2022 has been a bumpy year for the European tech industry. Covering total investments, to unicorns, workforce layoffs, IPOs, and gender disparity among others, the State of European Tech 2022 report published by Atomico, Orrick, Lazard, Silicon Valley Bank, and Slush features a survey of more than 4,000 VCs, founders, and start-up operators and sheds a light on how the tech industry is doing.
| High interest rates, inflation, geopolitics, and public market sentiment are ranked by most as the main macroeconomic factors which might slow down VC activity in Europe over the next few years. Despite the gloomy headlines and the macroeconomic shake up, there seems to be optimisim about the future among the community of VCs, LPs, founders, and policy makers among others. Tech spending has more than doubled in the last two decades and will continue to transform industries and our day-to-day lives. | Europe has more than 160,000 start-ups accounting about 9M ICT specialists across the European Union (representing 4.5% of the total workforce in the EU in 2021). |
We picked out 7 takeaways from the report:
1. Funding: Total investments to European tech start-ups are expected to reach $85B.
Despite that total investments in 2022 showed an 18% reduction compared to the previous year, according to the report, there seems to be still much 'dry powder' available for tech start-ups, an industry term used to describe access to large pools of investable capital that have not yet been deployed by investors.
The pool of investors is deep and many investors continue to explore investments in European tech. In fact, close to 3,500 institutions participated in at least one investment in Europe in 2022.
It is worth mentioning that $85B is the second largest amount invested to date in European technology start-ups indicating that the European tech start-up ecosystem is maturing.
Despite that total investments in 2022 showed an 18% reduction compared to the previous year, according to the report, there seems to be still much 'dry powder' available for tech start-ups, an industry term used to describe access to large pools of investable capital that have not yet been deployed by investors.
The pool of investors is deep and many investors continue to explore investments in European tech. In fact, close to 3,500 institutions participated in at least one investment in Europe in 2022.
It is worth mentioning that $85B is the second largest amount invested to date in European technology start-ups indicating that the European tech start-up ecosystem is maturing.
2. The Unicorn Club
31 start-ups have reached a unicorn status in Europe in 2022 so far compared to 105 companies reaching the $1B milestone in 2021. Compared to other years, 2021 appears to be an outlier year.
Top European unicorns broken down by Country
The United Kingdom, Germany, and France have the greatest share but other regions are growing fast. For example, the total value of private and public tech companies from Central and Eastern Europe has reached more than $74 billion, having grown almost 5x since 2017 according to the report.
3. Share of Capital Invested
European start-ups account for 31% of all capital invested globally in rounds of up to $5M, compared to 33% for the US.
European start-ups account for 31% of all capital invested globally in rounds of up to $5M, compared to 33% for the US.
4. Founder sentiment about fundraising
8 out of 10 founders believe that it is now harder to raise a financing round compared to 12 months ago.
5. Workforce layoffs
Many companies made the hard decision to reduce their staff in order to manage cash burn during an economic slowdown. Year to date, over 14,000 tech employees of European headquartered companies lost their jobs, representing 7% of all tech employee layoffs globally.
Many companies made the hard decision to reduce their staff in order to manage cash burn during an economic slowdown. Year to date, over 14,000 tech employees of European headquartered companies lost their jobs, representing 7% of all tech employee layoffs globally.
6. Fintech and Enterprise software are the winners
Fintech and enterprise software continue to attract large investments. In fact, 46% of invested capital went to these two categories in 2022.
Fintech and enterprise software continue to attract large investments. In fact, 46% of invested capital went to these two categories in 2022.
7. Top European Cities and Hubs with most capital invested
London, Paris, and Berlin occupy the top three positions among the cities with most capital invested. According to the report, Paris is even on track to grow capital invested by 21% in 2022E after a record year in 2021 (2.5x the level in 2020). Zurich, Helsinki, and Milan are all expected to grow as well in 2022 210%, 33%, and 94% respectively.
