A brand new report has shone a lightweight on the affect that European and Israeli unicorns have had on the broader expertise ecosystem because the global economic crisis 14 years ago.
The report, titled “Europe and Israel’s Startup Founder Factories,” was produced by VC firm Accel with heavy assist from startup and VC data platform Dealroom. It reveals that of the 344 VC-backed unicorns since 2008, practically two-thirds (203) have led to at the very least one startup being based by former staff, with 1,018 tech startups rising in whole.
Founded again in 2005, French adtech large Criteo leads the pack with its alumni happening to create 29 so-called “second technology” startups. That is adopted by Spotify (27), Supply Hero (27), N26 (24), Klarna (23), Revolut (23), Skype (21), BlaBlaCar (21), Zalando (20) and Clever (19).
Whereas lots of the names akin to Spotify or Skype are long-established founder factories, what’s maybe extra notable is that among the newer entrants to the unicorn brigade, such as Glovo and Wefox, are already resulting in a complete bunch of recent startups.
Certainly, a plurality of the unicorns coated within the report solely hit unicorn standing since 2019.
This newest report comes as companies from across the industrial spectrum have faced a frosty reckoning with reality this yr due to the global economic downturn: valuations at just about all stages are down.
Nevertheless, with the sheer variety of tech staff which have been laid of this yr, from massive tech giants such as Meta and Twitter, to growth-stage startups in nearly every vertical, this might create a fertile panorama for a swathe of recent startups to emerge. And that, maybe, is why Accel is producing this report now — it needs to point out that some good can come from robust instances.
Certainly, the timescale of this report is especially notable, as its information begins on the time of the final main monetary disaster — a cut-off date that additionally signalled a serious transformation within the expertise business, with smartphones just emerging into the mainstream arena. Within the intervening years, numerous expertise firms have sprung up, some catapulting toward world domination, some disappearing into oblivion and a few falling someplace within the center. However no matter how occasions transpired, all of it served to supply lots of people with expertise of constructing and scaling advanced tech-infused startups. Even failure isn’t necessarily a bad thing.
“Whereas founders and their groups are navigating a tricky macroeconomic surroundings, it’s additionally true that the group is in a a lot stronger place than throughout the 2008/9 monetary disaster,” Accel associate Harry Nelis stated in an announcement. “There’s now a wealth of sturdy founders and operators constructing progressive firms which have skilled the start-up journey earlier than and have the information to create world success tales.”
Evidently this development isn’t misplaced on unicorns themselves. Simply final week, Spanish supply firm Glovo, which was acquired by Delivery Hero back in January and which has laid off a number of employees this yr, introduced a brand new program referred to as Glovo House, designed particularly to assist Glovo alumni founders by way of mentorship, networking and assist for elevating cash.
For the aim of Accel and Dealroom’s report, the time period “unicorn” describes any VC-backed firm that achieved a valuation of $1 billion or extra whereas it was a personal firm, although it excludes pharmaceutical or biotech firms. And “startup” refers to any expertise firm that was based by somebody previously employed by a unicorn on a full-time foundation for at the very least 5 months, and who began their new firm inside six years of leaving the unicorn.
Digging into the info does reveal some potential flaws, insofar as lower than half (44%) of the second-generation startups have confirmed elevating greater than $1 million in funding. Whereas enterprise capital funding isn’t the one bellwether of what constitutes a profitable startup launch, it’s actually a robust indicator — thus, it’s tough to understand how lots of the startups gained any significant traction.
Certainly, when pushed on the info, Accel stated that simply 48% of the startups had revealed elevating $100,000 or extra. Nevertheless, it caveated this by noting that 54% of the startups had solely been based since 2020, which means that a lot of them are nonetheless very early-stage and both haven’t raised any exterior funding but, or have but to announce it.
Digging even deeper into the numbers reveals another notable nuggets. Supply Hero, for instance, has birthed Flink, Gorillas and Jokr, whereas Skype led to Wise, Bolt and Pipedrive — every of those firms have gone on to hit unicorn standing themselves.
Additionally, there’s at the very least one third-generation unicorn on the market. Israel-founded payments company Payoneer has spawned some 12 startups, considered one of which is IronSource, which not too long ago merged with Unity in a $4.4 billion deal. And it was IronSource staff who launched Noname Safety, which hit a $1 billion valuation last December only a yr after it was based out of Israel.
In whole, there are 23 examples of unicorns birthing unicorns, although not all of these secondary unicorns are essentially based mostly in Europe themselves. The report did state, although, that 56% of second-generation firms have been based in the identical metropolis as the unique unicorn.
On prime of all that, with layoffs and scalebacks rife, it’s not clear whether or not all these firms’ respective valuations are nonetheless at a “unicorn” degree right now — a few of these valuation needles might spin backwards in a future funding spherical.
The report additionally delved into founder factories by metropolis, with the info suggesting that London remains a bedrock within the European expertise sphere — the U.Ok. capital is prime of the listing by way of total variety of startups spawned by unicorns. Certainly, 27 unicorns based out of London created 168 startups over the previous 14 years, 69% of that are additionally based mostly within the metropolis. Berlin was second with 24 native unicorns creating 138 startups, 70% of which have been based within the German capital. Rounding out the highest 5 have been Paris (125 startups from 22 unicorns) Tel Aviv (108 startups from 27 unicorns) and Stockholm (98 startups from 11 unicorns).
Nevertheless, it may be tough pinning a startup to a particular area, as firms might transfer their headquarters to the U.S. early on to safe funding or be nearer to prospects. GitLab, whose former VP of Product launched Remote, which recently hit a $3 billion valuation, is probably a very good instance of this — whereas its foundations are actually rooted in Europe, the corporate is formally included within the U.S. with a fully distributed workforce unfold throughout dozens of markets globally. Equally, Payoneer has been headquartered in New York almost since its inception.
The report did word that the placement of the businesses within the dataset was based mostly on the place they have been initially created, no matter the place they might have later relocated. Put merely, in a world of distant work and founders with itchy ft, it’s maybe not as simple to pigeonhole a startup as “European” or “Israeli” in 2022 because it was 14 years in the past.
However regardless of all these gray areas, Dealroom’s information nonetheless offers some attention-grabbing insights into founder factories and the movement of expertise expertise over the previous 14 years.