A 3D map exhibiting the continent of Europe.
Constantine Johnny | Moment | Getty Images
LONDON — Europe’s tech sector is on hearth.
Start-ups within the area are on observe to haul in a file $121 billion in funding this yr, in response to a report from enterprise capital agency Atomico, roughly thrice the $41 billion of capital raised in 2020.
It’s the primary time European start-ups have raised greater than $100 billion in a single yr, and highlights surging curiosity from buyers within the continent’s rapidly-growing tech trade.
“It’s been a defining yr for European tech,” Tom Wehmeier, Atomico’s head of insights, instructed CNBC. “I believe what we have seen within the numbers is that European tech is creating worth quicker than ever.”
Based on findings from knowledge agency Dealroom, Atomico’s newest annual “State of European Tech Report” reveals that whole fairness worth of European tech corporations in the private and non-private markets surpassed $3 trillion for the primary time in 2021.
“It took us many years to get to the primary trillion in fairness worth in expertise from Europe,” Wehmeier mentioned.
“We obtained to that milestone solely three years in the past, in December 2018. And then we went from $1 trillion to $2 trillion in 24 months, after which this yr, the latest trillion has been added in eight months.”
Europe is now residence to 321 billion-dollar “unicorn” corporations, 98 of which had been minted this yr. There are additionally 26 so-called “decacorns” price $10 billion or extra, together with Klarna, Revolut and Checkout.com, in response to Atomico.
Tech start-ups had been a significant beneficiary of the elevated adoption of on-line companies in the course of the coronavirus pandemic, Wehmeier mentioned.
Europe’s tech sector is gaining momentum partly because of a “recycling” of expertise from prior success tales into new ventures, in response to Wehmeier.
“People from one technology of corporations are shifting on to develop into the following technology, whether or not it is as founders, as builders, or as buyers,” he mentioned.
This yr was additionally a file one for “exits” corresponding to mergers and acquisitions and preliminary public choices in Europe. A mixed $275 billion price of enterprise worth was produced by European tech firm exits this yr.
Notable offers embody British fintech agency Wise’s blockbuster direct itemizing and Finnish meals supply firm Wolt’s $8.1 billion sale to American rival DoorDash.
Another key driver of development for Europe’s start-ups has been an increase in demand from giant worldwide funding corporations like Tiger Global, Coatue and SoftBank.
The recent competitors has stored European enterprise capitalists on their toes. Atomico, for instance, is elevating round $1.2 billion to spend money on European tech corporations, whereas Balderton Capital secured almost $1.3 billion for 2 new funds this yr.
This helps to create a so-called “flywheel” impact the place extra expertise and extra capital results in a virtuous cycle of elevated development, Wehmeier mentioned.
Not all is rosy in European tech, nonetheless.
Despite venture-backed corporations elevating file ranges of funding in Europe, early-stage corporations are being squeezed, in response to Atomico.
Less than 1% of enterprise capital invested within the first 9 months of 2021 went to corporations that had been based this yr, a determine that has usually ranged from 1-3% in earlier years.
Meanwhile, variety stays a key difficulty. Only 1.3% of enterprise capital funding in Europe goes to start-ups with ethnic minority founding groups, Atomico mentioned, citing a survey of greater than 5,000 tech professionals within the area.
Another hurdle for Europe to beat is the shortage of pension fund allocation to start-up investments, Wehmeier mentioned, with European pension funds earmarking lower than 0.02% of their $3 trillion for enterprise capital funds.