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Written by Akriti Seth
In a big change from the investment frenzy of 2021, European tech startups in 2023 raised about 50% of the funding they raised in the same year, according to new data from Crunchbase.
The business intelligence firm reported this week that European startups raised $52 billion in funding last year, down from more than $100 billion in 2021. But this year was an anomaly, coinciding with astronomical fundraising metrics for a post-pandemic world.
Despite the decline in funding since 2021, the European startup scene remains well above pre-pandemic funding levels. Additionally, Crunchbase reported that Europe is capturing a larger share of the global venture capital space than its North American or Asian peers.
Like the rest of the global ecosystem, late-stage startups in Europe were hit hard by the lack of funding last year, with fewer funds raised than in previous years. In fact, Crunchbase said late-stage funding in the fourth quarter reached its lowest level since Q3 2020.
The drop in funding last year was of course expected. In early November, a report published by London-based venture capital firm Atomico estimated that the European ecosystem will raise around US$45 billion in 2023.
At the time, Atomico partner Tom Wehmeyer said, according to Reuters, “Some of the startups that have raised significant amounts of capital to reach $1 billion valuations in 2021 and early 2022… “The valuation is likely to be less than $1 billion,” he said. .
But the outlook for European startups is brightening. Some VCs and analysts are predicting consolidation across the VC industry, meaning some investors unable to raise follow-on funds will start shutting down their operations, a move that could impact the entire ecosystem. Some say it’s healthy.
Bridging funds for startups in VC portfolios may also dry up, but this could mean more capital available for early-stage companies, said Peter Walker, head of insights at Carta. told Forbes.
Mike Turner, a partner at law firm Latham & Watkins, also told Shifted that investors sitting on a pile of dry powder will start implementing it in 2024.
“There is uncertainty in the market in 2024. of It’s an election year when more than 50 countries head to the polls. This is causing some anxiety for investors,” said Jesús Tapia, head of the IMPACT accelerator at ISDI Digital Business School in Spain. It is worth noting that, in some cases, there are adversarial positions regarding how money flows into the startup ecosystem. But it’s clear that the focus will be on generative AI, traditional AI, healthcare, agrotech, and biotech startups. ”
After remaining flat for several years, it is still unclear whether startup funding will continue to decline or stabilize in 2024, but European startups are hopeful.
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