In a year that can be best described as record breaking, European innovation has continued to establish itself as a global destination for all things innovation. Coming off what was already a record 2020 despite the pandemic, we have seen almost every aspect of our innovation ecosystem grow as it has matured into an established global hub for technology. Whilst we have adapted to new challenges, the traction, velocity, and diversity of our ecosystem remain our key strengths.
Here’s what Silicon Valley Bank ('SVB') is seeing:
01. Europe is creating global market category leaders that are rivalling those of the US, as valuations reach record highs amid a thriving scaleup ecosystem.
Europe’s scaleups have now matured into global market leaders, having expanded overseas, and increased their valuations over the past 12 months, something we should celebrate. In most sectors, the size of the addressable market is large and growing. We are also seeing greater inflows of capital from multiple destinations, especially with late-stage investors willing to pay a premium to participate in pre-exit rounds. From this increased liquidity and an increasingly active secondaries market, comes a recycling of wealth, talent, and experience back into the ecosystem to support the next generation of startups, VC funds and the wider innovation economy creating a growth engine for Europe.
02. As innovation takes a leading role in Europe, we find it is becoming an ever more competitive market as international investors gain ground.
In 2021, we have seen more activity from international investors than ever before, with close to one in four deals involving some form of international investment according to this report’s data. European VCs are having to become more competitive in their value propositions and agile in their approach, as competing with established US VCs has now become the norm. These new strategies deployed by European VCs aim to ensure European investors remain the dominant presence from very early-stage through to pre-exit rounds. With the ecosystem maturing, we can expect to see further innovation, and new entrants, within the VC and investor community. Whilst competition between VCs may see some losing out on deal flow, the ultimate winners remain company founders, as demand to invest in European innovation is at record levels.
03. We must support diversity to help increase our probability of success and make Europe increasingly competitive.
The European tech community is making some progress to include entrepreneurs and investors with diverse backgrounds and experiences, but we must do more to put words into action if we are to make significant headway on diversity, equity, and inclusion within our sector. Progress is being made through organisations SVB partners with such as, ColorinTech, Diversity VC, The Newton Program and Atomico’s SOET report. Specifically, it’s encouraging to see further evidence that mixed and diverse teams perform better but we need to ensure they also increase their share of the total capital invested way beyond the current levels of 9% outlined in the report. This will go a long way to help make the innovation ecosystem an attractive place to work, build and scale a business.
04. Looking ahead to 2022, we are optimistic that the ecosystem will continue to grow, mature, and diversify, and we herald the beginning of a golden era for European innovation.
The robust activity across our broader innovation economy will continue to attract record investment fuelled by global fundraising and record levels dry powder. We also expect policy makers to recognise that promoting a healthy innovation ecosystem requires collaboration when it comes to talent, investment in ESG & DE&I, frictionless international trade, clear and scalable regulation and the sharing of technologies and best practices to help developing countries level-up. The ability to grow these businesses into global recognised leaders is a key strength of the ecosystem. SVB passionately believes we are entering a golden era for the European innovation ecosystem and the best is yet to come over the next decade.
Head of EMEA, President of UK Branch, Silicon Valley Bank