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With a Market Cap of 2.6 trillion dollars,  Apple is the biggest tech company in the world.   Followed by Microsoft and then Alphabet. If we look at the Top 10, notice how none of these companies are European. They are all American or Asian. In fact the first EU-based companies are ASML, SAP and Schneider Electric. Ranked at 13th, 18th, and 30th respectively. A similar story can be seen when we look at growth. Between 2014 and 2019, in comparison to large U.S companies, large European companies were 20 percent less profitable, grew revenues 40 percent more slowly, and spent 40 percent less on R&D. Most of these differences were observable in  the technology sector. So why does the European Union suck at technology? This video will look at six key reasons. Firstly, there are Europe's regulatory challenges. When we talk about Tech, this tweet sums it up well: China produces the hardware, the US the software and the EU regulates. The EU has one of the most complex regulatory frameworks compared to other major economies. This complexity prevents Startups from scaling up, due to cost, and bureaucracy. For example, strict Data Privacy Regulation, which requires companies to obtain explicit consent from users before collecting their data. Just look at what is happening with Chatgpt, which is already banned in Italy with Germany considering doing the same. This brings us to our second point: a lack of Venture Capital, or in other words a lack of startup funding. Venture capital in Europe is still underdeveloped compared to the US. Taking AI and Machine Learning as an example, Venture firms invested roughly 38 billion euros into US-based startups last year, while European companies raised only 10 billion euros. This is despite Europe being much larger than the US in terms of population. There are three reasons for this: Firstly, the U.S Venture Market is simply much more mature and therefore significantly larger. Secondly, startups in in Europe face a "Late Stage Funding Gap" when they become bigger and seek investment. As a result, they often turn to American investors who may request relocation to the U.S. And thirdly, there's a cultural difference. European investors are generally more reluctant to invest at the early stages of a startup when there's no revenue yet. This relates directly to our third point: Europeans are generally much more risk-averse than their American counterparts. Generally, European societies have a long history of social democracy, which values collective security and social safety nets over individual risk-taking and self-reliance. This mindset leads to greater risk aversion towards investing and starting startups. French founder of Adwanted Group, a startup that moved their headquarters to the U.S, sums it up quite well. In France people always tell you that you won't succeed and you should think twice. In the U.S they say just do it and if it works you're successful if you fail you can do something else. In the U.S there is the American dream ethos that places a greater emphasis on individual achievement and self-reliance, encouraging Americans to take risks. Next up is our fourth point, a Fragmented Market. Yes we have the European Union but we still have different languages, cultures, and Regulatory Systems. This fragmentation makes it challenging for startups to expand across borders. In the U.S or China there is one official language and one regulator, meaning that their domestic markets are simply much more lucrative for new companies. Look at it this way, a Polish startup has a population of 38 million it can cater to before it needs to cross borders. The U.S has 330 million and China has 1.4 billion. Next, our fifth point, is that the EU is simply late to the party. The Tech Industry in Europe started to gain momentum in the early 2000s, which was later than the U.S. Many successful Tech startups such as Google and Amazon in the U.S and Asian Tech giants like Alibaba and Tencent, were founded around 25 years ago. Ever since many European startups are just getting bought by these technology mammoths as can be seen in the table below. Yes, the data is a little old but I think you get the idea of what is happening. Lastly, our sixth point, is that many successful EU  startups relocate to the U.S or elsewhere. Over the last decade 40 out of 147 EU unicorns relocated their headquarters abroad for access to finance. Many of these companies now operate primarily  from the US, resulting in a huge loss for Europe in terms of jobs, intellectual property, and brain drain. Here are just a few examples of startups across Europe who relocated to the United States over the last 20 years. However, this trend is also slowly reversing, as only five years ago 13% of European scale-ups had a headquarters in the U.S. This has since dropped to 6% today. So what is the EU doing to help the technology sector? Most importantly there's the EU's Horizon Europe research and Innovation program, with a budget of 95 billion euros. The program aims to fund research and Innovation projects across various sectors. Including Health, Climate Change, Digital  Transformation and more. While Horizon Europe May somewhat address a lack of venture capital there are still the 5 other problems we discussed today. The EU needs to consider how to foster a culture  of innovation, attract and retain talent, streamline regulations, and encourage collaboration among our schools universities and companies. But what do you think? Can Europe catch up to China and the US? Please Subscribe and like the video. And if you want to support the channel further please consider signing up to Patreon. Until next time!