This year’s State of European Tech report – published by Atomico in partnership with Slush and Orrickshows at Slush 2019 – shows that European tech shines bright in the 2019 world economy. This is driven by record funding on track to total over $30bn in the region, including a record year for Sweden, Finland, Denmark and Norway. Even so, diversity and inclusion and a lack of cohesion between European policymakers and the tech community remain challenges for the region.
“European tech continues to be a bright spot in the global economy despite a media focus on turbulence in markets and tech this year. Europe’s economy may not be immune, but its technology companies have continued to break records in the past twelve months. European tech companies are performing at a level that many considered unthinkable when we first started this report five years ago. There’s a deep pool of talent, more than 150 billion-dollar tech companies have now been built from Europe, and record levels of support from institutional investors. However, though some small progress has been made, a huge diversity deficit remains.” – said Tom Wehmeier, Partner and Head of Insights at Atomico, and author of the report.
Read along for the key findings from the report:
Steady and solid growth in the European tech
European technology companies are on track to raise a record 30$B+ in funding in 2019, up from $25B the year before. Funding in Sweden is on track to exceed $3bn, up from slightly over $1bn in 2018 driven by mega-rounds such as Northvolt’s and Klarna’s most recent rounds; funding in Finland $710m, up 35%; funding in Denmark $544m, up 47%, and funding for Norway at $300m, up 14% according to Dealroom data. By funding, Sweden is still the fourth largest tech ecosystem, pulling strongly ahead of Switzerland with whom it was neck and neck in 2018.
Nordic tech ecosystems continue to punch above their weight.
Despite being smaller than other countries by population, Denmark, Finland, and Sweden all have the highest densities of researchers and developers per capita in Europe according to Stack Overflow and Eurostat.
There’s much room for improvement in Europe’s diversity figures
In 2019, 92% of funding went to all men teams, a similar level to 2018. There is still only one woman CTO in the 119 companies (less than 1%) based on a sample of executives in CxO positions at 251 European VC-backed tech companies that raised a Series A or B round between 1 October 2018 and 30 September 2019 with more than $10M funding, even though 7.5% of software engineers are women. (Source: Stack Overflow, Craft, Dealroom).
Looking beyond gender diversity, ethnic minorities in tech experienced discrimination at a much high rate than white peers. At least 80% of Black/African/Caribbean respondents who reported experiencing discrimination linked it to their ethnicity according to the survey.
63% of women VCs asked in the survey reported increased focus on attending events with stronger participation from diverse founders. The corresponding number for men VCs was only 33%, suggesting that their male counterparts are leaving female VCs to fix Europe’s diversity problem.
European tech policymaking and founders don’t speak a common tongue
When asked to describe the top priority of the European Commission in terms of tech policy, 40% of founders and startup employees say they don’t feel informed enough to comment.
European founders are not only about commercial success, but impact
One in five European founders states that their company is already measuring its societal and/or environmental impact. Only 14% of founders don’t believe it’s relevant for their company. Founders that are women are much more likely to be advanced in their approach to measuring impact. Employees are also placing a greater emphasis on corporate social responsibility, with 57% citing its importance in the State of European Tech survey.
What are the challenges of someone who starts a tech company in Europe?
As part of the report, Atomico, Slush, and Orrick surveyed 5,000 members of the ecosystem, including 1,000 founders. It paints a vivid picture of the current mindset as well.
Mental wellbeing is an active concern – a quarter of founders said that founding had mostly a negative effect on their mental health; people who felt negatively impacted were more likely to tell us that they struggled with challenges such as finding work-life balance and feeling lonely at the top, compared to their peers who said that founding a company was a mostly positive experience for their mental health. 57% of founders that have raised external capital said they would appreciate receiving support provided by the board or investors to specifically help with managing the pressure of being a founder.
People from a lower socioeconomic background face financial barriers to becoming an entrepreneur. 81% of entrepreneurs were living comfortably before they founded their company, compared to 39% of Europeans who say they are living fairly easily, easily or very easily according to Eurostat.
For more insights, read the full report here.