EU funding powers 10% of European startup ecosystem, study finds

About one in every 10 European startups that have raised VC investment are also backed by an EU grant of equity financing, according to a research project conducted by Dealroom and Dealflow.eu. While the full report is expected to be published later this year, the authors presented a few preliminary numbers in Warsaw last week.

In financial terms, the 10% share translates into EU-backed startups having raised €70bn in VC funding since 2010, or some 11% of total funding in Europe (which in this case includes the EU, Switzerland, Norway, UK, and Israel). With some €400bn in total enterprise value (that’s not including Arm), they now account for 13% of enterprise value for the entire continent.

Predictably, most EU-backed startups work in what the report calls physical tech, i.e. producing tangible goods in the verticals such as spacetech, semiconductors, biotech, etc. In these industries, the share of EU-backed startups ranges from 24% to 28%.

It also appears from the report’s preliminary findings that EU backing improves the probability of success in further funding rounds. From Series A to Series D, EU-funded physical tech startups show a ‘graduation rate’ that’s 1-3 pp. higher than for the rest of the industry.

Speaking on the topic of fragmentation of the European tech ecosystem at the presentation event, Marcin Hejka, co-founder and general partner at OTB Ventures, noted that the issue is not necessarily about regulation or the internal market size.

“The problem is on the technology consumption level,” he said. “Europe as a continent is a late adopter, especially on the enterprise side. […] But when there is willingness [at a corporate] to buy from a startup, they’re looking for startups from their own countries — and that’s a problem.

“If you’re a German startup, you’re pretty okay selling to German enterprises. But if you’re a startup from Romania or from Slovakia, or any other [smaller] country, it’s going to be an uphill effort.”

Theoretically, EU funding mechanisms should be solving this issue among others, however, most EU-backed startups are still based in Western Europe, with France, Germany, and the UK topping the rankings.

The full report will be available in December — you can pre-download it now.