STRIPE’s John Collison is forecasting a “leaner” 2023 in European tech, but says the industry’s long-term prospects remain good.
The Limerick-born president and co-founder of Silicon Valley’s most valuable private company said that “barriers to innovation in Europe remain too high” and that if European start-ups are to thrive, the regulatory framework “allows new business models to come to market have to be quick”.
Mr Collison spoke as Atomico presented its latest State Of European Tech 2022 report, which measures the health and progress of tech companies and the financing climate across Europe.
The report, which uses data from 41 European countries, shows that even as funding slows, Ireland is excelling in some areas while faltering in others.
Ireland, the report says, is one of the most outward-looking countries in Europe when it comes to tech companies building markets overseas, with most companies expanding outside the island after a Series A round.
Ireland is also the absolute leader in representing female funded founders in Europe, with 10 per cent of companies that have raised venture rounds having an all-female team.
However, Ireland still lags behind most European countries in terms of net migration of founders. In France, twice as many founders came into the country as they left, while in Ireland many founders still leave local shores to reach larger markets.
It is clear that founders have to adjust to leaner times
The report, prepared by London-based venture capital firm Atomico with support from Orrick, Lazard, Silicon Valley Bank and Slush, also clearly showed the decline in venture capital across the continent in the second half of the year.
It turns out that despite a strong start to the year, tech investments this year will be USD 85 billion (EUR 81.2 billion), almost EUR 20 billion less than last year’s record total of over 100 billion USD.
The Atomico report states that macro and geopolitical factors have slowed IPO markets as US investors pulled out of Europe and layoffs were widespread
Nevertheless, 77 percent of the survey participants “remain confident” in the future of European technology. And Europe now accounts for the largest share of all early-stage investments in purpose-built technologies.
“2022 looks like the start of a different economic climate as many parts of the developed world appear to be headed for recession,” Mr Collison said.
“Whatever happens in 2023, it’s clear that founders need to adapt to leaner times by taking revenue efficiency seriously while reducing non-essential spend, rather than optimizing for growth at all costs. European fintechs are hit harder than anyone else by persistent inflation, reduced investment budgets and scarce startup funding.”
Stripe recently announced layoffs, citing an overestimate of global market conditions.
“But it’s not all doom and gloom, and founders shouldn’t lower their ambitions,” he added.
“The long-term opportunities for the internet economy remain intact and the tailwinds are as strong as ever. The fundamentals of European market leaders such as Klarna, N26, Revolut, Alma and many others remain strong. And their ambitions and long-term opportunities remain intact.”
Mr Collison said that the medium-term prospects for FinTech in Europe remain good.
“European fintech is succeeding for two main reasons,” he said.
“First, Europe’s talent pool is excellent. There are almost 50 percent more software developers in Europe than in the US and a solid expertise in risk management and compliance to draw on. Second, the PSD2 has set out clear rules and standards across the EU, and startups are building on that. Of course it’s not perfect. There is no regulation. But there’s a reason the framework has become an inspiration to the rest of the world.”
Still, he said, Europe needs to keep an eye on its regulatory conditions if it wants startups to close globally.
“The talent and ambition in Europe is greater than ever to build and run globally relevant companies, but the barriers to innovation remain too high,” said Mr. Collison.
“If we want the European startup ecosystem to continue to thrive, we need more regulatory frameworks that allow new business models and ideas to come to market quickly, even in regulated sectors such as climate or biotechnology.”
This year has defied expectations
The State Of European Tech 2022 report was created based on a survey of the attitudes and experiences of thousands of European founders, operators and investors.
It turns out that European tech companies have lost almost €400 billion in value in both public and private markets since the start of 2022.
It also estimates that the total value of the ecosystem has now fallen to around €3.5 trillion from its peak of nearly €3 trillion in late 2021. However, the report notes that this is still five times what the ecosystem was worth in 2015.
IPOs, the report says, are all but frozen with just three in the US and Europe with a market cap of over €1bn in 2022, compared to 86 IPOs of over €1bn.
The report also noted that there were only 31 new unicorns in 2022, compared to a record 105 for 2021.
It also found that over 14,000 employees were laid off by companies headquartered in Europe, accounting for 7 percent of all employee layoffs worldwide.
“This year has exceeded expectations, but it needs to be viewed in a broader perspective than the past 24 months,” said Sarah Guemouri, director at Atomico and co-author of the report.
“The fundraising numbers we got used to last year were astronomical, so we can be optimistic that what we’re seeing in 2022 is still well above what we were two years ago. Of course, as the European ecosystem matures, we will experience ups and downs, but we should not discount our overall progress based on macro conditions affecting every sector globally.”
https://www.independent.ie/business/technology/stripes-john-collison-predicts-leaner-2023-for-tech-and-calls-for-deregulation-42200795.html Stripe’s John Collison predicts a “leaner 2023” for technology and calls for deregulation