European tech sector struggles with discrimination despite record year

5 Dec 2018156 Views

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According to a new report, investment in European tech reached record levels in 2018.

Now in its fourth year, The State of European Tech report offers some insight into the colourful and lucrative tech firms in the region.

Unveiled yesterday (4 December) by investment firm Atomico at the Slush tech conference in Helsinki, 2018’s report shows that Europe’s ecosystem is thriving, but has a serious diversity problem.

The report surveyed 5,000 respondents across Europe and is a generally optimistic reading of the European tech economy.

Major increases in tech investment

Report author Tom Wehmeiersaid: “Today, European founders have access to sophisticated investors, can hire the best talent, go the full distance, stave off ferocious competition, go public and win on the global stage.

“Europe is now reaping the early rewards from the transformation of its tech ecosystem. The fact is, the seeds of success this year were planted a decade ago. That is why we should expect even greater success in the years to come.”

The report found that a total of $23bn has been invested in the tech industry in Europe this year, up from just $5bn in 2013. It also found that 69 tech firms went public in Europe in 2018 so far, compared to just 28 tech companies in the US. European tech companies that went public this year also saw their share prices increase by an average of 222pc, while US tech IPOs reported an average gain of just 42pc. The research said that European exchanges are more supportive of smaller companies that want to go public.

A key source of capital in Europe is China, which participated in funding rounds worth more than $1bn to the European tech sector. This looks likely to grow as trade sanctions on the country from the likes of the US continue.

Despite the generally sunny outlook, there is an issue with a dearth of funding from institutional investors. According to Wehmeier, while family offices and wealthy individuals have been investing in tech firms, pension funds are much slower to do the same. He added: “If pension funds rebalance their allocations away from legacy industries towards game-changing technology instead, they can democratise access to the spoils of European tech.”

Discrimination plaguing European tech sector

Perhaps the most glaring issue of all found in the report is the diversity and inclusion gap in European tech firms. It found that approximately 45pc of women had experienced some form of discrimination, and people of African descent were more likely to experience discrimination than not.

While 75pc of respondents said they believe their own company is inclusive, with close to 90pc saying they agree diversity is a benefit, only 45pc say they believe the European technology ecosystem in general is inclusive.

The majority of men surveyed believe the ecosystem is inclusive, while just 38pc of women would agree. Men are also more likely to receive backing from investment companies. All-male founding teams received 93pc of the capital and 85pc of the deals, according to data from Dealroom.co.

Research commercialisation is key

The report also made some recommendations for European tech businesses. In order to compete with global economic powers, it advised higher engagement with the research community to commercialise academic endeavours. “This research prowess can be a strong differentiator for European tech as science and tech further converge. The key to making that happen: knowledge transfer and better links between STEM and start-ups.”

It also highlighted some ways in which companies can truly implement a diversity and inclusion strategy that delivers tangible results. Here’s hoping these figures can improve in 2019.

Updated, 2.47pm, 5 December 2018: This article was updated to clarify that the report was unveiled on 4 December.

Ellen Tannam is a writer covering all manner of business and tech subjects

editorial@siliconrepublic.com