Mega deals like the $2.75 billion funding round raised by Peter Carlsson, chief executive officer of Northvolt, for the Swedish electric vehicle battery maker, have driven the amount invested in European startups to more than double to $100 billion this year.
© 2019 Bloomberg Finance LPEuropean startups are expected to more than double the amount raised from investors this year, to a new record of $100 billion. VC firm Atomico’s annual State of European Tech Report charts how an explosion in mega-deals worth more than $100 million has helped smash last year’s record $41 billion invested in the continent’s startups.
While the number of $100 million funding rounds also more than doubled to 153, many of the startup founders surveyed for the report say that it was harder to raise capital than last year. Around $60 billion of the total invested with European startups this year was via these mega-deals, while the capital flowing to early stage startups only grew slightly.
The Atomico report highlights how the largest ten deals with huge fund-raises from the likes of Swedish electric battery maker Northvolt and Klarna accounted for more than 10% of the total invested in the continent’s startups this year. Around half of the largest rounds this year were raised by fintech companies.
“It has been a defining moment in the evolution of Europe’s tech ecosystem. We are creating more value faster than ever,” says Tom Wehmeier, Atomico partner and head of research. “It took us decades to get our first trillion and that only happened in 2018...and now we are beyond $3 trillion and the last trillion was added in the last eight months.”
Europe’s largest startups appeared to have shrugged off the lingering impact of the pandemic with 98 new unicorns emerging this year, while the number of startups valued at over $10 billion, or so-called decacorns, doubled to 26. “Five years ago, you could fit all of the continent’s unicorns in a dining room and decry Europe’s missing tech giants,” says John Collison, Stripe cofounder and president in the report. “Today, you’d need an auditorium with 321 seats and you’d hear a completely different story.”
Despite around a fifth of founders surveyed for the report saying it had been harder to raise this year than last—that number rose to 26% of women and non-white founders—the amount invested in early stage European startups is now close to matching the United States. This year around 33% of global capital invested in sub $5 million rounds went to European startups, up from 25% in 2015, while American startups’ share dropped to 35% from 55% in the same period.
“When you look at early stage funding Europe is now on par with the U.S. with a third of global funding so there is the strongest ever pipeline of early stage companies coming through,” says Wehmeier.
Investors have also had a good year, with Atomico recording $275 billion worth of exits and even with a flurry of SPAC activity across the Atlantic, Europe produced more tech IPOs than the United States this year. Auto1’s $10.5 billion IPO was the year’s biggest exit for VC but many others came from startups like Cazoo, Arrival, and Babylon Health pursuing a merger with a U.S. blank check company over listing on a European exchange.
The pandemic also unsurprisingly seems to have driven a radical shift in attitudes from founders towards remote work. Around 50% of the founders say relocating staff and being in a tech hub like London and Berlin with proximity to investors was less important than last year. Zoom might have leveled some barriers for connecting founders with investors but the report also highlights that only 5% of VC-backing over the last five years has gone to Central and Eastern European startups despite some notable successes like Romania’s UIPath’s $35 billion NYSE listing in April.
