European Dev Tool Startups on the rise
Mapping the European early-stage Dev Tool ecosystem in 2023
👀 To access the Notion database incl. all mapped companies, reach out to us
I’ve had the privilege of being an integral member of the team at Kubernetes-startup Replex from its inception and experience ist growth to becoming one of the first successful European US-Exits in the DevOps space. Currently, in my role as an enterprise investor at Signals VC, I get the chance to engage with early-stage DevOps founders on a daily basis.
Building and supporting DevOps companies firsthand has naturally sparked my curiosity to explore more about this market, especially from a European angle which has traditionally been overshadowed by the US. From what I’ve seen, there’s been a big uptick in both the number and quality of dev tools startup teams across Europe. Several have landed impressive funding rounds, like the French platform.sh’s $140m Series D, Paris-based Poolside.ai’s outstanding $126m Seed round, Hungarian Bitrise’s $60m Series C, and German-rooted GitPod’s $25m Series A, and Engflow’s $18m Series A — just to name a few.
These observations might be selective, but it’s hard to ignore that European dev tool startups are on the rise. By activating its enormous developer workforce, which boasts more engineering talents than the US, the quantity and quality of companies in the space is steadily increasing. One great overview of the flourishing ecosystem is this brilliant market map by Sapphire Ventures, highlighting some of the key European players in DevOps.
We’re keen on expanding this view with our own market insights and taking a closer look at developer tools startups in their early stages. So, what’s the state of the European dev tools ecosystem in 2023? And what significant changes are happening within the software supply chain that Europe’s builders are tackling today? Our market map below digs into these questions, exploring recent developments from developer-centric companies at the earliest stages.
The state of dev tools in Europe — Time for a new wave?
Before we unfold the landscape of early-stage dev tools companies, it might be insightful to examine the path this sector has taken in Europe over recent years. How do we measure up against the US, where dev tools startups have traditionally found their widest adoption?
A first glance at the data from Crunchbase reveals that there are 40% less in companies in the “developer tools” category when comparing Europe to the United States (1.5k vs. 2.2k). Considering the contrast of ecosystem maturity in both startups and “big tech” (start here or here for a further reading), this difference actually appears surprisingly small. However, when we turn our gaze towards the landscape of the Cloud Native Computing Foundation (CNCF) — a hub of global thought leaders in modern dev tooling — the geographical imbalance appears more pronounced. The US boasts representation with over 2x more cloud-native companies and nearly 4x higher funding than its European counterparts.
Moreover, the US has already witnessed a plethora of dev tools blockbuster — be it current unicorns like Vercel, Harness, Grafana Labs, Postman, LaunchDarkly, or significant exits such as Microsoft’s acquisition of GitHub and the IPOs of Hashicorp or JFrog. The list is extensive.
In contrast, Europe has yielded only a handful of dev tools success stories. However, unicorns like London-based DevSecOps giant Snyk, Finnish Aiven from the neighboring data engineering realm, and Swiss code analysis tool SonarSource demonstrate that the old continent possesses immense potential to cultivate billion-dollar companies in this space. Another indicator of a favorable environment for developer-centric companies is the consistent stream of successful international exits, such as Instana’s acquisition by IBM, Immerok’s by Confluent, or Replex’s by Cisco (all German). And Poolside, spearheaded by former GitHub’s CTO Jason Warner, made the strategic decision to relocate entirely from the US to France, armed with their fresh $126m Seed round.
These examples clearly illustrate that Europe, with its vast pool of top-tier tech talent, holds enormous potential for startups in the developer tools sector, making this moment an exhilarating time to establish a company in this domain. As Ed Sim from Boldstart Ventures notes in his commentary on the new wave of developer tools, a colossal opportunity awaits founders who are challenging long-established software engineering practices. Industry giants like Gitlab and Datadog have been around for over a decade and evolved into established corporates, potentially being ripe for disruption by a new generation of companies that redefines the way we build, ship, and operate software.
Mapping the Dev Tools Startups in Europe
Zooming further in on these companies in the our market map, we at Signals VC could not be more excited to take part on how these companies can shape this new wave of dev tools out of Europe.
Methodology
To identify the startups leading the new wave of European dev tools, we leveraged a) data from Signals VC’s own dealflow and network; b) Crunchbase data, filtering by the following criteria:
- Geographies: We took companies into account that a) have their headquarters in an European country, or b) have an European origin, also in case the headquarter is non-European. An example for this would be a startup initially founded in an European country and relocated to the US at a later stage; or a company with a remote setting for a European founder team.
- Company age: As we were specifically interested in identifying the next generation of companies, we limited the search to companies that have been founded no later than 2020.
- Segments: We took only companies into account that build tools around the general software development supply chain, with software developers or similar as their primary user. This means we did not include companies that build a) vertical-specific tools or in b) adjacent segments such as ML / AI / Data engineering.
General Observations on the European Landscape
Before diving into thematic clusters, it might be worth to look at the dev tools landscape from a high-level perspective. Below figure summarizes some of the main characteristics we found in the observed startups.
Interestingly, dev tools startups attract on average more Pre-Seed & Seed funding than their European counterparts from other segments in similar stages. It could be worthwile to investigate further whether there might be correlation of a larger presence of US VCs in dev tool startups compared to other segments. Another data point for the “VC fundability” of startups in the space is the fact that only 18 out of 65 of the observed companies are non-funded (might be biased as Crunchbase data, which is partly used for this overview, is centered around funding rounds).
On geographies, we could not identify a major dev tool hub in Europe. Although the majority of startups are headquarted in Europe and the UK, it is hard to relate this to any specific developer ecosystems rather than the general maturity of startup ecosystems of these countries.
These first observations hint at a promising and dynamic future for the European dev tools landscape, showcasing the vast potential of startups in the region. In our next post, we will dive one level deeper and discuss some of the emerging themes in dev tooling. As we continue to monitor the progress and development in this sector, we remain excited about the possibilities these companies bring in shaping the future of software development.
If you are a builder or fellow investor in the space, we’d love to chat — feel free to reach out directly to me and the team of Signals VC!
