The future is bright for European tech startups. In fact, the continent is so bright that it is poised to match or even surpass the United States as an innovation superpower.
Here’s the take on a new report published by VC. Creandum and a startup intelligence company deal room. According to the study, the evolution of the technology ecosystem over the past two decades or so has brought Europe to a stage where it has “all the ingredients” to establish a dominant position in technology, especially in fintech. , digital health, enterprise software and climate solutions.
So what are the factors that underpin the report’s optimism? I asked Creandum General Partner Staffan Helgesson.
Creandum was an early backer of Spotify, a European company that has established itself as a clear leader in its chosen market. Additionally, Creandum’s investment portfolio includes healthy unicorn companies. These include Depop, iZettle, and Pleo.
So from that perspective, Creandum has clearly had a fair amount of success in Europe, but the report predicts more than that. After 20 years of catching up with the US and China, Helgeson says he has a real chance of becoming a world leader.
population matters
He cites the sheer number of people living in Europe as a factor. “Europe has about 600 million people. In the United States, about 340 million,” he says. The logic here is that increasing population density inevitably means that Europe has deep wells from which entrepreneurship and technological talent can be tapped.
Then there is migration. Helgeson said Europe is attracting immigrants, but the United States is becoming less welcoming. “Historically the United States has been very good at immigration, but today that is not always the case.”
Equally important, the report notes that Europe now has a legacy of startup creation that will continue into the future. “Twenty years ago there were only a few start-ups,” says Helgeson. “I have something to do today.”
He credits Spotify with helping create new perspectives for Europeans. “Daniel Ek[Spotify founder]decided early on that he wanted the company to be based in Europe. Spotify changed its mind,” he says.
count the unicorns
And today there are unicorns in 65 cities in 25 countries across Europe (not just the European Union). In fact, the report claims that the continent now has the highest density of billion-dollar businesses in the world.
One result is a new generation of entrepreneurs who have trained in the first wave of successful scale-ups and are now starting their own companies. More than 60 startups have been founded by veterans of portfolio companies Klarna and Spotify, Helgeson said.
Access to finance
Europe is also benefiting from increased VC funding, the report says. Currently, Europe accounts for about one-third of early-stage global investment.
I have to say that there are still concerns about the investment climate. Last month, I spent a few days at the EU-sponsored Grow Digital 23 conference in Brussels, where policymakers realized that much of the late-stage capital flowing into companies comes from the US and Asia. He seemed to be genuinely concerned, and the concerns of the companies concerned seemed to be growing. Ultimately it will stick and set up headquarters elsewhere.
Nonetheless, Helgeson is optimistic about the investment climate. In particular, he points to a shift in attitude in the VC market. The fund will remain open longer. “The top demographic is 17-18 year olds,” he says. “Value creation takes time.”
And again he noticed a change in demeanor. VCs used to look for early exit, and frankly, so did founders. Now I have a growing desire to embark on longer journeys.
“In the early days, no one was making a lot of money,” Helgeson says. “So it was more attractive to sell early. Over time, we see more entrepreneurs and founders making money. There was no more pressure to sell.”
While the report identifies hotspots, particularly the aforementioned climate, health, enterprise software and fintech, Helgesson over-focuses on the hottest industries at the moment. Be careful about that. Opportunity, he says, comes from talented founders, not the sector itself.
Nevertheless, he cites the importance of Europe’s rapidly developing climate change technologies, partly because regulatory frameworks (such as the Net Zero Agenda) create opportunities. said there is. The impact of policies can be devastating. Helgesson points out that two decades ago Sweden decided to move away from its dependence on Russian gas for both environmental and political reasons. This has created an opportunity for those who can offer alternatives.
There are still challenges. For example, in the case of ambitious scale-up, the ideal end goal is listing on the stock market. Helgesson says public companies will become aircraft carriers. They make acquisitions and grow the field. Perhaps more needs to be done to make tech innovators more attractive to mainstream investors.
European policymakers worry about missing the technology boat, in which the continent loses to the US despite its superior research base in a brave new world of AI, quantum and other deep tech start-ups. I am afraid that The Creandum/Dealroom report suggests that there is indeed reason for optimism.