The hitchhiker’s guide to the European fintech ecosystem

QED Investors has been part of the European fintech ecosystem for close to a decade now, and during this period we have not only had the privilege to help build some landmark franchises but also to observe closely how the market has grown, becoming richer and more sophisticated.

One of our first investments in Europe was in fact Klarna in 2012, where QED’s founder Nigel Morris served on the board, and from there we moved on to the UK where we were the first investors in ClearScore in 2015. Also having invested in Zopa during this period, we then established our physical presence in 2017. Since then, we have broadened our geographic scope further, investing in Wayflyer in Dublin and Payhawk in Sofia, Bulgaria.  

As part of our work, we are frequently on the road, and having just completed a tour de Europe, we wanted to share our impressions from this incredibly diverse, rich and vibrant ecosystem. Not surprisingly, there are not one but many tech scenes emerging across Europe, and it is worth highlighting some of the nuances of each place.

And place is indeed important for no matter how much virtual or from-home work we do, these ecosystems center around people, and people, no matter how much they travel, center around cities.  

Sofia

Sofia, the capital of Bulgaria, is one such city that is rapidly emerging as a very exciting ecosystem.

Considering that Bulgaria was a socialist republic until 1990, it is dizzying to see how fast the tech scene there has emerged and is now on the forefront of European innovation. Entrepreneurs like Vassil Terziev who was the CEO and co-founder of Telerik have played a key role in this ecosystem that is characterized by a strong influence of Silicon Valley culture.

As a result, Sofia stands out with its focus on software, engineering, a strong product focus, and in general takes many pages from the SaaS playbook that has emerged in the U.S. over the last decade.

Belgrade

Moving slightly northwest, but staying in the Balkans, Belgrade is also emerging as another very interesting local ecosystem.

Sharing strong characteristics in terms of their focus on engineering and product with Sofia, another salient feature of Belgrade is the very strong crypto and DeFi ecosystem that has developed there. During a recent visit we got to witness the innovation that is taking place in this arena, and we are convinced that Belgrade will spawn many innovative companies in Web 3.0.

Istanbul

Going eastward, but keeping at least one foot in the Balkans, Istanbul is striking in terms of how large and varied the local scene is. The ecosystem there benefits from access to the largest population in Europe weighing in at 87 million, which has created, and undoubtedly will continue to create, tech giants on the consumer side.

The large population also goes hand in hand with the largest housing stock in Europe, so we expect many proptech related fintechs to emerge from Istanbul in the near future. Turkey also stands out as one of the largest crypto markets globally.

Berlin

Speaking of large economies, moving west to Berlin, it is hard to ignore the fact that the German economy, with a GDP in excess of 3.5 trillion Euros, is by far the largest economy in Europe, surpassing the second largest one, the UK at 2.5 trillion, by a factor of some 40 percent.

Given its distinctly non-centralized economy, it is likewise not surprising that there are many distinct ecosystems in Germany, but Berlin certainly stands in terms of the vibrancy of its tech scene. In addition to its sheer size and the subsequent implications for consumer facing companies, Germany also stands out for a lot of the innovation that is likely going to happen in the insuretech space in the coming years.

Dublin

Another very vibrant tech scene is the one in Dublin. The features that have most shaped the scene there is the presence of American big tech, with the likes of Google, Microsoft, Facebook, and others all having strong presences there.

A lot of the big tech also place their sales teams in Ireland, which has led to a presence of very strong pan-European sales talent. Dublin also stands out for its general proximity to the U.S. and also for its ever outward looking mindset, which drives innovation that is globally focused from day one.

Stockholm

Moving slightly more northeast, Stockholm strikes us as one of the most established tech scenes in Europe. If the emergence of Silicon Valley dates back to DARPA and the 1950s, the emergence of Stockholm dates back to the early 1990s, when the Swedish government made a top-down decision to invest more in IT infrastructure and give citizens access to high speed network connections and tech focused education.

This investment paid off in spades, with not just Klarna, but companies like Skype, iZettle, and Spotify emerging from the country over the subsequent years. Many things characterize the Swedish ecosystem, but punching above their weight is probably the one that stands out the most!

Needless to say, the list above is only a very partial sampling of the very rich European ecosystem, and whether it is Paris, Amsterdam, Madrid, Lisbon, or Milan each city has its own unique pool of talent and competitive advantage for creating that next breakout.

While on the surface, and based on funding volumes, it may look like London is the dominant place for venture capital in Europe, at QED Investors we believe that each local ecosystem in Europe, no matter where, has the potential to create that new fintech winner. Our recent tour of several European cities only served to strengthen this conviction, and we remain incredibly excited to continue funding and help growing the future champions, one customer at a time.

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