With all of its economic problems over the past five years, Europe has been often ignored as a major investment force, especially in the technology rich Silicon Valley. But a study released yesterday by the Bay Area Council Economic Institute shows that Europe, rather than Asia, has emerged as a dominant force in Bay Area investment, with technology as the big driver. The new message now is: ignore Europe at your own peril.
There have been signs for a while that Europe was making serious inroads in Silicon Valley. Barely two months ago, French President Francois Hollande made a stop in San Francisco and announced the opening of the French Tech Hub in the city with much fanfare.
Yet the Institute study finally puts some hard data behind the growing feeling that perhaps Asia wasn’t the Bay Area investment force that many thought they were. Europe is now the largest global direct investor in the Bay Area, pumping over $4 billion in private equity into the region in 2012 alone, nearly as much as all other countries combined.
“Investment is the big story,” said Sean Randolph, the Institute’s president, during a presentation yesterday at Wells Fargo headquarters in San Francisco. “These are economies that are investing in each other on a big scale.”
The study reveals that the door swings both ways when it comes to Silicon Valley and Europe. U.S. startups in communications and information technologies are turning to Europe first when they are ready to expand, and the list of established Valley companies with affiliates overseas is growing. According to the study, Hewlett-Packard, Oracle, Apple and Cisco each have well over 50 affiliates in Europe.
Other tech firms are establishing important new business markets in European countries as well. Uber’s disruptive “car-for-hire” smartphone model is gaining a presence in Paris. Yelp now has a European headquarters in Dublin and Netflix is preparing to launch in Germany and France after successful introductions in the UK, Netherlands and Ireland.
For European tech startups, the Bay Area has become a powerful magnet, but it comes with an ironic twist. As larger European companies come to Silicon Valley, the startups have no choice but to follow. “European companies are coming to the Bay Area, and then European startups are coming to the Bay Area to meet with European companies,” said Duncan Logan, founder of RocketSpace.
An interesting development also noted in the study was the growing number of “listening posts.” Despite sounding like a spy operation, these are nothing more than satellite offices set up in the Bay Area by larger European companies to connect with emerging new technologies and stay on top of important trends.
Various country governments are establishing their own more formalized posts in Silicon Valley in the form of trade and investment offices. These now include groups such as Czechinvest, Enterprise Estonia, IDA Ireland, Accio Silicon Valley (representing Spain), and Scottish Development International.
“We can work better as a European group here,” pointed out John Hartnett of SVG Partners and the founder of the Irish Technology Leadership Group (ITLG). His organization is a network of global Irish tech leaders (including former Intel CEO Craig Barrett) whose goal is to foster links between Ireland and Silicon Valley.
One of the newest landmarks in the greater San Francisco area is the recently opened three-mile span of the Bay Bridge, connecting the city with the East Bay. Today, the new bridge is covered in Ethernet-enabled LED lights, technology provided by Philips, a Netherlands-based company. For thousands of motorists crossing the bridge every day, it's yet another reminder that the European tech presence is here to stay.