As European businesses gradually return to normal amid easing pandemic restrictions, the Continent’s startups are ablaze. Halfway through this year, nascent companies got their hands on almost three times more money than in the first half of last year.
The influx means that Europe’s startup scene is — finally — starting to occupy a bigger space on the global stage. This year, the Continent accounted for 18 percent of total global funding for startups, their biggest ever share. The record makes Commission officials jubilant in anticipation of what one called a “spectacular” year.
The EU tech scene may also feel less like an impostor thanks to the numbers, collected by Dutch data provider Dealroom and shared with POLITICO. Sweden, one of Europe’s richest breeding grounds for startups, even outperforms the U.S. when the money is calculated per capita.
The Northvolt case highlights that wealthy Europeans are willing to invest in capital-intensive, technologically advanced activities, like producing batteries. The Commission approves. These activities, dubbed “deep tech,” are a top priority for the bloc.
“Deep tech startups are more likely to contribute to green transition and technological sovereignty, but the amount invested is larger and the return on investment is longer,” a Commission official said.
The bloc’s executive body is more worried about U.S. investors sneaking up on European companies like Klarna. U.S. investors put €10.1 billion into European startups in the first five months of the year, already surpassing the total amount of last year, according to numbers provided to POLITICO by the Commission.
“There is a big increase of investment from U.S. investors in digital startups, but there is also a direct relation with brain drain,” the EU official said. “Startups with foreign investors are more likely to relocate.”
The great divide
While the Nordics thrive, the eastern and southern parts of the bloc lag behind.
A ranking of investment money per capita shows that the Nordics, the Baltics, Luxembourg, Germany and France perform above the European average, while Belgium, Austria and countries in the East and the South fall below.
One of these countries is Slovenia — which holds the Council of the EU’s rotating presidency. “Assuring access to capital in all stages of growth, especially in the late stage, should be our number one priority,” Simon Zajc, the country’s state secretary for economic development and technology, said at a startup event in June.
One way to satisfy Zajc could be to launch large government funds that operate across borders, and alongside private co-investors. An example is the Central Europe Fund of Funds, a €97 million kitty supported by Austria, the Czech Republic, Hungary, Slovenia and Slovakia.
The European Institute for Innovation and Technology (EIT), an EU agency, has its own plan to bridge the gap: a budget ranging from €300 million to €450 million for a program that focuses on countries that perform poorly on innovation.
The EIT is determined to make innovation happen outside traditional startup hotspots like Paris, Berlin and Stockholm. “The last seven years we have already built up activities and hubs in Central, Eastern and Southern Europe, where there is lower innovation capacity,” EIT director Martin Kern said last month.