Atomico’s 2024 State of European Tech: Insights on Growth, Funding Gaps, and Future Potential

This week, Atomico‘s State of European Tech released a special tenth-anniversary edition. The report reflects on ten years of growth in the tech ecosystem and highlights the potential and challenges the sector faces today.

The report incorporates quantitative data from 41 European countries and surveys thousands of founders, operators, and investors to provide insights into the European tech landscape. I spoke with Sarah Guemouri, Principal at Atomico and co-author of the report, and Russ Shaw CBE, founder of Tech London Advocates and Global Tech Advocates.

Key insights from the report include:

• Since Atomico started its State of European Tech report in 2015, Europe’s tech companies have raised $426 billion. This amount is ten times the $43 billion raised in the previous decade (2005-2014).
• Atomico expects European companies will secure about $45 billion in investment this year, similar to the $47 billion raised in 2023.
• Guemouri stated, “Over the past decade, startups have shown flexibility in scaling, attracting talent, and securing funding. This empowers founders to set ambitious goals and drive innovation.”

The report indicates that Europe’s early-stage startups are strong and, in some areas, outpacing U.S. counterparts.

More Founders in Europe than the U.S.
Europe has more startup founders than the U.S., a trend that has persisted for the past decade. Currently, there are 35,000 early-stage tech startups in Europe, the highest number in any region worldwide.

In 2015, London was the only European city in the top ten global hubs for funding early-stage startups (rounds under $15 million). By 2024, London ranks second globally, with Berlin and Paris also in the top ten.

Of over 350 European unicorns, nearly half of the billion-dollar IPOs in the past decade originated from the UK. Shaw noted, “Success stories like Revolut and Zopa show the UK’s leadership in fintech and innovation.”

Guemouri highlighted that founders aim not just for billion-dollar companies but seek much larger goals. “Some envision going to Mars or serving billions of users,” she said, reflecting a shift in mindset among entrepreneurs.

Growth-Stage Funding Gap
Despite having eight times more growth companies than ten years ago, European startups face a funding gap. U.S. startups are twice as likely to secure rounds exceeding $15 million compared to their European counterparts.

One in two European scaleups has turned to U.S. investors for funding. This trend creates a migration of talent and knowledge away from Europe. It requires action at an institutional level. Currently, European pension funds invest only 0.01% of their capital in European venture capital, a tiny fraction of their nearly $9 trillion in assets.

Guemouri pointed out, “Europe has underfunded its growth-stage companies over the past decade. Reducing dependence on foreign capital, especially from the U.S., is crucial.”

She proposed increasing domestic investments from sources like pension funds to unlock billions for European scale-ups. Such funding could encourage top talent to stay in Europe and strengthen its tech leadership.

Job Creation
Since 2015, Europe has created almost 20 million tech jobs, with growth at a 24% compounded annual growth rate. The tech sector employs 3.5 million people in Europe, matching the U.S. in 2020.

Over 2.5 million jobs have been added since 2015, with the European tech talent market growing at the same rate as the U.S.

Founders are focusing on solving significant issues, with climate change attracting attention and investment. Climate-related startups have increased their share of seed-stage funding significantly since 2015.

Opportunities in Deeptech
Deeptech, including AI, makes up 33% of Europe’s funding this year. In the past decade, European deeptech startups have raised $94 billion, less than the amounts raised in Asia and the U.S.

The report predicts that in ten years, the European tech ecosystem could be valued at $8 trillion and employ 20 million people.

The survey found progress in diversity and inclusion over the past decade, but the funding gap for women-led teams remains. All-women teams now receive 4.9% of pre-seed funding, but this share declines at later stages.

Shaw stressed the need for greater diversity, noting that women make up just one-third of Europe’s tech talent. Ethnic minority founders also face challenges in securing funding.

To commemorate the tenth anniversary, Atomico produced a documentary featuring individuals who helped build the tech ecosystem and those shaping its future.