as significant a trend as the historic concentration of innovation in Silicon Valley, and will play a major role in the European economy for decades to come.

Niklas Zennström is CEO of Atomico, a London-based international technology investment firm, and previously co-founded Skype

Illustration by Leandro Castelao