Busting Myths About Europe's Tech SectorHere's how the European Union is encouraging innovation and making a name for itself in the process.

When it comes to tech, Europe has never been a more exciting place to do business.

Many of today's besttechnologyinnovations come from Europe rather than Silicon Valley, helped by a culture where regulators exhibit a flexibility and willingness to adapt rules to encourage innovation.

Related:How to Attract In-Demand Tech Developers in the Competitive European Market

That's especially evident in Europe's flourishing fintech sector, where the welcoming regulatory environment is attracting capital at a record pace. TheState of European Tech 2017report from Atomico and Slush reveals that Europe attracted record investment ofjust over $19 billionin its tech sector last year, up from $14.4 billion in 2016. And despite Brexit, the United Kingdom is the largest European destination for capital invested in technology.

Fintech is a particular strength.

Whether it's the increased security of chip and PIN credit and debit cards, contactless payment or credit card aggregators that allow users to choose from any number of credit cards on their smartphone, many of the best tech innovations are coming from Europe.

Europe has long had a global reputation for producing significant advances in mobile and has produced such globally recognized firms as Skype. Now, a startup-friendly ecosystem is encouraging a new generation of entrepreneurs. As a result, European tech firms no longer have to seek their exits solely from the United States. Instead, the report predicts that this year European non-tech corporations will invest some of their combined $1.5 trillion cash holdings buying European tech startups.

That environment is producing successes like Revolut, the digital banking app that turned heads when it recently raised a round of financing giving it a$1.7 billion valuation. It's also encouraging companies like Monzo to build a digital platform to challenge traditional banks and Stripe (one of our clients) to reinvent the online payments business model.

Related:Why London's Tech Community Is Thriving, Despite Brexit

A growing VC community

European tech also delivers great returns. Among the top quartile of performers, the net internal rate of return for European Investment Fund-backed venture capital funds was19.1 percent in 2014. Those returns were no aberration -- that metric reached 23.1 percent in 2008, 22.3 percent in 2009 and 24.9 percent in 2013.

The startup ecosystem is buoyed by a growing venture capital community that is also investing outside of their individual domestic markets.For rounds of $10 million or more, European VCs actually invest outside of their domestic markets more often than they invest at home. Investment is also coming from public market investors. Among the most publicly traded active investors in European tech, SwedbankRobur Fonder has invested in 24 tech firms, and NorgesBank and Schroder Investment Management have each invested in 21 tech startups.

Europe has also begun to replicate the serial entrepreneur model found in Silicon Valley, where之间preneursreinvestmoneyfrom one success into other ventures, with money from VC funders and investment funds supporting that virtuous cycle of growth. Standardized documentation has also helped deals get done quicker in Europe than was previously the case.

Related:Huge Growth in VC Funding Means the Time for Europe Is Now

A friendly regulatory environment

In fintech, where regulators in the United States can be an impediment for startups, in Europe their actions often spur innovation. For example, Europe's Payment Services Directive (PSD2) forces European banks to give access to raw account data through APIs and allows third-party vendors to initiate payments for customers. APIs are the small programs that allow things like Google Maps to be embedded in websites and Netflix to be embedded in streaming players. By pushing banks to open APIs, regulators are helping fintechs innovate. In contrast, U.S. regulators leave it to individual banks to decide whether to open APIs.

Europe's friendly regulatory environment is also exemplified by theFinancial Conduct Authority, which set up the world's first regulatory "sandbox" in London in 2015, giving startups fewer compliance concerns as they build their commercial products. The approach is akin to a regulator running an accelerator. Europe also is taking a welcoming stance on cryptocurrencies, compared to the U.S. -- something that can give Europe an edge when it comes to attracting blockchain entrepreneurs.

Americans often don't know that the high-tech innovations they love regularly come from Europe. The continent gave us such exciting companies as fantasy sports leader FanDuel and the gaming hitsClash of ClansandAngry Birds.

In the world of tech, Europe is the next big thing!