The State of European Tech 10th anniversary report

Europe’s tech companies have raised $426 billion since Atomico launched the inaugural edition of its State of European Tech (SoET) report in 2015 - ten times more than the $43 billion raised in the decade prior (2005-14). In its tenth edition of the SoET released, Atomico expects that this year European companies will secure $45 billion in investment - in line with the $47 billion raised in 2023.

The State of European Tech report combines quantitative data from across Europe’s 41 countries, and a survey of thousands of founders, operators and investors, to understand what’s really going on in European tech. This year’s report finds that:

• The fundamentals are strong for Europe’s early-stage start-ups - and in some regards, they are pulling ahead of the US.

Back in 2015, London was the only European city in the global list of top ten hubs by funding raised for early stage startups (rounds under $15 million). Fast forward to 2024, and London has risen to second place globally, with Berlin and Paris also joining it in the top ten. Europe is home to more founders starting companies than the US - as has been the case every year for the past decade. There are currently 35,000 early stage tech startups in Europe - more than in any other region globally.

• However, the ecosystem must address a critical growth-stage funding gap.

There are now 8x more growth companies than there were ten years ago in Europe, despite an uneven playing field. While Europe and the US start on equal footing, US startups are twice as likely to raise rounds above $15M than their European counterparts. As many as 1 in 2 European scaleups have turned to a US investor for funding. This matters as this creates a pull away from Europe - leading to talent, knowledge and economic leakage. This issue needs solving at an institutional level. European pension funds currently invest just 0.01% of capital into European venture capital - a figure that looks like a rounding error for the $9 trillion of assets they manage.

Other strengths of the European tech landscape

• Talent is drawn to tech.

There are 7x more people working in funded tech companies today in Europe compared to 2015. Talent pools in the US and Europe are growing at the same rate. The European tech sector now employs 3.5 million people - as many as the US had in 2020. Over 2.5 million of these jobs have been created since 2015, meaning Europe’s tech talent market has grown at a rate of 24% Compound Annual Growth Rate (CAGR) - on par with the US.

• European tech continues to focus on solving the toughest of issues, with climate grabbing the attention of founders, capital and talent.

Over the last ten years, carbon management is the theme that’s seen the greatest increase in its share of Seed-stage funding. It has climbed 39 places in Atomico’s rankings since 2015. 1 in every 5 dollars (21%) invested in Europe goes towards building a more sustainable future - double the ratio for the US which sits at 11%.

• Europe is well-placed to seize on opportunities in deeptech, but money and mindset need to follow.

Deeptech (including AI) has captured 33% of Europe’s total funding levels this year. Over the last ten years, European deeptech startups have raised $94 billion, versus $123 billion in Asia and over $300 billion in the US. Europe’s AI talent pool is one of its great assets. With the explosion of AI adoption, we’ve seen the number of AI roles in Europe increase by a factor of six - with 60,000 active roles in the UK alone. Thanks to the continent’s excellent academic institutions, there is plenty of talent to fill these roles.

Sarah Guemouri, Principal at Atomico and co-author of the report, added: “This lookback should encourage everyone in the ecosystem as to how far we’ve come and how much further we can go. The next step for Europe now is to develop its growth-stage ecosystem. To do this, we need more pension fund and government LPs, so that European later-stage companies can build a better world.”

Tom Wehmeier, Head of Insights at Atomico and co-author of the report, said: “While our survey participants called out a range of issues that might impede the continent’s progress - from R&D to regulation, we believe that unwarranted pessimism is the central barrier to Europe’s success. When you take the long-term view, it’s clear that the continent has made huge progress in the last ten years, and this should encourage us to re-discover our confidence and ambition. We must not undo the very thing that has been key to our success.”

In this retrospective edition of the State of European Tech report, Atomico examines the evolution of the European tech ecosystem over the last ten years. The report forecasts that in ten years’ time European tech could have an ecosystem value of $8 trillion and a world class talent pool of 20 million employees.

European ecosystem findings

• The European tech ecosystem is regionally diverse, but progress is slow for diversity of founding teams.

The countries that are home to the highest number of tech employees per capita are Finland, Estonia and Sweden; Of the 30 countries globally with the highest ratio of VC investment as a share of GDP, 17 European countries make the list. The top country on this metric globally is the small but mighty Estonia. This year’s survey finds that founders with over ten years’ experience say they have seen progress in diversity and inclusion over the past decade - a statement with which participants from under-represented groups also agreed. However, the report finds that the needle has moved only fractionally this decade when it comes to closing the gender funding gap. While all-women teams now raise double the proportion of pre-Seed funding they used to (at 4.9%), their share of the pie continues to decline at later stages, receiving just 1.7% of funding at Series B and beyond.

• While funding levels into Europe this year have stabilised, they haven’t broken records. But it’s clear that Europe remains on the right track.

As an example, between 2005 and 2014, UK tech companies raised a total of $15 billion - a decent sum for a nascent ecosystem. But in the ten years since 2014, the UK has raised $143 billion. Europe’s VC funding growth outpaced all other regions over the past decade. The continent’s 10-year average growth rate stands at 13%, higher than anywhere in the world. The US has logged an 8% compound growth rate over the same period, while China is at 2% and the rest of the world at 10%.

• 2024’s data continues to reflect a tough environment for investors, with fewer funds raised than usual. However, examining Europe’s funding landscape over the last decade shows how much the investor pool has grown and matured.

Ten years ago, Europe was home to just one fund of over $500 million. Just this year, Europe saw eight funds raise over $500 million. The top ten funds raised a combined $7 billion in 2024 across both early and growth stage strategies. Since 2015, European VCs have raised a total of $154 billion in funding. This is nearly triple the $54B they raised in the ten years to 2015.

• The re-opening of the IPO window will bring renewed self-belief back to Europe.

As a result of the uncertain macro environment, the IPO window stayed shut globally, with only one $B+ tech IPO this year (Planisware). However, the report looks back on the contribution of tech exits to Europe over the last decade, finding that exits have released nearly $1 trillion into the ecosystem in the last ten years. Even in a tougher market, Europe’s younger public companies are still doing well - Arm’s market cap stands at over $150 billion after its IPO last year.

To mark the State of European Tech’s tenth anniversary, Atomico has created a documentary interviewing individuals who helped build the ecosystem into what it is today, and speaking to those who are helping to shape its future. This will be launched on YouTube on the 19th November and will be screened at Slush on the 21 November. The documentary includes contributions from:

• Pieter van der Does, co-CEO & co-founder, Adyen
• Daniel Ek, CEO & co-founder, Spotify
• Rene Haas, CEO, Arm
• Taavet Hinrikus, Founding Partner, Plural & Co-Founder, Wise
• Alex Kendall, CEO & co-founder, Wayve
• Ingrid Lunden, news editor and writer, TechCrunch
• Bastian Nominacher, CEO & co-founder, Celonis
• Baroness Joanna Shields, CEO & co-founder, Precognition
• Reshma Sohoni, co-founder & managing partner, Seedcamp
• Gillian Tans - former CEO, Booking.com
• Niklas Zennström, CEO & Founding Partner, Atomico & co-founder, Skype

The State of European Tech is created by Atomico in partnership with Orrick, HSBC Innovation Banking, Amazon Web Services (AWS) and Slush.

Jon Jones, VP and Global Head of Startups, AWS said: “This landmark report certifies Europe’s role in the future of technology. Combining commercial ambition and a commitment to solving fundamental societal issues, the region is pioneering a new model for technological progress. Having powered some of the most exciting European startups in recent years, AWS is excited to be part of this journey.”

Simon Bumfrey, CEO, HSBC Innovation Banking UK said: “Atomico's report highlights the impressive transformation of Europe’s tech sector and the significant potential it holds for the coming decade. Europe has generated more new technology companies than any other region in the world, dramatically increased investment levels, and positioned itself as a frontrunner in sustainability and an established global leader in fintech. The region’s ability to push forward and continue cementing its status as a global superpower is dependent on the provision of sufficient funding for startups and scaleups to innovate and thrive. We are excited to see what’s on the horizon and remain focused on supporting the growth of European tech firms throughout their life cycles, to ensure they reach their full potential.”

Shawn Atkinson, Partner and Co-Head of Global Technology Companies Group, Orrick (London) said: "This year’s report makes it clear: Europe’s capital and talent are converging right as we’re on the brink of transformative technological change. With the right pro-innovation policies in place across Europe, the next decade promises unprecedented growth for this ecosystem."