Antler: The Crucial Role of Technical Founders in European Innovation

A new report by early-stage venture capital investor Antler has revealed a compelling insight into the European innovation economy. It highlights the critical role played by “technical founders,” entrepreneurs with backgrounds in computer science, data, and software development, in fostering the growth of successful tech companies.

• The report asserts that a shortage of technical founders has hindered Europe's ability to create world-beating technology companies, unlike the United States, where the twenty most valuable tech companies were founded by individuals with technical expertise.
• However, the report also notes a positive trend: an increasing number of software engineers are starting their own companies, driven in part by industry layoffs, and this shift is already having a noticeable impact on Europe's innovation economy.

Antler's "Day Zero" Investment Approach

Antler, known as a "day zero" investor, employs a unique methodology. It invites founders to participate in "residencies" lasting around two months. During these residencies, Antler assesses the founders, their teams, and the product potential before making investment decisions. Antler's research involved analyzing data from 1,000 European founders and 60,000 aspiring entrepreneurs seeking investment through its residency program.

• Antler's analysis highlights a stark contrast between Europe and the United States. While 100% of the top 20 tech companies in the US were founded by technical individuals, only 45% of Europe's largest technology companies (by market cap) boast founders with technical backgrounds.

Antler's Findings: The Importance of Technical Expertise

The research conducted by Antler emphasizes the link between technical expertise and the success of European tech companies. It posits that Europe's lack of a tech giant is partly due to the insufficient number of entrepreneurs with hands-on technical experience.

• The report observes a clear correlation between successful emerging unicorn companies and technical founders, with 54% of these businesses led by individuals with technical backgrounds.
• In contrast, less than 15% of failed unicorns had technical founders at the helm, further emphasizing the significance of technical expertise in startup success.

The Shift Towards Deep Tech and the Role of Technical Founders

While traditional business models relying on technology platforms might not always require tech founders, the current landscape is increasingly driven by deep tech, big data, and predictive analytics, often targeted towards business-to-business markets. This shift emphasizes the need for technical expertise to understand and develop solutions for complex technological challenges.

• Antler's research suggests that consumer-focused innovation has reached a saturation point, and future innovation will likely be driven by more advanced technologies.
• The report emphasizes the need for technical founders to not only possess technical skills but also understand the complexities of the market, including customer needs and technological solutions.

Antler's Insights: The Rise of Technical Founders from Established Tech Companies

The report highlights the increasing number of technical founders emerging from established tech companies like Meta and Google. These individuals bring not only technical skills but also valuable insights into real-world problems that require solutions. They have a proven track record of developing products to address challenges they have witnessed firsthand.

• The recent tech downturn has played a role in this trend, as many individuals with technical expertise are no longer incentivized to remain in traditional employment roles. The opportunity cost of staying employed is lower, with reduced emphasis on innovation and a shift towards maintaining existing products.
• Antler has observed a significant increase in its cohort of new founders with experience working for established companies, with a fourfold increase in alumni from these companies and an eightfold increase in technical founders.

Regional Differences and the Impact of Brexit on Technical Founders

The report highlights regional differences, with France and Germany exhibiting a higher percentage of tech-skilled founders compared to the UK. One contributing factor to the UK's situation is Brexit, which has made it more difficult for talent from across the continent to relocate to London. This has potentially impacted the availability of technical founders in the UK.

• Antler's research underscores the importance of fostering an environment that attracts and retains tech-skilled talent. Factors such as migration policies, access to funding, and a supportive innovation ecosystem play critical roles in attracting and retaining technical founders.

Antler's Conclusion: The Importance of Technical Expertise in the Future of Tech

Antler's research suggests that while other skills like sales and marketing are essential for business growth, technical expertise will be crucial for success in areas like AI, analytics, cybersecurity, quantum computing, and biotech. Understanding the intricacies of these technologies and their application is critical to creating innovative solutions that meet customer needs.

• Antler's research highlights the need for a proactive approach to fostering a thriving tech ecosystem, one that encourages and empowers technical founders to build successful European startups.