Unity Software is a Copenhagen-born company, which produces 3D software that powers popular video games like Cuphead and Hearthstone. It is one of 16 Danish unicorns—tech start-ups valued at more than $1 billion on the stock market—that have been established in the past three decades. However, Unity has shifted the majority of its operations and its corporate office to San Francisco.
It’s a popular observation that Europe excels at breeding unicorns but fails notably at keeping them on the continent. The majority of the tech success stories in Europe move to the US in order to obtain funding, take advantage of a sizable single market, and hire talented personnel. Denmark and the rest of Europe must restructure their tax systems, relax regulations that prevent the hiring of foreign talent, and create a seamless unified digital European market if they want to keep their citizens in their countries.
The odds are against the continent, except there is prompt intervention. Europe runs the risk of having an ageing commercial base if it does nothing. The most valuable enterprises in Denmark are, according to a recent survey, an average of 103 years old. The majority are industrial or logistics firms like Maersk and DSV. Although the United States has a lot of established, significant enterprises, emerging tech leaders have surpassed them. The average age of the wealthiest American businesses is 36 years. Facebook is still in its teen years, while Google turns 25 next year.
Innovation in Europe is not the issue. The emergence of unicorns is not a rare phenomenon in Europe. Since 1992, 30 have risen in France, 50 in Germany, and 100 in the United Kingdom. In 2021, Europe recorded twice as many unicorns as the US did, according to recent research. Yet, many European giants do end up moving away. In a poll conducted in 2022 by the Danish Chamber of Commerce, more than half of Danish business owners lament their inability to secure second-round finance and their trouble finding skilled employees.
According to Jeppe Rindom, CEO of fintech Pleo, startups cannot pay salaries as high as those of well-established businesses. Rindom claims that labour scarcity makes it impossible to expand a digital company with exclusively local people after Pleo increased its customer base to 17,000 enterprises and 350 employees.
Another obstacle is high capital gains taxes. Current figures in that regard stand at Sweden (30%), Norway (40%), and Denmark (42%) to mention a few. The high tax rate in Europe deters wealthy local investors from making investments once unicorns reach a certain size, despite the fact that early-stage capital is available in excess. Foreign investors frequently desire the company’s headquarters to move when they gain control.
The consolation, though, is that the unicorns from Europe don’t completely cut all links when they leave their homeland. At some point, wealthy founders who were successful may return home, bringing their knowledge, contacts, and fortune with them. Some go so far as to breed fresh unicorns.
Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.