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Atomico’s latest State of European Tech report found that the sector has lost about $400bn in value this year.
European tech start-ups are expected to raise around $85bn by the end of this year, falling short of the record-breaking $100bn raised in 2021.
That’s according to London VC firm Atomico’s State of European Tech 2022 report, which made the estimation based on average investment amounts between August, September and October.
It represents an 18pc year-on-year decline and is largely the result of a tough macroeconomic environment that began to choke investments in the second half of 2022.
This means that while the record level and pace of investments in 2021 carried over into this year, global events such as the invasion of Ukraine and rising inflation have caused activity to cool off.
European tech companies have seen around $400bn in value erased since the start of 2022, the report said, falling to $2.7trn from a peak of about $3.1trn this time last year.
The $85bn is still the largest amount ever invested in European tech in one year, apart from last year.
“This slowdown really took effect through August and September and has seen monthly investment levels drop closer to levels last seen in 2018, at around $3bn to $5bn invested per month,” the report noted.
“As a consequence, total investment in Q3 2022 ended up down more than 40pc compared to the same quarter in 2021.”
Ireland has seen a similar drop since last year, but still holds its ground above the $1bn mark in terms of tech investment. The report’s authors told the Business Post that investment in Irish start-ups declined from $1.6bn in 2021 to $1.2bn this year.
However one of the authors, Tom Wehmeier, said that Ireland’s tech scene showed signs of maturing with an increasing number of unicorn alumni starting their own companies.
“Obviously if more people are able to apply the knowledge and experience they have gained from operating at a certain scale in a breakout company at something new, then there are likely huge benefits to come from that.”
The state of European tech diversity
Ireland leads the way in Europe in terms of women founder representation, according to the report. Of all the Irish start-ups that raised funding over the last five years, 10pc have all-women founding teams while a further 11pc have women in the team.
This puts Ireland ahead of Spain, the UK, Italy and Sweden in the top five. Portugal had the highest proportion of mixed-gender founding teams at 17pc, meanwhile the Czech Republic has the lowest percentage of all-women founding teams at 3pc.
The report also noted that the representation of women is not automatically improved by increasing the size of the overall investment pie.
“One clear sign is that, looking across European countries, gender parity and total funding are not correlated,” it said.
“Some countries that rank highly for total investment – like Sweden, Ireland and Finland – also lead in the number of rounds raised by teams with women founders, as a proportion of their female population.”
But France and Germany, which are among the top three most VC funded countries in Europe, see far fewer funding rounds going to women on a per capita basis.
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