As investors continued to feel the pinch of high interest rates, venture capital investment into Europe’s IT sector fell by half in 2023, according to statistics from venture capital firm Atomico.
But one area that stood out and saw ongoing massive funding rounds was artificial intelligence.
According to the “State of European Tech” study by Atomico, which was released on Tuesday, venture-backed companies in Europe are expected to receive 45% less capital overall in 2023 compared to the previous year.
This year, Atomico predicts that venture capital funding for European tech startups will total $45 billion. That is less than the $82 billion in 2022—a decrease from the $100 billion the year before.
As the tech sector attracted record levels of capital flows, Atomico claimed that this year was a correction and a reversal to the pre-pandemic years, which witnessed a sharp increase in valuations and funding levels.
Europe is really up over the last three years compared to its U.S., Chinese, and other international competitors, according to Tom Wehmeier, head of data insights at Atomico, who spoke with CNBC about this.
After an excessive and unsustainable phase of growth in 2021 and the first part of 2022, “there has been this reset,” Wehmeier told CNBC. “As you can see, green shoots are beginning to emerge and a new reality is implanted.”
Wehmeier stated that institutional investment from the United States and Asia into European technology declined significantly in the previous year or two as “tourist” funds like Coatue and Tiger Global, which saturated the market in 2020 and 2021, withdrew due to macroeconomic headwinds.
Europe has seen investment levels climb 19% in the same time period, indicating the region’s resiliency, whereas the U.S. has decreased 8% and China has slipped 9% in terms of overall venture capital since 2020.
Source (CNBC)
