European VC-backed startups often favor a US IPO in the hope of better valuation, but data shows that listing closer to home has advantages.
The IPO window for European startups is widening, and the region is expected to see an increase in listings this year. Some companies will be looking at domestic floats—fintech company ClearScore‘s CEO this week told The Times that London is “the natural destination” for an IPO.
But the region increasingly struggles to keep its share of startup listings. According to a PitchBook analyst note, 84.7% of all domestic floatations last year occurred on European exchanges—the lowest percentage in a decade.
The exodus to foreign exchanges is particularly notable among VC-backed companies that are choosing more tech-focused destinations like the US. Recent losses for European exchanges include chip designer ARM and Swedish buy now, pay later company Klarna, which filed to go public on the NYSE earlier this month.
Other big names within Europe’s tech community are following suit. The Financial Times reported that Swedish driverless truck startup Einride is in talks about a US listing later this year, while challenger banks Revolut and Monzo are leaning away from the London Stock Exchange.
Investors and founders have cited multiple factors in their decision to list overseas, but one key motivator is their valuation prospects.
A Bigger Plate
The perception is that the US guarantees a higher IPO price tag, and, in absolute terms, that appears to be correct.
According to PitchBook data, the median post-valuation at IPO for VC-backed European companies listing on domestic exchanges between 2015 and 2025 is $45.9 million. That’s just a fraction of the median over the same time period for a European company going public in the US: $631.1 million.
Several factors explain the disparity. The US is home to more mature and liquid capital markets. Not only does it have a larger pool of institutional and retail investors, but those investors are more growth-oriented and have a higher risk tolerance than investors in Europe.
In addition to being large, the US stock market is homogenous, with investors sharing a single language, currency and regulatory environment. Europe has five main exchanges and dozens of smaller ones. The consistency in the US makes it easier for companies to market themselves and tap into strong demand at higher valuations.
However, the comparison between the two regions in absolute terms is an imperfect one. European VC-backed companies that list in the US tend to be among the most highly valued in the first place as the focus is on larger, high-growth opportunities.
Smaller companies would struggle to attract sufficient investor and analyst coverage. For reference, a company worth £5 billion on the LSE would be among the 80 most valuable companies on the exchange. In the US, it wouldn’t even be in the top 800.
Advantage Europe
Looking at step-ups instead—the difference between a company’s valuation at its last funding round and its IPO price tag—Europe has an advantage.
Across the same 10-year period, the median step-up for a European company listing domestically is 1.9x, slightly higher than for those going public in the US, 1.8x. For US companies, that figure is substantially lower at 1.3x.
It is likely that companies going public in the US previously raised substantially more capital at higher valuations than those with a European IPO. The US typically has much bigger price tags for VC-backed businesses—$74 million for a late-stage startup compared with $14.7 million in Europe.
European companies are more likely to be undervalued, and therefore, the step-up is higher than that of their US counterparts. European companies listing in the US tend to be larger and have higher pre-IPO valuations more in line with US market norms, leaving less room for significant revaluation at IPO.
Based on the historical data, for two companies of similar size and funding history, the company listing in Europe would be better off from the perspective of relative value creation.
There is also post-IPO performance to consider. Analysis from the LSE reported last week by The Sunday Times argues that UK-based companies that have either floated in New York or moved their listing from London have struggled with their share price.
Out of the 20 companies that have raised more than $100 million through listings since 2014, less than a quarter are trading higher.
As it stands, highly valued European companies are still likely to choose US stock exchanges to maximize IPO valuations and access deeper capital pools. However, European governments are actively reforming listing rules and easing regulatory burdens to make local markets more attractive—changes that could incentivize more companies to stay local.
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