Europe has come a long way over the past ten years, establishing itself as a global benchmark in the tech ecosystem. The annual report State of European Tech 2024 reflects a decade of transformation, highlighting impressive achievements and persistent challenges in investment, talent, and ambition. This article delves into the report's key findings and explores what the future holds for the tech sector in Europe.
1. Overview: A transformative decade
The European tech ecosystem has undergone unprecedented evolution over the past decade, establishing itself as a key pillar of the global economy. Since 2015, total capital investment in European technology has grown tenfold, reaching $426 billion. This growth is significant not only in absolute terms but also in reflecting remarkable diversification across sectors leading innovation. Areas such as Artificial Intelligence (AI), FinTech, Deep Tech, and sustainable technologies have been central to this transformation.
The number of startups has also skyrocketed. In 2015, Europe was home to some 7,800 startups, but that number has grown more than fourfold, surpassing 35,000 by 2024. This boom is a testament to the maturing ecosystem, driven by a combination of local talent and the growing ambition of European founders.
A pesar de estos avances, el camino no ha estado exento de desafíos. Factores como la fragmentación del mercado, la regulación compleja y un déficit de financiación en etapas avanzadas aún limitan el potencial del continente. Sin embargo, la resiliencia y el dinamismo de Europa han demostrado ser motores esenciales para consolidar su posición como líder global en tecnología.
2. Investment in technology: Achievements and gaps
Despite an uncertain macroeconomic environment, Europe has consolidated a solid foundation of tech investment. In 2024, total investment is projected to reach $45 billion, a significant growth compared to $15 billion in 2015. This increase reflects the maturity of the ecosystem and investors' confidence in the continent's innovative potential. However, a critical challenge persists: a $375 billion growth funding gap. This shortfall, driven by lower conversion rates to growth rounds, limits the ability of many startups to scale.
A key factor is the low participation of European pension funds, which allocate only 0.007% of their assets to venture capital, compared to 0.029% in the United States. Increasing these investments would be essential to unlocking the true potential of the European ecosystem.
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3. European talent: A strategic resource
Europe has experienced exponential growth in its tech workforce, rising from 500,000 employees in 2015 to 3.5 million in 2024, representing a 24% annual increase. This impressive progress positions the continent in a comparable position to the United States, especially in key sectors such as AI, FinTech, and sustainability. The talent increase is driven by a more mature ecosystem, where startups and scaleups not only attract local workers but also international ones.
The State of European Tech highlights that despite these advances, the competition for global talent remains a challenge. Countries like Germany, France, and the United Kingdom lead in tech hiring, but others, such as Poland and Spain, are gaining relevance. To stay competitive, Europe must improve its global talent attraction policies and continue strengthening education programs focused on technology.
4. Sector leaders: Innovation with purpose
One of the key highlights of the report is the growing investment in sectors focused on social and environmental impact, such as sustainability and Deep Tech. In 2024, 21% of the total capital invested in Europe was directed towards sustainability-related companies, a significantly higher proportion than the 11% observed in the United States. This positions Europe as a global leader in the transition to clean technologies and renewable energy.
The focus on sustainable solutions ranges from carbon management to the development of new materials, renewable energies and the circular economy. Companies such as Northvolt, specializing in sustainable batteries, or Climeworks, a pioneer in carbon capture technologies, exemplify this trend.
In addition, the Deep Tech sector continues to attract capital and talent, with 33% growth in investment since 2015. These technologies, which include artificial intelligence and quantum computing, promise to solve some of society's most complex problems, underscoring Europe's role as a global innovation engine.
5. Mergers, Acquisitions and Exits: An Evolving Marketplace
The European market for tech exits and transactions has shown steady progress over the last decade, reaching a total value of $1 trillion in combined IPOs and M&A since 2015. This impressive achievement includes milestones such as the ARM IPO in 2023, valued at $65 billion, and the acquisition of IHS Markit in 2020 for $45 billion, which stand out as some of the largest deals in Europe. However, in 2024, exit activity has declined due to a tighter liquidity environment.
Despite this slowdown, analysts project a recovery as market conditions stabilize. Europe has a strong pipeline of growth-stage companies poised to generate significant returns over the medium to long term. As experts in the field, from Baker Tilly's Tech M&A team, we observe above all that the processes take longer and are not closed in a few months.
6. Challenges and keys for the future
Despite the progress, the European tech ecosystem faces significant barriers that could limit its potential. Among the most noted challenges, 47% of respondents identify regulatory policies and bureaucracy as the main obstacles to growth. The fragmentation of the European market also hinders the scaling of startups, with less than 18% of early-stage investments being made cross-border. Additionally, the funding gap for growth-stage companies, estimated at $375 billion, remains a critical issue.
Proposed solutions include the implementation of a unified legal framework, known as “EU Inc.”, to simplify operations across Europe, and the more active involvement of pension funds and institutional investors. These actions would not only strengthen global competitiveness, but also enable Europe to retain its talent and lead in innovation.
7. Looking ahead: Europe as a technological superpower
Europe has the opportunity to establish itself as a tech superpower in the next decade, with projections including the creation of 15 million new tech jobs and an ecosystem valued at over $8 trillion by 2034. This growth will be driven by a combination of world-class talent, access to capital, and a strategic focus on addressing global challenges such as sustainability and digital transformation.
To achieve this future, it is essential to close the $375 billion funding gap in growth stages, attract investments from pension funds, and simplify the regulatory environment. The implementation of a single European market for startups, along with pro-innovation policies, could unlock a new era of opportunities.
Conclusion State of European Tech
The State of European Tech 2024 report is both a reflection of the progress made and a compass for the path Europe must chart in the next decade. The continent's achievements, such as a vibrant startup ecosystem, significant advancements in sustainability, and a constantly growing tech workforce, are impressive. However, challenges such as the lack of growth funding, fragmented regulation, and global competition for talent still hinder its full potential. Overcoming these barriers requires bold action and collaboration between public and private stakeholders.
With an ecosystem projected to generate 15 million new jobs and reach a value of $8 trillion, Europe has the opportunity to establish itself as a tech superpower, leading innovative and sustainable solutions with global impact.
Is your company ready to seize these opportunities? Contact our expert advisors in technology sector mergers and acquisitions to explore how we can help you maximize your impact in the European tech market.
The full report is available on the State of European Tech website