European tech funding halves to $45 billion, back to pre-Covid levels — but AI is a bright spot
Venture capital investment into Europe's tech industry plunged by half in 2023 as investors continued to reel from the effects of high interest rates, according to data from venture capital firm Atomico.
However, artificial intelligence was a standout category that saw continued mega funding rounds.
Atomico's «State of European Tech» report, published Tuesday, showed that overall funding for European venture-backed companies is projected to decline 45% in 2023 from a year ago.
Total venture funding for European tech companies will reach $45 billion this year, Atomico expects. That's down from $82 billion in 2022, which is itself down from $100 billion the previous year.
Atomico said that this year was a case of correction and a reversal to the pre-pandemic years which saw a wild rise in valuations and funding levels as the tech industry secured record amounts of capital flows.
Tom Wehmeier, head of data insights at Atomico, told CNBC that where Europe stood out was that the region is actually up on the past three years compared to its U.S., Chinese, and other international counterparts.
«There has been this reset after an overheated and unsustainable period of growth in 2021 and early 2022,» Wehmeier told CNBC. «Now you see that new reality is embedded and green shoots are starting to emerge.»
U.S. and Asian institutional investment into European tech faded in a big way, Wehmeier said, as «tourist» funds like Tiger Global and Coatue, who flooded the market in 2020 and 2021, retreated in the last year or so as macroeconomic headwinds caused them to get cold feet.
Whereas the U.S. has declined 8% and China slipped 9% for overall venture funding since 2020, Europe has seen investment levels grow 19% in the same time
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