*All graphs and figures are taken directly from the report itself.
Total capital invested in Europe hit at least $35B in 2020 and could potentially exceed $41B when adjusted for reporting lag. 2019’s total projected sum came in, even with a reporting lag, at only $36B. The lag is anticipated to be substantially greater for 2020 (see graph).
Compared to other major global players, Europe had a resilient year. Still, the total capital invested in North America reached $141B in 2020, nearly 5x Europe’s level. Asia, meanwhile, saw capital investment drop for the second year in a row: 2020’s $74B is some way behind the $117B from 2019. Europe also punches below its weight in terms of GDP (see graph): Despite making up 25% of global GDP, it only produces 13% of venture investment. The U.S. has a similar share of GDP and makes up 50% of total venture investment.
Cross-border investment accounts for two-thirds of all capital invested in the European tech ecosystem. Earlier stage companies and rounds see a greater domestic investment pattern (see graph); capital invested into rounds of less than $2M overwhelmingly comes from domestic investors. Rounds of $100M or more come from beyond the continent, most significantly from the U.S.
Europe is, of course, a collection of countries, which all have different levels of tech investment. The average per capita tech investment in the last five years across all countries is $172, and only 11 countries shoot above this figure. There is, however, a general upward trajectory: Investment levels in countries in the third quartile of investment per capita have already exceeded the investment levels of the top quartile countries just five years ago (see graph).
In order for Europe to grow its total tech investment market to just below $50B, every country would have to invest as much per capita as Germany (the 11th on the list by country, with $255 invested per head since 2016). The shift could take a long time. Although Europe's tech ecosystem has developed quickly in the past five years, companies founded during that period contribute only 37% of the capital raised in Europe last year (see graph). This is because older companies continue to raise large amounts.
The speed of investment has nevertheless increased. European tech companies founded in 2010 had raised a total of $2.8B by the end of their fourth year. By comparison, companies founded in 2015 had raised $14.4B by the end of their fourth full year. On the other hand, European companies are benefitting from a healthy early-stage ecosystem; Europe accounts for 40% of all capital invested globally in rounds of less than $5M (see graph).
Compared with 2019, 2020 saw a drop in larger funding rounds in general. While all of the top 10 rounds of 2020 exceeded $250M, none of the year’s top three largest rounds would have made the top three from 2019. The top 10 largest rounds in 2020 raised $4.1B, equivalent to 16% of capital invested in Europe in the first nine months of 2020 (see graph). The top three rounds raised $1.8B, or 7% of capital invested over this period.
2020 saw fewer $250M+ rounds in general, though they have been offset by a record number of $100M-$250M rounds (see graph). A notable slowdown is evident in rounds of $20M-$50M, which suffered as investors during the pandemic were unable to see the growth needed to justify doubling down. Seed investment, rounds of between $2M-$5M, has been remarkably strong and could exceed 2019 levels after lag has been accounted for.
Funding is naturally not divided equally between segments. European fintech companies raised more capital in 2020 than any other industry vertical (see graph). $20B has been invested into European fintech companies in the past two years alone. Enterprise software companies also continued to raise large sums of capital in 2020. Capital invested into companies in the transportation and energy industry verticals was also strong, though at somewhat reduced levels compared to 2019.
The seed market has provided the anchor to boost the number of active startups. While there are around 15,000 European startups that have raised upwards of $2M, just 74 have raised more than $250M (see graph). There are more than 140,000 startups in Europe, of which over 43,000 have raised at least one recorded round of funding. Per capita, Estonia has the most startups to boast with 865 per million residents.
For all of Estonia’s activity, it still cannot match big hubs for total capital flows. Its capital city, Tallinn, barely made it into the top 20 European cities in terms of total capital flows in 2020. In this regard, London remained the undisputed hub last year (see graph). It has attracted $34B since 2016. Paris cemented its position as Europe's second hub in 2020 by attracting $3.4B. Stockholm pushed out Berlin for the third spot for the first time in 2020. This was largely due to two of the year's largest rounds of investment raised by two Swedish companies: fintech Klarna ($650M) and EV battery developer Northvolt ($600M). On a cumulative basis since 2016, however, Berlin still ranks second to London with $12.6B of investment.
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