European start-up funding tops $100 billion for first time: Atomico
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The continent of Europe is shown on a 3D map.
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LONDON — Europe’s tech sector is on fire.
According to Atomico’s report, the record amount of funding for start-ups in this region is $121 billion. This figure roughly triples the capital that was raised in 2020, which was $41 billion.
This is the first year that European start-ups have raised over $100 billion in one year. It also highlights the growing interest of investors in Europe’s fast-growing tech sector.
CNBC’s Tom Wehmeier told CNBC that “it’s been an defining year in European tech.” According to me, the data shows that European tech creates value more quickly than ever.
Atomico’s most recent annual State of European Tech Report, based on data from Dealroom shows that the total equity value of European technology companies in both the private and public markets has surpassed $3 Trillion for the first-time in 2021.
Wehmeier explained that “it took us decades before we got to the first trillion euro in equity value for technology from Europe.”
It was December 2018 that we reached the milestone. That’s three years ago. We went from $1 Trillion to $2 Trillion in 24 Months, then the latest trillion in 8 months.
Europe now has 321 billion-dollar unicorn companies. 98 of them were created this year. Atomico reports 26 other so-called decacorns worth more than $10 billion. These include Klarna Revolut and Checkout.com.
Wehmeier explained that the rise in online use during the coronavirus epidemic was a huge benefit to tech startups.
Flywheel effect
According to Wehmeier, Europe’s tech sector has been growing in momentum partly because of a “recycling” of talents from previous success stories to new ventures.
He said that people from different generations of businesses are now moving to the next stage, either as entrepreneurs, builders or investors.
Record year in Europe for exits such as mergers and acquisitions. This year, European tech company exits generated $275 billion in enterprise value.
Some notable deals include a British fintech company Wise’s blockbuster direct listingWolt’s Finnish food delivery service $8.1 billion saleAmerican competitor DoorDash.
A rise in international investment firms such as Tiger Global and Coatue has also been an important driver for Europe’s startup growth. SoftBank.
European venture capitalists are being kept on the edge by this new competition. Atomico, for instance, is raising around $1.2 billionBalderton Capital secured $1.3 billion in two new funds to help it invest in European technology firms.
Wehmeier explained that it is creating the “flywheel”, a system where capital and talent can be combined for a positive cycle of higher growth.
Future challenges
It’s not always all roses in European tech.
Atomico says that despite venture-backed firms raising record amounts of capital in Europe, the early stage companies are suffering.
Companies that were established in 2021 received less than 1% venture capital investment in the first nine month of 2021, an average figure of 1-3% for previous years.
Diversity remains an important issue. Atomico reported that only 1.3% of European venture capital funding goes to startups with founding teams from ethnic minorities, according to a poll of over 5,000 technology professionals.
Wehmeier stated that Europe must also overcome the problem of a lack of allocation from pension funds to venture capital investments. European pension funds have earmarked less than 0.2% of their $3 Trillion for this purpose.
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