Now, more than ever, there are multitudes of options for young people wanting to get into tech and for more experienced people wanting a change in career.
Recent innovations in technology ranging from blockchain to AI to better e-commerce functionality to the Metaverse are pretty exciting. The developmental leaps combined with the investment in free educational offerings from the tech giants makes me hopeful. Now, more than ever, there are multitudes of options for young people wanting to get into tech and for more experienced people wanting a change in career. This bodes well for big tech corps and startups alike, there's more talent than ever available and this means more can be achieved.
In the last year we've been able to launch a chat bot (which I learnt to build for free during lockdown) and build an app on a tiny startup budget thanks to the new functionality that Flutter & Firebase allow. The future of tech is bright.
Confidence in Europe's tech talent pool is high
When asked about Europe's ability to build global leaders in tech now compared to 12 months ago, 56% of employees and 57% of department heads report feeling very confident in the prospect. Many feel the same as before, but only a very small proportion – 4% of employees and 7% of department heads – now lack confidence in Europe's prospects on this front.
Younger people are more confident in and attracted to working in European tech
Young people believe in Europe's ability to build global tech leaders, and are even more positive about working for a European tech company than a year ago. 70% of all respondents indicate working for a European tech company is more attractive now than 12 months ago, but this percentage rises to 83% for those under 25 years old. Similarly, 62% of under-25s are confident in Europe's ability to build global tech leaders. This is an encouraging indication that tech startups have established themselves as a credible career path for young talent. So how do we empower a new generation of leaders and founders?
How confident are you in Europe’s ability to build global leaders in tech compared to 12 months ago? / How attractive do you think it is to work for a European tech company now compared to 12 months ago?
- Very confident
- Neutral
- Not confident
- Notes
- Employees and department heads at European tech companies only. Numbers may not add to 100 due to rounding.
Closing the regional gap in founder base salary
We’ve seen convergence of market dynamics between Europe and US across round sizes, valuations and investor base, to name a few. This is another example of the gaps that once existed between the two regions starting to close, albeit not at the same speed for every funding stage.
There's a wide range of financial realities among founders
It's a common trope in tech that entrepreneurs don't get into it their job for the salary. But for many founders, a decent base salary is the difference between being able to take care of themselves, or not. There is wide discrepancy in founder salaries, with the top quartile being paid nearly double that of the bottom quartile. The widest discrepancy is seen among Seed stage founders, where 25% of reported salaries are below the $55K mark – close to half of the top quartile. This likely reflects the fact that founders have different preferences for the mix of cash and equity in their compensation.
European Founder salary ($K) by funding round and by percentile
- Base salary (25th)
- Base salary (50th)
- Base salary (75th)
- Notes
- At Seed stage some founders may not take a base salary and take incentive pay instead. Incentive pay is cash bonus or incentive, which is not related to equity or equity value. Converted at EUR:USD of 1.1574, the rate on 30 September 2021.
Incentives are dialled up in the US
Financial prospects do matter to founders, and can be a deterrent for many – especially those from less financially privileged backgrounds. It's therefore worth noting that European founders are consistently taking lower salaries compared to those in United States, both in terms of base salary and incentive pay. This is likely related in part to preferences and/or differences in tax treatment of stock options. Interestingly, the base salary gap between Europe and the US narrowed in the last year – most evidently at Seed stage, where average base salary increased by almost $16,000 in Europe while staying level in the US. However, progress on this dimension was accompanied by a decrease in incentive pay, indicating a shift in the average mix of compensation, rather than an overall increase. The salary gap between regions does get narrower at later stages of the company journey, possibly due to increased international transparency and alignment for larger companies.
Founder base salary and incentive pay ($) by funding round in the 50th percentile by region and by year
- Base salary (Europe)
- Base salary (United States)
- Incentive pay (Europe)
- Incentive pay (United States)
- Notes
- Note that at Seed stage some founders may not take a base salary and take incentive pay instead. Incentive pay is cash bonus or incentive, which is not related to equity or equity value. Converted from EUR to USD with an FX rate of 1.1574 from 30 September 2021.
🌱 Seeding the next generation
Well-rewarded senior operators and staff contribute to a virtuous circle, as they go on to seed the next generation of companies with raised ambitions and bolder ideas. Europe's Employee Share Ownership Plans ('ESOP') are critical in order to fuel the flywheel: Firstly, ESOP acts as an effective tool to attract and retain talent, which is one of the top concerns expressed by founders. Secondly, it aligns incentives across all participants. Yet ESOP stock option pools in Europe are still playing catch up with other regions like the US. It's encouraging to see this as a top priority for the newly set up European Startup Nations Alliance. We have seen time and again how early employees can have a meaningful impact on future generations as they reinvest in the ecosystem, and in doing so, make the flywheel spin faster.
Median employee ownership by funding round and by region
- Notes
- This details equity held by executive-level employees, staff-level employees and remaining unissued options. It excludes founder’s shares and equity allocations displayed as a percentage of fully diluted shares. Equity not related to salary nor incentives.
We’re seeing an increasing number of exceptional founding teams with global ambition.
The ecosystem continues to grow and mature, and we’re seeing an increasing number of exceptional founding teams with global ambition. This is partly due to the success of European founders like Daniel Dines from UiPath. To see Daniel start a company in Romania and go on to define a category, is hugely inspirational for the next generation.
Founders approach angel investing with the same mindset: building the future
The liquidity of the European tech marketplace – meaning the ease with which capital and talent flows from one company to the next – matters for multiple reasons: Talent recycling, for one, leverages experience and knowledge to build new and better companies, and to do it faster. Capital recycling is also important. One of the ways in which this is activated is when founders re-inject their capital gains back into the ecosystem as angel investors. More and more successful European founders and operators are becoming shareholders of and champions for a new generation of startups. It's interesting to understand their motivations for this. The most important one, especially for former founders, is to help build the future and have a positive impact, while supporting a new generation of entrepreneurs and early-stage companies.
We need to stop trying to copy Silicon Valley and be more self-confident to find our own DNA and strengths to accelerate our European cluster.
It is great to have a diverse set of visionary entrepreneurs such as Daniel from Spotify, Guillaume from Checkout, Taavet from Wise or the Strüngmann brothers (BioNTech / Hexal) that do not only strongly believe in the strength of our European tech ecosystem but play a very active role in amplifying it with capital as well as in-depth knowledge and conviction in contrarian ideas they thrive for that really make a dent for Europe. Strüngmann’s EUR 150m seed investment in BioNTech in 2008 during the financial crisis is a great example of such a contrarian investment – the rest is history. The challenge with European VCs is that we are sometimes too numbers and return focused too early on, don’t have large enough fund sizes to back the bold technologies and think too short term in terms of our returns.
Founders become investors
In partnership with Dealroom, we analysed the profiles of around 7,500 European tech founders. One aim was to gain quantifiable insights into the proportion of founders who self-identify as investors by listing their investment activity on their LinkedIn profile. We found that 6% of the founders whose profiles we analysed self-identified as investors on LinkedIn. This likely a significant underestimate of the true level of founder-turned-angel activity, as many will not have listed their activity on LinkedIn. Nevertheless, it does indicate that capital and knowledge recycling is starting to happen systematically and at scale across Europe. Interestingly, when we explored the subset of unicorn founders, the share that had listed investor activity increased to 17%.
Impact matters to European tech talent
Beyond financial incentives, there is a growing desire among talent to work for companies that are aligned with their values. Social and environmental impact is an increasingly important determinant of employer choice in the European tech ecosystem. Around 80% of respondents in our survey stated that impact is an important consideration for them when choosing where to work. This is felt most strongly among younger cohorts of talent, though it is not reserved to the general employee base; 75% of department heads within tech companies also agreed that impact is important to them.
Women job seekers are more motivated by impact
The growing importance of social and environmental impact is also underlined by the share of respondents that agree or strongly agree that it is an important determinant for them in making employment decisions. This trend is seen more strongly among women than men: 84% of women employees or department heads agree or strongly that it is important to them, compared to 75% of men.
Share of respondents for whom social and sustainability impact is an important determinant of employer choice by gender
- Strongly agree
- Agree
- Neither agree nor disagree
- Disagree
- Strongly disagree
- Notes
- Employees and department heads at European tech companies only. Numbers may not add up to 100 due to rounding.
Women founders are also more motivated by impact
The sentiment we see among women employees and department heads is mirrored by women founders, in their reasons for starting their companies. 64% of all founders agree that social and/or sustainability impact played a significant role in their decision to start a company, but that number rises to 73% for women, compared to 61% for men.
To what extent do you agree or disagree with the following statement: the potential social and/or sustainability impact played a significant role in my decision to start my company
- Agree
- Neither agree nor disagree
- Disagree
- Notes
- Founder respondents only. Numbers may not add up to 100 due to rounding.
Building with purpose
A number of changemakers in the European tech community are working to enable companies to integrate best practices environmental and social governance (ESG) best practices early on in their journey. Many also work on the investor end, helping them support their portfolio companies in implementing best practices. Overall, these initiatives enable more entrepreneurs to build and scale their businesses with purpose.
ESG_VC
ESG Measurement framework for companies
VentureESG
ESG standard for investors
We are very excited to watch sustainability establish itself as more than a trend. It has become a true priority on all fronts.
Stronger pressure from regulators and consumers who are increasingly more aware and engaged makes room for startups to establish themselves as category leaders. We've seen some interesting trends through some of our portfolio companies, like Sylvera on the infrastructure end, or Treecard, on the consumer front. Both startups have been able to attract world-class talent from day 1, as today’s employable generation is looking to join companies with stronger missions rather than financial returns. Furthermore, they have been able to assemble diverse teams from the get-go, which we deem to be crucial in building products and solutions for wider adoption.
Time and resource constraints are barriers for companies looking to better understand their impact
The majority of founders share that environmental and social governance (ESG) has grown in importance in their day-to-day operations. However, they also report a significant amount of friction in the process of understanding and improving the impact of their companies. Resource and time constraints are highlighted as the biggest constraints, followed by a lack of investor buy-in and external resources to support the process. Promisingly, initiatives have emerged over the last year to address these challenges, such as VentureESG and ESG_VC. For instance, ESG_VC has created a free and easy-to-implement framework to help companies quantify and set ESG-related objectives (link below the chart).
To what extent do you think the below impacts the ability to measure and improve your company's social and/or sustainability impact?
- Very great extent
- Great extent
- Some extent
- Little extent
- Not at all
- Notes
- Founder respondents only. Numbers may not add up to 100 due to rounding.
Angel firepower is now significant with influence over the diversity of the talent pool
In order for better ideas to fuel the next wave of companies, it is crucial to expand the pool of talent that gets access to funding. In the next chapter we will see how lack of diversity compounds over time. As such, it is key to make sure diversity is tracked at the top of the talent funnel, as well as across each stage of funding. Angel investment is important here, as it is typically the 'first money in'. It remains one of the most challenging datasets to report on, because a large share of that funding is not made publicly available and/or is suffering from significant reporting lags. Nonetheless, Dealroom's dataset is a helpful signal on the market's direction of travel. It shows that the gap in investment going to male and female founders remains stark. In 2021, founding teams comprised solely of men captured 87% of all angel funding.
Capital invested ($M) by angel investors by founding team gender, 2017 to 2021
- Men only founding teams
- Mixed teams
- Women only founding team
- Notes
- All Dealroom.co data excludes Israel and the following: biotech, secondary transactions, debt, lending capital, and grants. 2021 figures show data up to September 2021.
To grow my business in the 1960s, I had to become ‘Steve Shirley’ and disguise the true nature of my all-female workforce! Leaps have been made since then, but much remains to be done.
I arrived in the UK as part of the Kindertransport in July 1939 when Europe was on the brink of collapse. It is almost unbelievable to see Europe as it stands today, a thriving hub of entrepreneurship.
I know now that our community can grow despite great hardship, proved again by the pandemic. Founders across the region stepped up and set the stage for this extraordinary year of investment. We now have much-deserved world-class recognition of our talent and skills. To continue this trajectory, we need to even the playing field for people from all walks of life.
My advice to founders today? Make the most of the world’s new interest in European technology and stick with those who inspire you. Relay your successes back to those who helped you, and pay your debt forward to those who still face extraordinary barriers.
Women founders consistently report poorer experiences with investors
Landscape – a platform for anonymous VC and investor reviews – gathers insights from founders across a range of attributes to unpack the strengths and weaknesses of investors. For the purpose of this analysis, all reviews have been aggregated and anonymised. Scores range from 1 (lowest) to 5 (highest) and have been translated to percentages. Reviews were segmented by stage and gender to provide further insights into gendered experiences in the talent pipeline. We found that women founders at seed level consistently give investors worse scores on diversity, response time, punctuality and professionalism, compared to their male counterparts. The scores given to investors on diversity particularly stand out, as these materially weigh down overall net promoter scores. VCs still have work to do to ensure they deliver a consistent experience for all founders.
I do think as a woman founder I have to hit every benchmark. No one is saying "Peanut is excellent in XYZ, they will figure ABC out", we have to deliver the whole damn alphabet. "They will figure it out" is a phrase I hear often used about male founders, and I've never heard about a women led team.
We know that companies with a women only founding team have raised late stage capital that are half the round size of mixed gender founding teams and male only teams. To change that, we need more women writing the cheques, more women sitting at the table, leading decisions. That doesn't just mean having the title of Partner, that means having an active voice on ICs. If LPs were able to challenge funds on these points too, that would make a real difference too, although it is the responsibility of funds to challenge themselves on their pipeline. If your pipeline is not diverse, scrap it, and start again, diversity of founders are there if you search for it.
More must be done to increase opportunities for underrepresented groups
68% of women and 61% of men that responding to this year's survey do not believe the European tech ecosystem has made progress over the last 12 months when it comes to providing opportunities to individuals from underrepresented demographics, backgrounds or experiences.
A lack of equal opportunity
When asked which groups of society are currently lacking access to equal opportunities, non-binary respondents, women and people of colour feel most left out. But across the board, one in two respondents from underrepresented groups feel like that tech ecosystem is failing to provide equal opportunity to them. The range of answers given here speaks to the importance of building a broader awareness and better understanding of the many forms of discrimination that exist within the European tech ecosystem. There seems to be a clear mismatch in perception between people from the marginalised groups and those without. For example, for people from poorer socio-economic background and non-native speakers, their perception of their own lack of opportunity matches that of people from outside their group. Yet for women, people of colour and non binary people (especially) there’s clearly a disconnect. It is of course important to note that these survey results speak to people's perception, rather than an objective measure of reality. Nonetheless, they provide an important indication of people's lived experiences.
For which of the following groups of people do you think the European tech ecosystem is failing to provide equal opportunity?
- Respondents self-identifying with the group
- All respondents
- Notes
- Respondents who answered "about the same" or "less" to "Does the European tech ecosystem provide more or less opportunities for people of underrepresented demographics, backgrounds and experiences than it did 12 months ago?" Numbers do not add to 100 as respondents could choose multiple options.
I don’t think solving long lasting equality in entrepreneurship is simple, but diversity is no good if the environment is such that talented people from a minority background cannot be retained.
Hiring associates is important, but what about challenging the accepted criteria for hiring partners? Assembling a truly diverse senior team gives more access to deals and it’s widely proven that diverse teams are stronger and more robust in the long term.
For me, it can look like investors asking my male CTO about revenue and unit economics through kind words from well meaning investors telling me that I’ve “done well”, even though I know my male peers are not spoken to like this. It affects confidence. They might be small comments that we laugh off, but the truth is that these everyday examples chip away at that sense of self belief that is critical to being a successful founder. I’m looking forward to a day when I’m not asked this question anymore or when I mention these examples - and my kids look at me in amazement because it’s such a relic of the past!