MEMBER NEWS: 3 Reasons European Tech is Set to Explode in 2017

Author: Robb Miller, Sales Force Europe

sales-force-europeAs a consultant for startups and large companies looking to break into new territories, I’m often asked to issue predictions, especially about what’s coming in the European market for technology businesses. There are so many news stories, some conflicting, that you’ll read in sources like TechCrunch, The Economist or Harvard Business Review. But Telecom Council asked me to present a few findings at their recent Predictions 2017 event, held at Silicon Valley Bank in January. Here are some of my key impressions.

European tech is awash in cash

There was $88 billion in M&A activity in deep tech[1] in 2016 (following three brisk years — roughly one deal per month since 2014).[2] Further, Brexit impact will be negligible – only 2% of respondents to an Atomico survey cited Brexit as a big issue. Most founders’ concerns remained (predictably) on key business issues, such as finding sources of funding, regional professional support (such as legal and accounting help), prevalence of engineering talent, and general risk aversion from banks and investors. In the past year, the first European technology companies valued at or over $10 billion, such as Supercell, emerged. Can the first $25 billion or $50 billion valuation be far behind?

European tech will become better distributed in 2017

In part due to Brexit, but also because of the standard network effects of big business (education expanding, governments raising technology funds, etc.), European centers of excellence will not remain so focused on the UK. London will cede some talent and capital to Paris, Berlin, Stockholm and Helsinki, and there are already secondary upstarts, including Munich, Zurich, Copenhagen and Lisbon. Interestingly, talent is the leading reason founders locate to a city, beating access to money by 27%.[3]

Further, there is a lot of dry powder being stacked up on the other side of the pond. U.S. Venture Capital Firms are investing more in Europe (average increase of 88% every year since 2011), and I believe we should expect an 80% increase again in 2017. Where this capital goes will depend on where the talent is, and that talent, perhaps tempted to remain in place (rather than migrate to the UK, which has been common for much of the past two decades), will build local engines of innovation all across the Continent.

Artificial Intelligence (AI) Will Dominate Investment in Europe

Close to 1,000 deep tech startups, which include AI-based software, have been founded in Europe since 2014 with many more to come in 2017. $2.3 billion has been invested in deep tech in Europe since 2015, steadily increasing year over year – 4x the investment was made in 2016 versus 2011.[4]

Further, Europe has a recognized prominence in these fields, and top talent and entrepreneurship will become more regionally diverse. For example, there are already deep tech engineering centers of large U.S. tech companies (Amazon, Apple, Google, Microsoft) in Germany, the UK and Switzerland. But, just as interesting, new graduates specializing in AI are most abundant in London, Paris and, yes, Madrid and Barcelona, which means that Southern Europe, often an also-ran in technology-related fields, is getting in on the action.

Europe is coming into its own

Technology as a business is strong globally. The U.S. is frequently the fastest-moving engine of innovation, financing and leadership, but Europe has been showing signs that it is ready to assume the role of #2 – with the world’s second-largest GDP, a massive population of over 500 million, and a renewed – and healthy – distribution of talent, it is set to break new boundaries in 2017.

[1]  Deep Tech = AI (machine learning, speech recognition, NLP, etc…), VR&AR, IoT and Hardware (drones robotics); VR/AR = Virtual Reality and Augmented Reality and IoT = Internet of Things

[2]  Atomico | Slush, The State of European Tech; http://atomico.com/news/the-state-of-european-tech-2016

[3]  Atomico | Slush, The State of European Tech; http://atomico.com/news/the-state-of-european-tech-2016

[4]  Atomico | Slush, The State of European Tech; http://atomico.com/news/the-state-of-european-tech-2016

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