In the midst of a political reshuffle in Brussels, France Digitale, with the support of 32 organizations (Euratechnologies, Allied for Startups, Dutch Startup Association, Italian Tech Alliance, Startup Portugal, etc.) defending the interests of startups in 20 European countries, is unveiling the second edition of LETS (Leading European Tech Scaleups). This mapping highlights European gems founded after 2000 that generate at least €10 million in turnover and market their innovative products and services beyond their original market. This year, 251 innovative companies from the Old Continent are in the spotlight, compared to 135 last year for the launch of this mapping.
On the latter, the French delegation is largely the most represented, with 80 companies identified, including well-known names in French Tech, such as BlaBlaCar, Back Market, Doctolib, Devialet, EcoVadis, Electra, Ledger, Mirakl, Malt, Swile, Withings and Vestiaire Collective. The Netherlands, with 40 companies selected, and the United Kingdom, with 33 selected players, complete the podium. Note that some, such as Germany, are underrepresented due to information on income not available in the public domain.
60% of the selected companies are profitable
Among the lessons from this second batch of LETS, which is based on declarative information and publicly available information (Dealroom, LinkedIn, press, specialized sites, company reports, etc.), we can see that 70% of the identified European champions, or 174 companies, have customers outside Europe. In this context, the United States is the most popular, ahead of Japan and Australia. In Europe, the United Kingdom and Germany are the main targets.
To develop internationally, two paths are preferred: either by starting by expanding to neighboring countries before crossing the Atlantic, particularly in the software, finance and health industries, or by going directly from the domestic market to the United States. This second option is particularly common in the gaming, manufacturing and service sectors, where companies are by definition global from the moment they are created. On the other hand, sectors involving last-mile logistics, such as e-commerce, transport and energy, are more complicated to export beyond the Old Continent.
At a time when the tech funding crisis continues to rage, except in generative AI which is becoming a real bubble, it should be noted that the companies included in this map are showing fairly healthy and sustainable growth. Indeed, 60% of them are already profitable, and the remaining 40% plan to be profitable over the next three years. This good financial health is reflected in the job market: LETS companies have an average of 415 employees and most of them want to expand their workforce in the coming months.
Fragmentation, the Achilles heel of European tech nuggets
While this mapping gives a positive overview of the development capabilities of 251 European tech champions, there are some drawbacks. While most manage to expand into several European countries and even try their luck on the American market, very few manage to cover the entire Old Continent. A partial failure that France Digitale attributes to the fragmentation of Europe, still made up of more than 27 different markets, each with its own rules.
Thus, the time taken for a European country to open up varies considerably: from 3 months to 3 years! Finance and health are the sectors that suffer the most negative effects of this fragmentation. “The European market is underexploited. At the same time, there is much less bureaucracy and fewer cultural and linguistic barriers in the United States. This is one of the findings of the Draghi report.”analyses Agata Hidalgo, who deals with European affairs at France Digitale.
A 28th regime to finally establish a single European market?
Given this observation, the French organisation hopes that the new team at the European Commission will tackle the problem head on. “We are proposing the introduction of a 28th regime for innovative companies so that they can scale faster, everywhere in Europe. As a reminder, it is a market of 480 million inhabitants, bigger than the United States”notes Maya Noël, Director General of France Digitale. Such a measure would indeed allow European companies to carry out administrative procedures only once for the entire single market of the Old Continent. The elimination of cross-border transaction costs for equity investments, in order to increase the liquidity of European financial markets, is also an avenue put forward by France Digitale.
Now that Ursula von der Leyen has unveiled the list of new European commissioners, France Digitale now has more visibility to prepare its next battles in Brussels. And if Thierry Breton, the Commissioner for the Internal Market, left the European Commission with a bang, due to his stormy relationship with Ursula von der Leyen, France will however have an influential representative in the person of Stéphane Séjourné, the resigning Minister of Foreign Affairs, who obtained an important portfolio dedicated to prosperity and industrial strategy.
However, France Digitale will have to distribute its efforts since the subjects relating to digital technology and innovation will not be brought together in a single portfolio. “It’s not a bad thing that the topics are distributed among several people. Stéphane Séjourné is in charge of the economy and industry, while data, AI and quantum will be managed by another commissioner. This allows for several channels of communication. Generally speaking, things are moving in the right direction. There has been a real awareness. A few years ago, comments like those of Mario Draghi would not have been imaginable.”rejoices Maya Noël. Indeed, the former president of the European Central Bank (ECB) did not hesitate to throw a spanner in the works, by recommending in his report to lighten the constraints of the directive on sustainability reporting (CSRD) and that on the duty of vigilance (CSDDD), which constitute an administrative burden for companies in his eyes. Strong recommendations to strengthen a Europe that is often too timid in the face of the United States and China.
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