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European Tech Funding Declines, Yet Outperforms Global Average
November 29, 2023
Tech investment in Europe is expected to reach approximately $45 billion this year, a significant decrease from the $82 billion invested in the previous year, according to a report from Atomico. The companies most affected by this decline are those in the growth stage that require late-stage capital injections to scale up.
However, despite the overall decrease in investment, Europe is the only region where investment levels have risen compared to 2020. The report states that investment in Europe has increased by 18%, while the United States is expected to experience a 1% drop to $120 billion. China and the rest of the world (RoW) are also expected to see decreases of 7% and 8%, respectively.
One area that has been particularly impacted by the decline in investment is European late-stage tech startups. The report highlights that investment in these startups has almost dried up due to the unappealing IPO market for exits.
Furthermore, the report reveals a significant decrease in cross-over funds, which invest in both public and private companies. In 2021, there were 82 such investments, whereas this year, there have only been four. This decline further emphasizes the challenges faced by tech startups in Europe.
According to the report, raising capital has been the most frequently cited challenge by founders and senior startup leaders over the past 12 months, with 38% stating it as their biggest challenge. Securing customers was the next major concern, with 37% of respondents identifying it as their biggest challenge.
Looking ahead to 2024, founders remain cautious. 41% believe that raising capital will continue to be one of their biggest challenges, while 44% anticipate difficulties in securing customers.
Despite the challenges, Europe still boasts a higher number of new first-time founders compared to the United States. Although the rate of new company formations has decreased by 30% since its peak in 2020, Europe continues to see a steady influx of new entrepreneurs.
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