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Europe is all set to go head-to-head with Silicon Valley: Atomico

atomico / europe
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A new survey by the venture firm Atomico has revealed that Europe’s tech scene, instead of being in a slump post-Brexit, is instead being pulled forward by three new trends. Those being: a well of so-called “deep tech,” a growing number of tech hubs across the continent, and expanding interest by corporate investors, non-tech companies and foreign giants in European tech startups. This report is groundbreaking in locating Europe on the current tech scene worldwide.

The numbers Atomico cites are awe-inspiring. With the help of companies like LinkedIn, Meetup, Stack Overflow, Dealroom.co, and the London Stock Exchange, as well as survey responses from roughly 1,500 founders, investors and tech employees, Atomico says that deep tech companies have attracted $2.3 billion in investment over the last 22 months, and that nearly 1,000 related startups have been founded over the same period.

Deep tech, according to Atomico’s definition, means startups which employ artificial intelligence, are focused around virtual reality or augmented reality, fall into the “frontier tech” bucket – meaning they make drones or robots or nanosatellites or similar or have been oriented around the Internet of things, from wearables to smart-home startups.

Some of these companies are in Zurich, including Teralytics, a big data company backed by Horizons Ventures and Lakestar; Climeworks, which has figured out how to suck carbon dioxide out of the air and aims to remove 1,000 metric tons a year of the greenhouse gas with its first commercial plant just outside of Zurich; and the computer vision company Dacuda.

But a fast growing number are spread across many other hubs, as well. For example, France has seen 582 investments in deep tech startups in the last five years. In Germany, that number is 480. In Finland, it’s 137. By Atomic’s accounting, in the Netherlands, it’s 332.

In 2016 alone, there have been 282 related deals in such companies, a significant climb from five years ago when that number was 55. Despite these not being Silicon Valley-type numbers, there’s sufficient reason to think that gap in funding — which is roughly fivefold right now — will start to narrow.

For one thing, as Atomico notes, a growing number of U.S. tech companies have set up shop in Europe, and those European employees are just as likely as their U.S. counterparts to start their own companies eventually. Google parent Alphabet has now expanded to Zurich and London. Facebook is in Paris, London, and Somerset, England. Apple is in Cambridge, Berlin, Lund, Sweden, and Grenoble, France. (conglomerates headquartered in Asia are also setting up base in Europe, including Japan’s Rakuten, which now has an artificial intelligence center in Paris)

 Another important accelerant is M&A, says Tom Wehmeier, a principal at Atomico and its head of research.
We’re not only seeing teams grow organically across Europe, but we’re starting to see a number of European companies being acquired by Asian companies and bigger tech firms that are local growing more acquisitive.

Wehmeier cites the sale last week of Edinburgh’s Skyscanner to China’s CtripTencent’s deal to buy Finland’s Supercell Oy back in June; and Softbank’s deal to acquire U.K.-based ARM Holdings. He also notes other, more local activity, like that of U.K.-based Funding Circle, which has begun making acquisitions, as has Spotify, SAP, and other big European brands.

Like the U.S., Europe has also begun to see a growing number of corporate venture funds spring up, along with a rise in the interest of pension funds in backing tech startups. Atomico estimates that there’s at least $2.7 billion in committed capital residing with companies. It says there’s less hard data around the amount of capital that pensions funds are beginning to allot to venture but that it does have some number on the horizon. Siraj Khaliq, a firm partner who previously co-founded The Climate Corp. (acquired by Monsanto), said:

A lot of pension funds are by their nature conservative. But it’s baked into their estimates that they’ll be able to [produce a] 5 to 6 percent [return] a year, and they can’t make those ends meet anymore. It’s taken these professional investors a while to understand that tech isn’t funny money, but these same people are [awakening to the opportunity]. Generally, people everywhere now recognize that tech is very real.


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