According to Tech Tour Growth 50, an organization that identifies the. young firms valued between one hundred millions and one billion dollars and which benefits ("chiffre d'affaires" increase by 50% a year) there 284 of such firms in Europe and 833 in United States where the injected funds are five times higher. If 5*284>833 does it means that the return on investing in Europe is greater than in United States ?

I am not sure about the title I have to my question

Information provided by "l'Europe, le continent au plus fort potentiel de licornes" from Les Echos, a French newspaper about Economy

  • $\begingroup$ Sorry could you provide some links or something? I'm not sure what you're asking? Are you asking why this random group of companies in Europe increased in stock price faster than this random group of American companies? I have no idea? Why do you expect the American companies to be valued higher? I'm just not sure what your question is. $\endgroup$ Apr 25 '18 at 2:33
  • $\begingroup$ @TheSaint321 I'm asking that if the number of recently created firms valued more than 100 milion $ is four times upper in US, but where there is four times more investment, does it mean there is a better return on investing in Europe ? $\endgroup$ Apr 25 '18 at 10:17

I put the article through translate and it appears that this is the (translated) section you are talking about:

"To achieve this selection of 50 nuggets, the Tech Tour did not scan only the continent, but the whole world. The overall result for Europe is very encouraging since there are 284 companies (including 38 French) , compared to 121 in 2015. They are 181 in China, and 833 in the United States, a country where, nevertheless, injected are five times higher than those irrigating European nuggets."

The criteria for a "nugget" seems to be a company valued between $100 mm and $1 B with annual growth > 50%.

The fact that the U.S. has more of these companies is not surprising. The US economy is equal to that in size of the EU but the tech sector in the US is much more robust. In the US there are 100,000 software and IT companies with less than 500 employees which would put them in this category. US tech makes up 25% of the global marketplace. The fact that there are more US companies that fall into this specific criteria is not surprising.

Whether or not this makes the US a better investment is a different question. The number of investable firms has nothing to do with return on investment. If all the European companies grew in value at an average of 10% and the US companies grew at an average of 5% then the European companies would be a better investment in terms of expected value. It may be that the European companies are much riskier and more likely to default which would offset that number. The number of companies that falls into this arbitrary and narrow criteria has nothing to do about the benefit of investing in either in Europe or the US.

Investment decisions are based on a multitude of factors. European regulatory risk, political stability, etc. may all be factors to consider when investing in a European company but it's difficult if not impossible to make a blanket statement about the quality of a country's investment opportunities.

  • $\begingroup$ Thank you for this really interesting contribution! Yet what can we say of the fact that Europe has created proportionally more nuggets with proportionally less investment? Investments are more efficient? And if it's totally decorrelated, why and what explains this difference then? $\endgroup$ Apr 25 '18 at 15:21
  • $\begingroup$ I think the title of the question should have been : Are investments in young firms more efficient in Europe than in United States? $\endgroup$ Apr 25 '18 at 15:22
  • $\begingroup$ All of this depends on how you define efficiency. The growth of companies is an incredibly complicated procedure that revolves around thousands of variables. The only variable you are considering here is the amount invested (not actually sure where in the article it says europe invested less). You simply cannot make such blanket statements on such limited information. $\endgroup$ Apr 25 '18 at 18:30
  • $\begingroup$ The issue with all of this is how narrowly these companies have been aggregated. 50% growth and 100mm to 1B is an arbitrary group that has no bearing on the value of US v. EU investments. It's equivalent to saying "Which country has more tech company's called Apple that sells iphones based in it?" Well the answer is the US. That has no bearing on the US tech sector v. the EU. $\endgroup$ Apr 25 '18 at 18:32

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