European start-ups have raised a record amount of funding so far this year, with $34.3 billion of venture capital flowing into the continent's fledgling technology sector since the start of 2019.
That's according to a report released Thursday by London-based venture capital firm Atomico, which said the eye-popping sum was bolstered by a record number of mega-rounds — investments of $100 million or more — which accounted for 40% of deals.
"That ability for Europe's leading companies to attract mega funding rounds is one of the hallmarks of change we've seen reflected in the overall level of capital invested into European tech," Tom Wehmeier, partner and head of insights at Atomico, told CNBC over the phone.
In 2018, a total of $24.6 billion was invested into the region's tech industry, while the sector lured in $22.6 billion in funding the year before that, according to data compiled by Dealroom for Atomico.
This year has seen some huge funding deals for start-ups on the continent. U.K. food delivery app Deliveroo raised $575 million in a bumper round led by Amazon back in May, while health tech firm Babylon raised $550 in an investment deal that was backed by Saudi Arabia's sovereign wealth fund in August.
But the research also gave an insight into tech's gender diversity problem. Atomico, which surveyed 1,200 founders for its study, said that a whopping 92% of the money invested into European start-ups went to companies with all-male founding teams. That figure was barely changed from what last year's data showed, and indicates very little has changed when it comes to supporting female tech entrepreneurs.
Atomico added that 63% of the venture capital investors it surveyed who were women claimed to have increased their focus on attending events with more participation from a diverse mix of founders, versus just 36% of their male counterparts. "We actually see that the burden of taking on responsibility of behavioral changes is not necessarily evenly distributed," Atomico's Wehmeier said.
Europe's tech industry also appears to be failing to represent people from different ethnic and social backgrounds. Ethnic minorities in tech claimed to experience discrimination at a much higher rate than their white peers, with 80% of black respondents who said they faced such prejudice citing race as the reason behind it. Moreover, 81% of entrepreneurs said they were living comfortably before starting their company, much higher than the 39% of European citizens who claim to live comfortably, according to Eurostat data.
Still, Atomico's Wehmeier hailed the ability of Europe's tech industry to compete with Silicon Valley and China. "What's happening is that all of the foundations are being put in place," he said. "We have amazing people, we've built strong, engaged communities that allow those people to come together to share their knowledge and experiences."
One particular bright spot for Europe was fintech, or financial technology. The continent's fintech industry came out on top versus other sectors, with start-ups in the space raising over $9 billion. That was on the back of late-stage deals like German banking upstart N26′s $470 million Series D round and Swedish payments firm Klarna's $460 million equity raise.
Europe is now home to 99 unicorns, or start-ups with valuations of $1 billion or more, up from the just 22 that existed five years ago. It's a sign of the overabundance of such companies — the term unicorn was initially used to describe their rarity — and the fact that tech companies have been staying private for much longer.
But increasing skepticism from investors over rising start-up valuations paired with a lack of profitability has clouded the global tech industry. WeWork's botched initial public offering (IPO) and SoftBank's subsequent rescue deal for the office rental firm have recently accentuated those concerns.
Atomico's report noted that the number of European tech IPOs fell to 33 this year, down from 87 in 2018. And not a single venture-backed tech company went public with a valuation of $1 billion or more. However, there were still four more stock market flotations in Europe than in the U.S.
Wehmeier said that he doesn't think the WeWork debacle has reduced investors' willingness to back lossmaking companies, but that there has in recent months been a "greater focus" on the path to profitability. He added that, though U.S. start-up valuations have soared to massive levels, there remains a "big gap" between market values in America and Europe.
"I think over time that gap in valuation should correct itself," he said. "In part, the discount should dissolve because actually what we're producing here are companies that are absolutely emerging to be the global emerging category leaders in their relevant spaces."