The UK ecosystem continues to be Europe's most funded, capturing 35% of the total capital invested in Europe in the last five years. This is more than twice the level of investment in France, which ranks in second place. However, investment levels in the UK are down 22% year-on-year. This is in contrast to the French ecosystem, which continues to grow from strength to strength and is the only one of Europe's larger countries that has already reached investment levels on par with those of 2021.
As a result, French investment is significantly higher in 2022 than the level recorded in Germany (down a full 43% year-on-year), even though Germany has cumulatively raised more capital than France since 2018. On the smaller end of the scale, other countries that have seen 2022 investment levels exceed those from 2021 - included in this list are:
Larger ticket sizes seem to be par for the course in countries where larger amounts of funding flow - though this pattern doesn't always play out. Germany has the highest median Seed round size at $2.8M, followed by France at $2.2M. The United Kingdom, the much larger ecosystem by funding as well as many other efficiency metrics, has a median Seed round size of $2M. The UK, however, has the largest Series A median of these three countries, suggesting a higher willingness to provide funds once a company has had a chance to gain some traction.
We analysed how VC respondents based in specific countries may differ in their observations on the way the market has evolved.
While it’s clear that large numbers of respondents from all markets have observed changes to the market dynamics, the scope of change observed across all response options by those based in Europe’s largest markets by capital invested (UK, France, Germany) really stood out to us. This indicates that the biggest markets have seen the biggest changes in fundraising dynamics.
Given the shift in the macro environment and the widespread layoffs, it is not surprising to see less confidence in tech in this year's survey: 28% of survey respondents believe tech now offers less attractive opportunities. Last year only 2% felt it was less attractive.
But despite the hardship, many remain positive. According to our survey, 41% of employees and department heads believe it is more attractive to work for a European tech company today than it was 12 months ago.
Notably, sentiment is particularly optimistic in France and Spain, where the local ecosystems have thrived in recent years. In fact, many within the ecosystem, especially those with stronger risk appetites, see the downcycle as an opportunity for faster learning and development, as well as for better access to risk-adjusted upside potential.
The trend of younger founders starting companies is visible throughout Europe. Across all countries and regions, the share of new founders with less than 10 years of experience has risen significantly quarter on quarter since the beginning of 2020. The trend is most notable in France, where the share of founders that started companies with less than 10 years' prior work experience hit 63% in Q3 2022 - the highest level of any European country. This compares to 53% in the UK, and 41% in the Netherlands.
In absolute terms, the total number of new entrepreneurs tracked by Specter has also continued to rise across the continent.
The pull of the entrepreneurial ecosystem in France is evidenced not just by young founder cohorts, but by the rising interest in tech jobs. Looking at the share of job searches focussed on tech, France has seen the strongest growth year-on-year out of any European country, according to Indeed's dataset. France is followed by Sweden, Germany and the UK, respectively.
While most countries have seen a relative increase in searches for tech jobs, there are also notable declines in some countries, including as Portugal and Italy.
Through our sample of tech founders and leaders, we analysed more than 21,000 moves across European borders - and 40,000 moves between cities. This analysis highlights the inflows and outflows of talent in each country, and how these flows have evolved over time. For example, we can see that in the period 2020-2022, France has had a 2.2x net inflow of founder and leadership talent. In other words, for every tech leader that moved out of the country during this period, there were more than two that moved into France.
The data shows how certain ecosystems have been able to transform their talent flows over time. Most notably, France, Germany and Spain saw huge gains in inflow of founders and leaders in recent years. By contrast, other ecosystems, like Belgium and Ireland, have seen a small decline in net inflows.
It's important to note that this analysis is based on a data sample that exclusively looks at founders and C-Level leaders of companies that received investment in 2022. As such, the conclusions we can draw from these trends are limited by the scope of the analysis.
Hiring is much easier now with remote hiring platforms and tech-friendly policies, such as President Macron’s French tech visa. This reassures investors because we can test markets outside Europe quicker, at a lower cost, and develop our business models on a larger scale. That’s also one of the advantages of building a SaaS: you can build a global business from day one.
Slicing the sentiment data around the European startups and scaleups policy environment, Italy and France record the biggest share of respondents feeling the country has become “more supportive”, at 56% and 47% respectively. This is not surprising given the concerted efforts in these countries in recent years to seek to build a more startup-friendly and progressive policy environment.
On the other end of the spectrum, only 20% of Polish respondents feel the ecosystem has become more supportive in the past year, with 64% of respondents reporting feeling the ecosystem is about the same level of supportive as it was 12 months ago.