Funding for European tech seems to have stabilized in 2024 after a sharp decline in 2023, but there are still signs pointing to tougher times ahead, according to the latest State of European Tech report.
The annual survey, created by European VC firm Atomico, reveals that startups in the region are on track to secure $45 billion this year. Although it’s not as drastic as the 50% drop in 2023, the figure is still $2 billion lower compared to the previous year. Initially projected at $45 billion for 2023, Atomico has since revised it to $47 billion.
The slight decline this year stands out because the narrative post-pandemic suggested that the drop seen in 2023 was merely a return to “normal” growth patterns.
That narrative goes something like this: funding and other tech market indicators have been steadily rising for a significant period, with 2021 and 2022 being outliers due to increased usage of cloud, mobile, and digital services during the pandemic. However, by the end of 2022, it became evident that the “new normal” was temporary. Therefore, things went back to the “old normal” in 2023 and beyond.
Well, the 2024 figures suggest we might need to reconsider all that once more.
Atomico has been releasing these reports annually for the past decade, and this latest edition highlights significant improvements in the tech ecosystem in Europe.
It’s undeniable that the tech scene in Europe has exploded. Atomico reports there are now 35,000 tech companies in the region classified as “early stage,” with 3,400 late-stage companies and 358 valued at over $1 billion. Compare this to 2015 when there were just 7,800 early-stage startups, 450 late-stage startups, and 72 tech companies valued at over $1 billion.
Despite some positive developments, there are challenges and signs of geopolitical and economic unrest that continue to impact the market.
Here are some key points from the report:
– Exits have plummeted significantly, affecting liquidity and putting pressure on early-stage tech companies.
– Debt financing is on the rise, filling the funding gap especially for startups raising growth rounds.
– Average round sizes across all funding stages have improved, with startups that secure deals raising more on average.
– AI remains a dominant force, leading venture deals and attracting substantial investments.
– Startup valuations are on the rise again, although they still trail behind those of American counterparts.
However, sentiment in the market isn’t as optimistic as expected, with a record proportion of founders and investors expressing lower confidence compared to a year ago.
Overall, the tech landscape in Europe is evolving, with both opportunities and challenges ahead.
