How Will President Trump Affect Tech in Europe?


This Friday Donald Trump will be sworn in as the 45th President of the United States. And while the US media has been aflame on the back of lurid intelligence accusations, there is another influential group watching Trump’s moves with considerable trepidation.

The President-elect’s tussles with tech have been well-documented–this site included–but most conversations have, understandably, focused on his potential domestic effects. But investors in Europe have been shaken too, by shake-ups in the visa and cybersecurity sectors–and his economy-wide pledge to put America first.

Red Herring spoke to two transatlantic VCs about their views on a post-inauguration landscape. Here’s what they had to tell us.

“Europe better start helping itself” – Alex Fries, general partner, PolytechEcosystem Ventures

At this moment it is very difficult to say what will happen, what is real and what will not. Donald Trump said many things before the election–please note I am not a US citizen and could not vote–which he is now softening or even retracting.

Trump has and is appointing top pro-business candidates to occupy his cabinet and I am pretty sure that they will do whatever is best to keep a good relation with Europe. The issue may be how many engineers from Asia will be admitted on H-1B Visas. Europe, unfortunately, is not the issue here: they don’t provide that many H-1B candidates.

Trump is all about making the USA a superpower again. What this means is that Europe better get its act together and start helping itself. Why should Europe be dependent on any US money? The EU and EFTA are a bigger market, larger GNP, more population and with more wealth. There is no reason why they need to depend on the USA.

I think the sector that will suffer the most are European banks. EU tech companies will be less affected. US companies will acquire companies regardless of where they have the cash deposited. Investments, which in Europe are still nominal compared to the US and Asia, can be done easily from the US as well. The amounts being repatriated are so large, that the few billions needed to invest or acquire EU companies is minimal.

VC will increasingly be looking at Asia. USA is a given due to the culture of innovation and due to Trump’s push to make the US as competitive as possible. Europe, which has seen many new funds pop up in the past five years, is still far behind and not much in the radar of US and Asian funds.

It is my belief that Europe has the best technology, innovation and engineers in the world. But a lack of commercialization and venture capital is hindering its tech boom.

In Europe it seems everyone thinks Trump will destroy the world and the USA. The media is doing a great job in making Trump look very bad. I think every investor still knows that America is the biggest market for many products, is the most liquid, has the biggest exits and valuations, and large companies are willing to swallow innovation from start ups.

I think for the most part the Trump presidency will be positive for US startups: lower taxes, less government involvement, more cash flowing into the USA. Security technology will be huge. Infrastructure technology from construction tech to drones, robots, AI and big data will all continue to be big. Overall, I am optimistic.

“Any VC worth his salt is planning for volatility” – David Mes, managing partner, Arc Venture Partners

The degree of incompetence coming to Washington DC surpasses anything we’ve seen in our lifetimes and any VC worth his salt is planning for volatility. We just have to hope that nothing truly cataclysmic will happen. LPs generally understand this too, and are starting to think about strategies that will be best suited for the years to come.

I am a secondary direct investor myself–meaning that I buy stakes from VCs, corporate VCs and other investors or shareholders in venture-backed companies–and as such I’m seeing growing interest from limited partners (LPs) in anticipation of a worsening environment. From experience, that’s generally a precursor for a market turnaround.

The H1-B visa program discussion is a constant bone of contention between Silicon Valley and Washington DC. Ever since I arrived in the Silicon Valley over a decade ago, there have been ebb and flows in the size of these quotas. As with anything else, I think that the cancellation threats by Trump are taken with greater fear than other politicians’ menaces over the years.

The tech industry can get around the issue in part though. Large tech employers who rely heavily on the program will suffer at first but find workarounds over time, using alternate visa programs. A likely popular workaround could be acquihires of foreign companies. Target employees could “team up” in a startup abroad which would then be acquired, allowing for employees to be transferred to the US under different visas. 

For US startups, the problem is less acute, as there are other visa programs that allow foreign founders to transplant their companies to the US. I am plugged into the French tech community for instance, and there is a growing number of French startups flipping into US companies whose founders use other visa programs to spend up to 6 months a year in the Silicon Valley at first, and then transfer to more permanent solutions. 

All in all, I expect that tech firms will grapple with this at first, but as with anything else they’ll find solutions if their lobbying doesn’t faze the Trump administration. As to denting US-EU relationships in tech, I don’t see that happening. Time-based transfers within large tech groups will remain possible, and Trump’s policies are likely to be reversed anyway in 4 years. 

If there’s one major difference between US and the EU, it’s the extent to which private market valuations have grown. The proliferation of ‘unicorns’ and even ‘decacorns’ in the US is a source of growing anxiety. While a lot of the late-stage investors who invested in these companies at inflated valuations sought to protect their returns through financial engineering, tensions are mounting in boardrooms and there will be casualties at the end of the day.

Technology is always going ahead of society and regulation. The secular trends towards a greater use of artificial intelligence for instance won’t be stopped. Automation will reduce jobs, and there isn’t much any administration can do against that. Trump, and the entire political class, should spend more time thinking about how to train US workers for new jobs rather than closing borders. Robots don’t have visa issues.

Come to think of it, education technology companies could benefit from the new environment. There are already interesting private education firms training recent grads and young professionals in tech jobs. This trend will likely extend to broader population groups. Human resistance to change is hard to overcome, though, and educational programs with a strong gamification bend will likely go further than others.    

The one shift I see emerging though, is one of greater collaboration among tech firms and tech tycoons to make things happen in spite of government. The State of California has long had a leading role in environmental and tech-related issues, and while I don’t believe California will secede from the Union, I do believe that it will increasingly make its own rules and dare the rest of the States to follow.

Leading tech figures will be being this movement. The recently announced effort to revolutionize the energy sector through a major non-profit organization backed by Bill Gates, Mark Zuckerberg et al. flies right in the face of Turmp supporters’ calls to abolish the EPA and the Department of Energy. The space race has already migrated to the private sector in large part with SpaceX, Virgin Galactic et al.

It’s pure conjecture at this stage, but I wouldn’t be surprised if tech giants coalesced around standards that restricted government access to private data in practice. That will be a hard fight, but it could very well be the most important one in the long run. 

At a high level, Silicon Valley remains an unparalleled ecosystem and continues to attract entrepreneurs and engineers of all kinds. Trump’s policies may hamper it a little and favor the already ongoing trend of more distributed innovation around the world, but in the long run the balance between these two trends should not be affected much by Trump’s presidency. Meanwhile, lawyers are sure to make a killing out of the novel solutions that the tech companies will look to deal with new rules.