Atomico Partner Tom Wehmeier reviews ‘The State of European Tech’ 2019 report

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Atomico, the European enterprise capital agency based by Skype’s Niklas Zennström, has launched its newest annual The State of European Tech report, printed in partnership with Slush and Orrick.

As half of the report, the authors surveyed 5,000 members of the ecosystem — together with 1,000 founders — in addition to pulling in sturdy information from different sources, reminiscent of Dealroom and the London Stock Exchange .

This yr, the report reveals that the European tech ecosystem continues to mature and reveals no signal of slowing — notably highlighting the distinction from 5 years in the past when the The State of European Tech report made its debut. Almost each key indicator is up and to the appropriate, besides, quite depressingly, range.

The information reveals, for instance, that competitors for expertise and entry to the very best founders has elevated ferociously. And from a funding perspective, European founders have extra selection than ever, particularly with U.S. and Asian VC companies investing increasingly within the area. Progress with gender range stalled, nonetheless, reminiscent of 92% of funding going to all-male groups.

I caught up with the report’s writer Tom Wehmeier, Partner and Head of Insights at Atomico (additionally generally jokingly known as the “Mary Meeker of Europe”), the place we focus on in additional element some of the important thing findings and why, it appears, that the remainder of the world has lastly woken as much as Europe’s tech potential.

But first, just a few headlines from the report:

  • European know-how corporations are on observe to boost a report 30$B+ in funding in 2019, up from $25B the yr earlier than. (Source: Dealroom)
  • Despite failing to match the extent of venture-backed exits of 2018, there was a report quantity of 40 $100M-plus offers as of September 2019, a measurement that many European tech sceptics didn’t consider was doable. (Source: Dealroom)
  • A quantity of multi-billion-dollar non-venture backed corporations like Nexi and Trainline made their debut on the general public markets.
  • European tech policymaking stays a thriller to many European founders.
  • When requested to explain the highest precedence of the European Commission in phrases of tech coverage, 40% of founders and startup workers say they don’t really feel knowledgeable sufficient to remark. (Source: survey)
  • Despite this reported lack of consciousness on coverage points, all respondents voted EU competitors commissioner Margrethe Vestager as the one who had probably the most affect on European tech in 2019, good or unhealthy. (Source: survey)
  • European parliamentarians aren’t speaking about fintech and digital well being, two sectors which buyers poured a mixed $12.7bn into final yr (Source: Politico and Dealroom)
  • Europe’s range figures are nonetheless grim studying.
  • In 2019, 92% of funding went to all-male groups, the same stage to 2018. (Source: Dealroom)
  • There remains to be just one girl CTO within the 119 corporations (<1%) based mostly on a pattern of executives in CxO positions at 251 European VC-backed tech corporations that raised a Series A or B spherical between 1 October 2018 and 30 September 2019 with greater than $10M funding, although 7.5% of software program engineers are girls. (Source: Stack Overflow, Craft, Dealroom)
  • Looking past gender range, ethnic minorities in tech skilled discrimination at a a lot excessive fee than white friends. (Source: survey)
  • At least 80% of Black/African/Caribbean respondents who reported experiencing discrimination linked it to their ethnicity. (Source: survey)
  • 63% of girls VCs reported elevated give attention to attending occasions with stronger participation from numerous founders. The corresponding quantity for males VCs was solely 33% of feminine respondents urged that their male counterparts are leaving feminine VCs to repair Europe’s range drawback. (Source: survey)
  • European founders aren’t simply aiming for business success — they’re making an attempt to unravel some of the world’s largest issues.
  • One in 5 European founders states that their firm is already measuring its societal and/or environmental affect. (Source: survey)
  • Only 14% of founders don’t consider it’s related for his or her firm. Founders which might be girls are more likely to be superior of their method to measuring affect. (Source: survey)
  • Employees are putting a higher emphasis on company social duty, with 57% citing its significance within the State of European Tech survey. (Source: survey)

Extra Crunch: It is 5 years since Atomico printed the primary The State of European Tech report, which actually tried to seize a data-driven snapshot of the complete ecosystem. What are some of the largest modifications you’ve seen inside European tech within the intertwining years or on this yr particularly?

Tom Wehmeier: If I feel again to once we did the primary report, individuals who consider that Europe might really be an attention-grabbing participant in international know-how, had been largely restricted to individuals who had been within the tech trade in Europe itself. If you then quick ahead to at the moment, what has clearly occurred — and I feel 2019 was the yr the place this actually materialized and have become half of the narrative — was that perception translating from folks on the within to a bunch of those who had been on the surface.

Most clearly has been the power of curiosity from from the U.S. and the quantity of top-tier U.S. funds that aren’t simply rising their stage of funding exercise however committing to spending increasingly time right here on the bottom, hiring folks, constructing groups, constructing a community, and attending to know corporations. I feel it most likely surprises folks to know that 19% of all rounds this yr will contain at the least one U.S. investor in Europe, which is greater than double since for the reason that first yr we did the report.

I feel the opposite factor, the place I come again to this concept that now we have now lastly satisfied a sure group of folks concerning the function that Europe can play, is mainstream institutional buyers. I do know it’s not going to be misplaced on you, [but] that is going to be one other report yr for VC fund elevating from Europe. And while the headline numbers won’t be a shock, I feel what ought to catch folks’s consideration is that the composition of the LP base right here in Europe is now shifting. And lastly, there’s an unlocking of institutional buyers, [by which] I imply pension funds, funds of funds, insurance coverage corporations, sovereign wealth funds, who’re committing to European VC at ranges which might be considerably elevated and elevated from the place that they had been previously. So, if you happen to simply take pension funds, we’re going to see near a billion {dollars} invested which is up practically three fold.

It’s a validation of what’s taking place round European tech to see that now coming by way of and I feel is in the end one thing that helps to construct a basis for the subsequent 5 years of success. As a lot as it is a report that’s trying again, it’s additionally about making an attempt to grasp the place issues go from right here.

With regards to the pension funds, do you suppose that’s pushed by the overall bullishness in direction of European tech, or do you suppose it’s extra the macro financial actuality that perhaps different locations the place they might put their cash aren’t very engaging in the mean time?

I feel it’s actually a mirrored image that there’s a robust stage of perception that European enterprise as an asset class is a lovely funding alternative. And that’s mirrored by the numbers. One of the charts that we’ve acquired within the report is from Cambridge Associates who do the benchmarking for the VC indices… And once you look again over a 1, 3, 5, or perhaps a 10 yr horizon, the efficiency from European VC is demonstrating that it is a place the place for anybody constructing a diversified portfolio, they need to have some allocation. I feel it’s basically the power of the funding alternative. That is the one largest driver for why you’re seeing this occur.

I feel the largest factor that Europe has been in a position to show is that it could take a fantastic thought and switch it into a fantastic firm and that firm can scale to not only a billion greenback end result however to a multi-billion greenback end result and go during into an IPO or into a big scale acquisition. What you’ve seen occur in 2019 is partially A mirrored image of what occurred final yr the place it was clearly this report yr with Spotify, Adyen, Farfetch, Elastic and others that basically confirmed you may go full cycle from begin all the way in which to complete. And that the magnitude of these outcomes may be at a scale that makes them globally related.

Are the pension funds shifting their allocation of VC away from different geographies or are they only doing extra VC as a complete?