Investors see a new shine on the European tech scene

Europe’s tech scene has struggled to emerge from the shadows of giants in the US and Asia, but supportive local policies and a global flood of investment capital are now giving the region a source of liquidity.

Investments in European tech companies soared to $93.3 billion last year, a record high and a 142% increase over the previous year, according to CB Insights. The number of transactions also jumped, to 7,051 from 5,746 the previous year and 6,051 the previous year.

The region never had its answer to the likes of Apple Inc., Microsoft Corp.

and Netflix Inc. in the west, or Alibaba Group Holding Ltd. and Tencent Holdings Ltd..

to the East. But European investors and founders say there’s never been a more hospitable climate for their burgeoning tech companies.

Back Market, a Paris-based online marketplace that sells refurbished iPhones and other electronics, said this month that a recent seed round had boosted its valuation to $5.7 billion. .

Berlin-based grocery delivery company Gorillas Technologies Ltd. raised nearly $1 billion in October from investors including Coatue Management, Tencent and DST Global. British online payment company Revolut Ltd. brought in $800 million last July from SoftBank Group Corp..

‘s Vision Fund 2 and others, valuing the company at $33 billion.

“People have doubted that Europe can create very large companies because it’s more fragmented and it’s more complicated,” said Zoe Fabian, who oversees growth capital investments in several European countries at the firm. Eurazeo private equity fund..

But the recent increase in funding appears to have changed the narrative, she said.

Part of the frenzy is driven by envy of Silicon Valley in European capitals, where governments have created programs to kick-start tech fundraising.

French President Emmanuel Macron signed an initiative last year to create 10 European tech champions worth more than 100 billion euros, or $113 billion, by 2030. France also unveiled a initiative in 2020, in which institutional investors have committed to invest €6 billion over three years to finance technology companies via private funds. Capital has been distributed to companies like iziwork, which connects temps with employers, and PayFit, which offers automated payroll software.

French President Emmanuel Macron signed an initiative last year to create 10 European tech champions worth more than 100 billion euros each.


Photo:

Benoît Tessier/Agence France-Presse/Getty Images

In Germany, the government launched a so-called Future Fund last year, using 10 billion euros in public funds and 30 billion euros in total with private and public partners to finance startups. The first investments were made last year in venture capital funds, which will deploy the money in companies.

Ms Fabian said it can be cheaper to set up some companies and hire for them in Europe than in Silicon Valley, with its high cost of living. His team raised $2 billion in July for its third fund. Last year, his team doubled its number of investment professionals to 16 and reviewed 300 deals, up from 200 in 2020.

Nazim Cetin, Managing Director of Allianz X, the digital investment arm of German insurance company Allianz SE,

says that European companies have matured. Many are past their early growth stage, which means investors are pouring larger sums into them. Allianz X is an investor in N26 Bank GmbH, a Berlin-based digital bank that last October raised $900 million in new funding that valued it at more than $9 billion.

The number of European tech IPOs has surged, although they remain small compared to US tech giants. And because the valuations of European tech companies have not yet reached those of the United States, they represent a boon for investors and a chance to profit from a company’s IPO. According to CB Insights, there were 185 European tech IPOs in 2021, including British fintech Wise PLC,

compared to 85 in 2020.

Companies have the advantage of raising funds right now, said Spencer Crawley, co-founder of firstminute capital, which has just over $300 million in assets under management and invests in fundraising rounds. scale with a focus on the United States and Europe.

Companies are now commanding valuations they will reach in three to five years, not one or two years like a few years ago, Mr Crawley said, proof of investor confidence. Mr Crawley said his company was increasing the amount of checks it wrote in an attempt to counter the surge in investors in the space.

Christian Wiens, chief executive of Getsafe, which sells digital insurance products via app in Germany and the UK, said his company could have raised more than $93 million in its last funding round, which had already been expanded.

Mr Wiens said he had attracted interest from global investors, but saw it as a positive sign that European investors, who were part of the cycle, wanted to pump money into early-stage startups. ulterior.

Oritual to Julie Steinberg at julie.steinberg@wsj.com

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Mary I. Bruner