Europe misses opportunity to become world leader in software
New McKinsey report: Europe could become a leader in the software industry, but is failing to realize its potential.
Published on June 3, 2025
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Europe could play a key role in the global software industry, but for now, it's not fully utilizing its potential. That's what a new report from McKinsey and Boardwave, a network of European software leaders, says. According to the report, promising European software companies often reach a plateau at around €30 million in annual revenue and rarely manage to grow into global top players.
Europe vs. the United States
Fewer software companies are founded in Europe than in the US. This is partly because ideas are less likely to develop into larger companies here. Start-ups that do get off the ground grow more slowly. It takes an average of 15 years for a European software company to reach €100 million in annual revenue, five years longer than in the US. European companies are also less likely to reach growth milestones such as €10 million, €30 million, or €100 million in revenue.
Europe also lags behind when it comes to producing global software giants, in particular. In the US, 5 to 10% of companies with €100 million in revenue grow to €1 billion, while in Europe, less than 3% reach that level.
Opportunities for Europe
However, there are opportunities for Europe to rethink its innovation strategy—provided it makes the right choices, according to the report. New technology areas such as AI and automation offer opportunities for leadership on European soil, with European companies such as ElevenLabs, Mistral AI, and Wayve developing into major global players. This growth comes at a crucial moment, similar to the early internet and cloud era, when US companies turned their lead into global dominance.
At the same time, geopolitical changes are prompting governments to re-examine their technological independence. This often leads to new regulations, investments, and a focus on local suppliers.
Long-standing barriers to innovation, such as the fragmented market in Europe, are also being reduced by technological advances and policy changes. Pay-per-use software, together with cloud technology that allows you to work online without buying expensive equipment, is making it cheaper and easier for companies to use new technology. This is creating more opportunities for start-ups in Europe. Generative AI is also helping, for example, with real-time translations and automated cross-border compliance, enabling smaller teams to grow faster and compete more easily.
In short, opportunities exist, but Europe must ensure that they are seized quickly.
