Europe is about to reach the milestone of 100 billion dollars invested in its technology industry in a single year, and in this environment we see how the continent solidifies its place as a global technological power, according to the annual report “State of European Tech 2021 ″ By Atomico.
For the first time, your Series A investment levels (early-stage) are equated with those of the United States, and the number of unicorn companies increases, which makes the sector in Europe grow even faster than it did before the pandemic: only in the first eight months of 2021 has its value increased in 1,000 million dollars.
“Europe is experiencing a technological revolution, with profound repercussions on economies, societies and the environment, and which is driven by two irreversible trends: one, which is not unique to Europe, the unstoppable advance of technology. The other is what we call the European ‘tech wheel’, an incredibly strong set of foundations that includes talent, strong entrepreneurial teams and a healthy pool of investors at all levels. All of it power unicorns and create value at an ever-increasing frequency and magnitude. These two trends will make the European technology ecosystem prosper even if macroeconomic conditions change ”, explains Tom Wehmeier, Atomico partner, and co-author of the report.
“The market is also becoming more liquid, thanks to the convergence of different types of investors and the growing interest in public markets. Even in a conservative scenario, we expect the European tech sector to at least double in the next decade and add trillions of dollars in value. “, adds Sarah Guemouri, senior associate at Atomico, and co-author of the report.
Five key trends
1. Europe is consolidated as a player international technology: Spain makes great strides in terms of invested capital and Italy attracts seasoned entrepreneurs.
- After years of building the ecosystem, European technology is now on the verge of crossing the $ 100 billion invested milestone in a single year, about three times more than in 2020.
- The significant entry of venture capital in 2021 is shaking the rankings and moving the positions from 5 to 20 by invested capital. Spain, with 2.9 billion dollars, has replaced Switzerland in sixth place. Ireland, the only country that falls in capital invested from the top 15 (-5%). it has fallen out of the top 10 along with Belgium. Italy, with $ 841 million, is now ranked 15th.
- The total number of tech companies that have managed to climb to $ 1 billion in Europe has risen from 223 last year to 321. 12 of these unicorn companies are located in Spain.
- Spain, along with Switzerland, is the place where unicorn companies are most geographically dispersed: its 12 unicorns are spread over four different cities. On the contrary, France is where they are most concentrated (94% Paris).
- Europe has the largest portfolio of startups in their first steps than ever, with 33% of all the capital invested in the world in rounds of up to 5 million dollars. This makes it the second largest region in the world in terms of early stage investments, with a total of 3.8 billion dollars just behind the 4.1 billion of the United States.
2. Results are exceeding forecasts in both the public and private markets
- In the last 12 months, Europe has added more than $ 750 billion in capitalization value to the public technology market, which currently exceeds $ 2 trillion. Spain-based companies have totaled $ 1 billion, reaching $ 33 billion, behind Norway’s $ 40 billion. Italy, with $ 26.6 billion, has replaced Poland at number 10 in the rankings this year.
- IPOs of more than $ 10 billion are becoming the norm. The biggest of 2021 has been the Romanian company UiPath, which has debuted with some 35.6 billion dollars of profit after its first day. Other large-scale IPOs include Auto1, Wise or Deliveroo, which have transacted over $ 10 billion on their first day.
- 15 European companies have gone public via SPAC (Special Purpose Purchasing) in 2021, with a combined business value of $ 62 billion. 14 of them are now listed on US markets (13 have been backed by venture capital). They cover key technological areas, such as quantum computing, electric mobility, semiconductors, fintech or healthtech. 9 are British, and all of them went public in the United States on American markets.
- The added value of outputs (exits) of European tech companies by mergers and acquisitions and IPOs exceeds $ 180 billion, the highest figure in the last five years and well above 2020 levels. 2021 has also been a record year to date for agreements, with a total of 47.
- There are currently 26 European tech companies with Decaorn status (companies valued at more than $ 10 billion), compared with 12 in 2020. Adyen is poised to become the first European tech company founded after 2000 to reach the mark of $ 100 billion, with a valuation of $ 99 billion as of November 2021.
3. ‘Planet Positive’ startups gain momentum, but concerns about Socially Responsible Investment are less relevant in Spain
- In Europe, more than $ 31 billion has been invested in purposeful technology companies in the last five years, representing 51% of all investments and an annual increase of 57%. Purposeful companies are defined as companies that seek to build a sustainable future for all by addressing one or more of the SDGs.
- The ‘planet positive’ investments, defined as companies that work to make a sustainable use of the planet’s resources, achieved 11% of the total financing in 2021. Companies related to clean energy and climate are those that have obtained most of financing (24% each of these areas of all capital invested in technology companies with a purpose between 2017 and 2021 to date).
- If we look at the top 10 countries in terms of new funds, about half of the new venture capital financing in 2021 have a socially responsible investment policy on their website, but this figure falls to 33% in companies financed based on Spain.
4. Access to finance and talent are key challenges for founders of European tech companies, especially in southern Europe
- Portugal stands out in financing: 54% of those surveyed affirm that they see financing as a specific challenge for European technology companies in the next 12 months. 20% of Italians and 29% of Spaniards also say that fundraising remains a challenge.
- 59% of startup founders in Spain indicate that it is more difficult for them to attract talent than before, third in this metric after the United Kingdom (61%) and the Netherlands (60%).
- Entrepreneurs in Italy have gained their experience abroad: Italy has the highest rate in proportion of ‘migrant’ founders, as 64% have worked for a company worth more than 1 billion dollars outside of Italy. Switzerland and Germany, for their part, have the lowest proportion.
5. Portugal does better than the rest of Europe in gender diversity
- Women and ethnic minorities still have a harder time raising capital than their male and white counterparts.
- Despite the evidence that mixed and diverse teams perform better, it has only obtained 9% of the capital raised in 2021.
- According to an analysis by Extend Ventures, based on a sample of 4,684 Europe-based tech companies that have raised more than $ 2 million in total funding since January 1, 2020, only 0.7% of total capital raised through the date has been obtained by founders of color, 1.1% by founders men of color and 22.7% by founders white.
- Although gender diversity among founding teams remains poor across Europe, there are some differences across countries. Portugal has the lowest rate of male-only teams receiving funding, at 75%, while Ireland has the highest rate of female-only founding teams, at 10%