You might think Europe is treading water these days, with one of its biggest financial centers, London, hamstrung by Brexit and the uncertainty ithas fostered.
Youd be wrong. So suggests a new survey by the venture firm Atomico that persuasively argues that Europes tech scene is instead being fast propelled forward by three new trends: a well of so-called deep tech; a growing number of tech hubs across the continent; and expandinginterest by corporate investors, non-tech companies, and foreign giantsin European tech startups.
The numbers Atomico cites are eye-opening. With the help ofcompanies like LinkedIn, Meetup, Stack Overflow, Dealroom.co, and the London Stock Exchange, as well assurvey responses from roughly 1,500 founders, investors and tech employees, Atomico says thatdeep tech companies have attracted $2.3 billion in investment over the last 22 months, and that nearly 1,000 related startups have been founded over the same period.
Deep tech, per Atomicos definition,means startups that employ artificial intelligence; are focused around virtual reality or augmented reality; fall into the frontier tech bucket, meaning they make drones or robots or nanosatellites or similar; or have sprung up around the Internet of things, from wearables to smart home startups.
Some of these companies are in Zurich, includingTeralytics, a big data company backed by Horizons Ventures and Lakestar; Climeworks, which has figured out how tosuck carbon dioxide out of the airand aims toremove 1,000 metric tons a year of the greenhouse gas with itsfirst commercial plant just outsideofZurich; and the computer vision company Dacuda.
But agrowing number are spread across a number of other hubs, as well. Over the last five years, thereve been 582 investments in deep tech companies in France alone, for example. In Germany, that number is 480. In Finland, its 137. In the Netherlands, its332, by Atomics accounting.
Indeed, there have beenbeen 282 related deals in such companies in 2016 alone, up from five years ago, when that number was 55. Are those Silicon Valley-type numbers? No, but theres reason to think that gap in funding which is roughly fivefold right now will start to narrow.
For one thing, as Atomico notes, a growing number of U.S. tech companies have set up shop in Europe, and those European employees are just as likely as their U.S. counterparts to start their own companies eventually. Alphabet is now in Zurich and London. Facebook is in Paris; London; and Somerset, England. Apple is in Cambridge; Berlin; Lund, Sweden, and Grenoble, France. (Conglomerates headquartered in China are also planting flags in Europe, including Rakuten, which now has an artificial intelligence center in Paris.)
Another important accelerant: M&A, says TomWehmeier, a principal at Atomicoand its head of research. Were not only seeing teams grow organically across Europe, but were starting to see a number of European companies being acquired by Asian companies and bigger tech firms that are local growing more acquisitive.
Wehmeier cites the sale last week of Edinburghs SkyScanner to Chinas Ctrip;Tencents deal to buy Finlands Supercell Oy back in June; and Softbanks deal to acquire U.K.-based ARM Holdings. He also notes other, more local activity, like that ofU.K.-based Funding Circle, which has begun making acquisitions, as hasSpotify, SAP, and other big European brands.
Asin the U.S., Europe is has also begun to see a growing number of corporate venture funds spring up, along withan uptick in the interest of pension funds in backing tech startup. Atomico estimates that theres at least $2.7 billion in committed capital residing with companies. It says theres less hard data around the amount of capital that pensions funds are beginning to allot to venture but that it will have some numbers in the not-too-distant future.
A lot of pension funds are by their nature conservative, saysSiraj Khaliq, a firm partner who previouslycofounded The Climate Corp. (acquired by Monsanto). But its baked into their estimates that theyll be able to [produce a]5 to 6 percent [return] a year, and they cant make those ends meet anymore.
Its taken these professional investors a while to understand that tech isnt funny money, but thesesame people are [awakening to the opportunity]. Generally, people everywhere nowrecognize that tech is very real.
You can find the full report here.