When we refer to the technology flywheel, we ‘re talking about the compounding effect entrepreneurial activity has. In other words: success breeds success. This is what we’re seeing happening in Europe. At lightning speed, the bar is being raised for quality of ideas, ambition levels and execution capability.
As we look forward to Europe’s next act, we explore the additional factors which - if we get them right - can ensure Europe unlocks its full potential on the tech stage and beyond. By aligning the entire ecosystem around this shared goal, and recycling talent and capital at scale, we can turn stumbling blocks into the building blocks of the future.
Ambitious individuals are choosing tech
European tech benefits from a deep and experienced talent pool. The growing number of tech hubs distributed across all corners of the region have their own strengths and sets of attributes that make them unique, and knowledge and experience are flowing through an ever better-connected Europe. But talent acquisition continues to be a bottleneck, and lack of diversity risks being compounded over time.
To sustain this path of growth, it’s important that the government continue to provide encouraging conditions for high-growth entrepreneurship. First of all, entrepreneurs need favourable, clear regulation. On this front, I am pleased that, at the start of 2021, we passed into law a set of provisions that provide more options for extensive employee ownership in private companies.
Secondly, the government continues to be an important source of funding for startups. In this realm, I am proud of our choice to prepare ourselves to commit €250M of equity financing to Finnish startups in the spring of 2020 on the back of Covid-19 outbreak . Luckily, only part of the capital was needed to support the ecosystem, while the signalling effect to the market was strong. In due course, I hope it will also allow all Finnish taxpayers to reap the benefits of the exceptional potential of young technology companies.
Building better companies
European Tech has become a breeding ground for companies across all sectors. From eVTOL jets and quantum computing to B2B marketplaces and SaaS, Europe is proving it can do it all. Today's generation of European tech startups are coming out of the blocks faster than ever and scaling at an accelerated pace compared to prior generations. But there are still many structural challenges holding back better business connectivity across Europe, such as the friction associated with talent mobility and the ability to expand quickly across the region.
Like everyone, entrepreneurs have faced enormous challenges and barriers as a result of the pandemic. But they've also proven an incredible resilience and even unique growth. Startups are a key engine of economic growth for our region and a key agent of digitalization. They are the innovators in crucial industries such as health, education and cybersecurity. The only way for governments and legislators to support startups is to take the time to understand them and for regulation to keep pace with innovation.
Empowering world-class investors to fuel the flywheel
The European tech opportunity is huge, and has the potential to support a substantially larger level of capital investment as it continues its growth trajectory. This represents an opportunity to maximise the value captured by Europe itself, whether in the form of innovation, growth, employment or otherwise.
There is also still a largely untapped opportunity to match the hard-earned experiences, networks and capital of Europe's most successful founders and operators to more recent cohorts of talent. The alumni of more recent European tech success stories, such as Spotify, Pipedrive, Revolut, Wise and others are already actively investing in the next generation in increasingly systematic ways - but the more that others do this, the faster Europe's tech flywheel will spin. This is also an opportunity to catalyse a new generation of investors with more diverse backgrounds to fund more diverse ideas.
Facilitating liquidity and recycling to supercharge
With over $180B of combined exit value across European tech companies this year, there are clear signs that Europe's leading tech companies are finding paths to liquidity. This benefits European builders and investors, but it is also important for the role it can play to inspire the next generation of entrepreneurs and raise their ambition levels. Celebrating successes and establishing European tech entrepreneurs role models is an important contribution to building the mindset that anything is possible for tomorrow's generation of European entrepreneurs.
We struggled to pick one chart or quote to close the report. In the end, we went back to the very first State of European Tech from 2015 and the closing remarks to our original report. It's a quote from Supercell co-founder and CEO, Ilkka Paanenen, who shared his views when we asked him then to look ahead to how European tech might evolve over the coming years. His insights could not have been more prescient and also remind us beautifully of the critical role that role models can play to inspire a new generation of founders and continuously raise the bar on ambition. We can't wait to see what is next for European tech.