United States is the largest homogenous market in the world and remains a sought-after place to go for Europe’s most ambitious tech entrepreneurs.

But the journey to enter and successfully scale a business in the US is far from straightforward and encompasses a mentionable burn-rate risk with lots of trial-and-error learnings, something that the Airtame’s Spotify’s, and Zendesk’s of this world can testify to. For a long time, nonetheless, aspiring European tech ventures had but one option; to cross the Atlantic.

In recent years however, the European tech ecosystem has progressed considerably with multiple startup hubs blossoming, providing a scarcity of talent and funding. For instance, the European venture capital industry has doubled its investments from $18bn in 2014 to $36bn in 2019, according to Crunchbase. Moreover, Europe is home to around 5.7 million software developers compared to 4.4 million in the US, with European salaries being 60% lower on average for such workers. This distils the question if and to what degree European tech ventures should target the US after all?

As with most things, there is no single answer. For instance, in sectors such as finance, luxury and gaming, Europe’s rich heritage seems to provide a competitive advantage. But when it comes to B2B software, the US arrives as a top destination for European tech startups. In new research by Index Ventures, it was found that European corporates invest 76% less than their US counterparts on software, and that European investments are focused more on compliance rather than innovation. Therefore, B2B tech ventures are likely to continue to look to the US for commercialisation.

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The States also represent a strong case for European startups seeking funding and exit opportunities. In 2019, a total of $132bn was invested in US ventures, which constitutes more than half of all global venture capital investment activity and almost four times the invested capital in Europe 45 . The large amount of US capital is also reflected in valuations, which the investment banking firm GP Bullhound found to be 18 times the revenue for European unicorns and 46 times the revenue for US unicorns 6 . Thus, the Atlantic is said to house a natural valuation gap, which acts as another incentive for European ventures to go west.


According to Index Ventures, the most successful European software companies are found to have 78% more sales and marketing employees in the US than in Europe. This highlights the importance of conquering the US market for global leadership. But relative to years prior, more European companies choose to keep their engineering base in Europe, with 4 in 5 doing so. Creating US-based engineering and tech teams seems to have fallen out of favour.
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European tech ventures are staying in Europe for longer as well. Comparing the period of 2008-2014 with 2015-2019, the number of European tech startups expanding or moving to the US ahead of a Series A funding round decreased from 59% to 33%. While it seems right for a business to establish a US base once it reaches certain milestones, doing so has become increasingly costly and challenging.


If expanding too soon, startups risks burning cash excessively and spreading themselves too thin in the US while losing leadership in Europe. Contrary, a late expansion could mean losing the potential for US market leadership and subsequently the European leadership. Investors and founders alike share the view that no single roadmap for success exists.


At Scale Capital, it is our experience that proper guidance on the journey is invaluable. Building an understanding of how, why, and where to take your first steps in America’s ultra-competitive landscape together with a committed partner is indispensable. Knowing the paths that like-minded businesses have followed can set you up for success.


Are you a European B2B tech startup at the seed stage with great ambitions to take on the US market, then we at Scale Capital would love to hear from you. You can connect with us here.