The decline was mostly due to later-stage companies delaying fundraising, as well as a slower pace of deployment by investors.
ADVERTISEMENTInvestment in Europe’s start-ups fell to $45 billion (over €40 billion) this year, down 55% from 2021, as investors struggle to raise cash, according to data from venture capital firm Atomico.
The decline was mostly due to later-stage companies delaying fundraising, as well as a slower pace of deployment by investors, the “State of European Tech” report said. In 2022, capital invested in Europe was $82 billion (€75 billion).
The report, published on Tuesday, showed that overall funding for European venture-backed companies is projected to decline 45 per cent in 2023 from a year ago.
"Some of the startups who raised large sums in 2021/early 2022 to hit their billion-dollar valuation will see their valuations drop below the billion-dollar mark," said Tom Wehmeier, a partner at Atomico.
"I expect to see more of this next year as those companies are likely to be running out of runway at this point, and will need to return to market in 2024 or 2025 to survive," he said.
Over the five-year period between 2018 and 2022, a total of 257 European tech companies reached a billion-dollar valuation, including more than 150 in 2021 and 2022, according to Atomico.
However, Europe's funding rounds will still be 18 per cent higher compared with 2020, a year before the tech investment boom of 2021. In comparison, the United States, China and other countries are on track to land flat or below 2020 figures, the report said.
"When you consider how overheated those two years were, the fact we are up from 2020 suggests that Europe is heading in the right direction, especially since it is the only global region to be up since 2020," Wehmeier said.
Another glimmer of hope for start-ups is artificial intelligence as the report showed 11 AI companies raising mega funding rounds of $100 million (€91 million) or more.
