European tech investment is set to decline in 2024, with total capital falling to US$45 billion. Despite this drop, funding has tripled since 2015. According to the study The State of European Tech 2024 by Atomico, Invest Europe, and other data partners, it remains on a long-term upward trajectory.

Since 2015, European tech companies have raised a cumulative $426 billion, ten times the amount raised in the previous decade. Moreover, the volume of exits in Europe has also grown by more than 150% in the last ten years, reaching US$925 billion in value.

According to the study, “Europe has become a global leader in early-stage funding,” boasting 35,000 startups, more than any other global region.

“Innovation is the heartbeat of Europe’s future. Venture capital plays a vital role in fostering startups that tackle global challenges, drive the energy and digital transitions, and secure Europe’s position on the global stage,” highlights Eric de Montgolfier, CEO of Invest Europe.

A decade of growth in tech

Since 2015, Europe’s tech ecosystem has seen a sevenfold increase in talent, with the workforce growing from 500,000 to 3.5 million employees. The UK, Germany, and France have been at the forefront of this growth. Over the past decade, they have attracted US$250 billion in investment, with the UK alone nearing US$150 billion.

Nonetheless, while Europe’s entrepreneurial ecosystem was once concentrated in just a few hubs, today, over 30 countries have produced billion-dollar companies, with notable exits occurring across the continent. The UK remains the leader in this regard, accounting for nearly half of all unicorn exits in the past decade. Other important exits include IHS Markit’s US$45 billion acquisition and chipmaker ARM’s US$65 billion IPO.

“Once rare, companies valued at over US$1 billion (unicorns) are now a feature of almost every European economy”, according to the study. Nonetheless, some European unicorns have lost their unicorn status in the last year, such as the Swedish buy-now-pay-later startup Klarna.

Lack of funding for startups?

Despite the growth, Europe faces a considerable challenge: the growth-stage funding gap. While the number of early-stage companies has soared, fewer scale-ups have been able to secure the funding they need to reach the next level.

According to the study, since 2015, European companies have missed out on US$375 billion in potential funding due to lower conversion rates to growth-stage rounds and reliance on US investors. This gap in funding has left many European startups struggling to scale without moving to the United States (US) or relying on foreign investment.

“European firms often rely on US investors for larger rounds, risking talent and economic leakage. European pension funds allocate just 0.01% of their $9 trillion in assets to European VC, underscoring the need for institutional support,” the study notes.

Tech investment

Another barrier to Europe’s growth is the fragmented regulatory landscape. Many founders, investors, and industry participants cite bureaucracy and regulation as significant hindrances to scaling across borders. In fact, 47% of overall respondents see regulation and policymaking as a “barrier to Europe to fulfilling its full potential.”

“The fact that we have more than 300 unicorns in Europe is amazing. And the fact that a lot of these unicorns are profitable, fast growing iconic companies like Wise, Spotify, and Adyen. Nobody would have believed this in the early 2000s,” explains Taavet Hinrikus, Co-Founder of Wise.

“If we think about it, Europe has a maybe 30-year lag to Silicon Valley. We can only think about where we’re going to be in 10 years, 20 years from now; a lot more companies will get to the same state. We have all the ingredients for the trillion-dollar companies to be born in Europe,” he concludes.