European tech is going through a slow patch — funding is harder to come by, and startups have laid off thousands of employees.
Investors and founders are hoping it doesn’t continue this way for long — and they’re looking for promising signs in the data.
So, what does it tell us?
Sifted compiled the nine essential charts to understand what’s going on in European tech right now, based on our own analysis and Dealroom data. One key takeaway: it might not be as bad as it seems — if we could only remember what the pre-bull market days felt like.
1/ Investors have marked their scaleup holdings down
Scaleups that raised at the height of the tech bubble in 2021 and early 2022 are shying away from raising now — given they’ll likely have to do so at a steep discount to their last valuation.
As most of these companies are private, it’s hard to know exactly how much they'd be worth if they raised again. But looking at how some investors and mutual funds have valued their stakes in private tech companies gives a bit of an indication.
Until market conditions improve — including the listed tech company stock prices that serve as a benchmark for pre-IPO tech companies — there’s likely no way we’ll see 2021 valuations anytime soon, investors say.
2/ Mega and gigarounds aren’t dead, just rarer
4/ Top European VCs have kept up the dealmaking
Despite the drop in funding, most major VCs Sifted talked to insist that they’re still investing. And that bears out in the numbers — deal activity at Europe’s leading VCs has remained robust.
Interestingly enough, Northzone backed more companies in 2022 than in 2021, according to Sifted analysis. Accel saw the most drastic pullback in deals in 2022 versus the previous year, investing in 29 companies last year compared to a humongous 46 in 2021.
5/ Is this really just a return to normal?
Maybe we shouldn’t all be freaking out… was 2022 just a return to normal? A comparison with historic growth rates for European venture investing suggests so.
Europe’s tech scene grew at an average of 26% year-on-year between 2010 and 2019. Then, two key external shocks — the pandemic and rising interest rates — influenced VC deployment.
First, the global pandemic halted economic growth, then propelled the bull market of 2021. In 2022, rising interest rates brought investment levels down again, sparking widespread pessimism.
But 2021 is, as time goes on, proving to be an outlier. 2022 actually followed a fairly accurate progression in relation to growth rates from 2010 to 2019 — assuming no shocks — with $500m more capital invested than predicted.
6/ A tale of two worlds
Since the tech slowdown hit last year, European tech is still a tale of two stages. Seed and Series A startups are thriving — trust us, our newsroom is receiving a lot of seed deal pitches — but late-stage funding has dried up.
Early-stage (seed and Series A) funding increased from $29.9bn in 2021 to $31.3bn last year, according to Dealroom, despite a 16% fall in the number of rounds. Early-stage funding accounted for a third of total funding in 2022, up from 25% the year previously.
Meanwhile, late-stage (Series B+) plummeted from $89.5bn to $62.6bn. Reality check again here: $62.6bn is still double the entire amount invested in European tech in 2020. Not too shabby.
Jonathan Sinclair is intelligence research manager at Sifted. Federico Scolari is an intelligence analyst at Sifted. For more data insights and analysis on European tech, become a Sifted Pro member.
