In 2020 and 2021, Europe produced more than 80 new unicorns and speedy delivery startup Gorillas reached a billion-dollar valuation in just 13 months. But as we approach the summer holidays in 2023, the tech sector remains in the depths of the European tech winter.
Despite the government’s calls to create a Unicorn Kingdom, the reality is that venture capital investment is down by 25%, tech unicorns are struggling to raise the mega-rounds they need to stay afloat, and layoffs have affected more than 40,000 people in Europe.
But, if you look beyond the headlines, the founder ecosystem is as strong and robust as ever. In fact, the tech downturn is creating conditions that indicate there may never have been a better time to become a tech founder.
The exodus of 40,000 employees from tech unicorns in the last 18 months is a significant transformation in European tech’s employment landscape. And the UK has seen some of the most high-profile layoffs – Just Eat, Getir, Cazoo and GoCardless have all made major redundancies in London over the last 18 months.
Prime conditions for founders
Layoffs and redundancies from tech unicorns and startups inject new founder talent into the market in two ways.
Firstly, people who have been made redundant are able to use severance packages to review their options and pursue a career path that allows them to fully realise their potential and to build the technology companies they’ve always wanted to.
Secondly, high-performing employees at unicorns re-assess their opportunity costs when the company’s growth is stalling and their stock options are losing value. Two years ago, a high-flying executive at Klarna would never have considered walking away from their shares – now the situation is very different.
The result is an unprecedented quantity of new founders emerging. At Antler, the number of applications we received from people who want to create startups across Europe increased by 75% in 2022. We expect that figure to be surpassed again in 2023.
This is clearly being driven by restructuring efforts and the turmoil in many companies. We’ve tracked the number of applications we receive to our founder residencies from employees of companies that have made layoffs and, on average, there is a 391% increase in applications from employees in the 12 months after the company announces redundancies.
Fintech – the jewel in the crown of London’s tech ecosystem – is the sector that has been most affected. We see a 502% increase in applications from employees of fintech companies once they announce layoffs – higher than any other tech sector.
In real numbers, this means that in 2021, Antler received 600 applications in Europe from employees of tech companies that went on to announce layoffs the following year. By the end of 2022, Antler had received more than 1,200 applications from employees of those same companies who were now looking to create their own startups.
When you consider that these companies are all unicorns and fast-growth scaleups, these are highly skilled tech professionals with experience scaling Europe’s most successful tech companies. And 1,200 of them are now looking to build their own startups.
The flywheel effect in action
So far from tech layoffs negatively impacting Europe’s tech ecosystem, they are invigorating it. We are seeing this first-hand as we work with former employees from companies like Delivery Hero, Patreon and MessageBird who are now building their own tech startups with huge growth potential.
This is leading to a very different profile of founder emerging in the UK and across Europe.
Our research shows that whereas the founders of British unicorns were most likely to have previously worked at McKinsey, Cambridge Consultants and Boston Consulting Group, now one of the employers generating the highest number of new tech founders in the UK is actually Uber.
Across Europe, Booking.com, Spotify and Klarna are the large tech startups whose former employers are most likely to become tech founders.
This is the flywheel effect in action. Tech companies are scaling, and producing new generations of founders from their employees. This is a sign of the growing maturity of the tech ecosystem in the UK and Europe.
This trend is being accelerated by the tech downturn and layoffs, which means that a new cycle of startups is emerging. And the best talent is now determined to go it alone and use their knowledge and ambition to build for themselves.
They have the experience, knowledge and ambition to create technologies set to define the future of tech in London, Europe and around the world. That is why in ten years’ time, the tech companies that everyone is talking about will most likely have been created by someone who was laid off in 2022.
Dr Christoph Klink is a partner at investment firm Antler.