Europe is growing faster than it did before the Covid-19 pandemic. According to Atomico’s annual State of European Tech 2021 report, European tech is on track to reach $100B (approx €88B) invested in a single year.
The latest data shows that the early-stage investment levels are now on par with the US for the first time. The European tech industry has added $1T of value in the first eight months of 2021 alone.
“Europe is undergoing a technological revolution with profound effects across economies, societies, and the environment, driven by two irreversible trends: one, which is not unique to Europe, is the relentless march of technology,” says Tom Wehmeier, Partner at Atomico and co-author of the report
“The other is what we call the European tech flywheel – a set of incredibly strong foundations including a deep talent pipeline, exceptionally strong founding teams, and a healthy pool of investors at all levels — that spins out unicorns and creates value at ever-increasing frequency and magnitude,” he adds.
The State of European Tech 2021 report is an annual deep dive into European tech industry data across 45 countries. The report is published in partnership with tech conference organiser Slush, along with Orrick, a global tech law firm, Silicon Valley Bank, and Baillie Gifford.
Here are the key takeaways from the report:
The European tech industry is projected to cross the $100B (approx €88B) milestone of capital invested in a single year, close to three times the level in 2020, says the report.
“European tech is at an inflection point. The current record level of investment is a culmination of many years of groundwork that is now paying off,” said Chris Grew, a London-based partner at Orrick, the leading European tech legal advisor for 23 consecutive quarters.
“We are experiencing amplified interest from global investors seeking access to the European tech ecosystem, and significant exits are giving founders access to more opportunities than ever before,” he says.
Around $5B (approx €4.4B) was invested in the Netherlands in this period.
The rise in unicorn numbers
The total number of tech companies that have scaled to $1B+ in Europe has jumped from 223 last year to 321 this year.
20 of those originate from The Netherlands, says the report.
Strong early-stage ecosystem
The report says that Europe’s early-stage ecosystem is on equal footing with the United States. European startups account for 33 per cent of all capital invested globally in rounds of up to $5M (approx €4.4B), compared to 35 per cent for the United States.
This makes Europe the second region globally when it comes to early-stage investment, with a total of $3.8B vs the US at $4.1B.
Billion-dollar funding rounds
As per the report, the top 10 funding rounds by size have accounted for more than 10 per cent of all capital raised. Half of the largest rounds in 2021 were raised by fintech companies.
Rising startups counts
On a per-capita basis, The Netherlands occupies the 8th position in Europe with 2.5x as many startups per 1M population than the European average, ahead of the UK and France.
European unicorns have also become the new normal with the number of unicorns almost doubling in 2021, says Mariya Gabriel, EU Commissioner for Innovation, Research, Culture, Education, and Youth
With around 100 new unicorns minted in 2021, Europe now has 321 unicorns – up from 223 in 2020.
In 2021, with 20 $1B+ VC and non-VC backed tech companies, The Netherlands maintained its position in the top 5, behind the UK, Germany, France, and Sweden.
Public tech market and IPO
Europe has added over $750B (approx €665B) of public tech market cap value and currently sits over $2T, over the past 12 months. The report adds that Europe produced more tech IPOs (122) than the US (89) in 2021.
In Europe, the largest IPO of 2021 is Romanian company UiPath, debuting at around $35.6B (approx €31.5B) after opening day gains.
So far, 15 European tech companies have gone public via SPACs in 2021 for a combined EV of $62B (approx €55B). 14 of the 15 companies are now listed on US exchanges and 13 were VC-backed.
The top 10 countries in terms of public market cap remain the same, apart from the Netherlands ($0.85T) which shot up to fourth place above South Korea ($0.79T) and Japan ($0.66T), thanks to the spike in Adyen’s market value over the past year.
The Netherlands is now home to European public tech giants with Prosus, ASML, and Adyen contributing to the spike.
In fact, the value added by companies headquartered in the Netherlands in the last 12 months represents 47 per cent of the total European gains, followed by Germany, says the report.
In 2021, the Fintech industry attracted significant investment, growing from $9.4B (approx €8.3B) in 2020 to $21.7B (approx €19.2B) in the first nine months of 2021, followed by enterprise software at +$5.9B (89% increase) and transportation at +$4.9B (95% increase).
As stated by the report, the Crypto and blockchain deal count is up 5x in Europe over the past five years but lags behind the US. To date, Europe has 8 crypto unicorns.
Purpose-driven and Planet Positive companies
Purpose-driven companies are gaining momentum in Europe. Over $34B (approx €30B) has been invested in purpose-driven tech companies in Europe in the last five years, representing 17 per cent of all funding.
Planet Positive investments captured 11 per cent of total funding overall in 2021, with Clean Energy and Climate tech startups capturing the lion’s share of funding with 24 per cent and 19 per cent respectively.
The depth of the talent pool is improving, however, half of the founders find it increasingly more difficult to acquire talent, particularly in the UK, the Netherlands, and Spain, states the report.
The issue is particularly bad in the Netherlands where 56 per cent of tech jobs in October 2021 were hard to fill, compared to only 37 per cent in the UK, states the report.
Miika Huttunen, CEO of Slush, says, “In our inaugural report, we celebrated $10B invested in European startups. Today, we’re on track to $100B. We also regretted the lack of a big European technology company. Now, it’s only a matter of time before Adyen, Spotify or Klarna will break $100B in market cap. To have reached these milestones amid a global pandemic is one of the greatest displays of human perseverance in history. Most importantly though, even we couldn’t have dreamt of a future in which Europe compares to the behemoth that is the US. To that end, it is striking to see that we are now on par with the US in the volume of early-stage investments.”