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Key Findings

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Investors

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Purpose

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Policy

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Appendix

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A Word from Orrick

Tech is THE engine of European growth, as this year’s State of European Tech Report makes clear.

Europe’s tech ecosystem is well-established and robust, with record funding, sophisticated founders and investors, and accelerating growth. European tech companies will likely reach $34B in funding in 2019, up from $25B in 2018. Funding has more than doubled in five years. This includes more than 40 $100M+ deals so far this year – more than ever before.

Across Europe, there now are 174 $1B+ tech unicorns. In 2010, there were only 18 – a 10x increase in less than a decade.  And 20 countries now have at least one unicorn, twice the number only five years ago. Today, 170 cities have tech communities, compared to 70 four years ago.

While M&A exits are down this year, there were more than double the number of exits in the past five years than the previous five years. And M&A deal value is on track to surpass last year’s total of $100B.

What will it take to sustain this Europe’s success? The report points to four things:

The European Commission needs to clarify its regulatory priorities. Technology advancement continues to outpace regulation. The report demonstrates that AI and deep fakes are top of mind for regulators. Yet 40% of survey respondents reported that they don’t feel sufficiently informed to comment about the EC’s tech and digital regulatory priorities. We’ve seen the great benefits of collaborating on policymaking – for example, in the UK fintech market – but it starts with greater transparency from policymakers.

We also encourage policymakers to consider opportunities to simplify and streamline compliance requirements, scaling the burden as the company (and the risk) expands. This is especially important in the employment regulatory arena. Otherwise, we risk placing an outsized burden on startups – and stifling their ability to grow, innovate and create those very jobs.

Attitudes are changing about the value of inclusion; investment needs to follow. Inclusion continues to be a challenge for the sector with only 8% of funding going to companies led by mixed-gender and women-led teams. However, at the company level, more than 40% of team members see improvement. The report also notes that more than half of investors and startup employees have not yet had the benefit of unconscious bias training. The social science leaves no doubt that more inclusive leadership will generate greater innovation and returns.

Sustainability is top of mind – but there’s room for greater focus. More than 85% of founders say they care about the social and environmental impact of their companies – and investors are backing that commitment. Almost 50% of VCs say they take into account the societal or environmental impact of a prospective company before deciding whether to invest. We’d like to see even greater focus on social impact. We also applaud the 15% of VCs who continue to track their portfolio companies’ social impact metrics on an ongoing basis.

Likewise, as a community, we need to look out for mental health and career sustainability. Almost 20% of founders say that launching a company has had a “mostly negative” impact on their mental health, and the vast majority said they would welcome greater support from investors on managing the pressures they face. Founder wellness is an important factor in the overall health of the ecosystem. We believe a focus on inclusion can help here, too.

We’re incredibly grateful to Atomico for collecting and sharing the rich market insights in this report. At Orrick, we look forward to continuing our work with the European tech community to build an even stronger European platform. Over the past 15 quarters, we’ve advised on more venture capital deals in Europe than any other law firm – by a factor of 2.5. And we’ve backed 20+ unicorns with legal, regulatory and commercial advice since their inception. It’s an incredible honor to be part of your success story.

Keep disrupting.

Chris Grew
Partner
Technology Companies Group
Orrick

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