According to a report released by venture capital firm Atomico, the total capital invested in European tech startups is forecasted to plummet to $45 billion this year, marking a stark 55 percent decline from the record-breaking $100 billion investment volume witnessed in 2021.
The report identifies the primary causes for this downturn as later-stage companies deferring fundraising efforts and a deceleration in investor deployment pace throughout the year. In 2022, European tech companies attracted $82 billion in capital investment.
Tom Wehmeier, a partner at Atomico, highlighted that some startups that secured substantial funding in 2021 and early 2022 to achieve billion-dollar valuations might witness a dip below this benchmark. He anticipates a continued trend in the upcoming year as these companies could face imminent financial constraints, necessitating a return to the market for survival by 2024 or 2025.
The data revealed that over the five-year period from 2018 to 2022, 257 European tech firms achieved a billion-dollar valuation, with more than 150 attaining this status in the dynamic years of 2021 and 2022.
However, despite the anticipated decrease, Europe’s funding rounds in 2023 are projected to stand 18 percent higher than the pre-boom figures of 2020. This stands in contrast to the United States, China, and other nations, which are poised to either maintain flat figures or fall below 2020 investment levels, as per the report.
Tom Wehmeier underscored, “Considering the exuberance of those two years, the fact that we are up from 2020 indicates Europe’s positive trajectory, particularly as the sole global region to experience an uptick since 2020.”
Looking ahead, Atomico envisions European early-stage startups to surge to over 66,000 from the existing 41,000 within the next five years. Simultaneously, growth-stage startups — companies that have raised a minimum of $20 million — are expected to double to 8,000 within the same timeframe, indicating a robust growth trajectory in the European tech ecosystem.
