Last week Atomico published the 2019 edition of its report on the State of European Tech. Here are our top 10 takeaways.
1. The largest tech community in Europe is London. But in the UK London is not the only hub, both Cambridge and Oxford are home to thriving tech communities. As a whole, the UK is the single largest source of $1B+ VC-backed tech companies from Europe - it has 29. In what may or may not be a coincidence, the UK has 3,579,000 professionals with a scientific or technical training background - the highest number in Europe. The UK has also broken its own records this year; with $11,117M of capital being invested in 2019. This is in spite of a dip in capital invested in the UK last year.
2. Investment in European tech is increasing. Investment of capital in European tech has gone up year on year for the last 4 years (cumulatively increasing by 123%), with $34.4B invested in 2019.
3. Fintech and enterprise software companies are the major beneficiaries of capital. Since 2015, European companies in these two sectors alone have raised close to $50B. However, there are a further 5 industries that are also surpassing $2B capital invested versus only four in 2018. These are health, energy, transportation, food and marketing.
4. Artificial intelligence is booming in Europe. Europe is interested in AI - more research papers related to artificial intelligence are published here than in either China or the US and this year $4.9B of capital was invested into European AI companies.
5. Big deals are responsible for a significant amount of funding. 40% of all funding raised by European tech companies in the first nine months of 2019 was in deals larger than $100M.
6. There is a continued focus on sustainability. There are more than 500 European tech companies founded since 2005 that are tackling at least one of the UN’s Sustainable Development Goals as a core part of their mission. The goals most focussed on are SDG 13 - Climate Action, SDG 7 - Affordable and Clean Energy and SDG 3 - Health and Well-being.
7. Diversity is growing but very slowly. In 2019, 92% of funding went to all men teams. Quantum computing is an outlier in this respect; it was found that 23% of European quantum companies had a mixed or woman-led founding team, more than double the European average of 13%.
8. Asia and the US are increasingly taking notice of Europe. This year a fifth of European rounds had at least one US or Asian investor participating, this is a proportion which grows as deal size increases. The total capital invested into Europe from US-based investors in 2019 is approaching $10B, up nearly 3x since 2015. Many of the large North American and Asian funds are now turning their attention to Europe, opening offices and/or announcing growth funds specific to Europe.
9. Support ecosystems are growing. This year the CDL launched in the UK and new funds have emerged such as OSI (Oxford) and CIC (Cambridge) that are willing to support founders with the patient capital necessary for deep tech start-ups.
10. The majority of venture capital funds are going into follow-on funds. In fact, almost 80% of all venture capital funds raised in Europe go into follow-on funds. However, in the first half of 2019 more than $1.7B has been committed to 28 first-time venture capital fund managers in Europe.
Why can't Europe do tech? It's time to stop asking this question. We have irrefutable evidence that the European tech ecosystem can support great companies. We’re seeing a growing band of big investment rounds, and an increase in ‘purpose-driven’ companies attacking some of the world’s biggest challenges, and a pool of developer talent bigger than the US Yet challenges - such as a lack of diversity and divergent priorities between policymakers and the public - remain.