Europe punches well below its weight when it comes to tech. The market value of its quoted tech companies is just 6 per cent of the global total. But the start-up scene is flourishing.

Lithuania’s second-hand clothes marketplace Vinted was valued at €3.5bn in its latest funding round this week. Estonia, with just 1.3m people, recently upped its count of unicorn billion-dollar start-ups to seven. Sweden’s Klarna, a buy-now-pay-later fintech, has become Europe’s most valuable start-up with a $31bn valuation.

Historically, the build-up of Europe’s tech sector was hampered by the limited supply of large, late-stage risk capital pools. That is changing and not just because European funds are stepping up their investments. There is growing interest in European tech from US and Asian funds, attracted by lower valuations. About $28bn has been invested in European start-ups in the year to March, according to Dealroom. That compares with $36bn all last year, itself more than double the 2016 total.

Reluctance to list in Europe limits the share of the future value these start-ups create. The US accounts for slightly more than half of the exits of $1bn-plus venture capital-backed European companies, through initial public offerings and acquisitions, says VC group Atomico. But countries are striving harder to keep the businesses they build. Witness the UK’s push for more tech floats and its probe into the recent deal between Arm and Nvidia.

There are also hurdles for Europe’s entrepreneurs not faced by US counterparts — including borders, languages and smaller talent pools. But the remote working of the past year has shown that tech workers do not need to be concentrated in a single hub, such as Silicon Valley. Start-ups can tap into far-flung skills.

Europe will continue to trail a long way behind the US and China. But the blight that followed the bursting of the dotcom bubble has lifted. Young companies are scaling up rapidly. There are signs of a virtuous circle boosting the confidence of entrepreneurs and investors alike.

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