SUMMARY

• Europe and Israel are fostering an average of five new tech startups for every five venture-backed companies valued at $1 billion or more.
• Former employees from 'unicorn' companies such as Spotify, Delivery Hero, and Criteo are establishing new businesses, turning these unicorns into prolific 'founder factories'.
• Startup employees in Europe and Israel have a preference for founding their businesses in the same cities as their previous companies, contributing to the rise of startup 'mafias' in these regions.

Every five venture-backed companies in Europe and Israel with a value of $1 billion or more give birth to an average of five tech startups, as stated in a recent Accel report. As employees from the 353 'unicorn' companies leave to venture into their own pursuits, they establish an impressive 1,171 new tech-focused enterprises, according to the data derived from Dealroom.

This pattern follows the report from last year, which revealed that 201 out of 344 venture-backed unicorns led to the creation of 1,018 new startups. Spotify, Delivery Hero, and Criteo stand as shining examples of this phenomena, with their former employees founding a total of 32, 32, and 31 new startups respectively.

Such enterprises have been endearingly termed as "mafias" in the startup ecosystem. These "mafias" consist of companies birthed by employees from other tech firms, marking the birth of some of the most renowned tech companies in our time. They differ from the traditional mafia definition popularized by Italian-American gangster films and have been a long-standing phenomenon for decades.

From such mafias, personalities like Elon Musk of PayPal went on to establish Tesla and SpaceX, while Peter Thiel co-founded Palantir and is now known for his investments through Valar Ventures and Founders Fund VC firms. These entrepreneurial journeys were influenced by the unique culture of risk-taking endemic to Silicon Valley, a culture now gradually taking root in Europe with the rise of mature internet platforms such as Skype.

Today, companies like Spotify, Delivery Hero, Klarna, and Wise have become breeding grounds for new founders. The majority of these burgeoning mafias are in fintech, representing almost 20% of European startups. Interestingly, startup employees in Europe and Israel show a preference for founding their businesses within the same city they left, with over 50% establishing their new firms in the city of their previous unicorn.

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