LONDON: After years lamenting their local technology scene, Europe's startups and their venture capital backers are finally bullish about building businesses on their home continent. They just don't want to list their shares there.
Instead, companies including Irish communications software developer Openet and Prague-based antivirus firm Avast Software are headed for initial public offerings in New York, spurred in part by mounting investor interest in Facebook's $5 billion share sale.
While cities like London, Dublin, and Stockholm have proven fertile ground for nurturing startups, listing in the US may gradually drive operations there, too, depriving Europe of the full fruits of its tech boom, Bloomberg Businessweek reports in its April 9 issue.
"Ten years ago, we would have expected that the majority of the companies we backed would go public in Europe, with a minority in the US. It's been completely the reverse," said Barry Maloney, founding partner of London-based venture capital firm Balderton Capital. "There's huge opportunity that's being missed by European economies because most of the value in these companies is created after they go public."
Last year, four European technology companies led by the Russian search engine Yandex raised a record $1.8 billion in New York IPOs, according to data compiled by Bloomberg. The companies are fleeing their domestic bourses as US markets, less affected by Europe's debt crisis, offer higher valuations and greater liquidity.
The average ratio of price-to-book value for companies in the MSCI US. Information Technology Index is 3.7, compared with 2.3 for tech companies in the Stoxx Europe 600 Index, as of April 4.
Investing public
The investing public in the US "understands the sector better and is more willing to pay for growth," said Craig Coben, the London-based head of equity capital markets for Europe, the Middle East, and Africa at Bank of America.
The value of tech IPOs in the US last year was $4.5 billion, compared with $389 million in Europe, according to data compiled by Bloomberg.
Zynga, the San Francisco-based developer of games for Facebook, raised $1 billion in December and has seen its shares climb 19% as of April 5. LinkedIn raised $389 million in its May IPO. The last large-scale Internet IPO in Europe was in 2010, when Russia's Mail.ru Group raised $912 million in London.
While the European markets have shown some signs of recovery this year, with Dutch cable operator Ziggo and Swiss marketing group DKSH Holding raising a combined $2 billion, the total amount raised in Europe still lags the US by a third.
Tech lag
Even with some successes, such as online jukebox Spotify, Europe's tech industry continues to lag the US. Total venture capital investment in the third quarter of 2011 in the US outstripped that in Europe by almost eight times, according to the European Private Equity and Venture Capital Association and the National Venture Capital Association.
Only one of the 10 largest global technology companies by market value, Germany's SAP, is European. The value of tech companies in the US is $3 trillion, according to Bloomberg data, almost nine times the $351 billion in Western Europe.
Balderton, whose investments have included stakes in British online loan provider Wonga.com, is planning US share sales for Openet, based in Dublin, and Globoforce, a provider of employee-recognition systems also founded in the Irish capital that's now based near Boston, Maloney said.
NXP Semiconductor, the Eindhoven, Netherlands-based company that held a 2010 IPO in New York, now has more offices in the US than any other country.
Xyratex, a data storage and network provider based in the UK, has four offices in the US and only one in Europe after its 2004 New York IPO.
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