Europe has a unique opportunity this decade to grow a thriving and robust deep tech ecosystem, catching up with the US and Asia by solving our biggest challenges, while gaining technological sovereignty and leadership. Today, deep tech startups attract €60 billion in investments worldwide annually. European deep tech startups receive a quarter of all annual private equity investments in Europe, (€10B out of €40B) and have reached an estimated value* of €700 billion collectively (Dealroom). Nonetheless, the US and China account for more than 80% of investments currently going to deep tech (Sifted).
To help seize this opportunity, a community of more than 170 European tech leaders formulated 21 recommendations on how to create the next tech giants in Europe, as part of the initiative “Scale Up Europe”. The members of this initiative shared these recommendations to French President Emmanuel Macron on 15th June, with the goal of getting 10 companies valued at more than €100 billion by 2030. The European Commissioner for Innovation, Mariya Gabriel, embracing the ambition, even said “why not more?”
Let’s take BioNTech, for instance. They were one of the first scale-ups to produce the mRNA vaccine, teaming up with Pfizer for production and delivery. Over the last decade since their inception, they have grown to be valued at €22 billion. This is incredible speed, but we need to increase the pace this decade if we are to achieve the goal of getting 10 companies valued at €100 billion by 2030.
5 challenges were identified by the Scale Up Europe community, among which:
- A lack of European investment in late and exit stages, as well as a weak appetite for tech within stock markets (27% of the top 80% of large and mid cap companies in the US, compared to only 13% in German stock exchange and 7% in French.)
- Talent diversity and attractiveness of the region.
- Growing more deep technologies out of our strong research.
- Developing more efficient corporate-startup collaborations.
- A greater coordination at the European level.
5 recommendations were identified to grow European deep tech leadership:
- Improve patent frameworks to accelerate technology transfers, through guidelines, standardization, best practices or university labels, which could be disseminated by the European Commission within the university and research center financing schemes.
- Foster entrepreneurship within Universities, building stronger connections with the investor world. Johanna Michielin, CEO of CNRS innovation the tech transfer arm of CNRS and chairman of the deeptech track for this consultation was reminding participants “What we expect from VCs is not just an investment, we need them to be hands-on on the projects because they are extremely difficult to build. At the beginning, it is not just about the funding, it’s about having around the founders qualified people that are gonna help them with their advice, their network, their support of all kinds.”
- Boost the role and visibility of the European Innovation Council, whose mandate is to finance breakthrough innovation. It will be necessary to create and advertise a long-term, backed deep tech roadmap, invest with larger tickets more suited to deep tech needs, and coordinate pan-european countries’ public procurement efforts according to the deep tech roadmap priorities. A recent TechCrunch article about the initiative reminded us that “some of the tech stack used by European Startups is still US driven and that building truly European Scale Ups would take decades, not be a sprint”. But the digital infrastructure, which also complies with European GDPR policies, should not only be where the efforts are focused, but rather on the next deep tech stacks needed to grow the next tech giants (artificial intelligence, quantum,…).
- Modernize regulations to better include breakthrough innovations in 4 to 8 key innovation areas to regulate and advocate in priority. This European-wide initiative could help tackle some of the complexities faced by deep tech scale-ups and corporates, to operate in a context that is, as we were reminded of by some of our fellow members, highly fragmented, in terms of regulations and market. With a general risk-averse mindset to innovation, and even a perceived lack of understanding of breakthrough innovation within policymakers and leaders (e.g. on the potential of Artificial Intelligence), the region needs to make sure the next ‘warpspeed’ like project could exist here, on innovations that matter. And with more balanced consortiums of both large corporations and deep tech scale-ups. During the Sale Up Europe Panel at VivaTech 2021 with European scale ups, Emmanuel Macron was reminding the community that “if we are not betting big, with more focus, and fast, we will lose”. The French President will leverage the French Presidency of the European Union during the first semester of 2022, to implement some of the recommendations, following this year’s efforts in favor of the tech ecosystem.
- Adopt a specific action plan for European public banks, EIC and European Investment Fund,
to adapt to deep tech requirements. On this recommendation, Hello Tomorrow, together with BCG, explored in a recent report the need for the VC community to reconnect with its venture values, switch to 10-15 year-long funds, include more scientific expertise, and try new innovative funding approaches.
From the 21 recommendations put forward, Emmanuel Macron selected 5 actions to pursue:
- Scale the French TIBI initiative at the European level, which helped France to foster €5 billion on late stage investment and into funds specialized in listed tech companies, from institutional investors.
- Create a European finance market structuring the European stock exchange, to facilitate IPO and grow tech shares. Mega rounds (€ 100-250M) which was Europe’s weak point, are now in progress. Out of the ten mega rounds raised last year, one was in deep tech: winner of the 2016 Hello Tomorrow Global Challenge Lilium Jet, with €275M (largest being Klarna € 675M), who also raised funding of around € 700M again in March 2021 through a SPAC.
- Build a Next 40/ FT 120 at European level (French indicator of the most promising tech startups) and create a European tech visa, leveraging the success of the French tech programs to help companies access the fragmented European market more easily and attract talents.
- Adopt a massive deep tech policy with larger tickets, simplified procedures, revising the EIC instruments for greater investment focus on the European priorities: environment, cybersecurity, quantum and artificial intelligence, to name a few. Having a coordinated focus was a recurring recommendation shared by the deep tech track members throughout the initiative, to be able to finance the key technologies to the level of investments needed.
To leverage the “European tech ecosystem exponential growth” mentioned by Niklas Zennström, Skype and Atomico founder, deep tech startups could benefit most from the deep tech massive plan announced by Emmanuel Macron to get the right investments, on the right priorities, with the right speed. Christian Angermayer, Apeiron investment CEO and chairman of the deep tech track during this consultation, was reminding us:
“in a world of exponential growth, if we, as Europe, are missing for too long and our competitors in a startup term the US and Asia, grow economically and in terms of knowledge, of technology, over a certain period, there might be a point where Europe loses the game for good”.
No doubt that the €151 Billion US R&D plan on quantum and chips in the US announced a few weeks ago will inspire European stakeholders to mobilize even greater economic and coordination efforts to stay in the game, and play collectively to win it.
To truly turn this exponential ecosystem growth into a competitive advantage for the ecosystem, it’s not only up to policy makers. It will require more efficiency and speed across all steps (tech transfer, investments, corporate- deep tech startup collaboration) with a strong cooperative spirit across all stakeholders: institutions, universities and TTOs, startups, corporates and investors.
So, to all European readers, before we are too late, commit your organisation to support the effort, and join the signatory participants here, and share the recommendations within your national ecosystem!
About Scale Up Europe
Initiated by President Emmanuel Macron, the Scale-Up Europe initiative focuses on four key drivers: talent, investment, startup-corporate collaboration and deep tech. It gathers a community of more than 170 European tech leaders, which collectively shaped 21 recommendations. The initiative is facilitated by Hello Tomorrow, La French Tech, Station F, VivaTech, Roland Berger and European Startup network.