There has been a visible slowdown in investment into the tech space across Europe, according to a report from European Venture Capital firm Atomico.
The report, State of European Tech: First Look 2023, indicates the amount of capital invested into Europe fell by 52% between 2021 and 2023. In comparison, China, the US and the rest of the world saw falls of 46% to 49%. That said, it is not all doom and gloom.
“In 2022, we reported the beginning of a new market reality,” said Tom Wehmeier, partner and head of insights at Atomico and an author of the report. “This trend has continued into the first half of 2023, as total investment volumes in Europe are set to reach around $50bn+ (€46.6bn+) plus for 2023 as a whole, based on activity to date.”
He added: “This represents around a 50% drop compared to the record highs of 2021, and around 38% down on 2022. However, this is still roughly 35% to 40% ahead of what we saw in 2020 and 2019. Even in a market downturn, Europe is on track to have its third largest year in terms of funding raised.”
Liquidity challenges
Atomico also predicted the market would recover sharply, saying it was in a much-different state than in the downturns of 2000 and 2008. “Over the past five years, European tech has delivered in excess of $500bn in exit value,” said Sarah Guemouri, principal at Atomico and another author of the report.
“However, this year, like last year, remains stagnant. This creates obvious liquidity challenges at every level – for founders, tech employees, limited partners – all of who rely on the flywheel of recycled capital and talent for the progression of our ecosystem.”
She added: “ARM’s plans for a Nasdaq listing, alongside hints from the likes of Vinted and Visma, suggest the IPO window could re-open later this year. Once this window opens, there will be a strong pipeline of high growth firms – and tens of billions in unrealised value – waiting.”
The firm made a number of predictions about the outlook for 2023. Among these were that a challenging environment would persist, but the ecosystem looked healthier as the industry was “stripped back to first principles”; more founders would return; the exit market would reopen at the end of the year; the quality of talent at both founder and operator level would continue to deepen; and the AI supercycle would drive a “golden age of innovation”.
