Europe on track for record
tech investments this year: Atomico
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[November 30, 2016]
By Mia Shanley and Eric Auchard
HELSINKI/FRANKFURT
(Reuters) - Europe's tech sector is on track for a record level of
investments this year but poor access to late-stage capital is keeping
it from creating independent tech "gorillas", one of the region's most
active investors said.
Europe is expected to hit $13.6 billion in tech investments in 2016, up
from $12.6 billion in 2015 and almost five times levels five years ago,
venture capital firm Atomico said in a report released at Slush, one of
the region's biggest tech start-up conferences.
New hives of activity are popping up outside the main tech hubs in
places like Munich, Zurich, Copenhagen and Lisbon with money flowing
into industries ranging from music and fintech to fashion and food.
Long the laggard in terms of risk-taking, access to capital and creation
of globally successful companies relative to Silicon Valley, Europe's
rising tech scene is starting to stand out in some unexpected ways.
Five of the world's top ten technical universities are located in the
region and Europe also appears to have an edge over the United States in
software development.
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StackOverflow Insights, which tracks programmer trends, reckons there
are 4.7 million professional tech developers in Europe versus 4.1
million in the United States.
Just this month, Facebook <FB.O> and Google <GOOGL.O> announced major
expansions of their teams in Europe, citing skilled talent.
"We haven't had the gorillas in terms of size, but it's getting there,"
said Mattias Ljungman, who created Atomico with Skype co-founder Niklas
Zennstrom. "Slowly but surely it's building up," he told Reuters.
Instead of staying independent and going public, many European tech
firms tend to sell early to buyers in the United States or China.
China's Tencent Holdings Ltd <0700.HK> bought 'Clash of Clans' maker
Supercell in a deal valued at $8.6 billion. Chinese online travel firm
Ctrip.com recently agreed to buy UK-based Skyscanner Holdings Ltd for
1.4 billion pounds.
Moreover, Japan's Softbank snatched up British chip technology company
ARM for $32 billion while U.S. based chipmaker Qualcomm snatched NXP of
the Netherlands, Europe's largest chipmaker, for $38 billion.
Ljungman said Europe needed to boost later-stage access to capital to
ensure more companies stay put, get bigger and keep control of their own
destinies.
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![](../images/113016PICS/busine1.jpg)
Staff is working at Slush, one of Europe's biggest tech start-up
conferences in Helsinki, Finland November 30, 2016. REUTERS/Mia
Shanley
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"The mindset is raise early-stage funding here and then get the bigger
tickets in other parts of the world. There needs to be more regional
capital - I think that will be super helpful," he said.
Atomico estimates Europe needs to close a $25.1 billion funding gap with
the United States. Allocating just 0.6 percent of European pension funds
which manage some $4.1 trillion to the tech sector would close that gap,
it said.
Top U.S. funds are already getting more active in Europe while more
companies and private equity firms are starting to see opportunities,
Ljungman said.
Investors expect Swedish music streaming service Spotify, which has held
its own against rivals like tech giant Apple Music, could go public next
year.
Ljungman remains hopeful that tech gorillas will emerge in Europe.
"I don't think we should be surprised if over the next 10 years we
should be looking at outcomes that are tens of billions and making their
way up to hundreds of billions," he said.
(Additional reporting by Jussi Rosendahl and Tuomas ForsellEditing by
Ruth Pitchford)
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