Does Europe finally have the pieces in place to challenge the US as the world’s leading tech ecosystem?
Analysis from Creandum – Spotify’s first investors – and Dealroom suggest that the continent could potentially overtake the US within the next 20 years.
The venture capital firm claims that Europe’s tech sector is in the best shape of its life after analysing the evolution of the sector over the last 20 years.
Europe’s wealth of experienced VC investors, the talent amongst its 600 million-plus population, the flywheel effect of creating many globally successful tech companies, entrepreneur role models and the region’s dominance across emerging sectors all mean Europe is ready for its best decade yet in creating the world’s leading tech companies, it says.
The flywheel of entrepreneurship has been spinning fast in Europe, but there is still much potential to be unlocked. Recent startups and their founders have achieved companies with higher valuations, setting Europe up for even greater growth and dominance in the future.
Europe’s total number of unicorns has grown 88% compared to the US’s 56% since 2014, the data shows, with 20 of Creandum’s European portfolio companies becoming unicorns – including Depop, iZettle and Pleo. Meanwhile more than 60 new startups have been built by alumni from Creandum-backed unicorns Spotify and Klarna.
Europe’s share of global VC funding has quadrupled, with Europe now taking more than a third of global investments at early-stage. Of the $2.5 trillion value created in European tech over the past decade, most of the value has come from recent cohorts, meaning Europe is even better positioned for growth in the future.
Of the sectors that have received the most funding globally over the past 20 years including FinTech, digital health and enterprise software, Europe has created world-leading companies including FinTechs like Adyen, Revolut, Klarna, Pleo and iZettle; digital health like Kry and Doctolib; and enterprise software like Factorial, Personio and UiPath.
Sectors in which Europe has historically been strong – FinTech, digital health and ClimateTech – look set to grow even further with generative AI bringing further disruption.
And European ClimateTech has remained a growth area despite the venture downturn, with 22% of total European funding going into this sector in 2023 versus 7% for the US.
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Given that the climate transition is poised to transform industries that currently account for at least 25-30% of global GDP, Europe’s strength in this sector alone presents a huge opportunity in the years to come.
Finally, Europe’s tech sector is underpinned by a strong and growing VC network. European VCs have increased the amount of capital raised by 100x in the last 20 years and despite economic uncertainty, there is still significant dry powder.
Creandum alone has raised over $1.7 billion in that time, and its portfolio has gone on to raise $16.5 billion with portfolio companies employing 46,000 people in 35 HQ cities.
Staffan Helgesson, its general partner, said: “In just 20 years, Europe has gone from being an outsider to a global challenger. We’re confident that in the next 20 years, Europe can take the lead in emerging tech sectors, including digital health, ClimateTech, FinTech and AI, that are critical to our economies and lives.
“For the past 20 years, our overriding ambition has been to back the best entrepreneurs and the great thing about Europe is that successful companies can come from anywhere. We have seen first hand with companies like Spotify, which became a global category leader headquartered in Europe, how software has been a catalyst for disruption and as the ambitions of the next generation of founders get bigger, we expect to see even more great global tech companies created here.”