How can Europe step up to global tech leadership?

Digital adoption has accelerated, remote working has levelled the playing field in the war for talent, and technological sovereignty has become a hot topic. Now a few months in, Europe is seemingly navigating the crisis well, supported by decisive moves from national and regional governments. But this is just the start of the journey for Europe stepping up to global tech leadership.

To mark the launch of the new Europeanstartups.co data platform for macro intelligence about Europe’s innovation economy, we delved into the the role of governments in startup ecosystems, how Europe is fairing, and how the gap to the US can be closed in the coming years.

Navigating the crisis

Europe stands starkly apart from the US in its decisive economic response to the current crisis. In addition to broad scale business and employee support scheme, many European countries unveiled bespoke tech industry packages tailored startups which were often not eligible for other government loan and support schemes. These took different forms, including accelerated tax credits, R&D grants, co-investments fund-of-funds and direct loans.

Europe’s three biggest tech nations by ecosystem value each responded with support in the billions. Both in total value, and when calculated by number of domestic startups with over €1M funding, it’s clear that France responded most decisively, with an average €3M support per €1M+ funded startup.

France is also leading my VC investment growth so far this year, with Jan-May investment growing 17% year on year. Sweden also showed resilience with 10% growth, where other ecosystems were down for year-on-year investment. It’s worth noting that venture capital is a volatile and lagging indicator, for example a few large rounds can quickly turn things around, but the picture will become clearer as year goes on.

The long-term role of government in European tech

As European tech has matured, it has become less reliant on government capital, with private funding making up an ever increasing proportion of the now record levels on funds raised by European VCs.

In general, Europe still has a long way to go, but it is catching up with the US. Last year 16% of global VC was invested in Europe, compared to just 4% in 2004.

But the opportunities are huge. The market cap of the top 10 US VC-backed companies in €3.6T, compared to 0.3T for Europe’s top 10. If Europe can effectively leverage data-driven government support and smart regulation to navigate the current crisis, as well as capitalize on accelerated digital adoption and inherent industry adaptability, Europe can make big strides towards closing the gap.