The State of European Tech 2018 by Atomico

Dec 4, 2018 | Publisher: Techcelerate Ventures | Category: Technology |  | Collection: Startups | Views: 8 | Likes: 1

2018 In Partnership with & The State of European Tech 2 In Partnership with & www.thestateofeuropeantech.com Contents 2018 Key Findings The State of European Tech 2018 Tech & the European Economy Diversity & Inclusion Europe's Got Talent Tech Hubs Research & Development Regulation Investors & Investment Great European Companies Challenges Mythbusting Predictions About Appendix 3 7 14 26 43 62 82 90 102 126 138 141 145 151 159 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 In Partnership with & www.thestateofeuropeantech.com 2018 Key Findings It's been another record year for investment in European tech and the sector is powering growth in Europe's stagnant economy. Yet not everyone is benefitting from the boom. The gains are not being democratized by investors. Companies need to address diversity and inclusion tools and unlock hidden talent pools. Another record year for investment into the European tech ecosystem Europe urgently needs to fix its diversity & inclusion problem Europe's tech industry is the best hope for growth for a stalling European economy The gains from Europe's tech boom are not yet being democratised Mobilising Europe's hidden tech talent pool can unlock huge upside Europe is producing $B+ companies at a level that is 15x+ higher than a decade ago Top highlight statistics for Europe 01 02 03 04 05 06 07 What's changed for European tech in the past 12 months? KEY FINDINGS 4 In Partnership with & www.thestateofeuropeantech.com Another record year for investment into the European tech ecosystem Europe urgently needs to fix its diversity & inclusion problem Record sums invested in Europe's technology ecosystem- $23bn in 2018 up from just $5bn in 2013. 93% of all funds raised by European VC-backed companies went to all-male founding teams in 2018. There were four tech IPOs or direct listings of European tech companies in 2018 that reached valuations of more than $5B on opening day, including Europe's largest ever venture- backed publicly-listed tech company, Spotify. In total, Europe contributed three of the top 10 largest tech IPOs globally of 2018. Almost half of women reported that they have experienced discrimination in the European tech sector. This is a point of clear tension with the 75% of respondents who think the culture at their European startup is inclusive. In European tech, discrimination appears to be someone else's problem. CAPITAL INVESTED CAPITAL INVESTED TECH IPO COMPANIES GENDER DISCRIMINATION $23B 93% 4X $5B 46% Key Findings 2018 5 In Partnership with & www.thestateofeuropeantech.com Eurostat Europe's tech industry is the best hope for growth for a stalling European economy The gains from Europe's tech boom are not yet being democratised Europe's tech (software) industry is growing 5x faster than the rest of the European economy in terms of Gross Value Added, a level that has accelerated in recent years. Pension funds are not yet democratising Europe's tech sector boom - over the last five years, pension funds have invested just $1.7B in European VC, but have invested 45x more in European buyout funds, equivalent to more than $75B over that period. The European tech workforce grew 4% in 2018 (source: LinkedIn), a significant difference to overall EU employment growth of 1.1%. European tech growth and record success has not gone unnoticed by family offices and high net-worth individuals (HNWs). Over the last five years they have invested over $5bn in European venture capital funds. Only government agencies have invested more in European VC in that same period. TECH INDUSTRY GROWTH PENSION FUNDS INVESTMENT EMERGING TECH HUBS HNW INVESTMENT 5X 45X 4% $5B European Commission Key Findings 2018 6 In Partnership with & www.thestateofeuropeantech.com Mobilising Europe's hidden tech talent pool can unlock huge upside Europe is producing $B+ companies at a level that is 15x+ higher than a decade ago Europe's ecosystem is more distributed and more interconnected than ever - there are now 5.7m professional developers in Europe, up by 200,000 on 2017. This compares to the 4.4m in the US, a number that stayed flat year on year. European $B+ companies founded in the past 15 years, including a record 17 new companies that first surpassed the milestone in 2018. Europe has also now produced 12 companies with a $5B+ valuation, of which 5 have grown to more than $10B. Still more European tech hubs will emerge. Cities such as Cologne, Warsaw and Vienna all have larger developer populations than Stockholm and active local tech communities, but have yet to attract as much investment. In fact, there are 15 European cities with professional developer populations of 50,000+ that have seen less than $1B in total capital investment since 2013. Two companies founded in the 2000s had reached $B+ by 2008. Compare that to 31 founded in the 2010s that reached that milestone by 2018 - an increase of 15.5x. Where will the 2010s end up by 2028? PROFESSIONAL DEVELOPERS $B+ COMPANIES EMERGING TECH HUBS SUCCESS GROWTH 5.7M 61 15 15X Key Findings 2018 In Partnership with & www.thestateofeuropeantech.com The State of European Tech 2018 Welcome to the State of European Tech 2018 Executive Summary 01.1 01.2 ARTICLES This is the fourth edition of the State of European Tech report, the single, most comprehensive data-driven story of European technology today. We've gathered data from world-class data partners and a survey of 5,000 members of the tech ecosystem, from founders to students, investors to researchers. We've tried to tell the most important stories. We cover diversity and inclusion, talent, regulation, investment, research and development, and the great, global disrupters out of Europe. Back once again like the renegade...er... data analysers! 8 In Partnership with & www.thestateofeuropeantech.com We write this report to shine a light on the issues that matter in the European ecosystem. We aim to enrich conversations, highlight challenges, and support more informed decision making by closing the knowledge gap between perception and reality. Each year we aim to produce a resource that is more comprehensive than the last. To this end, you'll notice that this report is a lot longer than in previous years. This was a deliberate decision. Our data is open, and our hope is as many people as possible will use it to help tell the stories that matter to them in Europe. We're proud to present the 2018 edition of the State of European Tech report, which is once again the single, most comprehensive data-driven story of European technology today. It's been another incredible year for European tech - but there are some significant challenges too Welcome to the State of European Tech 2018 Photo: Anrietta Kuosku 9 In Partnership with & www.thestateofeuropeantech.com For the past four years, we've produced an exhaustive deep dive into the European tech ecosystem by analysing the rich insights of our data partners. Every year the data busts another myth about our ecosystem: from pointing out that Europe actually has more developers than the US, to quantifying European advances in deep tech. Executive Summary Another record breaking year for European tech European tech achieving density Technology has become a motor for growth in the European economy Europe is a research powerhouse This year we're at risk of sounding like a broken record about breaking records - but we can't dispute the data. In another extraordinary year, investment in European tech reached a record $23 billion - up from $5 billion just five years ago. European founders created 17 billion-dollar companies. And in 2018, Europe produced three of the ten biggest venture backed public listings. Last year we found that Europe was experiencing a 'Battle Royale' for talent. This year was the year Europe figured out how to effectively mobilise its deep pools of talent. The tech sector is attracting more participants - whether measured by the healthy increase in professional developers or the uptick in talented executives moving into tech from other sectors. The report shows dense areas of talent coalescing around universities, anchor tech companies, and innovation hubs, leading in turn to increases in investment, and growth in anchor tech companies. This all contributes to 'density' - which historically has been a crucial precondition for explosive growth. Europe is certainly achieving density, but it's doing it its own way. What is interesting is that the developer pool is growing fastest outside those countries that have historically attracted the most investment: Turkey, Spain and Russia's pool of developers have been deepening the most rapidly. All this will lead to a massive potential upside for the wider European economy as capital eventually flows into these new communities. At a macro-level, Europe's technology sector is booming as the wider economy is stuck in the doldrums. As of Q3 2018, European growth was flatlining at 0.2%, the lowest rate for four years. Europe's software industry is now growing at least five times faster than the rest of the European economy. This year's report suggests that for a number of reasons, this motor will only become more powerful. The importance of the tech to the overall economy will only increase. This year's report also shows that we are only scratching the surface of the potential of Europe's research community, and not fully harnessing our own cutting-edge science. An analysis by CERN, one of this community's most influential members, demonstrates that as science and tech converge further, there is huge scope to strengthen the link between European STEM and startups. Europe has a research community larger than U.S. and China - we need to make sure this becomes the hugely powerful differentiator it should be. 10 In Partnership with & www.thestateofeuropeantech.com Let Europe be Europe A big diversity and inclusion problem A word to the naysayers: irrespective of the huge strides European tech has taken in the last few years, our tech sector will continue to be compared to the performance of Silicon Valley. And as the ecosystem accelerates, we are increasingly cool with that! For a long time, US VC has outperformed European VC in terms of portfolio returns, but that is increasingly untrue. The latest historical performance data shows that European venture has been outperforming US venture in recent horizon periods. We believe this is a bellwether for a changing landscape. Let's not forget that 95% of the value creation of today's US tech sector is from companies founded 15 years ago or more, and that the early tech successes of ARM, Amadeus and Ocado were not venture-backed. Given that 21 European companies have been founded and scaled to billion-dollar- plus valuations with the support of venture capital since 2010 alone, we are confident that Europe has caught up on North America's head start. This year's report also unearths several figures which are extraordinary for all the wrong reasons. The State of European Tech has always highlighted the challenges Europe faces, but this year, we've identified a particularly serious problem: 46% of women told us they have experienced discrimination in the European tech industry. As our chapter on diversity and inclusion shows, this statistic is the tip of the iceberg. While most investment figures in this report spell good news, the fact that all-male founding teams received around 93% of the capital and 85% of the deals speaks for itself. Women and minorities are underrepresented at every level of the ecosystem. Corporate policy on diversity and inclusion is still way behind where it needs to be. This stark reminder of our shortcomings is timely, and it's important that we draw the right conclusions. Reporting this data is a first step in the right direction. Only by measuring the problem can you start to solve it. To take on this challenge, we've worked with Diversity VC to launch an industry- first resource: a practical and hands-on guide for technology entrepreneurs that will help them build companies that have diversity and inclusion at their core. It's not a complete solution, but we hope it's a contribution that founders will find useful nonetheless. You can find the toolkit at www.inclusionintech.com Executive Summary 01.2 Photo: Kai Kuusisto 11 In Partnership with & www.thestateofeuropeantech.com But we can still learn from the successes and failures of others Another broken record: Bridge the funding gap, democratise European tech's success An ecosystem irreversibly changed Thank you to all our partners As Europe catches up, it is vital that we make the most of our second mover advantage - both in the companies we build, and in our approach to building them. European tech has escaped most of the backlash which has engulfed big US technology companies and characterised media coverage this last year. For this to continue, we'll need to learn from past failures, and act ethically from day one. European technologists have already shown we can learn from the lessons of the past in terms of business strategy. Before he founded Skype, Atomico's CEO Niklas Zennstrm founded a streaming company called Kazaa. Kazaa was a failure, but a group of Swedes led by Daniel Ek were paying close attention, and learned important lessons. Learning from the mistakes of the previous generation led to the creation of Spotify. Spotify has unequivocally proven that today, European founders can raise the right capital, hire the best talent, go the full distance, stave off ferocious competition and win on a global stage. Spotify will now become the spur and inspiration for other European breakout successes. This report has consistently highlighted the need to close the institutional investor funding gap. Over the last five years, pension funds have invested just $1.7 billion in European VC, but have invested 45x more in European buyout funds, equivalent to more than $75B over that period. Meanwhile, family offices and high net worth individuals have spent the last five years investing $5 billion in venture capital. If pension funds can rebalance their allocations away from legacy industries towards gamechanging technology instead, they can democratise access to the spoils of European tech. The European ecosystem has levelled up. Today, as Spotify has shown us, European founders have access to sophisticated investors, can hire the best talent, go the full distance, stave off ferocious competition, go public and win on the global stage. Europe is now reaping the early rewards from the transformation of its tech ecosystem- the seeds of success this year were planted a decade ago. That is why we should expect even greater success in the years to come. As long as we all continue to learn from both success and failure, will European tech reach the heights we know it to be absolutely capable of. I'd like to dedicate my final words to thank all of our data partners and most importantly, Slush and Orrick. Without them this report would not have been possible. Executive Summary 01.2 Tom Wehmeier Partner, Atomico 12 In Partnership with & www.thestateofeuropeantech.com Scrolling through the figures of the State of European Tech 2018 report, it is easy to feel a nice sense of confirmation to what we've been seeing and hearing throughout the year in countless conversations with entrepreneurs: European tech is graduating. Record numbers of both raised funding and exits speak louder than words, and they have interesting consequences. As the amount of successful scale-up companies continues to rise on the continent, so does the need for ever greater amounts of top tier talent. As the access to venture capital is no longer the biggest bottleneck for European tech, our eyes are turning towards cultivating the next generation of world-class talent for the current and future tech companies that are set out to solve some of the biggest challenges on the planet. For this we need a diverse talent pool to be part of building the European tech companies. The problem of diversity that Europe, like the rest of the world, is having can be turned into an opportunity. By lifting up a more diverse set of role models will affect the decisions of to-be founders. Emphasizing the role that humanities and arts, in addition to STEM, will play in the future development of technological solutions should be done upfront if we want to gain an edge from the magnificent creative industry in Europe. One more additional thing that Europe really stands to benefit from is our strong academia. Nailing the combination of bleeding-edge, hardcore research and practical, world- class company building should be one of our main targets for the upcoming years. Almost all businesses that want to make it big in Europe have to think international or global from the beginning. This is a mindset that we should utilise also in the next generation of education for future entrepreneurs. Stay tuned! A Word from Slush Executive Summary 01.2 Andreas Saari CEO, Slush 13 In Partnership with & www.thestateofeuropeantech.com There has been a nearly five-fold growth in European venture capital investment in the last five years. There are five times the number of unicorns with at least 17 new billion dollar plus companies added in the past year alone. The European tech sector has produced nearly four times the job growth rate of the general economy, resulting in a talent pool of programmers and STEM researchers surpassing that of the United States. Tech and innovation is no longer on the sidelines in Europe it is driving the economy. That's the clear take-away from this year's State of European Tech Report. At Orrick, we see it in our practice every day as we have helped founders, investors and corporate venture clients raise or deploy more than $___ across Europe over the past year. As a global tech law firm, we're not surprised to see investors from around the world chasing strong returns from their European investments. While U.S. investment returned to 2016 levels after another record-breaking performance last year, investment from Asia continued to grow. We're encouraged by corporate venture investment growth, particularly from outside traditional tech industries. This affirms the strong demand for innovation as companies in every sector recognize the need to adapt to the tech transformation. Altogether these trends point to a robust future for European tech. However, the Report's purpose is to shine a light on all of "the issues that matter" in the European tech ecosystem. We applaud Atomico for highlighting some deeply troubling ones: 46% of women in tech report experiencing discrimination and only 7% of capital went to female founded companies or mixed gender founding teams. That's not right and it's not sustainable if Europe truly wants to innovate. We also applaud Atomico's collaboration with Diversity VC to provide guidance to founder teams on how to build a diverse and inclusive culture. Awareness and education are a key first step. Investors have an essential role to play. The good news is that there's an incredible amount of unfunded talent out there. Let's all participate in the conversation about how to dramatically improve next year's results. We're grateful to Atomico for the opportunity once again to help provide this data to the tech community in Europe and globally. We hope you find it as useful as we do in seeing the patterns and opportunities in this rich and promising ecosystem. A Word from Orrick Executive Summary 01.2 Christopher Grew Partner, Technology Companies Group Orrick In Partnership with & www.thestateofeuropeantech.com While Europe's overall economy and traditional industries are stuck in the doldrums, booming tech represents the best hope for growth. Tech firms are powering job creation and ambitious founders are tackling some of the world's biggest problems. All of that has members of the ecosystem optimistic - except in the U.K. where sentiment is not at the same levels as elsewhere. Tech & the European Economy Powering Workforce Growth Tech: The Motor for GDP Growth Heritage as opportunity Smiles (almost) all round in European techv Tech for Good: A European Opportunity? 02.1 02.2 02.3 02.4 02.5 Continuing to drive significant growth ARTICLES undefined16 In Partnership with & www.thestateofeuropeantech.com French tech workforce growth in 2018, based on a comparison of the size of the workforce in October 2018 versus October 2017. WORKFORCE GROWTH France's tech worker population grew at the fastest rate of any European country in 2018 7.3% The rate of tech workforce growth across Europe is not equally distributed with workforces in some countries growing much faster than others. France, for example, hit 7.3% growth in 2018, making it comfortably the fastest- growing tech workforce in Europe YoY growth in the worker population of the Top 20 largest tech workforces by country in 2018 DATASET : 1 1 -20 Source: L EGEND 2018 Note: Based on an analysis of sample pool of LinkedIn members and the difference between those in 2018 working in the Tech Sector in each country from this sample pool and those in 2017. YoY growth (%) 3.9% 3.5% 3.4% 3.3% 3.3% 3.1% 3.0% 2.8% 1.9% 1.1% Finland Italy Sweden United Kingdom Denmark Romania Netherlands Bulgaria Czech Republic Hungary 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 The rate of tech workforce growth across Europe is not equally distributed, with workforces in some countries growing much faster than others. Powering Workforce Growth 02.1 Photo:Jussi Ratilainen 17 In Partnership with & www.thestateofeuropeantech.com The implication of this sustained difference in growth rates is starkly visible when looking at indexed growth of the tech (software) and non-tech parts of the European economy. Over the past 15 years, tech (software) has grown to hit 194% of its relative value in Chain linked volumes of tech and non-tech GVA (indexed 2002-2016) Source: Eurostat LEGEND Tech Non-tech Note: 2016 is the most recent year for which full NACE breakdowns of European GVA are available. Tech refers to the European software industry, or NACE J62-63. Non-tech is everything else. Chain linked volumes (indexed 2002-2016)100 100 107 112 121 133 136 130 136 146 155 163 173 188 194 124 125 118 123 126 128 129 133 141 141 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 75 100 125 150 175 200 While the long-term historical trend in relative growth rates has been impressive, more recently the speed of growth between tech and non-tech has diverged even further. Today, the European tech (software) industry is now growing 5x faster than the rest of the economy % Growth YoY of tech and non-tech contribution to European economy by GVA (2016 versus 2015) Source: Eurostat LEGEND YoY growth (%) Note: *Tech refers to the European software industry, or NACE J62- 63 YoY growth (%)3.1% 0.6% Tech* Non-tech 0.0 1.0 2.0 3.0 There is an ever-widening gap in the indexed growth rates of the tech (software) and non- tech parts of the European economy. Over the past 15 years, tech (software) has grown to hit 194% of its relative value in 2002. While the long-term historical trend in relative growth rates has been impressive, more recently the speed of growth between tech and non-tech has diverged even further. Today, the European tech (software) industry is now growing 5x faster than the rest of the economy Latest figures show Europe's software industry Gross Value Added is growing 5x faster than the rest of the European economy ECONOMIC GROWTH Europe's software industry growth dramatically outpaces the rest of the European economy 5x Eurostat Eurostat Eurostat Tech: The Motor for GDP Growth 18 In Partnership with & www.thestateofeuropeantech.com Over the last 10 years, many of these traditional industries upon which the European economy is so dependent have either stagnated or declined, undermining the overall rate of growth in European Gross Value Added Chain linked volumes of tech and selected traditional industries GVA (indexed 2007- 2016) Source: Eurostat LEGEND Tech Real estate activities Wholesale and retail trade, transport, accommodation and food service activities Industry Financial and insurance activities Construction Telecommunications Note: 2016 is the most recent year for which full NACE breakdowns of European GVA are available. Tech refers to the European software industry, or NACE J62-63. Chain linked volumes (indexed 2007-2016)100 103 98 102 110 117 123 131 142 146 103 107 109 112 118 118 103 88 95 100 103 110 111 94 103 89 90 89 87 90 94 95 83 85 85 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 60 80 100 120 140 Yet the European economy today remains heavily dependent on traditional industries, such as industrial manufacturing, construction, retail and transportation Share of total gross value added in Europe Source: Eurostat LEGEND % of total GVA (2002) % of total GVA (2016) Note: Europe is based on EU-28. 2016 is the most recent year for which full NACE breakdowns of European GVA are available. Tech refers to the European software industry, or NACE J62-63 % of total gross value added 21% 19% 6% 2% 2% 1% 1% 1% 19% 19% 11% 11% 5% 4% 3% Industry (except construction) Wholesale and retail trade, transport, accomodation and food service activities Public administration, defence, educa Real estate activities Professional, scientific and technical Construction Financial and insurance activities Arts, entertainment and recreation; ot Tech Agriculture, forestry and fishing Telecommunications Publishing, motion picture, video, tele Publishing activities Motion picture, video, television progr 0 5 10 15 20 Over the last 10 years, many of these traditional industries upon which the European economy is so dependent have either stagnated or declined, undermining the overall rate of growth in European Gross Value Added Yet the European economy today remains heavily dependent on traditional industries, such as industrial manufacturing, construction, retail and transportation Tech: The Motor for GDP Growth 02.2 Eurostat Eurostat 19 In Partnership with & www.thestateofeuropeantech.com The European tech (software) industry contributes around $400 billion to the European economy today, though it remains just a fraction of total European Gross Value Added, accounting for just 2.5% of total European GVA Tech industry contribution to the European economy by total Gross Value Added ($B) and % of total (2002-2016) Source: Eurostat LEGEND Tech Tech as % of total GVA Note: 2016 is the most recent year for which full NACE breakdowns of European GVA are available. Tech refers to the European software industry, or NACE J62-63 Gross Value Added ($B)Tech as % of total GVA$194.0B $208.0B $234.0B $264.0B $263.0B $300.0B $335.0B $376.0B $1.8B $1.8B $1.8B $1.9B $1.9B $2.0B $2.1B 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.0 100.0 200.0 300.0 400.0 1.6 1.8 2.0 2.2 2.4 The European tech (software) industry contributes around $400 billion to the European economy today, though it remains just a fraction of total European Gross Value Added, accounting for just 2.5% of total European GVA At ~$400 bllion, Europe's software industry is still just a fraction of overall European Gross Value Added Eurostat Eurostat Tech: The Motor for GDP Growth 02.2 Latest data shows Europe's software industry accounts for 2.5% of total Gross Value Added in Europe, up from 1.9% 10 years ago ECONOMIC GROWTH 2.5% Photo: Kai Kuusisto 20 In Partnership with & www.thestateofeuropeantech.com As technology becomes an increasingly more transformative force across all parts of the economy, there is a huge opportunity to digitise and reignite Europe's traditional industries with trillions of dollars of value in play. The combined market capitalisation of European constituents of the S&P Global 1,200 equates to $8.8 trillion in just the top 10 most valuable traditional industries. Total market cap of European public companies in S&P Global 1,200 by industry group ($B) Source: S&P Global Market Intelligence LEGEND Total Market Cap ($B) Note: Based on an analysis of the industry breakdown by market cap, revenue, market cap/revenue multiple and age of the 328 constituents of the S&P Global 1,200 Index from Europe. Data as of October 2018. Total market cap ($B) $1,270B $1,231B $1,150B $924B $893B $777B $734B $648B $608B $523B Energy Financial Services Bio & pharma Materials Food & Drink CPG Retail Industry Insurance Mobility 0 200 400 600 800 1,000 1,200 1,400 Those same 300 or so European companies control more than $6.9 trillion in annual revenue and represent a giant potential opportunity for any European tech companies that seek to take on those incumbent giants in their traditional industries. Total revenue of European public companies in S&P Global 1,200 by industry group ($B) Source: S&P Global Market Intelligence LEGEND Total revenue ($B) Note: Based on an analysis of the industry breakdown by market cap, revenue, market cap/revenue multiple and age of the 328 constituents of the S&P Global 1,200 Index from Europe. Data as of October 2018. Aggregate LTM revenue ($B) $1,642B $1,012B $906B $843B $589B $537B $422B $375B $344B $269B Energy Mobility Materials Insurance CPG Financial Services Food & Drink Industry Bio & Pharma Retail 0 250 500 750 1,000 1,250 1,500 1,750 As technology becomes an increasingly more transformative force across all parts of the economy, there is a huge opportunity to digitise and reignite Europe's traditional industries with trillions of dollars of value in play. The combined market capitalisation of European constituents of the S&P Global 1,200 equates to $8.8 trillion in just the top 10 most valuable traditional industries. Those same 300 or so European companies control more than $6.9 trillion in annual revenue and represent a giant potential opportunity for any European tech companies that seek to take on those incumbent giants in their traditional industries Total value by market cap of European companies from traditional industries in the S&P Global 1,200 TRADITIONAL INDUSTRY There is huge equity value locked up in traditional industry in Europe $8.8T S&P Global Market Intelligence S&P Global Market Intelligence S&P Global Market Intelligence Heritage as Opportunity 21 In Partnership with & www.thestateofeuropeantech.com Interestingly, the median age of the incumbent companies in these industries is well over 100 years in most cases. In the battle of incumbent versus startup, it is not the young that beats the old or the large that beats the small. It is those that are fast that are more likely to succeed against the slow. Median age in years of European public companies in S&P Global 1,200 by industry group Source: S&P Global Market Intelligence LEGEND Median Age of Companies (years) Note: Based on an analysis of the industry breakdown by market cap, revenue, market cap/revenue multiple and age of the 328 constituents of the S&P Global 1,200 Index from Europe. Data as of October 2018. Median age (years) 155 154 135 130 125 113 102 92 66 62 Insurance Financial Services Industry 4.0 Food & Drink CPG Materials Mobility Biology 2.0 Retail Energy 0 100 25 50 75 125 150 175 Interestingly, the median age of the incumbent companies in these industries is well over 100 years. In the battle of incumbent versus startup, it is not the young who beats the old or the large who beats the small. It is those who are fast that are more likely to succ ed against the slow. Median age in years of the 348 European companies that are constituents of the S&P Global 1,200 index. This compares to 64 for North American companies. Do the old have the speed it takes to respond to tech-enabled change? TRADITIONAL INDUSTRY Europe's most valuable public companies - 95% of which come from traditional industries - have demonstrated remarkable endurance until now 102 Heritage as Opportunity 02.3 S&P Global Market Intelligence S&P Global Market Intelligence Photo: Joonas Linkola 22 In Partnership with & www.thestateofeuropeantech.com Europe's tech ecosystem remains characterised by a strong level of growing optimism about the future. This increase in optimism is most evident in Eastern and Southern Europe, where real momentum in building the local tech ecosystems is evident. The UK, perhaps unsurprisingly, registered the largest downturn in optimism by a wide margin. Are you more or less optimistic about the future of European technology today than you were 12 months ago? Source: LEGEND More About the same Less % of respondents Central Europe & Baltics DACH Eastern Europe France & Benelux Nordics Southern Europe UK & Ireland 0 20 40 60 80 100 Europe's tech ecosystem remains characterised by a strong level of growing optimism about the future. This increase in opti is is most evident in Eastern and Southern Europe where there is real momentum. The UK, perhaps unsurprisingly, registered the largest downturn in optimism by a wide margin. of the European tech community is either more optimistic about the future of European tech, or maintain the same levels of optimism compared to 12 months ago. This remains the same as 2017, when 91% of respondents were more optimistic or the same. EUROPEAN TECH OPTIMISM There continues to be a very strong sense of optimism across the European tech ecosystem 90 S&P Global Market Intelligence Smiles (almost) all round in European tech 23 In Partnership with & www.thestateofeuropeantech.com Munish Varma Rosie Dallas SoftBank Vision Fund Fat Llama 2018 has seen some strong wins for the European tech ecosystem and we are resoundingly optimistic and excited by the opportunity set we see emerging. There were several large IPOs in the region signalling that the sector is maturing while still generating opportunities to partner with emerging, disruptive companies that combine market leadership, multiplying network effects and data-driven approaches to create transformative businesses. Enhanced access to early growth capital is also a hugely positive market driver, enabling more companies to scale rapidly while still prioritising innovation." I'm definitely more optimistic than 12 months ago. I think we're seeing a marked shift in ambition in Europe, and crucially, that's being matched at an investor level. What's more, the increased cost of living and hiring competition seem to have taken the blinkers off a lot of Valley-bound entrepreneurs. This can only benefit Europe." " " 2018 has seen some strong wins for the European tech ecosystem and we are resoundingly optimistic and excited by the opportunity set we see emerging. I'm definitely more optimistic than 12 months ago. I think we're seeing a marked shift in ambition in Europe, and crucially, that's being matched at an investor level. The factors that are driving optimism around the future of European tech are many and varied. But when asked to state the most important grounds to be optimistic, respondents gave a clear number one reason: the people that make up the tech ecosystem What, if anything, makes you feel optimistic about the state of the European tech ecosystem? Source: LEGEND % of respondents Note: Based on respondents that gave explicit responses only. % of respondents 27% 25% 11% 11% 9% 7% 6% 5% People Growth & Momentum Startup Ecosystem European Collaboration & Diversity Capital Availability Tech Innovation Regulation & Political Climate Values & Ethics 0 5 10 15 20 25 30 The factors that are driving optimism around the future of European tech are many and varied. But when asked to state the most important grounds to be optimistic, respondents gave a clear number one reason: the people that make up the tech ecosystem Smiles (almost) all round in European tech 02.4 24 In Partnership with & www.thestateofeuropeantech.com There is strong agreement across all stakeholders, including within the public sector, that European tech entrepreneurs are changemakers for a better world and that they will have a bigger impact on helping to important global problems than Europe's governments. European technology entrepreneurs will do more to address societal challenges Source: LEGEND Agree Neither agree nor disagree Disagree % of respondents Founder or startup/scale-up employee Investor Policymaker or public sector employee Other 0 20 40 60 80 100 Selected early-stage European tech companies with a strong focus on solving a major global or societal challenge that have raised in the past year from top investors Area of Focus City Country Round Date Selected Investors Cambridge Glycoscience Biology 2.0 Cambridge UK 3Q18 Y Combinator Cytera CellWorks Biology 2.0 London UK 3Q18 Y Combinator Lifebit Biology 2.0 London UK 3Q18 Connect Ventures, Pentech Ventures, Tiny VC GTN Limited Biology 2.0 London UK 2Q18 Octopus Ventures, Pentech Ventures Quit Genius Digital Health & Wellness London UK 2Q18 Force Over Mass Capital, Village Global, Y Combina tor TPH.co Future of Retail Stockholm Sweden 2Q18 Propel Capital, STING, Seedcamp, The Nordic Web Ventures, Wave Ventures Veratrak Biology 2.0 Oxford UK 2Q18 Seedcamp Carbo Culture Future of Energy Helsinki Finland 1Q18 Wave Ventures, Lifeline Ventures, Starlight Ventures Disior Digital Health & Wellness Helsinki Finland 1Q18 Maki.vc KisanHub Future of Food & Drink Cambridge UK 1Q18 IQ Capital Partners, Notion Capital Sixfold Bios cience Biology 2.0 London UK 1Q18 Y Combinator, LombardStreet.io Ventures ThinkSono Digital Health & Wellness London UK 1Q18 AI Seed, WestTech Ventures WeFarm Future of Food & Drink London UK 1Q18 Localglobe, True Ventures, ADV, Norrsken Foundation Fat Lama Future of Retail London UK 4Q17 Blossom Capital, Greylock Partners, Atomico, Y Combinator Hygglo Future of Retail Stockholm Sweden (SWE) 4Q17 Norrsken Foundation, Schibsted Growth LabGenius Biology 2.0 London UK 4Q17 Acequia Capital, Kindred Capital, System.One Source: Tech for Good: A European Opportunity? There is strong agreement across all survey respondents, including within the public sector, that European tech entrepreneurs will have a bigger impact than European governments when it comes to solving important global challenges. undefinedIn Partnership with & www.thestateofeuropeantech.com While the vast majority in Europe's tech ecosystem agrees diversity is a good thing, the community has a major diversity problem. Women and minorities are underrepresented at every level of the ecosystem. Corporate policy on diversity and inclusion still lags. Diversity & Inclusion We've Got a Problem We're All Part of the Problem Accelerating Change 03.1 03.2 03.3 Perception and Reality ARTICLES 27 In Partnership with & www.thestateofeuropeantech.com No single question in the survey received a stronger level of agreement than this one. When asked if having a diverse team is a bene t to company performance, almost 90% of respondents agree. If the European tech ecosystem wants to achieve its full potential, then diversity and inclusion has to be at its core. Having a diverse team is a bene t to company performance Source: LEGEND Agree Neither agree nor disagree Disagree Female Male 0 10 20 30 40 50 60 70 80 90 100 % of respondents The European tech community is dominated by men. Women account for just 22% of participants in tech-related Meetup events in the region. Notably, the industry is failing to make any meaningful progress, having seen an increase of just a single percentage point in the level of female participation at European tech community events in the past two years. Share of female attendees in tech-related Meetup events in Europe Source: LEGEND Total in Europe (%) Note: % of the reported gender of attendees only. % of female attendees21% 21% 22% 2016 2017 2018 0 5 10 15 20 25 The European tech community is dominated by men. Women account for just 22% of participants in tech-related Meetup events in the region. Notably, the industry is failing to make any meaningful progress, having seen an increase of just a single percentage point in the level of female participation at European tech community events in the past two years. No single question in the survey received a stronger level of agreement than this one. When asked if having a diverse team is a benefit to company performance, almost 90% of respondents agree. If the European tech ecosystem wants to achieve its full potential, then diversity and inclusion has to be at its cor . We've Got a Problem Pip Jamieson The Dots Diversity is one of our core values. It's vital to our business and has been embedded from the beginning. Diverse teams are better for business, and better for creativity. 28 In Partnership with & www.thestateofeuropeantech.com We found only 1 female CTO out of 175 CTOs that work at VC-backed European tech companies that raised a Series A or Series B in the past year. Gender composition by job title for Executive-level positions of selected European Series A and B venture-backed companies Source: LEGEND Female Male Note: Based on a sample of executives in CxO positions at 270 European VC-backed tech companies that raised a Series A or B round between 1 October 2017 and 30 September 2018. % of Executives 6% 1% 11% 20% 21% 9% 9% 19% 94% 99% 89% 80% 79% 91% 91% 81% Chief Executive Officer Chief Technology Officer Chief Operating Officer Chief Financial Officer Chief Marketing Officer Chief Revenue Officer (or similar) Chief Product Officer CxO Other 0 20 40 60 80 100 The 'class of 2018' of VC-backed European tech companies shows no improvement compared to similar analysis from 2017. Share of women by position of senior leaders and founders of selected European Series A and B venture-backed companies (2018 versus 2017) Source: LEGEND 2017 2018 Note: Based on a sample of Founders and executives in CxO positions at 270 European VC-backed tech companies that raised a Series A or B round between 1 October 2017 and 30 September 2018. 2017 data is based on a similar sample. 6% 2% 6% 9% 6% 1% 5% 9% % of CEOs % of CTOs % of Founders % of all CxO leaders The 'class of 2018' of VC-backed European tech companies shows no improvement compared to similar analysis from 2017 We've Got a Problem 03.1 We found only 1 female CTO out of 175 Os hat work a VC-backed European tech companies that raised a Series A or Series B in the past year Women are not equally present in tech communities in any European country Share of female attendees in tech-related Meetup events by country DATASET: TOP 10 C OUNTR I ES Source: LEGEND 2018 Note: % of the reported gender of attendees only. Only countries with 100+ reported female attendees included. % of female attendees 33% 28% 28% 26% 26% 26% 25% 25% 25% 25% Albania Lithuania Romania Bulgaria Latvia Serbia Bosnia and Herzegovina Ukraine Portugal Sweden 0 5 10 15 20 25 30 35 The gender imbalance of the tech communities within different countries follows the European-wide picture, though there are leaders and laggards. The top 10 countries for female participation at tech-related Meetup events across the region is dominated by countries from Eastern Europe, though it should be noted that female participation in the number one country, Albania, only reaches 33%. 29 In Partnership with & www.thestateofeuropeantech.com Check Warner Diversity VC Lack of diversity is driven by a combination of factors that affect the pipeline of talent in STEM subjects, the availability of diverse role models, access to expertise and capital, social mobility and a range of other issues. Europe is not necessarily tangibly better or worse than other tech hubs however, given that Europe is such a diverse range of geographies and people this should be a key strength. I am encouraged to see the subject of diversity and inclusion appear on the agenda of more tech companies and more VCs over the last 12 months and to see so many funds participating in initiatives led by Diversity VC and others. I hope that this translates to sustained and impactful change the first step though is understanding the situation as it is today, which is why Atomico's commitment to this subject is so encouraging." " Europe is not necessarily tangibly better or worse than other tech hubs however, given that Europe is such a diverse range of geographies and people this should be a key strength. We've Got a Problem 03.1 The European tech industry's lack of diversity could not be more stark when it comes to how funding is allocated in the region. It is arresting to see that male founders and founding teams receive 95% of the capital invested and account for 90% of deals,. It is even more stark to see that the these shares have not changed in the last year Capital raised and # of deals by founding team gender (%) Source: LEGEND Male Female Mixed Capital raised (%) / # of deals (%)92% 95% 94% 93% 93% 93% 2% 1% 2% 3% 2% 2% 6% 4% 4% 4% 5% 5% 2013 2014 2015 2016 2017 2018 0 25 50 75 100 Capital Raised The European tech industry's lack of divers ty could not be more stark when it comes to how funding is allocated in the region. It is arresting to see that male founders and founding teams receive 95% of the capital invested and account for 90% of deals,. It is even more stark to see that the these shares have not changed in the last years. Source: 85% 86% 86% 85% 85% 85% 5% 5% 5% 6% 5% 5% 9% 9% 9% 9% 10% 10% 2013 2014 2015 2016 2017 2018 0 25 50 75 Capital raised (%) / # of deals (%)# of deals DATASET: # OF DEALS DATASET: CAPITAL RAISED The European tech industry's lack of diversity could not be more stark when it comes to how funding is allocated in the region. It is arresting to see that all-male founding teams receive 93% of the capital invested and account for 85% of deals. It is even more stark to see that these shares have not changed in the last years. The European tech industry's lack of diversity could not be more stark when it comes to how funding is allocated in the region. It is arresting to see that male founders and founding teams receive 95% of the capital invested and account for 90% of deals,. It is even more stark to see that the these shares have not changed in the last year Capital raised and # of deals by founding team gender (%) Source: LEGEND Male Female Mixed Capital raised (%) / # of deals (%)92% 95% 94% 93% 93% 93% 2% 1% 2% 3% 2% 2% 6% 4% 4% 4% 5% 5% 2013 2014 2015 2016 2017 2018 0 25 50 75 100 Capital Raised undefined31 In Partnership with & www.thestateofeuropeantech.com We've Got a Problem 03.1 Each node represents an article. Links connect articles sharing similar language. Clusters form when many articles share strong similarity, revealing topics. Blockchain: 11.91% Fundraising: 43.58% Diversity, Discrimination, Harassment, Pay Equity, Women: 10.62% Diversity: 3.8% Discrimination: 1.2% Harassment: 1.3% Pay Equity: 0.3% Women: 7.4%% 32 In Partnership with & www.thestateofeuropeantech.com Compared to other tech-related topics that gain large amounts of coverage in European news sources, it is notable that articles related to diversity and inclusion are more likely to be led by a negative sentiment. Share of total stories per topic by sentiment summary Source: LEGEND Positive Neutral Negative Note: Based on ~3,000 stories across 843 European news sources (primarily UK focused) from Septemeber 2017 to September 2018. % of total stories Fundraising Exits (IPOs & M&A) Blockchain Artificial Intelligence Diversity & Inclusion 0 20 40 60 80 100 Compared to other tech-related topics that gain large amounts of coverage in European news sources, it is notable that articles related to diversity and inclusion are more likely to be led by a negative sentiment. The narrative around diversity and inclusion is driven by US tech companies, leaving a huge vacuum in terms of European voices stepping up into the discussion. In the absence of European voices taking part in the discussion, does this leave an opportunity for leadership from European tech companies to help drive the discussion in a positive way? Top 10 most discussed companies in European news stories focused on diversity and inclusion in the tech industry Source: LEGEND # of mentions Note: Based on ~3,000 stories across 843 European news sources, primarily UK focused, from September 2017 to September 2018. # of unique articles primarily talking about the company 157 88 45 37 35 30 24 23 21 20 Google Facebook Twitter Microsoft Apple Salesforce PwC IBM McKinsey Amazon 0 100 25 50 75 125 150 175 Interestingly, the reporting we do see on diversity and inclusion in tech in European news sources is driven by US tech companies. There's a huge vacuum of European voices stepping into the discussion. We all have a responsibility to do and say much more. We've Got a Problem 03.1 undefined34 In Partnership with & www.thestateofeuropeantech.com Despite many voices in the industry taking a negative view on the level of inclusion in Europe's tech industry, people are much more likely to believe that the culture in their own companies is inclusive. In fact, more than three quarters of founders or employees at Europe's private tech companies perceive their company's culture to be inclusive. The culture at my tech company is inclusive Source: Occupation LEGEND Agree Neither agree nor disagree Disagree Founder or startup/scale-up employee Investor Policymaker or public sector employee Other 0 20 40 60 80 100 % of respondents Source: Female Male 0 20 40 6

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