Last summer, a colorful truck began driving slowly around the streets of London. The back of it carried an electric pink, blue, and yellow billboard that said, "Dear start-ups, keep calm and move to Berlin," a play on the famous 1939 poster the British government used to raise morale when the Nazi bombing of London was imminent. Indeed, the truck represented a German invasion of sorts; it had been sent by the FDP, a free-market liberal political party in Germany. As it drove around London's Silicon Roundabout, one Bloomberg reporter tweeted a photo of it. "The vultures are circling," he wrote.
Neither London nor Europe is quite ready for vultures, but 2016 was a punishing year. The Brexit referendum threw the U.K. into chaos, unnerving London fintech companies that discovered--to their horror--that they may no longer be based in Europe's banking capital after 2019. Many will likely flee, along with the banks they've partnered with, to other E.U. cities they never imagined being stationed in. Already, Barclays has identified Dublin as the home of its new E.U. headquarters post-Brexit.
The war in Syria has forced some two million refugees into Europe, a displacement unmatched since the expulsions of World War II. There was a failed coup in Turkey, which is slowly turning away from democracy and devolving into an Islamic republic. And, of course, there were multiple mass murders--in Brussels, Nice, and Berlin--inspired by or directly tied to ISIS.
Regional economies are in a tailspin. The Italian government has just begun the process of bailing out its banks from the nonperforming loans on their books, a task that Barclays believes will cost about $55 billion all told, if it works. Impaired loans in the entire system are estimated at $383 billion, about 20 percent of Italian GDP. Sitting on top of this economic powder keg is a gaggle of right-wing populist parties, like UKIP in Britain, the Five Star Movement in Italy, the AfD in Germany, and the National Front in France, which seem to be gaining strength. None of them are expected to immediately win anywhere--but that's what everyone said about Trump and Brexit.
All that uncertainty has unnerved markets. The number of IPOs in Europe fell to 174 last year, a decline of 36 percent from 2015; and their value dropped 49 percent, to $32 billion, according to Ernst & Young. Five high-profile IPOs in the U.K. were delayed or withdrawn (Misys, PureGym, TI Automotive, Mountain Warehouse, and O2). Likewise, European M&A activity declined 4 percent, and deal value fell 20 percent, to $986 billion, according to the Institute for Mergers, Acquisitions & Alliances.
Despite all that, the mood among European startups remains relatively upbeat. It's no wonder why: As revealed by the third annual Inc. 5000 Europe list--which recognizes Europe's private companies with the fastest-growing revenue over three years--these companies are averaging 486 percent three-year revenue growth. That's a collective $70 billion of growth in revenue from 2012 to 2015.
Rich Pleeth is a former Google employee who founded Sup, a social network app that didn't take off because it couldn't add users faster than they abandoned the product. But even he is optimistic about this year. "I have a positive vibe about 2017," Pleeth says. "We're going to see a number of U.K. startups explode."
In part, the optimism comes from a money faucet that is still running. The euro zone (under the European Central Bank), Sweden, Denmark, and Finland all have central banks with negative interest rates, or base-rate interest set at zero. With the U.S. Federal Reserve on course to hike its rates, this makes capital easier and cheaper to get hold of in Europe.
Second, the Brexit vote may be bad for the U.K., but it's a potential gold rush for everyone else. After all, in 2015 about 40 percent of tech startup founders in London were from outside the U.K., according to VC firm Balderton Capital. If Britain's departure from the E.U. makes it difficult for London to get immigrant talent, then places like Lisbon, Berlin, and Dublin are going to look a lot more attractive.
"If you're a Czech CEO who was happy to move to London a few years ago, there is nothing to stop you from moving to Amsterdam now," says Suranga Chandratillake, a general partner at Balderton.
The French seem particularly keen to poach from across the Channel. Axelle Lemaire, France's minister for digital affairs, has mounted a nonstop worldwide tour of tech conferences like Web Summit--which attracted 50,000 people to Lisbon last November--and CES in Las Vegas to persuade VCs and entrepreneurs to abandon Britain in favor of Paris. In January, she told the media that if and when Brexit happens, British startups will obviously want to remain accessible to the E.U. market--and she's already observed an increase in British fintech companies sniffing around France.
While no startups have announced outright that they will be exiting the U.K., many are quietly preparing. Officials in Berlin boast that more than 100 U.K. startups have inquired about moving to the German city.
According to Lemaire, the French startup sector is booming. In the third quarter of 2016 alone, she says, funding obtained by French startups reached $932 million, double the amount invested in Germany and almost equaling the $979 million invested in the U.K. Part of the appeal, Lemaire notes, is that France has lowered taxes for new companies and relaxed laws about layoffs. It also has in the works a new, uncapped tech visa that will allow anyone in the tech industry--from developers to founders--outside the E.U. to get a fast-track visa.
In addition, 2017 could be a good time for many European startups to be acquired. There are 47 unicorn companies across Europe, many of which will likely be eager to sell soon. Some of the larger U.S. and Asian tech companies have been on a quiet acquisition spree in Europe over the past couple of years. Chip designer ARM was acquired by Japan's SoftBank for some $31 billion; the travel search engine Skyscanner went to China's Ctrip for $1.7 billion; and in June, Twitter bought London's Magic Pony, a company that uses machine learning to sort and identify photos, for $150 million.
Of course, there is every reason to think there will be as much volatility and surprise in 2017 as in 2016. But the entrepreneurs in the Inc. 5000 Europe have already proved that they can succeed in an uncertain environment. Those who can read the risk correctly are bound to thrive, whether they're in Stockholm or Prague or Amsterdam.
It's unlikely we'll see a new European center emerge, and if one does, it won't be overnight. Europe might be more chaotic than ever, but that is just the kind of environment smart entrepreneurs thrive in.
By the numbers: Inc. 5000 Europe
European private companies with the fastest-growing three-year revenue
Number of companies
Number of companies per city
Number of companies in top sectors
Spotlight on No. 1: Daniel Wellington (Stockholm)
In 2017, the six-year-old company--started by then-26-year-old Swede Filip Tysander--earned the top Inc. 5000 Europe spot, with 4,695 percent revenue growth from 2012 to 2015, by creating preppy watches that sell for $149-$299.
5 of the 10 fastest-growing companies are in Stockholm
Sweden's Cabonline Technologies (No. 06), Star Stable Entertainment (No. 08), and FEO Media (No. 9) are outpacing other private companies in Europe. Above: Gamla Stan, the old city of Stockholm.