Tech Startups Raise Record $41 Billion in Europe This Year

(Bloomberg) -- European tech companies defied the pandemic this year to draw record levels of investment overall, though early-stage founders still struggled to clinch funding.

Europe’s tech sector is on track for about $41 billion in venture capital investment this year, up around $500 million from 2019, according to VC firm Atomico’s annual State of European Tech Report published Tuesday. The slight increase was driven by greater numbers of $100 million to $250 million funding rounds, it said.

Overall investment dropped around March, as large swathes of Europe went into lockdown, but began recovering by the end of summer and continued into the fall. September saw the highest-ever month of investment into European tech with more than $5 billion invested, Atomico said.

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“It’s not going to increase by much, but for a long period of time this year it was looking like we’d see a reduction,” said Tom Wehmeier, partner at Atomico, and co-author of the report. “Even creeping above last year’s figure represents quite an achievement for the ecosystem.”

Still, entrepreneurs looking to raise rounds of about $20 million to $50 million struggled to do so this year in many sectors as the pandemic made it harder to demonstrate growth potential.

“When it looks like your year may come in flat or it may even decrease, that is a much harder story to tell investors,” Wehmeier said.

The U.S. still vastly outpaces Europe when it comes to tech investments, attracting about five times as much capital in 2020, Atomico said. Foreign investors from the U.S. and Asia saw continued appetite to invest in Europe this year, however. A record 19% of funding rounds in Europe during 2020 included participation from at least one U.S. investor, up from 16% in 2019, according to the report.

Atomico also highlighted ongoing challenges with diversity in Europe’s tech industry. Its report concluded that little data about ethnicity exists at the European level, and what does emerge is “grim.” Between 2009 and 2019, only 0.24% of capital in the U.K. went to black founders, according to the report.

Meanwhile, progress on gender has stagnated, Atomico said, with 90.8% of all capital going to men-only teams this year, compared to 90.3% last year.

©2020 Bloomberg L.P.