According to a study by Venture Capital firm Atomico, investment in European Tech is expected to reach $85B in 2022. This is the second-largest amount of capital ever invested into the European tech ecosystem and represents more than a twofold increase in total capital invested compared to 2020. Compared to 2015, this represents more than 8 times the amount invested.
Despite the adverse macroeconomic conditions in 2022, European tech is mature and resilient as it is expected that the amount invested will not fall far behind the 2021 record-breaking levels according to Chris Grew, Partner at Technology Companies Group, Orrick.
The Atomico study shows that, despite capital market conditions, the ecosystem still benefits from access to large pools of investable capital that have not yet been deployed, known in industry terms as ‘dry powder’. At the end of 2021, a total value of dry powder available from European venture and growth investors amounted to $84B. This is the highest ever amount of dry powder on record and represents an increase of 2.3 times compared to the level of 2017. There is therefore capital liquidity within the market, even though the pace at which that capital is deployed will differ due to current market conditions.
The heated market conditions that characterized 2021 saw a record number of new unicorns emerge from Europe, with 105 companies achieving the billion-dollar milestone for the first time. Compared to the record figures of 2021, figures for 2022 show that there are only 31 new unicorns in Europe. However, 2022 figures show that the rate of new unicorn creation is similar to levels recorded in recent years as 2021 is seen to be an outlier year.
The pandemic accelerated tech adoption and Venture Capital will fuel the transition to net-zero greenhouse gas emissions, that will require an extra $3.5 trillion a year in spending according to McKinsey. The tech community is uniquely positioned to drive the transition through purpose-driven investments.
According to Simon Bumfrey, Head of Relationship Banking for Europe at Silicon Valley Bank UK, European innovation is still a promising powerhouse with 31 unicorns created in 2022. While Europe has an ecosystem valued at $2.7T and investment levels reaching $85B, Europe is expected to continue to accelerate and grow over the next decade.
European Tech is an engine of economic growth as Gross Value Added (GVA) has grown at twice the rate of non-tech sectors, even overtaking the finance and insurance industries combined. The digital economy already contributes more than 6% of GVA, that is equivalent to nearly $800B and is significantly more than the European finance and insurance industries combined. According to Eurostat, while the Tech sector contributed $800B to total European Union GVA, the Finance and Insurance sector contributed $640B to total European Union GVA.
According to Baroness Joanna Shields, CEO of BenevolentAI, technologies must live up to the standards we want for our future. She added that, ironically, it was Putin who said that ‘the country that leads in Artificial Intelligence would rule the world’. Chilling as it is, that quote illustrates what is at stake. Baroness Shields stated that, now more than ever, European tech has the opportunity to lead with human-centric and trustworthy AI that ensures a future that is safe, kind, generous and equitable for all.
Purpose-driven tech is closing the gap towards the record it reached in 2020, representing close to one-fifth of total capital invested. Planet Positive tech companies, that target the sustainable use of the planet’s resources, have gained further market share of the broader tech market, capturing 15% of total European funding, up from 12% last year. Investment in Planet Positive tech companies is expected to reach $10.3B in 2022, while investment in Climate tech companies is at $6.9B YTD.
Tech companies with Sustainable Development Goals are showing an upward trend since 2018, with spikes in their share of overall investment in 2022. There are now 42 European unicorns classified as purpose-driven, a close to threefold increase from 15 in 2019. In 2022, purpose-driven unicorns now account for 12% of all European unicorns.
Southern Europe is the sub-region with the second highest number of ICT specialists compared to the rest of Europe in 2021, according to Eurostat. From 2021 to 2022, Southern Europe added 4 new unicorns to their herd, that accounts for a 21% increase.
Portugal, in line with a number of other European countries, shows the growing pace of government intervention policies to implement startup initiatives that will foster accelerated growth in the tech sector. Portugal has developed policies in the fields of Government startup financing, tax incentives and support that includes visa policies.