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London's Surge of Tech Startups Positions Europe as Key Hub for Innovation The UK has long been established as a European leader in terms of fostering a conducive environment for unicorns to emerge.

By Dmytro Spilka Edited by Jason Fell

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Although London has faced widespread economic challenges in recent years, the city has outperformed much of the world in terms of startup investment, outstripping China, India, and France in fostering innovative new companies. As digital transformation continues to accelerate in the wake of the Covid-19 pandemic, London is set to become a European leader in the evolving tech landscape.

In the opening five months of 2022, the UK has already raised more venture capital funding than 2020 in the year's entirety. This acceleration of funding, even in the wake of Brexit, record-breaking inflation rates, the flare up of war in Ukraine, and myriad supply chain issues, indicates that London and the United Kingdom as a whole can still continue to compete when it comes to building successful startups with global ambitions.

The current rate of startup investment places the UK behind only the U.S. in terms of global competition, according to data from Dealroom, which was analysed for the UK's Digital Economy Council.

Throughout the opening five months of 2022, over 950 UK tech startups have raised £12.4 billion, in comparison to the £12 billion raised in 2020. This points to a record-breaking Q1 for UK tech in which £9 billion was raised - a significant increase from the £6.3 billion raised in Q1 2021. By comparison, this shows that the UK raised double that of France in terms of tech company funding.

As the data shows, the UK has long been established as a European leader in terms of fostering a conducive environment for unicorns to emerge. France and Germany have also become key players in the region, despite the UK delivering an output that's more than 50% more productive than the mainland European nations.

London as the city to lead Europe's startup surge.

Whilst North America remains the world's most prolific place for startups to flourish, London's influence is growing in an environment that's dominated by western tech hubs. According to the Global Startup Ecosystem Report 2022, Almost half of the top 30 global ecosystems where exits of more than $50 million reached a total of $698 billion in 2021 throughout North America. Meanwhile, Asian hubs made up $531 billion — making up around 30 percent of the top 30 ecosystems in the world.

Whilst Silicon Valley is, by some margin, the world's most active and prosperous startup hub, London has established itself as the highest ranked non-U.S. tech hub, placing in joint-second with New York. The next-highest ranking city outside of the United States is Beijing, ranking in fifth.

Elsewhere in Europe, Berlin has rallied six places to 16h place, and places behind Amsterdam and Paris respectively. With five exits reaching values in excess of $1 billion in 2021, having produced 14 unicorns in the process.

Europe's unicorn landscape is expanding at a rapid rate.

Despite London's position at the pinnacle of innovative new tech unicorns flourishing in Europe, data suggests that the tech unicorn boom is spreading throughout the continent.

Amazingly, there was just one unicorn in Europe in 2012. In the span of a decade, this number has grown to 132. Although the Covid–19 pandemic incontrovertibly contributed to the acceleration of tech startups in the continent, the peak rate of growth actually came in 2018.

Although the rate of unicorn development throughout Europe is exceptional, it's worth noting that around 50 percent of the investment experienced throughout the continent has come from American investors.

"International programs such as Scale-up Champions are key to forming a strong ecosystem for startups, especially for those who act in the deep-tech field," said Jurgita Šarkienė, who is a partner in Scale-up Champions and Expert of Innovations and Entrepreneurship at Kaunas Science and Technology Park. "In such programs, startups from different countries have the opportunity to receive the necessary consultations, training, and useful acquaintances in one place. It also helps you to be noticed by investors."

Europe seeks to grow into tech sector.

In May, Berlin-based firm, Earlybird Venture Capital, closed its seventh early-stage fund out of the organisation's Digital West investment team at a cap of €350 million in a move that made it one of Europe's largest ever early-stage funds.

This seventh fund has been allocated to support companies across enterprise software, fintech, and sustainability - with a specific focus set for deep tech. It's intended that this fund will be used to further strengthen tech throughout Europe as a means of fostering the development of further tech startups throughout the continent.

The development of more accessible programming technology is also helping to foster a more conducive environment for innovation in Europe, with easy-to-use programming languages like Django becoming more prevalent throughout the continent.

As data shows, eight of the top 10 websites built with Django by countries reside in Europe, and the programming language is becoming accessible enough for more startups to utilise for both processes and in building services for clients.

With demand for Django growing throughout the continent, Django is gaining more utility than ever. Through the development of PyScript, it's now possible to build programs in HTML browsers in Python, which is utilised via Django — which may be a major boost to the European tech startups that have ambitions toward becoming unicorns.

The future looks promising for London and the wider tech startup ecosystem throughout Europe. With one unicorn company in existence on the continent just 10 years ago growing into a collective of 132 firms worth in excess of $1 billion, it will be fascinating to see what the next decade brings to the sector.

Dmytro Spilka

Entrepreneur Leadership Network® VIP

CEO and Founder of Solvid

Dmytro is a CEO of Solvid, a creative content creation agency based in London. He's also the founder of Pridicto, a web analytics startup. His work has been featured in various publications, including The Next Web, Entrepreneur.com, Huff Post, TechRadar, B2C and Business.com.
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