The State of European Tech - 2017

As most of you know, the world’s leading startup event, Slush, was held last week in Helsinki. We sure enjoyed our few days at Slush and got promising leads and valuable connections! Besides connecting entrepreneurs, investors and corporate representatives, Slush is also an inspiring gathering of tech-savvy people and innovations. We as an innovation “headhunter” are always interested in insights from the tech industry and it’s development, so we eagerly went through Atomico & Slush’s report on the state of European tech in 2017.

Here are our takeaways from the State of European Tech report.

Europe’s tech industry is having another record breaking year!

The industry is creating jobs faster than the rest of the European economy and the tech workforce is growing a lot faster than the overall employment within the EU. According to the report, there's also a strong belief that tech entrepreneurs will have an important role in tackling massive global issues such as climate change, food sustainability and access to proper healthcare. 

VCs and Angel Investors agree that high-quality investment opportunities are increasingly emerging in European areas, even outside the typical geographical EU focus of UK, Germany, France and Sweden. One reason why the tech-ecosystem in Europe is thriving, is our strong pipeline of world-class talent. Did you know Europe is home to half of the top 10 computer science institutions in the world, and more PhDs graduate from technical studies in Europe than from the United States? Another factor for this tech boom, is the lively developer population and the growth in the size of professional developer populations in Europe. According to Stack Overflow, there are 5.5 million developers in EU, compared to the 4.4 million in the US. 

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The presence of tech giants in Europe is changing the dynamics of the region’s talent pool, last year Slush and Atomico reported that 53 acquisitions were made since 2011 by the top 5 largest US tech companies, and since then, 10 more acquisitions have been made in Europe, two of which are Finnish companies (Beddit, indoor.io). According to the state of European tech report, large tech companies are expanding their presence further in Europe through large and rapidly growing engineering centers.

The report announces yet another record breaking year for European tech investments. Europe has seen more than 3B dollars invested per quarter, for impressive 11 consecutive quarters. There's also an increase in the capital invested and the number of deals for all round sizes, except for the under 2M dollar rounds that have declined slightly. Ever since 2012 the amount of capital invested and the amount of deals per quarter, have increased reflecting quite well, the long-term investment trend in European tech-startups.

Reportedly, UK remains the largest destination for capital invested in Europe, France taking the second place. In addition, 10 other European countries (Germany, France, Sweden, Spain, Netherlands, Russia, Switzerland, Ireland, Finland) have now raised over 1B dollars since 2012. The median and mean of round A investments have increased significantly from 3.3M dollars in 2012 to 5.5M dollars this year.

Fintech, food, transportation and healthcare have all seen large capital investments in 2017. (Fintech $4.195B, Food $2.022B, Directory $1.826B, Back office $1.644B, Transportation $1.558B, Health $1.459B, Analytics $1.368B and Marketing $1.296B)

The strength of Europe’s tech ecosystem is attracting a diverse set of investors. Around 2,000 unique investors have participated in at least one investment round in Europe this year, which is  around 4 times the amount compared to 2012. In addition, Asian investors are showing an increased interest towards European tech companies. This year Asian investors have invested around 1.8 billion dollars across more than 100 rounds. The level of investments in Europe from Asian investors has grown from 11 deals in 2012, to 117 deals in 2017.

Deep tech companies continue to attract large amount of investments and interest from American and Asian tech giants, as well as European corporates. This year Europe is waiting to see 3.5 billion dollars to be invested to deep tech companies, across over 600 deals - that is one billion dollars more than last year!

  • AI & crypto are seen as major opportunities for European tech leadership on the global stage
  • AI & blockchain are viewed as the areas where Europe is best-positioned to attain worldleading status
  • Europe is home to the largest share of the top 100 AI research institutions worldwide

There has been a massive increase in the European developer engagement with cryptocurrencies, mostly on Ethereum-related topics. Europe is also the largest source of Global distribution of reachable Bitcoin nodes. According to the report the UK, Germany and Russia on the other hand, are the most active blockchain developers on GitHub.

Last year European corporates started to pay more attention to tech-startups and realised their potential and opportunity. This year is showing similar signs, affirming that this trend is evolving at pace. Across the board, Europe is holding on to its traditional strengths and industrial heritage, and the relationship between old and new industry is now characterized by different partnership types and collaboration.

European corporates have different levels of focus and engagement with European technology, although almost all of them are starting to run accelerator programs, investing in funds etc and this is seen to bring the startup and the corporate world closer together.

Leading European corporates are building meaningful partnerships with startups for mutual benefit.

Here are a few examples from 2016-2017:

  • LendInvest & Citigroup - lending partnership
  • Scalable Capital & ING – distribution partnership
  • AIMotive & PSA Group – technology partnership
  • Funding Circle & Aegon – lending partnership
  • Farfetch & Conde Nast – content & distribution partnership
  • Klarna & Visa – product partnership
  • BlaBlaCar & Opel – distribution partnership
  • Chronocam & Renault – technology partnership
  • Deliveroo & Heineken – distribution partnership
  • N26 & Allianz - distribution partnership

Until now, Europe has produced 41 tech companies that have achieved over billion dollar evaluations through private market investment rounds, via an acquisition or through a valuation in the public markets post-IPO.

Here are the European companies that surpassed a $B+ valuation for the first time in 2017, either through a private investment round, via an acquisition or through passing a $B+ valuation in the public markets for the first time since IPO:

  • Improbable
  • Outfit7
  • Purple Bricks
  • Rovio
  • Talend
  • The Hut Group
  • Trivago

Finally, to sum up some of the most impressive milestones In 2017:

  • Total M&A exit value is tracking towards another $75B+ 
  • Europe is on track for a record high number of VC-backed exits 
  • Europe has had the most tech IPOs globally 
  • There has been six over billion dollar tech IPOs from Europe

If you wish to read the full Report, Click here!

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