The total value of Europe’s tech ecosystem has seen a fivefold increase over the past decade, rising from almost $560B in 2015 to be worth close to $3.2T today. That’s an increase of more than $2.6T.

The $3T threshold was last crossed in 2021, when public tech companies saw their share prices soar and private valuations also rose. While the public markets have traditionally been an important driver of value in Europe’s tech ecosystem, the tables have now turned. Now the growth story is centred on the private tech universe, which has been steadily rising over the past decade, pushing the ecosystem past the $3T threshold despite economic headwinds along the way.

This is partially a consequence of tech companies choosing to delay IPOs following 2022’s market correction, instead waiting for more favourable market conditions. As a result, there are now more companies than ever poised for IPOs, at a time where liquidity events are sorely needed by investors. 

When these companies do go public, they could unlock a new phase of growth for Europe’s tech industry, enabling LPs to reinvest in European tech and keep the value creation flywheel spinning.

Over the past decade, M&A and IPO transaction values in Europe have steadily increased, consistently surpassing the $50B per year threshold, aside for 2024YTD. While some level of activity has persisted over the past two years, transaction volumes across both M&A and IPOs are at their lowest point in the past decade as liquidity routes remain subdued post correction.

A handful of blockbuster transactions are driving the overall transaction value. In 2023, ARM’s $65B IPO alone accounted for 92% of the total IPO value, while in 2020, the $45B IHS M&A deal represented 35% of that year’s total M&A activity.

Exits are a more common event in some sectors than others. Three — Horizontal Software, Enabling Technologies and Finance — have generated the vast majority of value in the European M&A and IPO markets over the past decade. 

Since 2015, Horizontal Software has contributed 24% of the value generated across both markets, and accounted for the largest share of M&A transaction value (29%). Enabling Technologies — which includes technologies like AI and semiconductors that underpin further innovation — follows. The sector has accounted for 24% of the IPO market by value since 2015. A significant portion of this can be attributed to chipmaker ARM, whose $50B+ IPO in 2023 was the largest exit of the past decade. Third in line is Finance, where the IHS Markit acquisition is driving its share of M&A transactions to 22%.

Looking at the 10 biggest VC-backed public exits since 2015, we were able to map a combined $50B of value across founding teams and disclosed VC stakes at the time of IPO. While this is not representative of the overall value created by these companies for their backers, much of which is undisclosed, it speaks to the scale of these outcomes for founders and investors and what it means for a local ecosystem.

On average, these companies have taken 10 years to go from founding date to IPO, with the fastest being Delivery Hero in six years and the longest being THG, which took 16 years.

Founding teams have benefitted from $25B or 23% of the value created across these deals as a whole, although the biggest event in terms of providing value to company builders was Spotify's direct listing, where the founder's Daniel Ek's and co-founder's Martin Lorentzon combined ownership was valued at $11.8B. Exits are equally important for VCs to generate returns for their LPs. Across the top 10 VC-backed public exits, $24B (22%) of value was reaped by the VC backing the companies. For example VCs holding the most valuable stakes at the time of Adyen's IPO had participated in rounds totalling $270M across Series A and B. In turn, their stake was worth $4.4B, representing a 16x+ increase.

To achieve the best outcomes, specialist expertise is needed to help startups and their investors navigate all stages of the exit process — from legal structuring and financial due diligence, to communicating the transaction to employees, stakeholders, and the public.

The number of unique European tech transaction advisors has stepped up significantly since 2015, reflecting an increasingly mature ecosystem with more high-stakes transactions taking place. The number of law firms providing services to tech companies has grown the most, up by 43% today compared to 2015. The count of M&A advisors has increased by 39%, and accountants, which make up the biggest segment of the specialist pool, by 35%. 

A combination of these players is needed to see a deal through, and the expanding advisor network reflects the volume of sizable, complex, and cross-border transactions taking place in Europe’s tech ecosystem.

Professional advisors guide tech companies through the exit process, while on the acquirer’s side, a strong base of corporate development talent is also needed to identify and pursue acquisition opportunities. 

In Europe, these roles are increasingly common, with a deep pool of talent being built. There are now seven times as many in-house corporate development roles in Europe than in 2015, however the vast majority of that growth has come from the non-tech sector. Putting this differently, the US has 94% more corporate development and M&A talent in its tech industry than Europe, but achieves 218% more $B+ M&A outcomes. A larger network in Europe could help unlock greater efficiencies for executing high-value exits.

CFOs play an important role in the IPO process and a new CFO hire at a late-stage company can be a sign that a company is readying itself for a market debut. Atomico’s proprietary analysis of a sample of CFOs involved in $B+ listings in the US and Europe shows that most CFOs who take a company public join less than two years before the IPO filing. Our analysis also found that while the pool of CFOs with experience listing $1B+ companies is three times deeper in the US, Europe stands out with the experience level of its CFOs. 

Three quarters of CFOs who have taken $B+ companies public in Europe over the past decade previously lead the finance function of another company. Meanwhile, although it’s not common for CFOs to have led multiple IPOs, 17% in Europe have at least one other IPO under their belt, compared to 8% of their US counterparts.

Selling partial stakes via the secondaries market is one way to start generating distributions and crystallising returns until the full exit event takes place — although it can come at a cost. In the face of difficult market conditions, many investors are finding that potential buyers are still seeking larger discounts today compared to a year ago. Responding to our survey, VCs report that secondary offers are coming in at higher discounts, with half of Seed and early stage portfolios more discounted than they were 12 months ago.

Growth stage portfolios, however, are reporting the highest share of ‘less discounted’ offers at close to 40%, likely due to improving public markets positively influencing late-stage valuation expectations.

Of course, the diversity of results also speaks to each VC portfolio having unique challenges and opportunities. Hence, the survey responses can provide a pulse check on the state of the market. The fact secondary buyers are prepared to pay more for growth-stage portfolios now versus one year ago is a positive sign.

IPOs are especially powerful events in any tech ecosystem. Beyond unlocking capital for reinvestment, these events shine a spotlight on the ecosystem, creating momentum that can extend well beyond a single company’s debut.

Yet, IPOs have been notably scarce recently. Given recent market volatility, many companies have delayed their exit plans, opting to strengthen their financials while awaiting more favourable IPO conditions. How long that wait will be remains uncertain.

Half of the M&A advisers and investment bankers surveyed say conditions for IPOs have worsened over the past year. Among those with more than a decade of experience who can compare today's conditions with those of 10 years ago, the majority (55%) see a deterioration.

Meanwhile, a majority of experienced respondents report long-term improvements that have strengthened alternative exit routes, offering encouragement to VCs and LPs eager to see structural gains that support capital distributions. In fact, 54% of respondents say that conditions for individual company secondaries have improved, and 52% report positive trends for GP-led secondary solutions, opening up new paths for liquidity amidst the IPO slowdown.

When European companies choose to go public on the US markets, the local ecosystem loses out. This challenge has long held Europe back, as its stock exchanges struggle to retain tech firms that often prefer to list across the Atlantic.

Consultants, M&A advisors, and investment bankers — key influencers in listing decisions — generally view the IPO process in Europe as less competitive than in the US. Nearly 60% believe that completing an IPO is significantly faster in the US, and 65% agree that regulatory requirements are more favourable there.

On costs, however, Europe and the US are more evenly matched, with 44% of professionals finding Europe the more cost-effective option, compared to 41% who prefer the US.

The NASDAQ-100 tech index, a basket of the world’s biggest tech companies listed on the US stock exchange, started decelerating in the end of 2023, but has had a strong recovery since. In the first quarter of 2024, the median multiple across the list of NASDAQ-100 tech companies has bounced back to highs last seen in 2021, reflecting strengthened investor confidence in tech growth prospects. While markets have cooled off again since, the tech multiple still remains well above its ten year average.

On the other side of the pond, European public $B+ companies listed locally in Europe are still hovering around the 10-year average, and the rally experienced by the NASDAQ-100 tech index is not visible.

While it might be tempting to get drawn into the headline numbers, with headlines at times anchoring on the significant delta in multiples between the two benchmarks, it is important to understand the differences between the underlying companies driving these figures. 

The NASDAQ-100 tech index includes the world’s biggest tech companies like Apple, Microsoft and Nvidia. Their combined total enterprise value for the top five sums to $13T, significantly ahead of the European listed equivalent, where the top five sum to $0.8T. The difference in scale is significant, with all NASDAQ-100 tech constituents’ TEV at $10B+ while only 23 of the 74 mapped European $B+ companies surpassing this milestone. This tail end of mid to small cap listings in Europe is driving the lower multiple in Europe, while the top 10 European listings trade close to the US median. 

This comparison ultimately highlights underlying structural challenges. For example, if ARM had chosen to list in Europe, it would have stood as the region’s highest-multiple billion-dollar company, with a multiple approaching 30x at the time of analysis.

One reason why IPOs have become rarer is that the bar for going public has been raised. An example of this is the steady increase in the mention of "profitability" in quarterly earnings calls. Across all listed tech companies, it's clear that it's increasingly a priority. Since 2015, references to profitability have increased, peaking in late 2023 as higher interest rates began to impact the market.

A few years ago, it wasn’t unusual for tech companies to go public while still being a few quarters or even years away from profitability. But with the rising cost of capital, unprofitable companies are now a tougher sell. It's not surprising then to see that public market investors are increasingly looking for companies to report at least one quarter of cash profitability and to outline a clear path to adjusted operating profitability before listing. There are still exceptions, though. For example, US-based social media platform Reddit saw a share price rally after its recent IPO, even without reaching profitability (although it has since achieved this milestone).

However, the trend is clear: time to IPO is expanding as investors expect more from private tech companies — be it profitability or even revenue target closer to $200M (versus $100M just a few years ago).

Over the past 10 years, European companies have consistently led the way in acquiring technology companies on the continent, accounting for 54% to 61% of the total number of transactions. European VC-backed tech companies follow, accounting for 14% to 20% of transactions. Notably, their share is growing, which bodes well for the development of the local ecosystem. Corporates and VC-backed companies from the US each account for around 10% of acquirers of European companies, while private equity firms from either Europe or the US are buyers in only a small number of transactions.

While European corporates are the biggest buyers of European tech by deal count, US corporates punch well above their weight when we compare buyers by overall transaction value. This, combined with higher transaction sizes on average, speaks to the bigger risk appetite of US buyers and their willingness to engage in bold M&A initiatives. Their share of spending has been increasing over time, too. In 2015, they accounted for 9% of transaction value while for this year so far this has increased to 48%.

The average transaction values paint a clear picture — US firms are much more likely to take big steps on outlier-sized transactions than European firms. The average transaction value stands at $150M for US buyers versus $45M for European ones.

While fewer US corporates are actively pursuing tech acquisitions in Europe, those that do are making meaningful investments. So far this year, the median transaction value for European tech acquisitions by US corporates stands at nearly seven times the European corporate buyers median.

Interestingly, the acquisition price for European and US VC-backed buyers has been much closer this year, with median deal values at $36M and $33M, respectively. This marks a shift from pre-2021 trends, when the latter typically paid twice as much, and from 2021 to 2023, when they were willing to pay up to six times more than their European counterparts.

Europe and the US have followed similar exit trends in recent years, with 2021 standing out as a bumper year: 130 $B+ exits in the US and 42 in Europe. Since then, growth has flattened, and 2024 is on track to be the lowest year in a decade for billion-dollar exits in both regions.

As of mid-October, just two $B+ exits have been recorded in Europe — Planisware and BETA CAE — compared to 10 in all of 2023. The same can be said about the US, with 13 exits so far this year, down from 25 last year. Yet, the contrast is sharp — while the US exit market is struggling, Europe is facing an even steeper decline.

Despite these challenges, there are some positive signs. The US IPO market is showing signs of recovery, with six billion-dollar tech IPOs already this year, compared to just two in 2023, offering a glimmer of hope for liquidity in the tech ecosystem.

The issue of Europe’s attractiveness as an IPO destination has become more pressing since 2021, when we last asked respondents for their views on this issue. While this shift can be partly attributed to the overall subdued market — where a drop in activity tends to encourage people to cast a critical eye — addressing these concerns is essential for Europe to reach its full potential.

The success of Europe’s tech ecosystem is closely tied to its ability to tap into deep and liquid public capital markets. Yet, almost half of M&A professionals and tech consultants we surveyed say this is a problem for Europe, as seen in the lower trading volumes on our stock markets compared to the US. There has been a significant negative shift in sentiment here since 2021, when just 19% of respondents selected this answer. Another drawback is Europe’s fragmented capital markets, cited by 66% of respondents, with no obvious tech listing destination in Europe compared to the Nasdaq in the US.

Sentiment has also shifted regarding Europe's analyst community, with 27% of respondents concerned about its lack of depth, compared to 15% in 2021. This is something of a chicken and egg scenario — if there are fewer notable companies listing in Europe, there will in turn be fewer analysts covering the sector. Analyst coverage is an important decision-making tool for institutional investors and funds, and thus a key component of a successful flywheel that attracts further capital.

While the majority of European companies choose to IPO in Europe, a growing share of high-profile IPOs are opting to list in the US. A recent example is ARM, the UK-based tech giant that bypassed London to go public in New York last year. ARM’s decision contributes significantly to the record-breaking share of European IPO value listed on US exchanges, with its IPO alone representing roughly a third of the total $180B European IPO value listed in the US — which, in turn, makes up about 65% of the total IPO exit value of European companies over the last five years.

The decision to list in the US can increase the likelihood of the relocation of talent, knowledge and ultimately economic output as the centre of gravity shifts overseas. Calls for action to make Europe more attractive for marquee IPOs are intensifying, and ignoring them could mean watching more of Europe’s potential leave the continent.

A power law distribution is evident in the European public tech markets, with the top five companies — ASML, SAP, ARM, Prosus, and NXP Semiconductors — making up 61% of the total tech market cap this year.

ASML and SAP stand out as longstanding pillars of the European tech sector, consistently among the top companies since 2005, when their market caps were just $9.2B and $52B, respectively. In fact, at $357B and $227B as of October 2024, they represent 25% and 16% of the total market capitalisation of European companies, respectively.

The dominance of the US stock market continues to draw foreign tech firms looking to go public, as seen in UK chipmaker ARM’s decision to list on Nasdaq — a move that sparked reflection on Europe’s standing as an IPO destination.

A look at market cap by region highlights the US’s lead, with its $25T market cap dwarfing that of any other country or region. This dominance fuels a cycle where the US market attracts more listings, including from foreign companies eager to tap into its liquidity and investor demand. As a result, home exchanges in other regions, like Europe, are left out. Europe currently trails China by a small margin, with a total market cap of $1.4T that is shared across a fragmented set of local exchanges across the region.

Tech companies are drawn to exchanges with a critical mass of investors and market participants who understand their growth potential and the value of their offerings. However, Europe’s fragmentation limits this appeal. The continent comprises numerous countries, each with distinct stock markets or regional exchanges, resulting in market capitalisation being dispersed across multiple venues and lacking a central hub for tech IPOs.

Euronext Amsterdam stands out as the leading European exchange by tech market cap, its position is bolstered by a few major tech players, such as semiconductor supplier ASML and Adyen, one of Europe’s most valuable companies in the payments space. Holding 23% of the total market in tech, Euronext stands higher than the equivalent for the New York Stock Exchange at 14%, but far behind NASDAQ at 67%.

Comparing median trading volumes — which give a clearer picture of typical trading activity — it is clear that European stocks worth $1B or more have higher trading volumes on US exchanges. Higher trading volumes indicate greater market liquidity, allowing investors to trade shares more easily without significantly affecting share prices. Lower trading volumes, on the other hand, can lead to greater volatility as individual transactions have a greater impact.

Despite the volatility that has affected both the US and European markets since 2023, in the long term it is clear that European companies that choose to list in the US are able to tap into deeper pools of capital.

We compared the number of active equity research analysts covering the top 20 technology companies by market capitalisation in Europe and the US. Across these 20 companies, we identified 489 unique analysts who have issued recommendations, a proxy for stock market coverage. We collected their self-reported location to identify the region they belong to in relation to the region of the company's listing exchange they cover.

The most valuable companies in the US are covered by 2.5 times as many analysts - the top 10 US companies have an average of 66 active analysts covering them, while the top 10 European companies have an average of 26 active analysts covering them. One limitation of this analysis is that the top 6 companies in the US have larger market capitalisations of $1T+, which makes it more difficult to make a like-for-like comparison with the European top lists. However, Netflix's market cap of nearly $300B is similar in size to European companies ASML and SAP, which have 34% and 48% fewer analysts covering them respectively. As a result, more research is published on US companies.

Europe's most valuable listed tech companies are also less likely to be covered by a global analyst group than those in the US, with 73% of analyst coverage coming from the region, compared to just 63% for the US top 10, where more analysts from Asia cover US listings.