Startups across Europe are on track to raise $85 billion in funding this year — down from $15 billion in 2021 when funding topped $100 billion, according to a new report published today. The figures come from the annual Atomico released by Atomico in London European technology country, which has become a leader in the tech industry in the region, and underscores the pressure on it as the region grapples with an ongoing war in Ukraine, a faltering economy, the tech industry in particular, and the reluctance of residents to return to work. He introduced it and became productive again two years after the Covid-19 pandemic.
Overall, Atomico said, the European tech industry has lost about $400 billion in value: it is now valued at $2.7 trillion.
The report includes a survey of venture capital and founders, as well as research from third-party companies like Dealroom, and also notes that tech layoffs in the region will amount to about 14,000 a year — a huge number, but still only 7% of the total, she said. The number of layoffs worldwide, which numbered about 200 thousand.
The total number raised also isn’t quite a bleak message when put into context. And Atomico noted that this year’s funding was in fact on track Exceed 2021 levels. Then in July, the activity dropped off a cliff and never came back. This isn’t a great sign in 2023, but it also seems to indicate that the $100 billion raised 2021 was also a weird year. The numbers from 2020, for example (the year all kinds of activities stopped with the onset of the pandemic) were only $39 billion.
Why drop? Interestingly, those surveyed said that while economics – and specifically high interest rates and inflation risks – were two of the biggest fear factors affecting the tech industry in Europe, they said the second most important factor was the unfriendly regulatory environment. Public market companies’ performance and public sentiment about technology and geopolitics ranked third and fourth, respectively.
In fact, some of Atomico’s other big conclusions confirm what many of us have seen. Atomico notes that the IPO markets are completely closed. There were only three IPOs this year in the region, compared to 86 the previous year, a decrease of 30%.
The number of “unicorns” being produced – that is, companies worth more than a billion dollars – has also fallen. There were 31 such companies this year, compared to 105 in 2021. But again, as with finance, this seems to indicate that last year was out: 2020 had 25 companies, and 2019 had 35. with a value of $1 billion or higher.
Likewise, I found that the funding rounds themselves narrowed as the year progressed. Again, as with total financing, the first half of the year broke records, with 133 rounds of equity financing of $100 million or more (not including debt or secondary rounds), which was more than 2019 and 2020 combined. Still, the founders may have been looking to make hay while the sun was still shining: By the second half of the year, that total had dropped to “a mere” 37 rounds of that size. US investors are also making fewer moves in the region: their participation is down 22% in 2021.
Notably, it’s not just those at the growth end of the spectrum who feel the pinch:82% of founders surveyed believe it is more difficult to raise investment capital now than it was 12 months ago,” the report states.
And in tough times, the push for diversity has been more overlooked than before. Atomico noted that 87% of all VC funding in Europe “is still being raised by founding all-male teams.”
Conversely, the percentage of funding raised by women-only teams has fallen from 3% to 1% since 2018, with the number of deals holding steady at 5-6% but the money going to them not increasing. “until When women’s teams lift a round successfully, they’re likely to receive less — and that pattern goes in the wrong direction,” Atomico notes, “and you can see below how poorly women are represented at the higher end of the finance scale in actual terms, even as they grow a bit in some brackets.” :
Meanwhile, ethnic minority founders were virtually unknown: only 1.4% of funding by number of deals went to minority founding groups. Only 0.7% in value went to them. (Atomico does not detail the other categories in DEI.) The message is clear that there is a lot of work that needs to be done here to improve the ratios.
Unsurprisingly, all bad indicators lead to massive devaluation. The wave of private company cutbacks and the lost market value of public companies has caused a loss of about $400 billion to the technology as a whole, Atomico notes. Its total value is now estimated at $2.7 trillion, down from $3.1 trillion at the end of 2021.
One silver lining to the incremental effect on tech — where the largest companies (those that are publicly traded, or very mature and privately owned) may feel the most — is that the early stage is still doing very well overall in Europe, relatively speaking. The region’s youngest startups account for 51% of the massive investment in “Purpose drivenTechnology companies. (Note: these are startups that blend science and technology, or bring technology to bear to fix the world’s biggest problems like climate change – not the same as investing in All early-stage startups.)
And just as we’ve been charting a number of mutual funds in the area raising over $1 billion this year, Atomico connects the dots on this one to note that there’s really a lot of “dry powder” — ready funds invested when the right opportunities arise.
At the end of 2021 (the latest full available period), InvestEurope estimated that there was about $84 billion in uninvested funds across Europe — coincidentally not far from the total amount startups will raise this year. The $84 billion includes both venture capital and given the amount of fundraising collectively across the industry this year, and the subsequent decline in investment, particularly in the latter half of this year, Atomico believes dry powder reserves could be higher when all is recorded, Although now it seems to be half that:
“The tech ecosystem as we know it is barely twenty years old and in that time we have matured at an astonishing rate. Real success of the sector is about talent, innovation and building the company for the long term,” writes Tom Weihmeyer, Atomico Partner and Head of Insights and co-author of the report. The critical pieces of this puzzle are still in place, though $44 billion In European venture capital funds ready to invest in the right opportunities. In terms of the underlying strength of our ecosystem, it hasn’t changed much from what we think.”