Europe’s technology sector has benefited from the shift to digital solutions driven by the corona measures, such as teleworking. This year, private funding reached a new record of 34 billion euros (41 billion US dollars). Last September was an absolute record month. Never before in history was so much new money pumped into the tech industry (more than 4 billion euros).
A billion for an online event platform
Its success did not stop there. This year, eighteen technology companies managed to raise investment capital of more than one billion US dollars. Europe now has 115 of these types of companies backed by venture capital. Hopin, an online events platform, managed to pull it off in even the shortest amount of time possible. In seventeen months, Hopin was able to secure those aforementioned one thousand million dollars. This is revealed in the latest ‘State of European Tech‘ report published this week.
Europe now counts 115 technology companies with an invested capital of more than a billion dollars.
As is the case every year, the report is published by Atomico, a European venture capital company headquartered in London. The company currently has €2.2 billion in risk capital at its disposal. In particular, institutional investors such as pension funds, insurance companies, and foundations from Europe and the rest of the world have put three times more money into the European technology industry this year than they did five years ago.
The categories that are flourishing are financial services (fintech) and business software. In Europe, the SaaS model (‘software as a service‘ or in other words, software that is sold as an online service) is king. This year, a record 10 billion euros of invested capital has been put into these types of companies. More than five billion euros have also been invested in technology companies that focus on solutions to environmental issues.
However, less investment went this year to companies dedicated to advanced technology (7.3 billion euros in 2020 compared to 8.4 billion euros in 2019). Cutting-edge technology encompasses artificial intelligence, machine learning, big data, autonomous driving, blockchain, and robotics. So, there is room for improvement here.
European start-ups are not giving up
Another hurdle that encumbers investment in the European technology sector is that our continent is better at setting up a company than in supporting the subsequent stages. Worldwide, Europe accounts for 40 percent of all capital under 5 million US dollars. But subsequent financing rounds, involving larger amounts, tend to be more difficult.
Nevertheless, European start-ups are not giving up. American start-ups are 50 percent more likely than European companies to go under after the first round if things don’t go right the first time. On the other hand, when things are on track, American companies are much more likely to prosper.
The role of venture capital is on the rise in Europe, albeit in the shadow of the US and China. The largest engineering companies in the US are financed 80 percent by early-stage venture capital. In China, the figure is as high as 90 percent. In Europe, the percentage is just over 30 percent. However, venture capital involved in the establishment of European start-ups is growing rapidly.
Yet however you look at it, Europe is definitely pulling its own weight on the world scene. This can be gauged, among other things, by the total value (measured by the market capitalization) of technological companies. Globally, this figure comes to almost 20 trillion US dollars. The lion’s share is accounted for by the United States (nearly 13 trillion), followed by China (3.3 trillion). In Europe, the Netherlands (500 billion US dollars), Germany (300 billion), and the United Kingdom (100 billion) are all in the world’s top ten. The fact that the Netherlands occupies such a prominent position also has to do with the fact that many international companies have their headquarters in this country for tax purposes.
If we take other parameters into account, then other European countries seem to perform better. For example, Sweden and Ireland are number one and two respectively in terms of capital invested per capita (over the period 2016-2020). On the basis of population, Estonia is the European capital of start-ups. There are almost five times more technology start-ups there compared to the average across Europe. Atomico has also drawn up a ranking of European innovation hubs. When measured in terms of invested capital, London ranks firmly at the top. This is followed by Paris (France), Stockholm (Sweden, rather surprisingly), Berlin and Munich (Germany), Amsterdam (the Netherlands), and Zurich (Switzerland).