European VC funding is down 50pc while AI remains an outlier

28 Aug 2023

Image: © Mopic/

Crunchbase has released a report that says European VC funding in Q2 was significantly lower than last year, in line with a global downturn.  

European venture capital funding in the second quarter of 2023 was half of what it was last year, latest figures from a Crunchbase report show.

Funding totalled $12.4bn between April and June this year, marking no increase over the previous quarter and down a whopping 50pc from the same period last year, when a total of $24.7bn was invested by VC firms in Europe.

While this is in line with a similar slash in North American VC funding volume over the past quarter, Crunchbase reports that the start-up ecosystem in Europe is younger and more vulnerable.

Yaron Valler of Berlin-based investor Target Global told Crunchbase that Germany only became a viable start-up ecosystem as recently as 2008. “I think we are more sensitive to a downturn,” he said. “If there is a persistent downturn and sources of funding dry out, this can have an effect for decades afterwards.”

According to the report, the UK led Europe as the largest market for VC funding in Q2, followed by Germany and France. Overall, less than a fifth of global venture capital was invested in Europe.

Late-stage funding, in particular, has taken a hit in the general downturn, having declined each quarter since the second quarter of 2022. Funding in this stage has fallen 64pc year on year as global investors dial back on private company financings.

Meanwhile, early-stage funding has declined by a third compared to the same period last year, at a little shy of $6bn. It has, however, increased over the previous three quarters, while seed stage funding has stayed largely flat.

Paris-based Bpifrance, Germany-based High-Tech Gründerfonds and Brussels-based European Innovation Council were some of the most active public-private investors in the first half of 2023. Others active in the VC funding scene include Antler, Techstars, Plug and Play, and FJ Labs.

Despite the general funding lull, start-ups developing artificial intelligence have seen a boost, not least helped by the current gold rush surrounding generative AI.

According to the data, European AI companies raised $1.5bn in the second quarter, representing 12pc of the continent’s total funding.

London-based companies stood out in the AI space. Large rounds were raised by AI applications development platform, intelligence platform for banking and insurance Quantexa and AI-powered video platform Synthesia.

Germany’s Aleph Alpha, which helps government and private enterprise implement AI technologies, also raised significant funding.

Enterprise Ireland, one of the most active VCs in Europe, invited entrepreneurs and start-ups to apply for its Pre-Seed Start Fund last week.

Open to all sectors and entrepreneurs all year round, Anna-Marie Turley told the fund responds to “current market needs” and provides entrepreneurs with an “attractive financial offering” to help accelerate their start-up business plans.

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Vish Gain is a journalist with Silicon Republic