European start-up funding exceeds $ 100 billion for the first time: Atomico

A 3D map showing the European continent.

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LONDON – Europe’s tech sector is on fire.

Start-ups in the region are on track to raise a record $ 121 billion in funding this year, roughly three times the $ 41 billion in capital raised in 2020, according to a report by venture capital firm Atomico.

This is the first time that European start-ups have raised more than $ 100 billion in a single year, and highlights the growing interest of investors in the continent’s rapidly growing tech industry.

“This has been a defining year for European technology,” Tom Wehmeier, Knowledge Manager at Atomico, told CNBC. “I think what we’ve seen in the numbers is that European technology is creating value faster than ever.”

Based on findings from data firm Dealroom, Atomico’s latest annual State of European Technology report shows that the total equity value of European technology companies in public and private markets has exceeded 3,000 billion dollars for the first time in 2021.

“It took us decades to achieve the first trillion market value in technology in Europe,” Wehmeier said.

“We hit that milestone just three years ago, in December 2018. And then we went from $ 1,000 billion to $ 2,000 billion in 24 months, then this year the last trillion was added in eight. month.”

Europe is now home to 321 billion “unicorn” companies, 98 of which were created this year. There are also 26 so-called “decacorns” worth $ 10 billion or more, including Klarna, Revolut and Checkout.com, according to Atomico.

Tech start-ups have been a major beneficiary of the increased adoption of online services during the coronavirus pandemic, Wehmeier said.

Flying effect

According to Wehmeier, the European tech sector is growing in part thanks to the “recycling” of talent from previous successes into new companies.

“People from one generation of businesses are evolving into the next generation, whether as founders, builders or investors,” he said.

This year was also a banner year for “exits” such as mergers and acquisitions and IPOs in Europe. A combined enterprise value of $ 275 billion has been produced by the exits of European technology companies this year.

Notable deals include UK fintech company Wise’s successful direct listing and the $ 8.1 billion sale of Finnish food delivery company Wolt to US rival DoorDash.

Another key growth driver for European start-ups has been an increase in demand from large international investment firms like Tiger Global, Coatue and SoftBank.

The new competition has kept European venture capitalists on their toes. Atomico, for example, is raising around $ 1.2 billion to invest in European tech companies, while Balderton Capital has secured nearly $ 1.3 billion for two new funds this year.

This helps create a so-called “flywheel” effect where more talent and more capital lead to a virtuous cycle of increased growth, Wehmeier said.

Challenges ahead

However, all is not rosy in European technology.

Although venture-backed firms have increased record levels of funding in Europe, start-ups are in a hurry, according to Atomico.

Less than 1% of venture capital invested in the first nine months of 2021 went to companies founded this year, a figure that has typically ranged from 1% to 3% in previous years.

Meanwhile, diversity remains a key issue. Only 1.3% of venture capital funds in Europe go to start-ups with founding ethnic minority teams, Atomico said, citing a survey of more than 5,000 tech professionals in the region.

Another hurdle for Europe to be overcome is the lack of allocation of pension funds to start-up investments, Wehmeier said, with European pension funds earmarking less than 0.02% of their $ 3 trillion for start-up funds. capital risk.


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