The tech sector in Europe is in a potentially delicate, yet exciting position.

On one hand, companies in the United States and China are largely ahead of Europe in industries such as quantum computing, 5G connectivity, and sustainable energy production or cleantech. Europe’s GDP per capita has also been trailing behind that of the United States.

On the other hand, Europe has several advantages up its sleeve, which could quickly close the gap between European countries and their competitors – if companies and investors can capitalize on these advantages.

Here are the latest European tech sector insights every investor should know.

Companies in other regions are receiving and spending more external funding…

Over the past few years, the United States and China both secured more external funding for 5G and artificial intelligence technologies than Europe did.

Europe also did not take the lead in expenditure and investment in biotechnologies, spending only a fraction of what the United States did. Europe is also falling behind on sustainable energy production or cleantech, such as solar and wind power.

Early in 2022, European technology stocks also fell 20 percent, reaching bear market territory.

…but Europe is quickly catching up

However, Europe will not be behind for long. Some investors, seeing opportunity up ahead, are buying European technology stocks despite the recent price weakness.

Several European tech companies have reached the initial public offering stage, which is not only an indicator that Europe can succeed in this sector, but also attracts additional investors and capital – in some cases, hundreds of millions of dollars. This IPO activity is expected to remain strong into 2022.

Some banks are even beginning to create dedicated teams for raising capital to support tech startups. All of these form a positive feedback loop that could help capital flow into the European tech sector, funding further growth and innovation.

Europe has advantages in education, talent, and resilience

Despite many difficulties, Europe still has a strong opportunity to close the gap and catch up with – or even begin to dominate – its competitors in the global technology sector.

Among other things, this opportunity is based on the strength of Europe’s education and talent pool.

The continent has high-quality education systems that produce a wealth of human capital skilled in STEM (Science, Technology, Engineering, and Mathematics) fields. To add to this, European technology companies have increased their number of employees by more than 40 percent over the past few years.

In 2020, even as the COVID-19 pandemic was continuing to rise and affect economies worldwide, European tech companies were able to raise over $40 billion in investments. In the same year, the value of these companies rose by almost 50 percent.

This performance is proof of Europe’s impressive level of resilience despite enormous challenges such as the pandemic.

In order to see more evidence of this resilience and tenacity, an investor need only look at the many examples of European companies that continue to perform well globally, such as Skype and Spotify.

European countries are reforming their processes and adopting digital methods

Though Europe may not have started out with the most advanced processes or the most efficient bureaucracy, this is rapidly changing.

Greater use of technology, increasing adoption of remote work culture, and a general embracing of digital processes all allow European companies to raise additional investment funds, communicate quickly over large distances, and find and recruit new talent from all over the world.

Startup companies in the region are also reimagining payment processes and banking practices, as well as providing customers directly with analytics. Both of these result in greater efficiency for customers and businesses, as well as attracting more interest and investment.

Ready to start investing in Europe?

With more investment and innovation taking place in Europe, now is the time to move boldly into the market.

Scaler8 provides Asian startup companies and SMEs with enhanced opportunities for marketing, mentorships, and partnership. Whether you need business expansion, market validation, or a stronger local presence, we can help you reach your goals and improve your business performance.

Scaler8 is backed by German Entrepreneurship, a leading innovation services provider with strong connections and expertise in both Germany and Asia.

Ready to start connecting with new customers and partners in Germany and Europe? Speak with an expert here.