00:00:00 · Sebastian Johnson, Christoph Klink
[00:00:00] S0: Hello, and welcome back to Scaling Europe show. I'm Steven Johnson. Today on the show, we've got an amazing guest from Antler who has just released a very interesting report about the state of European tech. How are you doing today? Thank you for joining me. [00:00:11] S1: Very well. Thanks for having me. Really looking forward to our chat. [00:00:14] S0: Yeah. I mean, is, a super interesting report. Like, data here that... I don't think people would assume, but it's sort of like a... It's telling the tale of almost two things going on in European tech. We're seeing this amazing growth, more unicorns, better companies. We're seeing companies that are really winning. There's also some strange stuff going on at the early stage. I guess, like, can you give me the headline and maybe some of the key points from it?
00:00:36 · Christoph Klink, Sebastian Johnson
[00:00:36] S1: Sure. So I think as you said, right, there's there's really two things going on right now. And it feels like this extremes are getting more accentuated right now. The one side is the one that fortunately, we all speak about quite a bit, because we all have to be optimists in the line of work that we're in. And that is, there's more founders building, they are more experienced, they're more technically skilled, they're building bigger companies, all of a sudden there's 13 decacorns in Europe, all of a sudden there's a new branch of unicorns after that 2022, 2023 slump. And they're scaling faster, they're raising a lot more money, and they are attracting the best investors in the world. So when you look at the Midas list, the share of them coming to back European companies at a very, very early stage is almost shooting through the roof. And I think that's very, very, very positive. And that's great. There's still a lot of work that we need to do. And I think we as Europeans, we're not always as optimistic as we should be. So we speak a lot about that work that needs to be done, but I think overall, we're on a great path. However There's there's this Sorry. Go ahead. [00:01:49] S0: Go ahead. No. No. No. I was gonna... No. You go ahead.
00:01:51 · Christoph Klink
[00:01:51] S1: There's there's a flip side to all that where I think there's less attention being put on right now. And when you look into the earlier stages of building, then we see a bit of what we call a funding gap emerging because the number of companies being started and number of founders starting new companies is shooting through the roof and has been increasing pretty steadily after the last peak of 2020. So we're right now 50, 60% over the peak and over the volumes of 2021. And it looks like 2026 is gonna be even stronger. So German startup association released the H1 numbers for Germany and they were 50% above H2 twenty twenty five. First half of the year 2026 was already above the number of companies started in Germany in 2024. So this continues. However, the number of pre seed seed and series a rounds isn't keeping track at all. So when you look at what has happened there from 2021 to 2025 into 2026, then they have decreased by something in between 4055% altogether. So that means that capital is actually concentrating in a lot fewer companies And a lot of other companies are not succeeding in raising capital early on. And if you never raise a Series A, it's very unlikely you're ever gonna see that hockey stick growth. You're ever gonna shoot through the roof growth wise. It is possible and we see great companies that are being bootstrapped and very likely we're gonna see more in this age. But still, we believe that there's probably a bit of attention that should also be devoted to what's going on in these earlier stages.
00:03:41 · Sebastian Johnson
[00:03:41] S0: Yeah. And I think the early stages is so interesting. So, you know, as I was reading the report, there's something like new... Total early stage investors have dropped by 40%. New investors entering early stage, I think it was 45%. And so we've had all this noise around, like, fixing the growth capital stage in here at... Here in Europe. And I... We're doing a lot of great stuff there, whether it's the EU scale up fund and some other bits. And, you know, there's more money flowing to that stage. But interestingly, we sort of have taken that the early stage is like a fixed problem. We've got a great ecosystem here. But as a result, we're actually seeing the number of investors drop and new investors drop. And I don't... Yeah. Like, what are the risks of this? Right? What what happens if that trend continues?
00:04:25 · Christoph Klink
[00:04:25] S1: Yeah. I think what we're what we're seeing is exactly that that not a lot of new investors, emerging managers have grown into it. Right? So in a healthy ecosystem where people are starting new funds, where people are spinning out of their own funds to start their own new fund, you would always see small managers growing into it, and they usually don't start raising a growth stage fund. They'll usually start raising a pre seed or seed fund, start deploying with a relatively small fund, deploying relatively small tickets, and are actually going after those companies there. And I think in the tough market environment, it's not only tough for founders, it's also tough for people that are starting funds that we've seen essentially over the last four years. That number of new funds being set up has certainly dropped. So, I think the tough thing is always you always have to keep in mind that the market behavior we saw in 2020, 2021, and somewhat into 2022 also wasn't healthy, right? So, you can't take that as a baseline. So, throughout the entire report, we always try to take the baseline of anything before that peak, which is probably conservative, right? Because we should have evolved further in the sophistication that we have as an ecosystem since what happened between 2014 and 2019, right? But I think that reloading of that lower tier of investors hasn't happened. There's a lot fewer people that have set up their own funds than the first funds. And then at the same time there's some that have grown out of the very early stage, and then there's some that have just dropped out and are not active anymore, or are simply taking longer to fundraise. So, it's also stretching that deployment out, and I think that overall leads to fewer deals being made. At the same time, what I also found very interesting is that in those companies that actually make it, that are very, very successful, we called them rocket ships, which we we thought would be a good term for companies that were started since 2020 and already became unicorns. They... On average, they take less than three years to actually get there, which compares to seven point two years before 2020. So they're very, very fast, like a rocket ship. They on average have seven investors, almost twice as many investors on board of their cap table when they raise their seed round.
00:06:50 · Christoph Klink, Sebastian Johnson
So it's not only more capital concentrating, it's also more consensus, it seems, building between investors. It's more investors hugging on to the same companies that are doing really, really well. [00:07:03] S0: And why do you think that is? You know, I know that we... In the report, you talk a bit about jets and juggernauts. I think we can go into that a little bit. But when you talk about some of those early stage rounds where there's over consensus, is it because actually some of these companies since 2020 are able to experience much faster revenue growth? They're seeing much more traction. Is that a reason why? Or is there maybe just like a greatest feat? Like, is it just because there's more consensus thinking in venture?