The European tech landscape has undergone a metamorphic change over the past decade, blossoming into an entity with a combined valuation of $3.4 trillion, according to the latest Dealroom report on European venture capital. This transformation reflects Europe's status as a hub of technological innovation and a magnet for venture capital (VC). The shift is not merely numeric; it signifies a continent poised to become a cornerstone of global tech innovation.
Elevating tech in Europe
The continent's share of global venture capital has risen to 19% in 2023 from 13% in 2013. This is not only a late-stage phenomenon; Europe's share in global early-stage VC has also marked a record at 24% in 2023. Annually, about 3,700 startups across Europe receive their first funding from venture capitalists, indicating a thriving startup culture. Europe has been producing unicorns and decacorns at a rate similar to the USA. Although there hasn't been a $100+ billion VC-backed outcome yet, the size of the ecosystem suggests it is a matter of time.
Europe hosts a growing number of experienced entrepreneurs. Founders from European unicorns are creating new ventures, contributing to the ecosystem's growth. The science and engineering talent in Europe is significant, with over half of the world's top science clusters located in the region. This talent drives innovation and attracts major tech companies like Amazon, Google, Facebook, and Microsoft to establish a presence in Europe. Moreover, Europe has birthed its own tech giants such as Adyen, Spotify, Klarna, and Just Eat Takeaway.
Current European VC Dynamics
Investment into European startups is estimated in the same report to reach over $77 billion this year, well over the previous pre-pandemic record. The value generated from VC-backed exits in Europe is approximately $70 billion per year, which is about three times the amount of venture capital invested a decade ago. The sector has seen 11 new European unicorns in 2023 so far, although there has been a dip in late-stage investment in 2023.
The majority of countries have rebounded to their 2019 activity levels; however, the growth is not uniform across all of Europe. For example, investment activity increased in Norway by 181% and in Austria by 161%. In France and Switzerland, the change since the first half of 2019 is 37% and 64% respectively.
Europe's venture has shifted towards physical tech, with manufacturing's share increasing to 48% in 2023. Deep tech and climate tech sectors have experienced consistent growth in venture capital investments over the past decade, especially in recent years, with top segments being energy storage, clean energy, and vehicle production.
Venture capital horizon
The landscape of venture capital in Europe is evolving with a significant increase in the unique number of active investors in EMEA VC rounds, continuing into the second quarter of 2023. The top 60 Seed VCs have invested in two or more unicorns, and the top 63 Series A investors in three or more unicorns, showcasing the capacity and willingness of European VCs to back high-potential startups.
Despite concerns about “tourists” exiting the scene, corporate and other investor groups are on the rise in 2023, driven by the burgeoning climate and deep tech sectors. European corporates are showing an increased need to innovate on a larger scale, and startups are key to this innovation drive. The sectors attracting corporate R&D spending range from internet, software, and hardware to automotive and pharmaceuticals, indicating a wide spectrum of interest and investment.
The decade ahead requires ecosystems that can merge entrepreneurship, capital, deep R&D, and science to continue this growth trajectory. Established corporates like Fiat Chrysler Automobiles N.V., Leonardo S.p.a., and Telecom Italia S.p.A. are part of this evolving ecosystem, indicating a robust interaction between traditional corporates and new startups in driving innovation and economic growth.
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