Released annually since 2015, Atomico’s State of European Tech is a global reference for all things tech and Europe. Silicon Luxembourg compiles 9 takeaways from the 8th edition report, including Luxembourg’s performance.
Containing over 450 charts and 117 pages, this year’s State of European Tech is full of insight into the state of tech funding, VC engagement, unicorns, the dwindling workforce – you name it. Interestingly, the report not only gathered its information through reputable sources such as Dealroom.co, S&P Global and others, it also collected data from more than 4000 VCs, founders and startups across Europe.
1. Investments rose and fell in 2022
The first half of 2022 saw record-breaking levels of investments. In July however, these took a dramatic dip which has continued until the end of this year. As a consequence, investments in Q3 of 2022 are down more than 40% compared to 2021.
2. Total investments expected around $85B
For the first time in European history, 2021 saw European tech investments reaching +$100B. The economic downturn experienced over the summer has significantly slowed down investments, with conservative estimates suggesting we’ll hit around $85B for the full year.
While this decline is significant compared to last year – representing a year-on-year decline of 18% – it bears reminding that Europe is in the toughest macroeconomic period since the Global Financial Crisis and this year’s investments are still more than double those of 2019 and 2020.
3. Mega rounds and unicorns decreasing
The first 6 months of 2022 saw more than double the number of mega rounds – 133 to be exact – compared to 2019 and 2022 combined. However, the dramatic decrease in investments in the second half of 2022 suggests that there will be fewer +$100M rounds in the remainder of the year than in preceding years.
It is not surprising then that the proliferation of unicorns is also slowing down. Whereas 2021 saw a record-breaking 105 companies achieve unicorn status, only 31 emerge in 2022. While this decrease appears drastic, it actually falls in line with previous years and suggests that 2021 was a bit of an outlier.
4. 14K European tech employees lose their jobs
Globally, more than 200K tech workers lost their jobs this year. While the number of job losses was “only” 14K in Europe, this puts many workers in precarious positions and will have far-reaching implications for the European tech ecosystem as a whole, especially since November has seen two times the number of layoffs of any prior month of 2022.
5. Gender equality hit hard
If most of the findings weren’t cause for concern already, women in tech, who are already fighting an uphill battle, appear to have suffered some significant losses. Indeed, the proportion of funding raised by women-only teams has dropped from 3% to 1% since 2018. Thankfully, the proportion of deals made by women-only teams has stayed constant at around 5-6%.
6. A glimmer of hope
While most of the report’s findings don’t exactly give cause for celebration, its survey respondents seem cheerful enough. Indeed, 77% of all survey respondents were either more optimistic or retained the same level of optimism as they did a year ago. While it seems debatable whether this is a useful metric, optimism is certainly a better catalyst for action than pessimism.
7. A resilient institutional investor base
Despite less-than-ideal economic conditions, the European tech ecosystem continues to benefit from a high volume of experienced and active investors, the number of which is trending upwards, with more than 3,200 unique institutions having participated in at least one European investment.
8. Luxembourg among the greatest “fallers” in total capital invested
According to the report, Luxembourg invested 20% less capital in 2022 than in 2021. While this puts it still far ahead of The Netherlands (-54%) and Germany (-43%), it should not be brushed aside lightly.
9. Luxembourg conspicuously absent from the report
The 117-page document only mentions Luxembourg, a country aiming to establish itself as a startup hub, once. Whether this is due to an absence of quality data about Luxembourg or a lack of trying on the part of Atomico, is unclear. Silicon Luxembourg has, however, reached out to the authors for a comment.
While this year’s report contains more downward-facing graphs than previous editions, most authors and commentators remain cautiously optimistic about the future.
“This is not the time to sit back. Whatever is happening in the markets, the fundamentals of this ecosystem haven’t changed. The opportunity for Europe is greater than ever,” said Tom Wehmeier, partner, co-author and head of insights at Atomico.
