A sweeping new report about European startups from venture firm Atomico paints a picture of a cross-border ecosystem that is brimming with confidence and having a transformative effect on the continent’s workforce.
“The State of European Tech 2017,” the third annual data set Atomico has compiled, was released today at the Slush tech conference in Helsinki, Finland. While the 143-page report covers a wide range of topics, it reaffirms the feeling among many on the right side of the Atlantic that years of a startup groundswell is now creating a robust tech economy that has a distinctly European flavor.
“We think the European tech ecosystem is the healthiest it’s ever been,” said the report’s author, Tom Wehmeier, a partner and head of research at Atomico. “We think the solid foundation we’ve seen being built over many years is allowing Europe to march to its own drum.”
The evidence of this momentum includes $19 billion invested into European startups in 2017, already surpassing the $14.4 billion recorded in 2016. And the continent is on pace to see more than 50 startups raise rounds bigger than $50 million, up from 43 in 2015.
Wehmeier points to several factors that he believes demonstrate that Europe is not simply trying to mimic Silicon Valley, but creating something distinct.
The first is the distribution and diversity of the landscape. While the U.K. is still the continent’s unquestioned leader in terms of startups and fundraising, startup hubs are emerging across Europe, from the Nordics to Spain to Eastern Europe. Two of the largest funding rounds this year were raised by companies in the Netherlands (Picnic, $110 million) and Spain (Cabify, $100 million). This creates more variety, more chances for cross-pollination of ideas and cultures, and a wider pool for talent, he said.
The second characteristic is the growth of so-called “deep tech.” Atomico identified $3.5 billion of investments into deep tech companies in Europe, up 40 percent from 2016. Even better is that many of them are raising large, late-stage investments that will help them remain independent, Wehmeier said.
Third, European startups are much more open to working with established corporate players. Atomico tracked 637 investments into startups in 2017 that included at least one corporate investor, up 600 percent from 2012. The firm estimates that 20 percent of Europe’s venture investments come from corporations.
Finally, the continent’s leaders are embracing government policy and regulation as a competitive advantage. With groundbreaking advances in technologies like autonomous driving, artificial intelligence, and blockchain, governments are putting in place regulatory reforms to make their countries more attractive to potential startups by signaling their support as well as putting in a clear set of rules on how to operate, Wehmeier said.
These factors have combined to drive a surge in Europe’s tech workforce, which is growing three times faster than all other sectors of the continent’s labor market.
For all this success, plenty of challenges remain, Wehmeier said. While investment capital has grown, it still remains far behind the levels seen in Silicon Valley. The Atomico survey also revealed growing anxiety in the U.K. over the potential impact of Brexit. And finally, there are still some countries, such as Italy, that have not fully embraced an innovation economy.
“It’s a challenge to encourage those places so they can get to those next levels,” he said. “But I think that’s not a question of if that will happen, but when.”