Harry Nelis
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Talent is the cornerstone of any successful tech ecosystem. In the last two decades, we’ve seen a wealth of strong founders and operators emerge across Europe and Israel, building innovative products and category-defining, unicorn companies that are competing on the global stage.
This in turn has encouraged employees from some of Europe’s biggest tech success stories to take their experience working at a unicorn, use it to found the next generation of startups and win venture backing. As a result, we’re now seeing a spinning flywheel effect, in which unicorn pedigree and know-how is trickling down and fueling the next wave of ambitious entrepreneurs similar to what we have seen in the U.S. over the last few decades.
Since opening our London office 23 years ago, the Accel team has backed some of Europe’s greatest startup success stories, including Celonis, Miro, Monzo, Personio Spotify, Supercell, UiPath and Vinted.
Our recently launched Founder Factories Report explores the unicorns, or “founder factories,” now producing the largest amount of entrepreneurial talent in the region and the resulting journey from unicorn employee to tech founder.
Our data paints a clear picture: the ecosystem is in a strong position despite current macroeconomic headwinds, thanks to its flywheel of inter-generational talent spawning from unicorns.
To illustrate this, let’s take a look at some key takeaways from the report:
The rise of the “founder factory”
Established juggernauts in the European and Israeli ecosystem are fast becoming hotbeds of talent. These “founder factories” are attracting and upskilling the region’s brightest tech operators – and inspiring many of them to become founders and start new ventures in the process.
Our data reveals that 221 of the region’s 353 VC-backed unicorns have fueled 1171 new tech-enabled startups through their alumni, illustrating this trend. Moreover:
- The founder factories at the top of our ranking are Sweden’s Spotify and Germany’s Delivery Hero, both of which have produced 32 startup spinoffs, followed by the likes of Criteo (31), Klarna (31) and Zalando (30). Other familiar unicorns including BlaBlaCar, Deliveroo, Glovo, N26, Revolut, Skype, Wise, Wix and Zalando, have all also produced more than 20 new tech startups each.
- However, a wave of newer founder factories is also on the rise with younger unicorns such as Babylon, Celonis, Conduit, iZettle and SumUp seeing 10 or more companies set up by former employees.
- Alumni-founded startups are attracting significant private investment, with more than half (59%) of these new startups already securing private funding. Of those, 45% (311) have raised between $1M-$10M and almost a third (30%) have raised more than $10M.
In our experience, founders who have worked at unicorns often have the networks and connections that make it easier to quickly kickstart a new business. Potential co-founders, operators, mentors, employees, angel investors and even customers will generally be easier to find for a second-generation founder. Moreover, as investors we are naturally drawn towards operators, builders and leaders who have already been on the start-up journey before and navigated the challenges associated with building a company.
It’s therefore no surprise that we are seeing certain successful unicorns create countless new founders from their ranks.
The archetypal “second-generation” founder
Successful founders can come from any educational or professional background, but our data illustrates that many entrepreneurs who do secure venture backing have spent considerable time working in tech, including at an established unicorn, and have been through higher education.
The data also reveals that almost two thirds (63%) of these “second-generation” founders had at least seven or more years work experience before founding their startup, with a fifth benefitting from joining a unicorn early on (within two years of its launch), and being a part of its hyper-growth journey, with the median time spent on the team being 28 months.
After cutting their teeth at a unicorn, many founders are often quick to start a new business, with over half (60%) founding their startups within a year and almost a fifth (18%) have even gone on to create more than one startup after leaving.
We’ve found that ambitious entrepreneurs often feel a sense of urgency to pursue their own ideas and passions after helping scale other entrepreneurs’ ideas. In some cases, second-generation founders may feel that the market is ripe for their ideas and that they need to move quickly to capitalize on the opportunity – innovation waits for no one.
Finally, a common educational background emerged in the data, with 70% of second generation founders having gone through higher education and, of those, 60% had a master’s degree. This suggests that higher education is an advantage – but not a prerequisite – to entrepreneurial success.
A bright future for fintech
Europe and Israel also continues to shine as a fintech powerhouse when it comes to producing second generation startups, with nearly a fifth (17%) of all startups spun out of unicorns being fintechs according to our data. Currently, 63 fintech unicorns have seen 333 startups founded by former employers, of which 38% of which were also in fintech too.
Many of the top founder factories in the region fall under fintech, with the likes of Revolut producing 26 new startups – including Screenloop and Tesseract – and N26 producing 24 including Penta, Spoke.ai and Wonder.
The prevalence of fintech founder factories is unsurprising, given the size of the opportunity in the industry, Europe’s access to leading financial markets and a more flexible regulatory environment. The barriers to entry in the sector are lower than other industries too, with many fintech startups leveraging existing infrastructure (e.g. payment networks) to roll out their products. This makes it easier for second-generation startups to enter the market and compete with established players from the get-go.
The flywheel keeps spinning
All in all, while founders and their teams are navigating a tough macroeconomic environment, the European and Israeli tech ecosystem is in a much stronger position than during the 2008/9 financial crisis due to the compounding effect of repeat entrepreneurs.
As our data reveals, with over 350 venture-backed unicorns across the continent, there’s a strong foundation of talent and success that we firmly believe will be passed onto the next generation of ambitious entrepreneurs. The future remains bright for Europe and Israel.
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