The venture slowdown has been a topic of discussion for quite some time now, and recent data from VC firm Atomico suggests that this "adjusted market reality is here to stay." In this article, we will delve into the details of the report, exploring the current state of venture capital in Europe and its global implications.
A Global Phenomenon with European Ties
According to a new report from Atomico, based on Dealroom and Crunchbase data, if things stay the same, the amount of capital invested in European startups this year will be 52% lower than in 2021. While this decline is significant, it’s essential to note that other major regions are experiencing similar trends.
European Venture Capital: A Mixed Bag
The report from Atomico comes with a caveat – it excludes Israel and biotech, secondaries, debt or lending capital. These exclusions might raise some eyebrows, but they are consistent with prior Atomico reporting. This allows for a more accurate comparison of historical data.
Common Challenges in Europe and the US
Many of the same issues plaguing the United States are now showing up in Europe. Infrequent exits and a dead IPO market are just a few examples. However, this is not new information; these problems have been well-documented.
Recent European Venture Capital Totals: A Cause for Optimism?
While it’s true that European tech investment volumes are tracking at around half of 2021 levels, set to reach $51 billion in 2023 compared to $106 billion two years ago, this comparison might be less than useful. After all, 2021 was a unique outlier.
Comparing 2022 and 2023: A Tale of Two Years
If 2023 does end up with a cumulated $51 billion invested into European startups, that would be more than we saw in 2019 ($36 billion) and 2020 ($38 billion). However, it would be less than the recorded $83 billion in 2022. The real difference between these two years lies in the US VC funds’ investment levels.
The US Factor: A Headwind for European Startups
Atomico found that in the first half of 2023, U.S. VC funds invested 34 cents in European startups for every $1 invested by European VCs, compared to 54 cents in 2022. This decrease means less money is flowing across the Atlantic, which presents a challenge for European startups.
Signs of Resilience: A Brighter Future Ahead?
Atomico partner Tom Wehmeier, who co-authored the report, offers a slightly more optimistic outlook. According to Wehmeier, there are signs that the venture capital market is adapting and finding new opportunities. This might indicate a brighter future for startups.
European AI and ML Startups: A Hype Worth Exploring
One area where European startups have seen significant growth is in AI and Machine Learning (ML). These companies accounted for 35% of all funding so far this year, compared to just 5% in 2022. This rapid increase highlights the growing importance of AI in the tech landscape.
Conclusion: The Venture Slowdown – A Global Phenomenon with European Ties
In conclusion, the venture slowdown is a global phenomenon that has taken hold in Europe as well. While the numbers might seem daunting at first, there are signs of resilience and growth in specific areas such as AI and ML startups.
Key Takeaways:
- The venture slowdown is a global phenomenon with European roots.
- European tech investment volumes are tracking at around half of 2021 levels.
- US VC funds’ investment levels have decreased compared to the previous year.
- There are signs of resilience in specific areas such as AI and ML startups.
By staying informed about these trends, investors, entrepreneurs, and industry leaders can better navigate the ever-changing landscape of venture capital.
