European tech on track to raise 50pc less this year than 2021

9 Jun 2023

The Atomico report claims that an adjusted market reality is ‘here to stay’ and said similar trends are taking place in investment worldwide.

Europe is facing a market dip, with tech investment on track to be roughly 38pc lower than it was last year and half of the record highs experienced in 2021.

That’s according to a new report by VC firm Atomico, which claims a new market reality began last year and that this adjusted reality is “here to stay”. Based on Dealroom and Crunchbase data, the report predicts that European investment will reach $51bn by the end of 2023, compared to $83bn last year. This data excludes certain elements however, such as biotech, secondary transactions, debt, lending capital and grants.

While the predicted figure is a clear drop compared to the previous two years, the Atomico report says this will be roughly 35pc to 40pc ahead of investment in 2020 and 2019.

Tom Wehmeier, Atomico partner and head of insight, said 2021 was a “clear outlier” and that investment volumes are returning to “long-term averages”. He also noted that this “won’t be an easy time for everyone”.

“Down rounds will continue to feature and there could be more layoffs,” Wehmeier said. “Creating the right conditions for talent, plus deeper and more liquid capital markets, and a policy approach that bets on innovation while managing risk, will be crucial.”

The report claims that a “steep decline” in investment levels has been observed across Europe, with only some exceptions such as the Netherlands and Denmark. The UK saw one of the biggest drops with a 57pc investment decline year-on-year, followed by France at 55pc and Germany at 44pc.

But the report highlights some positive aspects in the current market, with a “degree of stabilisation” being detected when compared to the tech slowdown witnessed in the second half of 2022. “Moreover, despite funding having fallen significantly, the ecosystem remains diversified with over a dozen countries on track for annualised investment levels in excess of a billion,” the report said.

The Atomico report also noted that this trend is not unique to Europe, as investments in both China and the US are on track to drop by nearly 50pc this year compared to 2021 figures.

Last month, a report from TechIreland claimed Irish start-up funding had its third consecutive year of staying above a billion in 2022, with total funding last year of €1.3bn.

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Leigh Mc Gowran is a journalist with Silicon Republic