How did we get here?
In 2022, the European tech industry is valued at $2.7 trillion in comparison to $3.1 trillion the year before.
How should we feel about these numbers, when we put it into perspective?
Research published by Atomico on December 7, presented data that at first came as a shock to many. However, after thinking about it, it only made sense that 2022 was an intense year for European tech industry, having in mind the ongoing inflation and the Ukrainian war.
But those are not the only factors that contributed to an 18% decline in venture capital funding in Europe.
What’s underlined in research several times is that 2021 was the ‘outlier’ year, meaning that the industry was at its peak after recovering from the beginning of pandemic in 2020. After the hype has set down, the numbers were, too.
And that reflected on every area of the industry.
For example, in 2022, the forecasted number of layoffs in the region will be around 14,000. This number has a jaw-dropping effect, with many of us knowing the struggles of someone who got laid-off.
Not to say the European average is something to be proud of, but we need to mention the fact it only makes up for 7% of the total 200,000 of global layoffs.
In other words, only when put into context, we can have a clear picture of what the landscape really looks like.
Now, let’s look into European startups.
European startups raising $15B less than in 2021
In the famous outlier year, European startups have raised over $100 billion. This amount was so impressive that entrepreneurs started rubbing their hands together, thinking there’s no going back.
Photo Illustration: Freepik
However, numbers from this year are showing a significant setback when compared to 2021.
According to Atomico, European startups will raise around $85 billion in total by the end of 2022. This may sound less impressive than a three-digit number from the year before, but it’s actually reflecting a stable and growing industry if we look at the 2021 hype rationally.
Decline in overall statistics doesn’t end here. These areas suffered as well in 2022:
- 30% less IPOs in the region.
- Only 31 unicorns, compared to 105 in 2021.
- The participation of US investors was 22% less than the year before.
Factors contributing to the decline
The year 2022 started off great. As noted in the research, it was actually expected that the funding will exceed levels from the previous year. More precisely, in the first half of the year, the overall funding broke records, with 133 rounds of equity funding at $100 million or more.
But then, July came.
The following six months towards the end of the year reported only 37 rounds of $100+ million equity funding.
82% of surveyed founders say it’s harder to raise venture capital now than in 2021.
According to Atomico’s survey, these were the factors that contributed to the decline the most:
- Lagging economy with high interest rates and inflation risk;
- Unfriendly regulatory environment that’s holding entrepreneurs back;
- Performance of public market companies and general public sentiment around tech;
- Geopolitical situation and the Ukrainian war.
Although this data could sound pessimistic, keep in mind that in 2020 only $39 billion was raised in total. So, the figure of $85 billion doesn’t seem so terrible now, does it?
