Venture capital investment in Europe’s technology sector saw a significant decline of 50% in 2023, attributed to the lingering impact of high interest rates, as per data from the venture capital firm Atomico.
Despite this overall downturn, artificial intelligence emerged as a standout category that continued to attract substantial funding rounds.
Atomico’s recent report, “State of European Tech,” revealed a projected 45% decrease in funding for European venture-backed companies this year compared to the previous year.
The total funding for European tech firms is anticipated to amount to \(45 billion in 2023, a notable drop from \)82 billion in 2022, which itself was a decrease from the $100 billion recorded the year before.
According to Atomico, this year marked a correction phase, signaling a return to the more stable pre-pandemic period after a surge in valuations and funding levels during the peak of the pandemic.
Tom Wehmeier, the head of data insights at Atomico, highlighted that Europe has shown resilience compared to its U.S., Chinese, and other global counterparts over the past three years.
Wehmeier explained to CNBC that the industry had undergone a necessary reset following an unsustainable period of growth in 2021 and early 2022. He noted that the current landscape reflects a more sustainable reality with positive signs of recovery.
While institutional investments from the U.S. and Asia waned, Europe experienced a 19% increase in investment levels since 2020, contrasting the 8% decline in the U.S. and 9% in China.
The tech sector, however, witnessed a surge in interest in artificial intelligence, with companies like Aleph Alpha, Mistral, and DeepL securing substantial funding due to the buzz surrounding OpenAI and its ChatGPT chatbot.
AI companies dominated fundraising rounds exceeding \(100 million, with 11 such companies securing significant investments. Additionally, AI emerged as a focal point for investors at the seed stage, attracting 11% of funding rounds valued at \)5 million or less.
Europe’s prominence in AI talent was underscored, with a tenfold increase in highly skilled AI roles over the past decade, outpacing the U.S.
Another notable sector highlighted by Atomico was climate tech, with funding for carbon and energy companies comprising 27% of all investments in European tech in 2023, tripling the figures from 2021.
The report also indicated a rebound in the combined value of private and publicly listed tech firms in Europe, surpassing $3 trillion in 2023 after a dip below this mark in 2022.
Despite the recovery, the IPO market in Europe remained stagnant, with few significant IPOs taking place. However, companies like Klarna, Revolut, and Monzo are reportedly eyeing public listings in the near future.
Mergers and acquisitions activity in the tech sector remained subdued, with deal transaction value totaling \(36 billion in 2023, primarily comprising smaller deals below \)100 million, according to Atomico.
