In an uncertain economic and political context, 91% of European startups rated by Early Metrics consider that innovation in Europe has a bright future ahead. Nevertheless, 28% of them also believe that compliance with European regulations (RGPD, MiFIDII …) burdens their activity, and 15% see their international expansion directly impacted by Brexit.
April 30, 2019 – Ahead of the Vivatech conference, which this year will focus on Europe and its ability to generate innovation, the rating agency Early Metrics surveyed more than a hundred European startups on their vision of the European tech ecosystem.
An optimistic vision of the future of the European tech ecosystem
65% of European startups surveyed say they are optimistic or even very optimistic (26%) about the future of the European tech ecosystem. An optimism mainly brought by the positive growth prospects for startups in Europe:
– 2018 was the year of all records for European innovation – about 20 billion euros invested in European startups, 69 IPOs, 17 unicorns and a rise in the job rate created by 4%, according to the fund Atomico investment.
– A pool of skilled talent in Europe – Talent is at the heart of London’s Fintech success story, where job creation jumped 61% in just one year. London is even on the verge of taking the place of the current world leader San Francisco, with 7 unicorns in the British capital against 9 across the Atlantic. Nevertheless, progressive immigration rules remain to be put in place to maintain and fuel this growth.
– More progressive legal frameworks – Some sectors have benefited from new legislative measures that favour startup growth (such as the financial sector with PSD2) and governmental efforts to boost entrepreneurship have accelerated the development of European startups.
The impact of European regulations and Brexit on startups
Compliance with European regulations (GDPR, MiFID ll …) is considered as burdensome and costly (28%). But positive effects were also highlighted by the entrepreneurs, such as the creation of new business opportunities (28%) and greater transparency (24%).
85% of startups have taken no steps to prepare for Brexit, although they argue that it will complicate their import/ export business (19%); in particular with the reinstatement of customs (clearance, ICS / ECS …) and changes in the collection of value-added tax (VAT).
Another concern linked to Brexit: international expansion (15%). Several founders surveyed are considering leaving the UK or ending their projects with UK companies. Non-British startups also note a certain reluctance on the part of British companies due to the uncertainty surrounding the divorce, leading to delays in the signing of contracts. Several also say they have diversified their business partnerships and looked for other suppliers in Europe.
Similarly, 1 out of 5 startups said they were affected by international trade tensions which have led to a slowdown in Chinese investment in Europe, down 40% last year according to Rhodium Group and Merics.
Rising populism in Europe: are tech businesses to blame?
72% of European startups surveyed say that technology has contributed to the rise of populism: 20% say strongly and 24% say it moderately fuelled it. More than a third think that, while the web and technology have contributed to this trend, they also have a role to play in reversing it. For instance, Facebook, in part as a result of pressure from the European Commission following the Cambridge Analytica scandal, is in the process of updating its data protection policy. Facebook also now concedes to be responsible in case of negligence or mishandling of data by third parties.
Antoine Baschiera, CEO and co-founder of Early Metrics commented: “The countries member of the European Union, individually and collectively, have shown in recent years a strong willingness to help startups flourish, hence the optimism among the respondents. To go further, European governments could join forces and increase direct investment. Access to the public market remains limited for these startups, therefore it would also be interesting to see the creation of more call for tenders that startups can apply to. “