European Talent Wars: The State of European Tech Report

The latest report published by the venture capital firm Atomico, has found that there’s a massive talent war happening across the whole of Europe. The State of European Tech report surveyed 3,500 investors, founders and members of the tech community to collect data on hiring and investments, as well as to understand current trends and attitudes.

According to the report, there are now 5.5 million developers in Europe. The number has grown by 500,000 from last year, with Germany in the lead (837,000 developers), the UK in second place (814,000), and France in third (467,000). It also found that the tech workforce is growing three times faster than the overall EU average due in part to the fact there are twice the amount of PhD students in STEM in Europe compared to the US.

European Investment

The report also shows that 2017 will also turn out to be a record-breaking year in terms of investment across the European tech sector. Total capital investments are predicted to reach £ 14 billion this year, well above the £10.6 billion that was raised last year.

The UK is still the leading hub in terms of investments, with £5 billion predicted to be invested into UK tech by the end of the year. Second on the list is Germany with an estimated £2.3 billion. Several independent UK startups have secured massive amounts of investments, turning into tech “unicorns” (a term used for tech companies valuated at £750 million and above).

Tom Wehmeier, Atomico’s head of research notes that a lot of capital is being provided by government agenices, which are “important sources of funds” in Europe, which isn’t the case in the US. He also says that a further 20% of investment originates from European “corporates” that want to have a better understanding of the chancing tech landscape. Not only do “corporates” invest, but they also buy (Ikea acquired TaskRabbit, Assa Abloy bought August Home).

Asia also has a lot of interest in what is going on in Europe. The continent has seen £1.3 billion invested so far by Asian investors. A great example of this is Softbank’s £370 million investment in Improbable Worlds (London startup that developed a platform for 3rd parties to develop and build complex simulated worlds).

Despite all these big amounts being invested into the UK, a lot of UK founders say that investment has been impacted by Brexit. It was the only country where founders said it was harder to raise capital this year compared to last.

UK Still Number 1 in Talent Attraction

Top of the list in terms of capital investment, the UK still finds itself leading in talent attraction. According to LinkedIn, 21.4% of international migrants moved to the UK and 14.9% moved within Europe.

However, its share is declining due to tougher competition. Germany is starting to close the gap quickly. The UK is also number one when it comes to outbound tech talent (moving to Europe and outside). While Germany is closing the gap as whole, it has already overtaken the UK in terms of number of professional developers. This is very important as most startup founders say that software developers are the hardest talent to find and recruit.

Wehmeier says “For founders based outside of the UK, the biggest impact [of Brexit] is basically that the UK has become less attractive as a place, either to have a regional HQ or to relocate staff. So I think it’s very clear that it’s playing on the minds of the tech ecosystem here”

Brexit and Tech

While there seems to be a wave of optimism hitting mainland Europe, UK startup founders don’t share the feeling. When asked how they felt about the future of European tech, 27% said they felt less optimistic compared to the previous year, while only 6% said the same across the rest of Europe.

Wehmeier says “There is a material difference in terms of the level of optimism from the UK relative to other regions in Europe.” The reason behind this is the current political climate in the UK. In the UK and Ireland, 71% of those surveyed said that the triggering of Article 50 had the most impact on the European tech landscape. They also said that it had impacted their fundraising and hiring.

This feeling is in stark contrast to what’s going on in France. Recent political events in France have had a positive impact with 70% of those surveyed saying they were optimistic about the future of European tech. Wehmeier says “There is a much higher level of overall optimism in France post-Macron, because of the impact that’s had on injecting renewed entrepreneurial spirit. There’s a strong commitment to building the French technology ecosystem.”

Deep Tech in the UK

Even though there’s a lack of optimism in terms of investment and hiring, as we’ve seen the UK still leads the way when it comes to capital attracted. It is particularly strong in deep tech, with £1.3 billion having been invested into this area in 2017 so far. Wehmeier says that companies are managing to raise large amounts and making the choice to not sell to tech giants and remain independent.

Graphcore (Bristol-based processer company) raised £37 million in their latest round, Improbable (simulation startup) raised £373 million, and Babylon Health (AI healthcare app) raised £44 million in their latest round.

Wehmeier says “These guys are becoming well-capitalised to go on and pursue their dreams as independent companies and fulfil those visions, and I think that’s a huge change that we’ve seen.”

You can check out the full report and some of the more detailed information here