Yes, we've only got two weeks left of this long year, things slow down little by little, and I'm starting to receive polite suggestions to talk in January when trying to record an interview before Christmas. So, welcome to the week of reflection on the past 12 months on Tech.eu — starting with the most important stories and trends we've noticed.
All in all, 2021 has been the year when a few interesting industries came to prominence — and not just fintech that positively dominated the media coverage, but also things like quick commerce and Amazon business aggregators. On the other hand, European regulators have definitely shown their teeth in a number of fights with Big (Bad) Tech, from antitrust rulings to alleged GDPR breaches. All of that, and more — in our end-of-year reflection below.
A quick disclaimer: this story won't focus on individual funding and M&A deals or public listings; we'll cover those separately over the course of the next few days. Instead, let's take a wider look at the industry to see behind the flashy amounts in headlines.
Big fines for Big Tech
As European authorities — both on the EU and national levels, — continued scrutinising the power of Big Tech, a number of global digital giants have been slapped with hefty fines. This year's record was set by Italy, where the country's antitrust watchdog fined Amazon €1.13 billion for alleged abuse of market dominance.
Elsewhere, the Luxembourg National Commission for Data Protection issued Amazon with another €746 million in fines — this time, for alleged breach of the GDPR. Google got fined €500 million in France over “failing to comply with the regulator's orders on how to conduct talks with the country's news publishers in a row over copyright.”
Despite the formidable numbers, keep in mind that the tech giants are appealing all the mentioned fines, meaning that it's going to take a few years before the respective authorities get paid their dues — if at all.
Looking into the future, the tech giants may be facing even bigger fines in Russia, which has been tightening its grip on online information access for a while now. The country now demands that all Big Tech establish local offices, as well as threatens to issue fines of 5 percent to 20 percent of a company’s annual local revenue if it refuses to delete content deemed illegal by the authorities. In a recent example, Apple and Google already bowed to one such request, removing a protest voting coordination app from their respective app stores.
The year of fintech
Looking back at the year 2021, it's quite obvious that fintech was the most active and attractive industry in European tech, with more than €25 billion raised across almost 800 VC deals — that's according to Tech.eu's own data. Companies running “buy now, pay later” (BNPL) financing offerings, as well as challenger banks and behind-the-scenes payment processing operators seem to have raised the lion's share of this amount.
The vertical isn't showing any signs of slowing down yet, promising a wild ride in 2022 — and a possible wave of fintech IPOs after that, if market conditions for public listings in Europe become more favourable (see more on the latter a few paragraphs below).
Your groceries, delivered in a jiffy
This year, more customers than ever got their groceries delivered within 10-20 minutes thanks to the boom of “quick commerce”. Pioneered by Getir and Glovo, the European market of bringing you that carton of milk faster than it'd take you to go to the store now consists of over 20 startups. Their operational model is based on strategically placing a number of “dark stores” stocked with the most popular grocery items across cities in order to minimise the delivery times.
Among the noticeable newcomers to the market are Gorillas, Flink, Wolt (acquired by DoorDash), Dija (acquired by GoPuff), Cajoo, and many others. In total, European players that offer speedy grocery deliveries have raised over €3.7 billion in 2021.
Seedrs and Crowdcube don't merge after all
The two major UK-based equity crowdfunding players — Crowdcube and Seedrs — announced their imminent merger back in October 2020. The deal promised the creation of a dominant player on the market, which didn't make the UK's Competition and Markets Authority (CMA) quite happy.
In March 2021, the CMA published provisional findings of its probe into the deal, highlighting serious competition concerns and making it clear that it was very likely to block the merger. One day later, the companies announced a joint decision to terminate the merger to avoid a lengthy fight with the CMA they were unlikely to win.
At the end of the day, Seedrs has found another powerful partner to boost its position on the market. In early December, the news broke that the US-based fintech startup Republic acquired Seedrs in a $100 million deal.
CMA never sleeps
Seedrs and Crowdcube weren't the only companies stopped in their tracks by the CMA this year. The authority went even further in its next big case, effectively blocking a deal that had already happened, namely Facebook's acquisition of Giphy for $400 million. In late November, the CMA “directed” the social network to sell the GIF repository; it argued that the acquisition “would reduce competition between social media platforms and that the deal has already removed Giphy as a potential challenger in the display advertising market.”
The CMA has also created a cinematic cliffhanger moment in December, as it published an interim report that targets Apple and Google. In the document, the authority “recommends” the companies to open up their mobile ecosystems by making it easier to switch between the two, install apps from outside of their respective app stores, give users more freedom to choose in-app payment options, and offer them to pick the default web browser.
NVIDIA's takeover of ARM is not likely to happen
Probably the biggest and most heavily discussed deal in European tech in 2021 was NVIDIA's bid to acquire the UK-based and SoftBank-owned chipmaker ARM. Announced back in 2020, the deal has drawn a lot of criticism in the UK and across the continent. Of course, the CMA — who else? — couldn't remain uninvolved, and launched an investigation into the proposed takeover citing national security and competition concerns.
The results of that “phase one” investigation were published in August and contained a recommendation to run a deeper probe into the potential ramifications of the deal. In November, the UK's digital secretary Nadine Dorries instructed the CMA to do just that and be done within 24 weeks, i.e. before mid-May. The CMA has also recently mentioned that it holds weekly talks with its counterparts in the US and the European Commission regarding the deal.
Speaking of the counterparts, the Federal Trade Commission (FTC) in the US filed a lawsuit to block NVIDIA’s takeover of ARM in early December. With both the CMA and the FTC being that unhappy with the idea, the general consensus in the industry seems to be that the deal is “highly unlikely to go through.”
Blockbuster turned lacklustre: Deliveroo goes public
The IPO of the UK-based food delivery darling Deliveroo was widely expected to be a big success — but turned out to be London's worst major public debut in decades. On the first day of trading in March, the shares closed 26 percent below the listing price, wiping out some £2 billion in paper value. Deliveroo's shares rebound above the IPO price in August, only to tank even sharper in December for labour-related reasons we'll cover in a minute.
Over the course of 2021, hosts of experts have offered all kinds of explanations of Deliveroo's terrible performance on the public market, ranging from wrong pricing to wrong choice of stock exchange. What's more important, however, is that it has supposedly cooled down the investment climate and deterred other European startups from listing in the UK, if not at all — think Klarna as a good example.
Gig economy in trouble
The need for better (and, some would say, fairer) regulation of the gig economy industry has been a topic for many years, but 2021 marks the first serious steps made in this direction. The first one came to be in the summer, when Spain introduced its “rider law” that prescribed the likes of Deliveroo, Glovo, and UberEats to reclassify its couriers from freelancers to employees. (Deliveroo had subsequently left the Spanish market.) The jury, however, is still out on whether the new regulation actually managed to improve riders' lives.
Towards the year's end, the European Commission presented a proposal to establish legislation that would mandate gig economy platforms to employ their contractors in a way that's similar to that in Spain. The proposal now has to be adopted by the European Parliament and European Council; after that, Member States will have two years to introduce corresponding national laws.
European money flows in startups
The European Commission entered the direct investment market in earnest this year with the full-fledged launch of the European Innovation Council (EIC) Fund, which had been undergoing its pilot phase since 2018. The organisation's first round of equity funding amounted to some €178 million; later, it ran a “fast funding” programme focused on combatting COVID-19 worth €164 million of taxpayers' money. In December, the EIC also announced that a whopping €627 million will go to 99 selected companies shortly.
Recently, the EIC reported the first results of its pilot stage. Among other things, the companies that received money from the Council have raised an impressive €9.6 billion in follow-on (mainly VC) funding — compared to €3.8 billion provided by the EIC.
Legal turmoil at Web Summit
A few weeks before this year's Web Summit, which gathered over 40,000 attendees in Lisbon, the story of a significant legal row between its founders surfaced in the media. Paddy Cosgrave, the company's CEO and public face, sued his co-founder and another business partner for allegedly using the Web Summit brand for a secretly developed venture fund.
In the meantime, Web Summit itself has proven to be quite a resilient organisation over the course of the pandemic. In addition to its family of events, the company started licensing its conference software this year, with the list of clients including the United Nations and the Consumer Electronics Show.
Amazon business aggregators grow like crazy
Aside from fintech and quick commerce that dominated the European tech landscape in 2021, one other niche has generated an unexpected amount of buzz — and funding. As of the end of this year, there are more than 20 companies in Europe buying up merchants who offer their wares using the Fulfilled by Amazon (FBA) programme. The most recognisable players include SellerX, Berlin Brands Group, Razor Group, Branded, Heroes, and more.
The main idea — pioneered by the US-based Thrasio that's also active in Europe, — is similar to that of private equity funds, but on a (much) smaller scale. The aggregators are looking to scoop up merchants with good growth metrics, unite them under one corporate umbrella, and use the in-house expertise to grow the businesses more efficiently. To that end, European players in this market have raised some €2 billion in 2021 in equity and debt (which is the standard mix for this industry).
DSA and DMA are shaping up
In December 2020, the European Commission introduced draft versions of the Digital Services Act (DSA) and Digital Markets Act (DMA), two documents meant among other things to limit the power of Big Tech on the continent. Over the course of 2021, both pieces of legislation have been heavily discussed across the relevant European institutions, and while the DSA seems to be taking a while to get finalised, the DMA is moving forward quite quickly (by the standards of European bureaucracy, of course).
Over the past two months, both the European Council and the European Parliament have agreed their respective negotiating positions on the DMA proposal. This means that the draft legislation will move to the final discussion stage in January, before the negotiation process with the EU governments starts. All in all, we're likely to see the final version of the DMA in 2022, while the actual implementation by member states won't happen until 2024 or so.
This was a broad overview of the year 2021 in European tech — a year that's brought incredible growth to the ecosystem as a whole, but also had a fair number of disappointments in store. Stay tuned for a series of more focused snapshots of the industry — and find everything we've published so far over here.