Unicorns and Soonicorns: What’s Driving Significant Growth in European Tech

Scale and Market Growth

• The European tech sector now comprises 120 unicorns, a significant increase from just 26 companies a decade ago.
• European technology market capitalization now exceeds the combined market cap of the financial and natural resources sectors.
• The region hosts a growing cohort of public tech giants, with numerous companies valued between $20 billion and $70 billion, up from only a few exceeding $10 billion a couple of years ago.
• Venture capital funding into European tech has surged 6x over the last six years, reaching $43 billion (with 2020 alone seeing $46 billion).

Sector Breadth and Diversification

• The sector has diversified beyond its historical dominance by e-commerce to include robust activity in health tech, food tech, EdTech, fintech, and software.
• Fintech and software subsectors now each contain over 25 unicorns.
• EdTech has recently produced its first European unicorn, with further growth expected.

Founder Ambition and Capital Strategy

• A fundamental shift has occurred where founders no longer view a $1 billion exit as the primary goal, preferring to raise more capital to build companies worth multiple billions.
• This increased ambition is driving longer private tenures and a strategic focus on raising substantial capital in public markets before or upon IPO.
• Goldman Sachs facilitated six to seven tech IPOs valued at over $1 billion each in Europe over the last 12 months, setting a new record.
• 2020 was characterized by strategic M&A consolidation (e.g., Just Eat/Grubhub/Takeaway, eBay Classifieds/Adavinta), while 2021 has focused on an "IPO super cycle" utilizing direct listings and SPACs.

Challenges and Geographic Trends

• A primary challenge is the "exodus" of enterprise software companies from Europe to the U.S. to access the American enterprise customer base.
• While consumer tech remains more rooted in Europe, retaining listed status and operational headquarters in Europe without U.S. relocation remains a strategic goal.
• There is still significant capital market pressure driving the need for larger domestic valuations to compete globally.

Forward-Looking Outlook

• Current VC funding is positioned to fuel the next wave of "superunicorns" expected to emerge over the next 5 to 10 years.
• Goldman Sachs forecasts the creation of 5 to 10 European companies with market caps exceeding $100 billion in the near future, up from the current two.
• The trajectory suggests that the "best is yet to come" for European tech as capital inflows mature into large-scale public enterprises.