European Startup Funding Falls to $45 Billion in 2023, According to Latest Report from Atomico

Table of Contents

Introduction

The technology sector has been experiencing a downturn, largely driven by inflation, higher interest rates, and geopolitical events. This trend is particularly evident in venture capital (VC) funding for startups outside the United States. According to a recent report by Atomico, companies in Europe are on track to raise just $45 billion this year, approximately half of the $85 billion raised in 2022.

The European Tech Ecosystem: A Mixed Picture

While the overall investment amounts have decreased compared to previous years, there is a silver lining. Atomico’s theory suggests that 2021 and 2022 were outliers due to lower interest rates, increased technology usage during the Covid-19 pandemic, and a pent-up amount of funding among investors. Removing these two years from the mix reveals a more stable investment trend.

Investment Trends in Europe

The report highlights several key trends in European tech:

Climate Tech: Climate-related investments have seen a significant surge, accounting for 27% of all capital invested in European tech in 2023. This is more than double the amount invested in this area last year and outperforms other traditionally dominant sectors like finance, insurance, and software.
Carbon & Energy: The Carbon & Energy sector has overtaken Finance & Insurance and Software as the single largest sector by capital raised. This represents a dramatic increase in the scale of capital invested behind the green transition.
Fintech: Fintech investment volumes have slowed down since their peak, with climate tech emerging as a major driver of growth.

Startups and Venture Capital

The report also provides insights into startups and venture capital:

European Startups: European startups are expected to raise $45 billion in 2023, compared to $85 billion in 2022.
Median Funding Amounts: The median funding amount for European startups is significantly lower than that of US startups. This highlights the need for more investment and support for early-stage startups in Europe.

Conclusion

The state of European tech is complex and multifaceted, with both challenges and opportunities emerging from the current market trends. By understanding these trends and investing in areas like climate tech, startups can navigate this landscape successfully.