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In public markets, Europe continues to produce more tech IPOs than the US. 2021 has seen 50 more unicorns join Europe’s public herd - but listing in the US is seen as more attractive, with over 1 in 3 companies founded after 2015 choosing the US over Europe.
Insights
$750B of public tech market cap
Over the past 12 months, Europe has added more than $750B of public tech market cap and has surpassed $2T in combined value. As a result, the region has grown its share of global public tech market to 6.8%, up from 6.3% last year. The Netherlands has risen to fourth position globally and now stands at $0.8T in aggregate market cap, thanks to the strong underlying performance of companies such as Adyen and ASML.
49 unicorns join the public herd in 2021
The public herd of $1B+ companies took a big leap forward this year, now standing at 139 - up from 90 in 2020. And we can now see is a credible path for Europe to see ten companies all valued at $100B or more in the next few years - not far from President Macron's goal of ten companies valued at €100B.
Over 1 in 3 companies founded after 2015 choose the US over Europe to list
More recent cohorts of European tech companies have been inclined to list on US exchanges. While just 5% of public European tech companies valued over $1B and founded pre-2000 are listed on US exchanges, this is up 7x to 36% for companies founded after 2015.
The fact that Lilium, a German electric vertical take off and landing company headquartered in Munich was able to go public in 2021 fills me with confidence.
We now have the capital and expertise to achieve our long-term ambition of building a regional electric air mobility network. At a European tech macro level, all the key indicators such as investment, the growth in the number of founders and new tech companies being spun out of existing tech companies and the growing numbers of engineering students at our top universities is testament to the growing strength of European tech. Last year’s report made reference to the European tech flywheel. I suspect we have had another great year and we will see that flywheel spin even faster.
$30T of aggregate market cap in global public tech companies
Global tech companies in the public markets now have a combined market cap of more than $30T, following a stellar year for public tech companies across the US and Europe. China, however, barely contributed to that growth in value, adding just $20B of incremental market cap in the past year. By contrast, the total market cap of US public tech companies grew by $6T - from $14T in November 2020 to $20T in November 2021. The weak Chinese public tech company performance can be mostly attributed Alibaba and Tencent, both of which have been significantly impacted by the Chinese government crackdown on tech companies. Looking across the rest of the top 10 countries, all of them experienced strong growth in value over the past year. The Netherlands stands out, having risen to fourth position globally and now stands at $0.8T in aggregate market cap, thanks to the strong underlying performance of companies such as Adyen and ASML.
Crossing the 1️⃣0️⃣0️⃣0️⃣ milestone
The accelerated pace of digital transformation has helped to pull the future forward and injected a huge boost to the relentless march of technology, driving unprecedented scale in the addressable markets for technology products and services. Global public tech companies have made huge gains as a result of accelerated adoption and spend on tech and tech-enabled products and services. We are now firmly in the era of trillion-dollar tech companies. Five companies have now scaled to this milestone and beyond, all founded in the United States. Behind the leading pack, there are now 32 public tech companies valued at more than $100B. This year also saw the global tech industry pass a significant milestone and now counts more than 1,000 public companies that have surpassed the $1B+ milestone.
Global public tech market cap remains concentrated
As a result of the contraction in the aggregate value of Chinese tech stocks, the share of total global value held by US public tech companies has grown from 65% in Oct 2020 to close to 70% this year, while China has fallen from 17% to 11%. There are still no countries outside of these two that exceed a 5% market share. This year, Canada joined the '1%+ of global public tech market cap share' club, alongside seven other countries.
📈 Europe keeps growing its share of global public tech market cap
Over the past 12 months, Europe has added more than $750B of public tech market cap, surpassing $2T in combined value. As a result, the region has grown its share of global public tech market to 6.8%, up from 6.3% last year. A 500 basis points change in market share may appear small, but it actually represents its largest-ever one-year change in absolute market cap.
🇳🇱 The Netherlands is home to European public tech giants
The Netherlands continues to lead as the home of the largest share of European public tech market cap, driven by material changes in the value of a handful of its leading companies, including Prosus, ASML and Adyen. These companies contributed to a year-on-year increase of incremental market cap of more than $350B. In fact, the value added by companies headquartered in the Netherlands in the last 12 months represents 47% of the total European gains. Germany follows, driven by SAP, Infineon, Zalando and Delivery Hero. Norway ($40B) overtook Spain ($33B) to move into seventh place, while Italy entered the top 10, having seen a 83% gain year-on-year led by payments company Nexi.
30+ year-old tech incumbents continue to rule public markets
As highlighted in the first chapter, public market cap should be considered a lagging indicator as a measure of the state of global tech and its future direction of travel. More than 42% of the total value of today's public tech companies, equivalent to $12.3T, is held by companies founded in the 1980s or earlier. Europe only has 11 companies that have crossed the $1B+ milestone that are from the same generation and just four of those are publicly listed (Sinch, Amadeus, Avast and Auto Trader). Just because these companies are now decades old, however, does not mean that they aren't continuing to grow and add significant value. In fact, global public tech companies founded in the 1980s and earlier added $2.9T of market cap in the past 12 months, equivalent to a 30% increase and the largest absolute gain by any of the cohorts identified in this chart. The fastest-growing cohort, however, is the youngest set of public tech companies (2010s), which increased in value by 81% between 2020 and 2021. The 2000s cohort is also notable for having added more than $2T in incremental market cap, growing by 55% year-on-year.
Total market cap ($T) created by global public tech companies by company founding decade, 2020 versus 2021
- 2020
- 2021
- Notes
- This does not include $314B of total market cap representing companies that had an unclassified founding year, equating to <1.1% of total market cap. S&P Capital IQ Platform, as of date 15 November 2021, for illustrative purposes only.
Nearly a third of the 10 most valuable public tech companies are VC-backed
Three of the top 10 most valuable public tech companies from Europe were VC-backed during the journey to scale, namely Adyen, Spotify and Delivery Hero. Just outside the top 10 sit both Yandex and Zalando - both are in the top 15. As Europe's largest tech companies keep getting bigger, it becomes a tougher and tougher ask to break into its top ranks. Last year, a market cap of $47B was enough to secure a spot in the top 5, but this year it will mean barely scraping into the top 10. The bar for getting into the top 5 is now $84B.
Number of VC-backed European tech companies finding liquidity small but steady
VC-backed companies are not yet strongly represented within Europe's largest public tech companies, but there is a healthy pipeline of VC-backed companies going public and creating value in the region. The accelerated growth in the number of new European $1B+ companies means that the count of private unicorns is outpacing the number of liquidity events. At the time of publication, there are 122 private European unicorns, up from 79 in 2020. This should not, however, mask the remarkable statistic that 32 European VC-backed unicorns exited or found liquidity during the past 12 months: 24 via the public markets and another eight via M&A.
Combined value of realised $1B+ VC-backed tech companies is closing in on $1T
The combined value of realised VC-backed unicorns, that have either gone public or been acquired, has now grown to over $770B in 2021, up from $470B in 2020. In aggregate, the total value of all European VC-backed unicorns is $1.2T, of which the value of the region's exited VC-backed unicorns is well on the way to hitting $1T in value. The total value of private VC-backed European unicorns has grown by close to 60% in the space of 12 months and now stands at $421B, up from $269B in 2020.
Nearly 50 new joiners to public $1B+ companies herd
The public herd of $1B+ companies took a big leap forward this year, now standing at 139 - up from 90 in 2020. It is also exciting to see companies move through the funnel and create further value in the public markets. The three companies valued at over $100B - namely ASML, Prosus and SAP - have added a combined $306B of market capital over the past 12 months. In August 2021, Adyen's market cap hit an all-time high of $99B - it is well on the way to becoming the next $100B+ company to emerge from Europe. When it gets to that milestone, it will also become the first ever VC-backed European tech company to scale to $100B. Dassault Systèmes is also on course to hit $100B, having grown from $47B in 2020 to $83B at the time of publication. There is a credible path for Europe to see ten companies all valued at $100B or more in the next few years - not far from President Macron's goal of ten companies valued at €100B.
🔔 Amsterdam ringing the bell for first place
As a result of the strong performance of constituents like Adyen and ASML, Euronext Amsterdam increased its aggregate total market cap from $435B in 2020 to $765B. This represents 38% of overall European exchanges market cap and places it first by a wide margin. Stockholm's OMX ranks 7th by aggregate market cap, but it was the number two exchange by year-on-year change in value in 2021, having welcomed a number of sizeable listings in 2021 including Truecaller, which is now valued at over $4.5B.
Over 1 in 3 companies founded after 2015 choose the US over Europe to list
But will these gains be sustained? More recent cohorts of European tech companies have been inclined to list on US exchanges. While just 5% of public European tech companies valued over $1B and founded pre-2000 are listed on US exchanges, this is up 7x to 36% for companies founded after 2015. This is across a relatively small sample of 11 companies, and is also in part influenced by a number of European tech companies that went public on US exchanges via SPACs. But given that future decisions on where to list are likely to be influenced by recent comparables, this could further compound the trend, if the perceived and actual attractiveness of listing on European exchanges is not strengthened.
Share of total public $1B+ European tech companies (%) by region of exchange and founding date
- European exchanges
- US exchanges
- Notes
- S&P Capital IQ Platform, as of date 15 November 2021, for illustrative purposes only.
UK has seen more of its $1B+ tech companies list on US exchanges than other European countries
The UK is home to the largest number of $1B+ companies listed in Europe, but it also has seen the largest number (in absolute terms) of its $1B+ companies list on US exchanges. Sweden, on the other end of the spectrum, has only one company that is now valued at $1B+ that elected to list away from home.
The majority of the European public tech market cap is listed on European exchanges
For now, the overwhelming share of value created by European public tech companies is held on European exchanges as measured by share of market cap by exchange venue. There are notable differences across countries (based on the company headquarter location). For example, while just 2% of the total market cap of tech companies with French headquarters is listed on US exchanges, this same metric is at 50% for Sweden - solely driven by Spotify.
A record year for tech IPOs in Europe
Across a five-year timeline from 2017 to 2021, Europe has averaged just under five (4.8) tech IPOs per month. In 2021, this has already exceeded more than 10 tech IPOs per month, marking a record year for tech IPOs in Europe by volume. By comparison, the US averaged 3.3 tech IPOs per month over the same five-year period. However, the US also had a standout year for tech IPOs in 2021 with 90 at the time of publication.
European tech IPOs are typically much smaller compared to the US
Over the course of the last five years, there have been 343 European tech IPOs. This compares to 238 from US tech companies. However, as we have highlighted for many years now, the scale of the average European tech IPO is much smaller than the US. The majority (75%) of European tech IPOs are concentrated in the <$250M market cap group. Those in the US are more distributed: tech IPOs of <$250M are also the largest grouping, but represent just 38% of US tech IPOs. For the initial $1B+ market category of $1-5B, 21% of US tech IPOs reach that value compared with just 9% of European tech IPOs at the same scale.
The average tech IPO in Europe and the US is very different
These differences translate into very different mean and median market cap at IPO across the two regions. The mean market cap of a European tech company is slightly above $765M, with the median at $139M, pointing to some impact on the mean from high-performance companies. Looking at the US, the mean market cap is $5.3B and the median is also much higher at $2.9B. But the average European tech IPO is getting bigger every year. In 2017, the median first day market cap for European tech IPOs was just $25M. This has now grown more than 5.5x to $139M in 2021.
US exchanges attract Europe's larger-scale tech companies
This year, new European tech companies that came to market via IPO on a European exchange were larger on average than those already listed on European exchanges. The median market cap of those that listed on European exchanges in 2021 was $139M, compared to the median company of $64M. If we screen to look at the scale of those European tech companies that chose to list on US exchanges, however, it's clear that US exchanges attract bigger European tech companies on average. The median first day market cap of a European tech company listing on a US exchange in 2021 was $2.9B, almost 22x larger than the median company listing on a European exchange.
🚀 An exceptional year for European tech IPOs
Despite all this, it's clear that 2021 has been a phenomenal year for European tech IPOs. This year has seen 28 tech IPOs with an initial market cap in excess of $1B. This compares to an average of just five per year in the preceding four years - this is just another positive indication of the increased liquidity now present in the European tech ecosystem. In the US, meanwhile, 62 tech companies went public with a first-day market cap of more than $1B, compared to just 13 in 2017.
What are the biggest structural impediments for successful large-cap IPOs in Europe?
Blockbuster US tech IPOs
In 2021, the top 5 tech IPOs of companies founded in the US had an combined first-day market cap of $145B. This is 4x the combined value of Europe's five largest tech IPOs in 2021, with an aggregate first-day market cap of $36B. Looking at the top 10, the gap in value expands to 4.6x based on $235B for the US versus $51B for Europe. It should be noted, however, that for the purpose of this analysis UiPath is not included in the data for Europe. Though it was founded and started out in Romania, it is now headquartered in the US and therefore counted as part of the US listings (given the methodology is based on company headquarter). UiPath went public with a first-day market cap of $36B, just $15M less than the value of all of this year's top 5 European tech IPOs combined.
While UiPath is today a multinational company, we are proud of our Romanian heritage and how the country has developed over the past two decades.
Romania is one of our most important talent pools and remains a key market for our developer teams, along with India and the United States. It’s become a tech hub in its own right and produces some of the world’s best tech talent. Culture is very important to me and to our leadership team at UiPath. That’s as true in our Romania offices as anywhere. Traditionally, we’ve thought of culture in terms of interaction among colleagues in the workplace, but now with office closures due to the pandemic we’ve had to broaden how we think about it. One of our goals now is to ensure the UiPath culture isn’t lost or diluted as the workforce transitions to work from home.
💪But European IPOs are scaling up
European tech IPOs are steadily increasing in value. Every one of the top 10 largest tech IPOs from Europe in 2021 came in with a first day market cap of greater than $2B. By comparison, just five of the top 10 in 2020 exceeded the $1B milestone. To make the top 10 in the US, however, it requires a first day market cap of more than $13B at time of publication.
In addition to traditional IPOs, SPAC listings became a notable alternative path to go public in 2021 – not only in the US, but also in Europe.
We saw numerous tech IPOs including Auto1, About You, Mister Spex and more this year in Germany. The increasing importance of tech companies is also reflected in the new composition of Germany’s flagship DAX index. With Delivery Hero, Zalando and Hello Fresh, three Berlin-based and former VC-backed companies are now part of the 40 DAX constituents.
In addition to traditional IPOs, SPAC listings became a notable alternative path to go public in 2021 – not only in the US, but also in Europe. The business combination of Lakestar SPAC I and HomeToGo marked the first prominent example of this alternative route to capital markets in Germany.
The pipeline for further IPOs remains strong and – subject to prevailing market conditions – we’re expecting continued growth in European IPO activity also in 2022.
SPAC attack
2021 marked the year that SPAC activity came to European tech in force. At the time of publication, a total of 15 European tech companies have completed de-SPAC processes and gone public on exchanges around the world. These 15 companies have a combined enterprise value of $62B and span a range of categories, including quantum computing, semiconductors, electric mobility, marketplaces and fintech. Notable companies that completed de-SPAC processes in 2021 include Cazoo ($8B), Babylon Health ($4B) and Lilium ($3B).
An alternative path to liquidity and/or growth financing
The arrival of SPACs on the scene in the European tech ecosystem has created an important new path to the public markets for the region's VC-backed companies. 13 of the 15 completed de-SPAC transactions in Europe this year involved VC-backed companies (87%) with a total aggregate enterprise value in excess of $32B, equivalent to 53% of the total enterprise value across all companies. In many cases, these companies are still early in their lifecycle (the VC-backed companies have a median founding year of 2014) and so for many of the companies the move into the public markets may be viewed by their shareholders as a financing event, rather than a liquidity event.
UK tech companies have led the way
There have been 15 completed de-SPAC transactions for European tech companies originating from six different countries in 2021. The UK is by far the largest contributor to the cohort. Nine out of 15 of the companies are UK-based, accounting for 60% of the total cohort by count and 53% by enterprise value. Every single one of these UK tech companies went public in the US, either on the New York Stock Exchange (6) or on the NASDAQ (3). These companies had a combined enterprise value of more than $32B. The other countries to have seen local tech companies go public via a SPAC are Germany (2) and Cyprus (1), Ireland (1), Spain (1) and Sweden (1). The recent changes to the rules for SPACs to list on UK stock exchanges are very timely in this context.
SPACs are taking European tech companies public in the US
The SPAC phenomenon that swept through the global public markets in 2020 was driven by sponsors from the US raising vehicles on US stock exchanges. These acquisition vehicles have not hesitated to look beyond the US to find compelling targets. It's notable that 14 of the 15 European tech companies that went public via SPAC in 2021 listed in the US. This is equivalent to $60.1B of enterprise value, or 98% of the total value of this cohort of European tech companies. To date, only one European tech company has listed on a European exchange in 2021; HomeToGo was taken public by Lakestar SPAC I on the Deutsche Börse in a transaction that valued the company at $1.4B.
The European SPACs have arrived
2022 is likely to see further SPAC activity. Beyond a large number of US-listed SPACs that have European tech in their sights, 2021 saw European sponsors respond to the trend. There are at least 13 SPACs that have successfully completed listings on European stock exchanges, including in Amsterdam (6), Paris (4), Germany (2) and Finland (1). Together they have raised a combined $3.9B to target European tech companies across a range of different sectors, including climate, fintech, SaaS and more. These SPACs have been sponsored by high profile European tech leaders, as well as European VCs.
Looking ahead to the next 12 months, what do you think best describes the role that SPACs will play for European target companies?
4x growth in $1B+ PE-backed exits
Another interesting development is the growth of PE-backed exits of European tech companies. The speed of dealmaking had already accelerated at the end of 2020, with nearly 60% of all transactions taking place in the final four months. 2021 has been a record year so far, with a total of 46 $1B+ PE-backed exits recorded with a total of $225B+ in aggregate enterprise value - almost 4x as much as in the whole of 2020. This is across all types of acquisitions, SPACs and IPOs.
Over the last decade, private capital has rapidly expanded to fuel its best entrepreneurs - but public risk capital has lagged. At the same time, the race for tech IPO volumes continues to intensify across global exchanges.
The main considerations in Europe for founders considering a public listing today remain: liquidity such that they can reliably access a deep long term investor base, a valuation that is not a discount to an alternative exchange, depth and quality of research coverage, a regulatory framework that provides maximum flexibility (alternative listing structures, founder control, minimum float and capitalisation requirements) vs. the US. Clearly there is some way to go yet but key European exchanges and policy makers, not least the LSE and the FCA earlier this year, have demonstrated the willingness to compete globally while continuing to provide an adequate level of investor protection. This is not a race to the regulatory bottom but instead recognises that technology is a unique long duration asset, which needs a discerning capital base and regulatory environment to support innovators over the long run.