Southern Europe in 2023

1. Legs on legislation

   Forward-looking legislative efforts are crucial elements of maturing tech scenes — including talent retention and attraction schemes, as well as fiscal incentives for both investors and entrepreneurs.

   Spain approved a heavy set of startup laws (dubbed the “Startup Law”) in December 2022, including stock and corporate tax breaks, reduced barriers to entry and up to 50% tax reductions for investors. Portugal passed a lighter but similar legislative framework in May this year, also outlining favourable fiscal terms for tech operators. Greece’s respective law has been in place since 2020.

   Sluggish on legislation, the existing Italian Startup Act dates back to 2012 (yes, 11 years ago). Approved by one chamber and awaiting the other’s, its new charter is expected to be passed sometime next year.

2. Tempus Fugit

   While Europe’s worried about losing AI advantage to the US and China, Southern Europe is more concerned about falling behind its continental peers. Only $437m has been raised by AI startups — including machine and deep learning — against $1.4bn for both Germany and France, and $4.1bn for the UK.

   $437m equates to just 4.75% of Europe’s total AI funding this year — dropping even lower for pure AI applications — with no large rounds recorded just yet. Whether it’s due to funding gaps, salary mismatches, structural issues or regulatory impediments, Southern Europe can hardly be described as an AI hotbed.

3. If it’s not AI, then what is it?

   Since 2015, Southern Europe has been all in on transportation ($4.68bn) — led by the Spanish quartet Glovo, Paack, Cabify and REVEL. Health towers above fintech by a $356m margin — which goes against historical European trends — followed by B2B software and foodtech (though the latter suffered significantly over the past three years, down -53%).

   As for what’s growing, education, energy and robotics have posted strong averages since 2015 (precisely between 23.5% and 38.9%), while music and events tech have pushed the most since 2021 (47.7% and 40.3% respectively).

4. Watch out bpifrance

   Domestic investment has ramped up consistently over the past three years — 41% of overall funding YTD in 2023 against 26% in 2021 — and international money is flowing in at a steady drip. For each of the past three years, 19% of total funding has arrived from the US.

   Domestic funding is eating up the shortfall from the rest of Europe, which has dropped 16.8 percentage points since 2021. Stable foreign injections and expansive domestic stimuli are a further sign of the region’s growing maturity.

Who early stage startups are up against