Despite the challenges that Covid-19 brought, Atomico’s latest report shows the European tech ecosystem had a record year for investment.
Today (8 December), venture capital firm Atomico published its annual report, The State of European Tech 2020, which examined tech investment in Europe this year and the challenges faced by European businesses throughout the Covid-19 crisis.
According to the report, total investment into European tech is on track to exceed a record $41bn in 2020.
The total estimated enterprise value of European tech companies founded after 2000 now stands at $388bn in public markets compared to $37bn in 2016, and $573bn in the private markets compared to $136bn in 2016.
In spite of several challenges facing the European tech scene, including a 36pc decline in capital investment in Q2 of 2020 compared to the previous year, the ecosystem recovered as the year went on. September 2020 became the all-time highest month on record with $5bn in capital investment.
Large funding rounds
Another challenge to the European tech scene was the eye-watering IPOs in the US this year, which dwarfed the activity of European tech counterparts. In fact, the combined value of the top 10 IPO listings in the US was four times that of Europe’s top 10.
However, Europe’s most successful companies still completed large funding rounds, with Revolut raising a total of $580m in an extended Series D funding round, fintech start-up Klarna raising $650m and battery maker Northvolt raising $600m.
The report also noted the growth of newer players and the important role they may have in the future of European tech investment. But older cohorts of companies are still raising large sums of capital. “For example, companies founded eight years ago or more still contributed a third of total capital raised in 2020,” the report stated.
However, the acceleration of growth for newer companies is greater than before. The report shows that European tech companies that were founded in 2010 had raised a total of $2.8bn by the end of their fourth year. By comparison, companies that were founded in 2015 had raised $14.4bn by the end of their fourth year.
This speed of growth is expected to accelerate further in the future. The report highlighted Hopin as an example of the speed and scale of capital raises in Europe.
The virtual events platform is said to have “reached a $2.1bn valuation and raised more than $170m in just 17 months from founding in the summer of 2019”. Most recently, the UK-based company closed $125m in Series B funding.
Venture capital fundraising also saw a record high in 2020, closing on $16.5bn of new funds. According to the report, preliminary results for 2020 are encouraging “with fundraising activity in the first six months of 2020 slightly ahead of H1 2019 and very much on track to break 2019’s full-year total”.
A focus on climate
The report also examined where funding and investment landed for purpose-driven tech companies, which are determined based on a framework aligned with the United Nations Sustainable Development Goals (SDGs).
Based on this analysis, the report projects total capital investment in purpose-driven tech companies to exceed $6bn in 2020.
Climate action appears to be the SDG garnering the most response from investors, with more than $11bn invested cumulatively in European tech companies targeting climate action since 2016.
The report also showed that the extent to which European tech investors are embracing climate action, affordable and clean energy, and sustainable communities is increasing, with capital investment in the last two years (2019 to 2020) nearly doubling the investment of the previous three years (2016 to 2018).
Tom Wehmeier, partner at Atomico and co-author of the report, said this is a huge opportunity for Europe’s start-ups. “The European Commission’s expansive Green Deal has been a key policymaker focus in 2020 and has the potential to be an important catalyst for continued investment in this area.”