European 2023 tech startup funding to drop to $45 billion: Atomico

The funding landscape for European tech startups is anticipated to experience a decline in 2023, with total capital investment projected to plummet to $45 billion. This marks a crucial 55 per cent decrease from the remarkable $100 billion investment volume seen in 2021, as reported by venture capital firm Atomico.

The primary factors contributing to this downturn include the postponement of fundraising activities by later-stage companies and a deceleration in investor deployment. 

In the preceding year, 2022, the total capital invested in European tech amounted to $82 billion.

Tom Wehmeier, a partner at Atomico, highlighted the likelihood of startups that secured substantial funding in 2021 and early 2022, aiming for billion-dollar valuations, witnessing a decline below this significant threshold.

He anticipates a continuation of this trend in the coming years, with these companies facing the challenge of returning to the market in 2024 or 2025 for survival.

Despite the decrease, there is a silver lining, with funding rounds in Europe still expected to be 18 per cent higher than the levels observed in 2020, a year pre-dating the tech investment surge of 2021.

This contrasts with the United States, China, and other nations, where funding figures are projected to remain stagnant or fall below 2020 levels.

Over the five-year period from 2018 to 2022, Atomico reported that 257 European tech companies achieved billion-dollar valuations, with more than 150 of them attaining this status in the years 2021 and 2022.

Looking ahead, Atomico foresees the number of European early-stage startups growing from 41,000 to over 66,000 in the next five years. Additionally, growth-stage startups—those securing at least $20 million in funding—are expected to double, reaching a count of 8,000 in the same timeframe. Despite the challenges, this growth trajectory suggests a positive direction for the European tech ecosystem.

(With Reuters Inputs)