Will Telegram CEO’s Arrest Dent Tech Investment In Europe?

Durov himself has now been charged, although it remains to be seen whether he is found guilty. However, regardless of the specifics of this case, there are fears amongst tech industry figures that this sets a dangerous precedent and could even dent investment into Europe.

After all, it is not just Telegram that Europe is perceived to be going after. The European Union has also accused X of breaching its online content rules over somewhat vague claims that verified accounts have the potential to “deceive” users and spread “toxic content.” Elon Musk, who has also defended Durov and called for his immediate release, responded that the EU was attempting to “censor speech.”

In the UK, large swathes of the political class believe that Musk and X was responsible for stirring up the recent race riots and that the platform should face serious restrictions on its activity, if not outright closure.

Back in July, Meta was charged after the platform offered users a choice between being targeted by advertisements based on their personal data or paying to avoid them. The European Commission said this binary choice means users cannot “freely consent” to the two options. Meta now faces a fine of up to 10% of global revenue. The principle the EU is trying to establish could dent a major blow to the business models of Meta and other tech platforms, who rely on tailoring advertisements to individuals based on their personal data and activity on the platform.

These stringent moves against these firms come at a time when Europe’s competitiveness as a tech market is steadily decreasing. In 2023, Europe recorded a 4% year-on-year decline in terms of foreign direct investment in digital technology projects, the continent’s lowest total since 2020. The total was 11% lower than its pre-pandemic level and 14% lower than in 2017. Total capital invested in the European tech ecosystem plunged by nearly half in 2023. The overwhelming majority of tech innovation – particularly in AI – is taking place outside the continent.

Just two of the world’s twenty biggest technology companies are now in Europe, and none are in the top ten. The continent is being outflanked on both sides: emerging markets in Asia are increasingly able to produce both low-end hardware and high-end techn at a much lower cost, while the US is the most attractive mature market owing to its favourable regulatory climate. Will Durov’s arrest encourage more ambitious European tech entrepreneurs to leave Europe and head to the US or elsewhere?

Shaun Maguire, a partner at global VC fund Sequoia Capital, has suggested that might be wise. Following Durov’s arrest, he tweeted the following:

Europe is at risk of indicating that tech entrepreneurs – and their businesses – are simply not welcome on the continent. Only time will tell how much of a dent this leave on tech investment into Europe. But nobody should be surprised if Europe’s relevance continues to decline.

Author: Harry Clynch

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