Atomico’s annual report on the State of European Tech came out last week and there was one obvious takeaway: the continent’s startup ecosystem is going from strength to strength with more money, more ambition and more international interest than ever before.

But we shouldn’t get too excited. Excitement about startups is going up everywhere. According to an analysis of PitchBook data by my friend Ian Hathaway, Europe’s share of global venture activity has been about flat this decade. Our continent is not so much racing ahead as it is rising with the global tide.

However, there may be an opportunity to really move the dial.

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One of the most visible macro-trends these days is the weakening and the retreat of US tech giants. Almost all of the largest US tech companies have been encountering setbacks recently. And since this unprecedented context will make it harder for them to compete at a global scale, that could provide room for European startups to expand and accelerate.

There is currently a fragmentation of the global market. Not long ago, US tech giants could chase a truly global footprint. But now they’re having to slow down and even retreat in defeat.

China has been the main battlefield where this has been evident. EBay famously forfeited in China in 2007 after having been outdone by local competitors, notably Alibaba. Google decided to leave China in 2010 rather than comply with demands from the Chinese government that they deemed incompatible with their values. Then Uber decided to sell its Chinese operations to local competitor DiDi in 2016, before further retreating from Southeast Asia two years later. As for Amazon, it is still fumbling in China and Facebook, despite many attempts, never really had an opportunity to enter it.

This fragmentation has been accelerating for various reasons. One is the mounting “Second Cold War” between the US and China, which makes it even harder for US companies to compete in China and other regions in the Chinese sphere of influence. Apple is extremely dependent on selling iPhones in China, but their numbers have been receding there. Apple also depends on China for manufacturing most of its products and the current trade war makes that more difficult. And so it’s possible that at some point even companies as strong as Apple or Microsoft will have to move away from the Chinese market.

But it’s not only China. The rising conversation around “digital sovereignty” is turning more and more governments against US tech companies. There are those, such as in Russia and India, that require collaboration in implementing their versions of surveillance and censorship. And then there are those, such as in Europe, that question market power and aim to strike blows via antitrust, regulation, and taxation. As EU Commissioner Margrethe Vestager recently declared, she’s “just getting started”.

Finally, another trend weakening US tech giants is the “techlash”. It’s a key problem that arises not just abroad, but also at home. Google, for instance, is in the midst of a deep cultural crisis that has shaken up its leadership and inspired unrest among its workforce. Facebook has been forced to compromise so much with the Trump administration that it’s now being called “the right wing’s social network”. Apple has so much to lose in tariffs envisioned by Donald Trump that Tim Cook recently had to cozy up to him during a staged photo-op at a MacBook factory in Texas. And Uber is going through the double whammy of even more regulatory challenges and a disappointing performance since going public.

It’s likely that each of those corporate stories is translating into a damaged brand from both consumers’ and workers’ perspectives. Add the fact that challengers such as Zoom, Slack, and Lyft are doubling down in trying to compete with established giants by shipping products that are better and cheaper and you realise just how many hostile fronts US tech giants currently face. None of that is to say that these companies are in danger of disappearing. But what seems clear to me is that they’ll have to pull back on their global ambitions. And that being the case, there are really two scenarios for European startups.

One is that US tech companies lose so much ground elsewhere in the world that they’ll want to double down on Europe to secure their position here. That could have a positive impact on the local ecosystem through more acquisitions of European startups. But it would also mean that certain key markets would be forever dominated by US companies. And so, unlike their Chinese counterparts, European entrepreneurs would be deprived of an opportunity to enter their own domestic market and then scale up with a uniquely European approach to innovation.

The other scenario is that US companies take so many beatings abroad and at home (as is happening with Facebook, Uber and to a certain extent Google) and face so much disruption in their global value chain (as with Apple) that they’ll be less focused on Europe. This would then create breaches through which European contenders could enter their own domestic market and then rapidly expand.

I was long convinced that there was an almost perfect alignment of interests between US tech giants and European startups. But the current context has knocked things onto different tracks. US tech giants are stumbling now and it might be an opportunity for Europe to rise up out of the pack.

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