How to Unlock the Hidden €20.4 Trillion Potential of European Tech in 2022

The recent annual State of European Tech 2021 report published by Atomico showcases how the European tech landscape is currently emerging as one of the biggest tech powers across the globe. With a total of €3.4 billion and 321 unicorns (up from 223 in 2020), Europe is now close second within the early-stage investment ecosystem, beaten only by the U.S. where this number reaches €3.6 billion.

But the report also shows that, although 2.7 trillion euros of value has now been unlocked, the Old Continent still offers an estimated value of €20.4 trillion that is waiting to be unleashed.

This is a huge potential that is yet to be harvested, and with 100 new unicorns and €100 million funding rounds now happening almost on a daily basis, the European tech market has reached a €221.7 billion exit value.

However, there’s still much room for improvement.

For example, 66% of investors in European rounds over €100M are not European according to the EIF’s study:

(Image source: EIF)

While there are also numerous challenges when it comes to:

• Improving diversity
• Investing in businesses located in less-developed European countries
• Hiring the right people

Let’s take a closer look at the current issues and how they can be solved so Europe’s tech environment can bloom to its full glory.

Problem 1: Lack of Funding in Female Entrepreneurship and Diverse Environments

The abovementioned studies revealed that ethnic minorities and female business leaders are having more difficulties raising capital as almost 50% of women and 40% of non-white founders state that having underrepresented backgrounds hindered them in their efforts to raise capital.

According to the Atomico study, only 1.3% of Europe’s venture capital funding goes to start-ups that have ethnic minority founding teams (though I would be careful with the portrayal of this type of data as we can never truly know all the necessary details about how the surveyed founders actually founded their businesses or what the percentage of people with a migration background is within a country).

But one thing is definitely straight — the diversity scores should go up.

Even though diversity has proven to move the needle for team productivity, diverse teams take up only 9% of raised capital in 2021. Meanwhile, up to 74% of female and non-white individuals have shown increased interest in working for European tech companies.

So, how do we connect the two sides?

Solution:

Though the modern business landscape in Europe has matured greatly, long-term ambitions are only achievable if obvious structural issues are properly addressed. Improving diversity is among key remedies for further improvement as it holds unharvested potential for boosting productivity and securing growth.

An effective way to tap into diversity-rich environments is to use workforce analytics software like Osterus. Businesses that use our platform are able to deeply analyze their investment opportunities by getting insight into the most valuable asset of any company — the people.

Osterus features advanced CV sorting capabilities that help you:

• reveal bias
• improve diversity scores
• find hidden short- and long-term benefits of ALL candidates

The data points provided by Osterus enable businesses to better understand the backgrounds and the potential of each employee profile, allowing them to invest in more diverse teams and thus improve the performance and the ultimate success of their company.

Problem 2: The Unlocked Potential of South and East

Berlin, Stockholm, Munich, London and Paris are currently the five largest Europe-based tech environments in terms of total capital invested. These cities harbor businesses that comprise 54% of total investment in 2021.

This means that more-established companies (mainly based in Northern and Western Europe) tend to capture most of the funding, while the growth-stage businesses in under-developed tech environments (Southern and Eastern Europe) have a much more narrow window of exposure and opportunity.

So, how can investors unlock the vast potential of these hubs?

Solution:

The European tech playing field is currently slanted towards north and west. To use the basketball analogy — most investors are passing the ball to the cluster of players in the paint, while there are many open and skilled MVPs on the three-point field goal waiting for their opportunity. And a vast number of them are great at making 3-pointers. (Trust me, I should know!)

This is why investors need to stop neglecting the tech environment based in Southern and Eastern Europe. But making the European tech ecosystem more homogeneous requires advanced workforce, M&A and investment opportunity analytics — all of which are available through Osterus.

We can help investors aggregate workforce data and examine the companies from less-developed tech countries and let them realize that — when it comes to skills, experience and motivation — Europe’s south and east tech players are not lagging behind at all.

Problem 3: Finding and Hiring Quality Talent Has Become Much Harder

Among the biggest challenges for European tech companies and their founders is recognizing and hiring highly skilled, quality employees. According to a 2021 talent pipeline analysis conducted by the joined forces of Atomico, Extend Ventures and Dealroom, the founders at the seed and Series A levels claim that it is much harder to find the right skilled employees in 2021.

The State of European Tech 2021 survey analyzed 45,000+ founder and senior leader profiles across almost 5k European tech businesses and revealed that approximately 6 out of 10 founders at seed and at Series A report this as one of the major bottlenecks.

Solution:

Using smart recruitment solutions. Another effective feature that Osterus provides to businesses is smart recruitment. Our software enables companies to sort through ALL the CVs and potential candidates, providing valuable and actionable insight into which profiles are more likely to:

• perform better
• improve over time
• advance the management ladder
• stay longer in the company
• provide an overall boost in human capital, etc

Sorting CVs will be available starting April 2022. Meanwhile, you can easily use Osterus to assess the hiring and recruiting strategies of competitors or any other company on the market.

If you’re interested in using Osterus to analyze your competition, assess the potential M&A opportunity, or something else — feel free to schedule a demo and we’ll explain how we can help your business grow.

We have a saying here at Osterus, “Let the data speak.” So, let’s!