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Global Banking & Finance Review®
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By Supantha Mukherjee
STOCKHOLM (Reuters) – More than 1,000 technology startups were created in Europe and Israel by former employees of about 200 venture capital-backed unicorns in the region since the financial crisis of 2008, a report by VC firm Accel showed on Tuesday.
After the boom in startups in the last two years, sentiment has turned negative in the second half of this year with several companies lowering valuations and cutting jobs in a bid to find a path to profit.
But Accel argues that the community is in a much stronger position than during the financial crisis with a strong set of founders ready to create “the next wave of companies”.
Top startups such as BlaBlaCar, Criteo, Delivery Hero, Klarna, N26, Revolut, Skype, Spotify and Zalando have become the breeding grounds for new founders. Each of those companies has led to the creation of more than 20 startups, helmed by former employees.
Former employees from each of the newer startups like Babylon, Celonis, iZettle and SumUp have also created more than 10 companies.
[ Startups spawning startups ] https://graphics.reuters.com/EUROPE-STARTUPS/ACCEL/zjvqjkdgypx/chart.png
“Last year, the pace of investment was very high. That has gone down dramatically,” Harry Nelis, partner at Accel, said in an interview.
“There will be fewer deals, fewer transactions taking place in a time of transition, but once the new level has been found, I think things will pick up quite a bit,” he said.
While London saw the most number startups being created with employees of 27 unicorns forming 168 startups, Swedish capital Stockholm had one of the highest per capita numbers with 98 companies spawning from just 11 startups.
“Unicorns tend to create more rounded founders than large organizations like the tech behemoths because people have had kind of a better training ground for entrepreneurial activity,” Nelis said.
Employees in a startup tends to get access to many different functions from engineering to sales, giving them exposure to various parts of the business, he said.
(Reporting by Supantha Mukherjee in Stockholm; editing by David Evans)
A startup is a newly established business, often in the technology sector, that aims to develop a unique product or service and bring it to market.
Venture capital is a form of private equity financing that provides funds to startups and small businesses with long-term growth potential in exchange for equity ownership.
A unicorn is a privately held startup company valued at over $1 billion, often recognized for its rapid growth and innovative business model.
Job creation refers to the process of generating new employment opportunities, often driven by business growth, economic development, and entrepreneurial activities.
A financial crisis is a situation in which the value of financial institutions or assets drops significantly, leading to widespread economic instability and loss of wealth.
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