Investment in European technology firms is expected to rise from $12.6bn in 2015 to $13.6bn in 2016, according to a report published by VC firm Atomico.
The report identified three key trends in Europe: growth in “deep tech” startups (for example those focused on machine-learning and AI); new tech hubs emerging in Munich, Zurich, Lisbon, Madrid and Copenhagen to sit alongside London, Berlin, Stockholm and Paris; and investments and acquisitions in tech by large corporations.
The report suggested that Europe still faces a “late-stage funding gap” for startups that are scaling up, leading many to seek their larger, later rounds of funding outside Europe.
“We haven’t had the gorillas in terms of size, but it’s getting there,” Atomico’s co-founder Mattias Ljungman told Reuters. “Slowly but surely it’s building up… The mindset is raise early-stage funding here and then get the bigger tickets in other parts of the world. There needs to be more regional capital – I think that will be super helpful.”
Atomico also warned of a pressing need to “overcome an alarming gender imbalance by attracting more women to become the engineers, entrepreneurs and investors of tomorrow”.
Meanwhile, the TechCrunch Disrupt conference in London was discussing another challenge for the local startups scene: the prospect of the UK leaving the European Union, which could come as soon as 2018.
“I think we’re sort of in a deer-in-the-headlights mode, candidly,” said Accel VC Sonali De Rycker. “We do not know what’s happening, and that’s disappointing for planning.”
The Brexit panel at the conference agreed that the concern for the UK is less that startups and founders who are already there will leave; but rather that non-British founders who might have come to launch their companies there will think better of the idea.
“When you compound the high cost of living [in London] with the difficulty of getting visas, it’s a problem,” said Seedcamp’s Reshma Sohoni.
London’s Brexit headache is, of course, an opportunity for those other startup hubs around Europe identified in Atomico’s report. Recent years have seen a steady flow of music startups from across the EU, so one result of the UK’s vote for Brexit could be an uptick in their number.
Spotify’s anticipated IPO in 2017 – not to mention CEO Daniel Ek’s longstanding desire to support and improve the startups ecosystem well beyond Stockholm – is also likely to have a positive impact.