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Europe’s definitive tech report
The definitive take on
European tech
A word from...
Executive summary
Companies
Talent
Fundraising
Outcomes
SOET community
00
01
02
03
04
05
06
05
19
65
159
189
219
245
00
A word from Atomico



07
A word from Orrick



10
A word from HSBC Innovation Banking
13
A word from Affinity



15
A word from Slush



17
A word from...
7 | A word from...
A word from Atomico
After 2022 proved to be one of the most challenging years our ecosystem has ever faced, 2023 was never
going to be plain sailing. There’s no getting away from difficult macroeconomic conditions that Europe has
faced this year, with Europe set to reach little over half of 2022’s levels at $45 billion by the end of the year - a
trend being felt across the globe. What’s more, we’ve seen a slowdown in rounds of over $100M, with only 36 of
these so-called ‘megarounds’, down from 163 in 2022 and almost 200 in 2021. This has also meant only 7 new
$1B+ companies have been minted in 2023. And while dry powder is at a record high, the fundraising environ-
ment for VCs has resulted in a compression of fund cycles. The venture asset class is certainly being put to
the test.
A word from the report co-authors
| 8
And yet, this year European tech has proven its resilience and shown signs of stabilisation. De-
spite this tough macro environment, the ecosystem has bounced back to a value of $3 trillion,
recovering the $400 billion that was wiped out last year; the layoffs that plagued 2022 have
peaked and levelled off, with the worst of them seemingly behind us; Europe’s overall funding
levels, while experiencing the same pullback being felt across the globe, is still the third high-
est on record at $45B, indicating that the ecosystem remains resilient, and is correcting itself
following the highs of 2021 and early 2022.
Looking at the exit environment, the public markets have started to wake from their slumber
after an incredibly quiet first half of the year with signs of activity in H2. Arm’s $50 billion IPO
made the headlines earlier this year, paving the way for others to float and prising open the IPO
window, ready for next year. M&A activity also picked up this year, adding $36 billion of value,
but this is far from the levels recorded in 2020 and 2021.
In terms of startup formation, Europe is now creating more new startups than the US, and
while startup formation has slowed this year, this is largely due to the weeding out of first-time
founders, with the share of repeat founders remaining stable. That means a class of dedicated
founders who are ready to face a higher bar to raise money, attract talent and win customers.
This is now critical, given the easier access to capital in the US, despite both regions having the
same likelihood to scale to a $1B+ outcome.
We’ve also found that talent in Europe’s ecosystem is proving to be one of Europe’s key
strengths. Despite challenges in the capital markets and a subsequent risk of layoffs, Europe-
an tech is not losing its strong appeal to talent; there has not been any type of mass exodus of
talent out of the industry, but rather, we have seen net growth. In the last five years, European
tech has expanded its workforce from slightly over one million employees to more than 2.3
million today. Even more encouraging is the fact that Europe is gaining from talent flowing into
the ecosystem from the US, rather than losing out to them. We’re also seeing the proliferation
of early-stage startups driving job creation; early-stage companies typically account for almost
double the number of new joiners to the tech industry in each period, compared to growth-
stage companies.
This talent advantage is also bearing out in AI. Naturally, advancements in AI have dominated
the media landscape, with fears that Europe is in danger of falling behind the US. The data,
however, tells a different story. Not only does Europe have more AI talent than the United
States, with 108,000 AI operators in Europe vs. 87,00 in the US, but also we’ve seen AI become
the number one theme at Seed stage, including Mistral AI securing the largest seed round in Eu-
ropean history. AI-focused companies made up 22% of all European megarounds this year, even
surpassing the levels in 2022, indicating that investors’ appetite to fund the sector remains
strong despite the macro turbulence. This achievement is especially impressive when com-
pared with the trend in the US, where the availability of growth-stage capital has a substantial
impact on the number of $100M+ rounds raised.
9 | A word from...
Of course, AI is not the only sector where Europe has continued to perform,
as the region continues to show dedication to solving humanity’s toughest
challenges. The Carbon & Energy sector, which encompasses ‘climate tech’,
accounts for 30% of all capital invested in European tech in 2023, tripling its
share of total investment since 2021. This made it the single largest sector
by capital raised, overtaking both fintech and software. It’s encouraging to
see capital flowing to companies solving the world’s most crucial challeng-
es, despite difficult market conditions.
Atomico invests in ambitious tech founders at Series A and beyond with a particular focus on Europe, lever-
aging deep operational experience to supercharge their growth. Founded in 2006, Atomico has partnered
with over 100 ambitious teams - including those at Klarna, Supercell, Graphcore, Compass, MessageBird,
Masterclass, Attentive Mobile, Pipedrive and Hinge Health. Atomico’s team of founders, investors and opera-
tional leaders have been responsible for global expansion, hiring and marketing at companies from Skype and
Google to Twitter and Uber.
About Atomico
We are at a crucial moment in the
innovation cycle, standing before the
greatest funding imperative we’ve seen
in generations. European investors,
both private and institutional, now need
to plug this gap in funding if Europe is to
reach its full potential.
Tom Wehmeier
Head of Intelligence & Partner, Atomico
So, we’ve got the technical bedrock. We’re drawing new talent into our
ecosystem. We’re starting more companies than any other region. We’re
building our strongest ever teams. And we’re seeing the brightest talent
being directed to the hardest and most pressing problems. We have all the
ingredients to become the next tech superpower.
| 10
A word from Orrick
While 2023 tech investment in Europe is far off from the extraordinary highs of 2021 and around 38% down
from last year, it was still a very solid performance with many signs of strength and green shoots in the eco-
system.
We see clear indications that tech and innovation remain the engines for economic growth in Europe and
across the globe.
11 | A word from...
The pool of investors, including investors exclusively focused on Europe,
has never been deeper. The number of unique investors in European tech
has risen consistently over the past decade. VCs have raised more than
$50B in new funds locally since 2021.
Carbon and Energy solutions account for approximately 30% of all capital
invested in European tech in 2023, tripling the proportion of investment
since 2021. Energy storage, clean energy and energy efficiency top that
trend.
AI investment has soared globally, including in Europe. AI & Machine Learn-
ing companies accounted for 11% of the total investment in 2023. What’s
more, Europe already has a growing and maturing ecosystem of late-stage
companies with AI at their core. Eleven mega-rounds of $100M+ were raised
by AI companies in Europe in 2023 alone.
Since 2014, Europe has minted more than 350 new unicorns. The conti-
nent’s tech ecosystem is well-stocked with more than 3,900 growth-stage
tech companies that have the potential to become the next generation of
household names and success stories. Europe also has 41,000 early-stage
startups – and in the next five years alone, at least 25,000 more tech start-
ups are expected to be formed.
We see clear indications that tech and
innovation remain the engines for economic
growth in Europe and across the globe.
There is a lot of dry
powder.
The market has heeded
the call to action on
climate, the fastest
growing segment.
AI and automation
attracted the most
capital and has a robust
growth stage pipeline.
As one measure of the
ecosystem’s maturity,
there is an abundance
of companies across
the lifecycle.
Funded European companies are as likely as their American counterparts
to scale to a billion-dollar valuation after five years in operation. Yet U.S.
startups are 40% more likely to have secured venture capital funding in the
same timeframe. That said, Europe’s share of global VC reached 17% in 2023
– showing the market is awakening to this opportunity and closing the gap.
Mind the gap in funding
and you’ll find incredible
opportunity in Europe.
| 12
Orrick ranks No. 1 in Europe for venture capital (Pitchbook) and has been the leader for each of the past seven
years. We counsel venture-backed companies, as well as the most active funds, corporate venture investors
and public tech companies worldwide.
Our advice is informed by working with more than 4,000 high-growth tech companies globally (including hun-
dreds of companies in emerging sectors, such as AI, Life Sciences & Healthtech, Energy Tech and Fintech), 13
of the 25 largest public tech companies, and more than 400 investors.
Our annual Deal Flow Report analyses the hundreds of transactions we help companies and investors close
in Europe and shares insights gleaned from term sheets, industry trends, deal volume and more. Our 2022
report leveraged data from the 500+ transactions we closed for clients in Europe with an aggregate value of
more than $12 billion and our 2023 report will launch in Q1.
We recently launched Orrick Tech Studio, a self-service resource to help companies grow and thrive at all
stages. With 50+ customizable forms & document generators, 300+ articles, videos and podcasts and robust
FAQ and glossary databases, it’s our version of open source for the ecosystem. Learn more at OrrickTechStu-
dio.com.
About Orrick
The European tech community
continues to disrupt, innovate and
scale.
Chris Grew
Partner, Technology Companies Group, Orrick
Serial entrepreneurs and next generation founders are collab-
orating and leveraging technology to solve some of the most
pressing issues we face. Thank you as always to Atomico for
affording us the opportunity to be part of the most important
conversation on the State of European Tech.
13 | A word from...
A word from HSBC Innovation
Banking
The European innovation economy has had a reset
which we believe will be a positive for the long-
term.
The macro environment has driven uncertainty and investor caution, and led to a shift in how we do business
across the innovation and venture landscape. We are now in a period of thoughtful company-building with
investors and management teams identifying sustainable growth opportunities with the capacity to generate
profit and have meaningful global impact.
Despite the slowdown, we should be optimistic about the European tech ecosystem in 2024. There are nearly
3,900 growth-stage tech companies with the potential to become the next generation of global category
leaders, and that number is set to double in the next five years. As the report will show, the key to delivering
on this potential and ensuring Europe becomes the next tech superpower is improving access to capital,
broadening our expertise in key sub-sectors and continuing to foster innovation hubs
Going into 2024 we have some tailwinds in that the bench of active European investors is diversifying and
expanding, and they remain committed to investing through market cycles. Driving 79% of the total capital
invested in European startups at the early stage, our domestic investors have proven to be the bedrock of the
startup ecosystem: early-stage investment has shown significant stability in the past five quarters, which
should encourage entrepreneurs starting out now.
| 14
HSBC Innovation Banking provides commercial banking services, expertise and insights to the technology,
life science and healthcare, private equity and venture capital industries. HSBC Innovation Banking UK is a
subsidiary of HSBC Group, benefiting from its stability, strong credit rating and international reach to help
fuel its growth.
About HSBC Innovation Banking
Seizing these opportunities in 2024 is
unpinned by investor capacity, upskilling
and attracting world class talent, and
maintaining a long-term view around risk
and value creation.
Simon Bumfrey
Head of Relationship Banking, HSBC Innovation Banking UK
If we want Europe to become the next tech superpower, investment is
key and at HSBC Innovation Banking we look forward to playing our part
in fuelling this critical sector.
Founders in Europe have led in building purpose-driven tech, which has attracted an increase in funding at
the growth stage that are setting out to solve some of our hardest problems. There is strong momentum in
areas such as sustainability and climate, with ground-breaking developments in foundational technologies
such as Generative AI with potential applications across almost every industry sub vertical. The Carbon &
Energy sector which encompasses ‘climate tech’, accounts for 27% of all capital invested in European tech in
2023, tripling its share of investment since 2021.
However, startups in sectors such as AI, climate, healthcare, education and infrastructure typically take a
lot of money to scale. As a result, investors will need to revise their playbook to back these capital-intensive
long-term businesses.
Investing in capital-intensive industries requires a comprehensive approach and patience that goes beyond
financial analysis; you need deep sector expertise and a nuanced understanding of these specific industries.
While this may sound challenging, to create disruptive companies with the potential to change the world, we
need institutions that can find creative, empathetic and long term solutions to finance them. The economic
challenges the venture landscape has weathered means entrepreneurs face a higher bar fundraising, se-
curing talent and customers. Startups in Europe are 40% less likely than their US counterparts to secure VC
funding after five years, even if year-on-year the volume of new startups in Europe outpaces the US. Europe-
an founders are resilient, but they need help unlocking access to varied and scalable long-term capital, and
this is where utilising a breadth of financing sources to build out the capital stack matters.
Through our years of supporting and financing innovation business across every subsector, our expertise
in helping companies scale and appetite to deploy capital means we are right there alongside the investors
when looking to help founders and companies across all life stages reach their next milestone, extend runway,
or gear up for an exit.
15 | A word from...
A word from Affinity
A time of cautious optimism
Investors almost unanimously predict that deal volume will rise in 2024 compared to 2023. According to our
research, 89% of global VCs foresee doing the same or more deals in 2024. The optimism is equally strong in
Europe, at 87%—a stark change from last year when only two-thirds of European investors forecasted a better
dealmaking environment in 2023 compared to 2022.
Still, market conditions remain uncertain. Exits are down, one-year VC returns are in negative territory in both
the US and Europe, and US investors are withdrawing in record numbers from the European market.
After a tough year for many in private capital,
sentiment is trending back up. But as the State of
European Tech 2023 shows, the path forward is
not without obstacles.
| 16
But private capital investors are resilient. A VC deal now averages 10 more hours of research compared to last
year. Investors are continuing to reset their portfolios with stronger investments that meet a vastly stricter
set of investing criteria—transitioning away from hype and growth-at-all-costs to proven business fundamen-
tals, durable long-term growth, and profitability.
Returning to offense
Total VC fund count globally is up 33% over the past decade. Venture capital has never been more competitive
than it is now, amplified by all of those investors chasing a much more select group of startups.
While international VC firms may be withdrawing from the region, Europe benefits from a strong and signif-
icant base of local investors. They’re taking advantage of this situation by finding and closing the highest
quality deals with a pivot from a defensive to an offensive approach.
Venture capital is intrinsically relationship-driven: the best deals are often sourced and closed through an
investor’s network. Top European VCs ranked by volume of unicorn investments are growing their networks
faster than their peers by 11%—they know this is a move that drives increased and high-quality deal flow.
A year of innovation
Internally within firms, VC is on the cusp of reinventing itself thanks to an explosion of investment in data and
AI. More than 60% of European investors plan to increase their productivity by automating internally manual
and repetitive tasks. Almost 45% plan to leverage AI to accelerate their market research and due diligence.
Investors are looking forward to reallocating that time they save to the activities AI will never do—building
strategic relationships, and playing a more active role in portfolio company support and success.
Externally, AI is ushering in a wealth of innovative products and services. Speaking recently, Kelly Graziadei,
Founder & General Partner of F7 Ventures summarized the opportunity: “There are a couple of moments we
can look back on where we saw the advent of big platforms and the billion dollar companies that spun out
from them. We’re going to see the same thing happening with AI.”
Whether it is operational innovation to drive efficiency, or product-led innovation creating exciting new in-
vestment opportunities, there’s plenty to look forward to in 2024.
Whether it is operational innovation to
drive efficiency, or product-led innovation
creating exciting new investment
opportunities, there’s plenty to look forward
to in 2024.
Ray Zhou
Co-Founder & Co-CEO, Affinity
17 | A word from...
A word from Slush
Amidst layoffs and down rounds, it is safe to say that there have been sunnier days for founders and VC inves-
tors alike. The European and global startup ecosystem has entered into a new reality, marking an end to easy
access to capital, customers and talent — a reality where new rules apply.
This new reality is evident in multiple ways, as this report shows. Valuation multiples for software companies
have dropped by a third, and the European tech sector witnessed over 10,000 layoffs just in the first quarter
of 2023. Additionally, the total capital invested in European startups has declined by half in comparison to the
record-breaking year of 2021.
Nevertheless, despite the evident challenges, we believe that this also marks the beginning of a promising
new era for the European tech ecosystem. While this chapter certainly presents its difficulties, it also comes
with many positive aspects for entrepreneurship in Europe, serving as a reminder to focus on what matters.
In the startup community, we find ourselves
facing a challenging chapter.
| 18
First and foremost, there are multiple reasons for remaining optimistic about the current opportunities for
founders. As outlined in this report, the funding landscape in Europe remains on an upward trajectory from a
long-term perspective, and the European startup ecosystem continues to attract investors from all parts of
the world. Hence, it appears that the downturn is a temporary market correction rather than a lasting threat
to the European startup ecosystem.
Secondly, the adjusted market reality has raised the bar for aspiring founders: Only companies genuinely
dedicated to solving the world’s most pressing problems will thrive. The emphasis has shifted from explosive
growth and quick returns to building enduring companies. Founders must prepare themselves for the long
haul, driven by a sense of purpose and mission, which in the long run, could bring positive outcomes for the
European ecosystem.
Lastly and perhaps most importantly, the European ecosystem has taken the lead in building purpose-driven
companies, with sectors like carbon and energy accounting for a third of all invested capital. Furthermore,
Europe has put itself at the forefront of AI ethics and regulation amid the breakthrough of large language
models (LLMs). In a world where technological innovation is driven by competition, it is essential to establish
regulatory frameworks that promote ethics and safety. Europe has already taken the lead in tackling societal
challenges in the field of AI and technology, potentially setting the standard for decades to come.
As Slush has consistently emphasized
throughout the past couple of years, we
have every reason to believe that we are
experiencing a pivotal moment in the
history of technology and innovation.
In fields spanning energy, biotech, space, computing, and AI,
we are suddenly able to build things we could only dream of
for most of human history. This unprecedented potential for
world-changing entrepreneurship is reflected in our theme for
Slush 2023: A story of entrepreneurial grit and building to last.
We are witnessing a rising ecosystem with Slush 2023 attract-
ing a record-breaking number of founders, which speaks for an
exciting future in the European startup ecosystem and beyond.
Linda Björkenheim
Slush
01
Executive Summary
The market reset is not a solely European concern. The projected
volume of total investment in 2023 is expected to equal less than
half of the investment seen in the peak year of 2021 across every
global region.
Despite two years of challenging conditions, the SoET community
still feels positive about the future of European tech. 45% of
our survey respondents feel more optimistic about the future of
European tech than they did 12 months ago.
Our executive summary brings together the most important data points of
the year. Here, we dive into key indicators of the ecosystem’s health, high-
light bright spots, and put forward our thesis for the year - that to shape the
future, the entire ecosystem needs to start embracing risk.
Embrace risk to shape the future
Investment levels have
dropped globally
Europe is staying
positive
After $400B in value was wiped from the ecosystem during last
year’s downturn, public markets have rallied to bring Europe’s
value back up to its historic high.
Ecosystem value
bounces back to
$3 trillion
21 | Executive summary
Nine years on, the State of European Tech report continues to measure and analyse the state of the industry.
Our aim has remained the same: to bring you an accurate picture of what’s happening in European tech - go-
ing beyond the headlines, digging into the data, and reflecting the true state of European tech.
In June, we launched our first-ever mid-year update, which highlighted the new market reality after downturn
hit in the summer of 2022. Amidst rising inflation and interest rates, and growing uncertainty, the environ-
ment has been even more challenging this year. But the foundations of the ecosystem remain strong. Now,
we’re diving into the fundamentals that will turn this reset into an opportunity for European tech, and provide
a data-driven exploration of the path forward.
Stability after the storm
The European ecosystem is in a much stronger position compared to prior
downturns and has proven its resilience.
Venture model passes the test
1
More and more indicators point to the green shoots of recovery and validate
our long-term optimism. But this remains a critical moment for Europe to
come back stronger.
Recovery under way, but Europe’s
potential remains untapped
2
Europe has entrepreneurship aplenty. But the whole ecosystem must em-
brace risk to make sure that innovators can succeed.
The ecosystem must embrace innovation
3
| 22
Counter-intuitively, let’s start this year’s report by looking at IPO & M&A activity, even though these liquidity
events are typically associated with the latter stages of the startup and investment lifecycle.
Liquidity events - or exits - are critical to the effective functioning of the European tech flywheel - the virtu-
ous cycle that powers the ecosystem. These serve not only as a means to unlock the realisation and redistri-
bution of capital gains, but also as catalysts for the systematic recycling of talent and expertise into a new
generation of companies.
Following the peak of the market in Q4 2021, six consecutive quarters of subdued exit activity followed. The
IPO landscape, in particular, was notably quiet - though not entirely dormant.
Before ARM’s gigantic $55B IPO this year to test a ‘re-opening’ of the IPO window, Europe had already wit-
nessed two other billion-dollar tech public offerings this year, including the $2.6B listing of German cloud
infrastructure provider IONOS Group and the ill-fated $1B IPO of UK fintech CAB Payments, all of these listings
taking place in the third quarter of 2023.
In contrast, the M&A market has displayed higher levels of activity, although the volume and value of deals are
still far from the peaks of 2020 and 2021.
As we’ll explore throughout the report, the big shifts in the exit landscape, both in the pathway to liquidity and
in the form of a reset of the valuation environment, have led to knock-on consequences for founders, talent,
VCs, LPs and beyond.
Exit landscape stirs after extended quiet period
European tech M&A exit value and tech IPO market cap at close of first trading day ($B) by
announcement quarter, 2019 to 2023
Notes:
S&P Capital IQ Platform, as of
date 30 September 2023, for
illustrative purposes only.
2023 figures extrapolated
linearly based on year to date
figures. Includes announced
and completed M&A transac-
tions only (excluding since
terminated/withdrawn).
Sources:
Exit value ($B)
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
23
0
25
50
75
100
125
IPO
M&A
23 | Executive summary
Of course, the market reset isn’t solely a European concern: it’s a worldwide phenomenon. There has been a
notably consistent reduction in global private tech investment not only in Europe, but also in the US, China,
and beyond.
However zooming out a few years, Europe has continued on an upward trajectory and is on track to raise 18%
more compared to 2020. We are the only region globally where long term growth has not flattened out. Mean-
while US, China and Rest of World are on track to land flat or below 2020 figures.
Unsurprisingly, this global retraction in total investment volumes is also having a knock-on effect on the flow
of capital between regions.
It’s a global phenomenon
Notes:
Data is as of 30th September
2023. Full year extrapolated
based on year to date data.
Excludes the following:
biotech, secondary transac-
tions, dept, lending capital and
grants.
Sources:
Capital invested and chnage in capital invested (%) by region, 2020 versus 2023
+18%
2023E vs
2020
-1%
2023E vs
2020
-7%
2023E vs
2020
-8%
2023E vs
2020
Europe
United States
China
RoW
$45B
2023E
$120B
2023E
$48B
2023E
$45B
2023E
Powered by
| 24
Not surprisingly, the highly visible impact of the market reset is mirrored in the short-term performance of
venture capital. One-year VC returns are now well into negative territory in both Europe and the US, as a con-
sequence of increased down rounds, write-offs, and markdowns reflecting in the data.
This undoubtedly makes for painful, if not unexpected reading for investors. In VC, however, what matters is
the long-term perspective, given that returns take 10 years or more to be realised. In this regard, European
VCs have consistently delivered outperformance over two decades, at least matching or, in most cases, beat-
ing benchmarks from US VCs, European buyout, and public equities.
Short-term returns are weighing down long-term
track record
Horizon pooled return (net) by fund index, June 2023
Notes:
Data is as of 30 June 2023. MSCI Europe Index is
derived from the CA Modified Public Market
Equivalent (mPME), which replicates private
investment performance under public market
conditions.
Sources:
20 Year
15 Year
10 Year
5 Year
3 Year
1 Year
-20
-10
0
10
20
30
2023 MSCI Europe Index
2023 Europe Developed Private Equity Index
2023 US Venture Capital Index
2023 Europe Developed Venture Capital Index
25 | Executive summary
As highlighted in the ‘First Look’ midyear update to the State of European Tech, a consequence of a very
different exit landscape has been a huge decrease in, and in some cases a complete withdrawal from, activity
by so-called ‘crossover investors.’ The retreat of these funds that actively invest across both the public and
private markets has been a major factor in the slowdown of late-stage and large-round investment activity.
In 2022, the volume of new investment activity had already started to slow dramatically, especially during the
second half of the year. This year, investment activity has effectively ground to a halt with just four new in-
vestments announced publicly during the year to date. Interestingly, this slowdown is visible across both large
rounds of more than $100M, as well as smaller rounds.
Crossover investor activity grinds to a halt
Number of new investments by selected crossover investors by quarter, 2019 to 2023
Notes:
Data is as of 30 September
2023. Excludes the following:
biotech, secondary transac-
tions, debt, lending capital,
and grants. Crossover investor
activity is based on a repre-
sentative cohort of more than
10 of the most active funds
investing across both the
public and private markets.
Sources:
# of deals
Q1
20
19
Q2
20
19
Q3
20
19
Q4
20
19
Q1
20
20
Q2
20
20
Q3
20
20
Q4
20
20
Q1
20
21
Q2
20
21
Q3
20
21
Q4
20
21
Q1
20
22
Q2
20
22
Q3
20
22
Q4
20
22
Q1
20
23
Q2
20
23
Q3
20
23
0
5
10
15
20
25
30
$100M+
<$100M
Powered by
| 26
Share of rounds with participation from US-based investor (%) by stage, 2019 to 2023
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, debt,
lending capital, and grants.
Sources:
% of all deals
2019
2020
2021
2022
2023
0
10
20
30
40
50
60
Early stage
Growth Stage
Overall
Powered by
In Europe, shifting global capital flows have led to less investment from US investors in both early and late-
stage funding rounds.
Despite the drop in investment stages, US investor participation in European funding rounds is still higher
than historical norms. Many long-term US investors continue to be actively involved in the region.
US investor participation down
27 | Executive summary
Capital invested in Europe by geographic source region (%), 2019 to 2023
Notes:
Data is as of 30 September
2023. Excludes the
following: biotech, second-
ary transactions, debt,
lending capital, and grants.
Sources:
% of capital invested
2019
2020
2021
2022
2023YTD
0
20
40
60
80
100
Rest of World
Asia
North America
Europe
Early stage
As a consequence of reduced US investor activity, the role of European investors has taken on even greater
prominence in the past year, underscoring the significance of building a consistent and dedicated source of
European capital across all stages, and especially at later stages. At the Growth stages, for example, the share
of total capital invested by US investors has fallen from a peak of 39% in 2021 to just 25% in 2023. The declin-
ing share is also evident among Asian investors, whose share of total capital invested has declined from 11%
in 2021 to 7% in 2023.
This shifting mix of geographic sources are less of an issue at the earlier stage, since European startups
primarily attract initial rounds from domestic or pan-regional investors within the European ecosystem. In
fact, investors in Europe, including both domestic and cross-border players, contribute to approximately 80%
of the total capital invested in European tech companies during early stage funding rounds, a share that has
stayed broadly consistent over the past five years.
Local capital increased in importance
| 28
The number of unique investors actively deploying into European tech companies has risen consistently over
the past decade, unsurprisingly spiking during the peak period of 2021 and the first half of 2022. This period in
particular was characterised by a significant ramp in the number of investors from outside the region deploy-
ing into Europe, growing especially quickly from North America.
While the full-year numbers for 2023 will end up higher than the year-to-date numbers shown in the chart, the
reset in the market has seen the number of active investors retreat, driven by a significantly reduced level of
participation from non-European investors.
But despite the slowdown in 2023, and even without taking into account full-year numbers, the base of active
investors is still more than double the level of just a decade ago.
This commitment to embrace the perceived risk of investing through market cycles is a critical foundation to
ensure the European tech ecosystem continues to benefit from a significant and stable base of local inves-
tors.
Bench of active European investors is deepening
Notes:
Data is as of 30 September
2023. Excludes the
following: biotech, second-
ary transactions, debt,
lending capital, and grants.
Sources:
Rest of World
Asia
North America
Europe
% of capital invested
2019
2020
2021
2022
2023YTD
0
20
40
60
80
100
Growth stage
29 | Executive summary
Number of unique investors investing in European tech by investor HQ region, 2014 to 2023
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants. Other
includes investors with HQ
countries in rest of the
world.
Sources:
# of unique investors
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
2k
4k
6k
8k
10k
Other
Asia
North America
Europe
Powered by
| 30
Despite the backdrop of almost two years of challenging macro conditions, as well as the persistent noise
from negative events such as down rounds, write-offs, and reduced investment volumes, sentiment on the
future prospects of the European tech ecosystem have stabilised. In fact, only 23% of respondents are less
optimistic than they were a year ago. By comparison, almost two times the number of respondents (45%)
stated that they are more optimistic today compared to 12 months ago.
Looking across respondent types, the state of industry sentiment is broadly aligned across all stakeholder
groups. On the investor side, responses from angels, VCs and LPs all showed remarkably similar perspectives.
While on the tech company side, founders and C-level executives showed slightly less positive sentiment
overall in comparison to their department heads and employees.
Europe’s unwavering sentiment
I am confident that investors, in the light of
the multi-layered crises we are facing, will
realise that VC as an asset class is the single
best hedge for their exposure to portfolios
of companies with unsustainable business
models.
Uli Grabenwarter
Deputy Director, Equity Investments & Guarantees, EIF
What will make investors deploy capital? Human intelligence, I would
hope. What is the alternative to deploying the accumulated capital
now? To wait? Wait for what? Better entry valuations than today?
Unlikely. Or lower interest rates that make VC relatively more “attrac-
tive”? Institutional investors, pension funds, insurance companies,
won’t meet their future payment obligations with single digit fixed
income rates, without the returns that only venture will be able to
generate. Or maybe wait for a more stable geopolitical environment?
Dream on. Besides, as the investors community, we will have to real-
ise that without us engaging at scale in the funding of innovation and
technology, many of the business models that our today’s returns rely
on will disappear.
31 | Executive summary
Compared to 12 months ago, are you more or less optimistic today about the future of European
technology?
Notes:
Numbers may not add up to
100 due to rounding.
Sources:
% of respondents
2019
2020
2021
2022
2023
0
20
40
60
80
100
Less
Same
More
A pulse check for European tech
Europe’s ability to build and scale a tech ecosystem capable of realising its full potential requires a concerted
focus from all stakeholders to address challenges that serve as barriers to progress.
To explore industry sentiment on this point, survey respondents shared their perspectives on what they per-
ceive to be the greatest challenge facing the European tech ecosystem over the next 12 months.
The poor economic environment since the end of 2021 has caused a lot of pain, and so it is no surprise that
the number one concern among respondents was access to capital , with the macroeconomic environment
coming in at third. The ongoing war in Ukraine, as well as the devastating events we have seen unfold in the
Middle East, placed geopolitical risk as the second most cited challenge. Respondents also felt the greatest
problems ahead included the perceived challenge of Europe’s general competitiveness when it comes to
technology on the global scale, talent shortages and regulation.
| 32
What, if anything, do you see as the greatest challenge facing the European tech ecosystem
in the next 12 months?
Notes:
Based on sentiment analysis of survey respondents free
text answers
Sources:
Publicly-listed tech showing signs of recovery
In the public markets, a story of 2023 has been one of stabilising and recovering multiples. The heady highs of
2021 remain distant peaks, but after sinking below the long-term, 10-year average for large parts of 2022 and
the first half of 2023, the median enterprise value to next-12-months (NTM) revenue multiple rebounded back
above this level earlier this year, only to have fallen just below again in October 2023. The multiple for compa-
nies trading in the top quartile, meanwhile, is still hovering below the long-term, 10-year average.
It is this recovery in multiples, coupled with reduced volatility, that helped to lay some of the necessary
groundwork for an initial reopening of the IPO window in late-2023 and, more significantly, will be continue to
be crucial, along with confidence in strong post-listing performance, to set the scene for a potential stronger
increase in IPO activity in 2024.
33 | Executive summary
Reflecting the multiple compression of the public markets, valuations in the private sphere are also returning
to normalised pricing levels, once again highlighting 2021 within the broader context as an exceptional year.
Valuations across stages in Europe are now hovering around 5- and 10-year long-term averages. The notable
stage exception is Seed, where despite a levelling off of median Seed pre-money valuations in 2023, pricing
has not yet displayed a correction to long-term averages in the same way that has been evident at every stage
from Series A and later.
This shift back toward longer-term averages in Europe mirrors what is happening in the US. Notably, however,
median valuations in Europe continue to be 30-60% lower than in the US across all stages.
Valuations back at 5- and 10-year averages
NASDAQ-100 Technology Sector Index - Total enterprise value / NTM revenue multiple in time
Notes:
Where revenue efficiency is the total of
unlevered free cash flow margin and revenue
growth. S&P Capital IQ Platform, as of date 31
October 2023, for illustrative purposes only.
Sources:
Total enterprise value / NTM revenue multiple
Q1
20
14
Q3
20
15
Q1
20
17
Q3
20
18
Q1
20
20
Q3
20
21
Q1
20
23
Q3
20
14
Q1
20
15
Q1
20
16
Q3
20
16
Q3
20
17
Q1
20
18
Q1
20
19
Q3
20
19
Q3
20
20
Q1
20
21
Q1
20
22
Q3
20
22
Q3
20
23
0
5
10
15
20
25
30
Median multiple
Average for top revenue e ciency quartile
Last 10 year average median
Last 10 year average top quartile multiple
| 34
Europe has had a strong decade of growth,
and it’s well on its way to competing with the
US.
Vishal Marria
Founder & CEO, Quantexa
But, the attractiveness of Europe for tech startups and tech innova-
tion has come under the microscope in recent months. And this is
because we’ve reached a supposed turning point in which growth can
only be achieved if we a) secure the right level of investment and b)
involve and engage with the right talent and c) ensure that digital reg-
ulation is designed in such a way that it continues to allow companies
to innovate and reach incredibly technological breakthroughs. The
long-term success of Europe in becoming the next tech superpower
lies in our governments’ willingness to ensure that the businesses
at the cutting edge of this technology innovation, are involved in
ongoing conversations around how to regulate against technology.
We need to see incentive schemes put in place to encourage VCs to
invest in European businesses. And, we need to ensure we’re doing
so safely, whilst not stifling growth.
35 | Executive summary
Median pre-money valuation ($M) by stage, 2014 to 2023
Notes:
Data is as of 30 September
2023. Excluded biotech &
pharma firms.
Sources:
Europe median
Europe 5-year median
Europe 10-year median
US median
Seed
Series A
Valuation ($M)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
0
10
20
30
40
50
Valuation ($M)
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
2
4
6
8
10
12
14
Europe median
Europe 5-year median
Europe 10-year median
US median
| 36
Private and public markets ecosystem value ($T), 2014 to 2023
Notes:
Private market data from
Dealroom.co excludes the following:
biotech, secondary transactions,
debt, lending capital, and grants.
Based on data up to 30 September
2023. Public markets data as per
S&P Capital IQ Platform, as of date
31 October 2023, for illustrative
purposes only.
Sources:
Ecosystem value ($T)
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
1
2
3
4
Public
Private
Notes:
Data is as of 30 September
2023. Excluded biotech &
pharma firms.
Sources:
Europe median
Europe 5-year median
Europe 10-year median
US median
Serie B
Series C
Europe median
Europe 5-year median
Europe 10-year median
US median
Valuation ($M)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
0
50
100
150
200
250
300
350
Valuation ($M)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
0
25
50
75
100
125
150
37 | Executive summary
Private and public markets ecosystem value ($T), 2014 to 2023
Notes:
Private market data from
Dealroom.co excludes the following:
biotech, secondary transactions,
debt, lending capital, and grants.
Based on data up to 30 September
2023. Public markets data as per
S&P Capital IQ Platform, as of date
31 October 2023, for illustrative
purposes only.
Sources:
Ecosystem value ($T)
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
1
2
3
4
Public
Private
Ecosystem value bounces back to $3 trillion
One of the ‘north star’ metrics for the European tech ecosystem is its total value, as measured by the com-
bined equity value of all tech companies headquartered in the region across both public and private markets.
For context, after a peak of $3T in 2021, 2022 saw a reduction of total ecosystem value equivalent to around
$400B. The rallying of the public markets this year, however, has helped this number bounce back to the $3T
mark.
This rebound in ecosystem value has also been supported by the continual influx of new companies starting
and raising private capital for the first time, as well as the fact that, despite a large increase in the number of
down rounds, the overwhelming majority of follow-on capital deployed into the ecosystem has been through
flat rounds tor uprounds.
| 38
Total capital invested into the European tech ecosystem in 2023 is on track to reach around $45B, more stark-
ly highlighting the impact on capital flows from the shift in the broader macro landscape compared to 2022.
This will be down more than half (55%) from the record year of 2021, when investment volumes surpassed the
threshold of $100B for the first time.
This also represents a steep drop-off of 38% from 2022’s total of $82B. The decline is not surprising given the
dual effect of many later-stage companies delaying fundraising, as well as materially slower deployment pac-
ing by investors, which have both served to drive the large decline in the prevalence of outsized, late-stage
investment rounds that is the biggest factor in lower amounts of capital invested.
While the decline from the peak in 2021 is large, it’s worth highlighting that 2023 is on track to be the
third-largest year on record by total capital invested, and is on track to come in at four times the volume seen
10 years ago in 2014. In fact, the resetting of investment levels appears to reflect a correction to the long-term
upwards trajectory, following two outlier years of overheated activity.
On track to raise $45B of capital in 2023
Total capital invested ($B) in Europe, 2014 to 2023E
Notes:
Data is as of 30 September
2023. Full year extrapolated
based on year to date data.
Excludes the following:
biotech, secondary transac-
tions, debt, lending capital,
and grants.
Sources:
Capital invested ($B)
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
E
0
100
25
50
75
125
Powered by
39 | Executive summary
Total capital invested ($B) in Europe by stage and by quarter, 2014 to 2023
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, debt, lending
capital, and grants.
Sources:
Total capital invested ($B)
Q1
20
14
Q3
20
15
Q1
20
17
Q3
20
18
Q1
20
20
Q3
20
21
Q1
20
23
Q3
20
14
Q1
20
15
Q1
20
16
Q3
20
16
Q3
20
17
Q1
20
18
Q1
20
19
Q3
20
19
Q3
20
20
Q1
20
21
Q1
20
22
Q3
20
22
Q3
20
23
0
5
10
15
20
25
30
35
Growth stage
Early stage
Powered by
The decrease in investment since 2021 is mainly due to a slowdown in growth stages. However, after a sharp
drop right after the peak, there has been a stable total investment volume for the past five quarters.
Two important things to note are: Firstly, early stage investment has stayed stable despite the ups and downs
in investment volume in 2021. Secondly, if we exclude the overheated 18-month period from Q1 2021 to Q2
2022, we get a clearer view of the consistent long-term growth in investment in the European tech ecosys-
tem.
Beyond the slowdown, a funding equilibrium
| 40
The combination of the withdrawal of crossover investors and the general slowdown in late-stage investment
activity is unsurprisingly reflected in a huge decline in the number of so-called mega-rounds, meaning round
sizes of $100M or more. In the peak of 2021, there were almost 200 rounds of this magnitude, including more
than 50 rounds greater than $250M.
While this number declined slightly in 2022 to 163 rounds of $100M or more (of which 38 were greater than
$250M), the first nine months of 2023 saw a far more significant decrease. In the first nine months of 2023 to
date, there have been 36 rounds of $100M or more, of which only seven have been sized in excess of $250M.
Mega-round momentum drops
Number of $100M+ rounds, 2014 to 2023YTD
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, debt,
lending capital, and grants.
Sources:
# of rounds
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
50
100
150
200
250
$250M+
$100-250M
Powered by
41 | Executive summary
Number of new $1B+ European tech companies by year, 2014 to 2023YTD
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, debt,
lending capital, and grants.
Sources:
# of new $1B+ European tech companies
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
25
50
75
100
125
Predictably, a reduction in late-stage funding round volume and a major reset in the valuation environment
has led to a huge drop in the number of companies surpassing the billion-dollar valuation milestone for the
first time in 2023.
2023 is on track to see the lowest number of new $B+ companies emerge from Europe in the last decade, with
just seven as of the publication deadline at the end of October 2023. This is, of course, in stark contrast to
2021’s record-breaking total when 107 new companies hit a billion-dollar valuation.
In our last year’s report we first introduced the concept of de-horned unicorns, $B+ companies who’s valua-
tion has dropped below this milestone since first hitting it. In 2022, 58 dehorned unicorns were mapped with
the equivalent figure improving to 50 this year. Hence, in an effort for more clarity, then when referring to $B+
companies, we have in mind tech companies that command that that valuation still today.
Tough times for Europe’s billion-dollar startup
club
| 42
Unsurprisingly, capital investment volumes are also being shaped by changes in round sizes and not just the
absolute count of rounds taking place. At the later stage, following a reduction in the latter half of 2022, there
are now observable signs of stabilisation in round size over the course of the past four quarters. As a conse-
quence, these changes have brought round sizes back in alignment with the longer-term, 5-10 year averages
for the later stages.
The trend at the earlier stages, however, is somewhat different. At Seed and Series A, median round sizes
have also seen a period of stabilisation following rapid increases during 2020 and 2021, but remain elevated at
levels significantly above 5-10 year averages.
For late-stage founders in particular, this inevitably translates to having to achieve more with less capital for
an extended period of time, despite the ongoing inflationary pressures on wages that are keeping talent costs
elevated.
US Seed stage companies raise significantly larger rounds, roughly twice as large as their European counter-
parts. This delta start narrowing as companies mature, disappearing by Series C.
Round sizes realign with historical averages,
talent costs soar
Moving forward requires the courage to
take risks and to continue investing in and
researching technology that has the potential
to impact business and society.
Jarek Kutylowski
Founder & CEO, DeepL
Overall, it is an incredibly exciting time to be working and researching
in the technology field, and even more so in the AI landscape. If you
want to create truly groundbreaking technology, taking risks is the
only way to do it. In that, you should consider competition as both
an encouragement and an existential threat. In Europe we are in a
unique position where we can harness new, up-and-coming talent
while incorporating the lessons learned by our predecessors in the
US tech scene. European companies can also leverage strength
through embodying European values—such as data security—to be
successful on a global scale. Product wise, I would advise that found-
ers keep quality top of mind when developing digital products. This
will keep customers engaged and will solidify their trust for years to
come. There are so many talented tech innovators who have a solid
business foundation—ensuring quality transforms a sound business
idea into a truly great product.
43 | Executive summary
Round size ($M) per quarter by stage, 2019 to 2023
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants.
Sources:
Seed
Series A
Round size ($M)
Q1
20
19
Q2
20
19
Q3
20
19
Q4
20
19
Q1
20
20
Q2
20
20
Q3
20
20
Q4
20
20
Q1
20
21
Q2
20
21
Q3
20
21
Q4
20
21
Q1
20
22
Q2
20
22
Q3
20
22
Q4
20
22
Q1
20
23
Q2
20
23
Q3
20
23
0
1
2
3
Median
Last 5 years average
Last 10 years average
US Median
Round size ($M)
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
23
0
2
4
6
8
10
12
14
16
Median
Last 5 years average
Last 10 years average
US Median
Powered by
| 44
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants.
Sources:
Series B
Series C
Round size ($M)
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
23
0
10
20
30
40
Median
Last 5 years average
Last 10 years average
US Median
Round size ($M)
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
23
0
20
40
60
80
100
Median
Last 5 years average
Last 10 years average
US Median
Powered by
45 | Executive summary
Even in the face of challenges in the capital markets and concerning indicators such as layoffs that may
impact the perceived attractiveness of joining the industry, European tech is not losing its strong appeal to
talent and has not seen any exodus of talent out of the industry. In fact, new positions are constantly being
created, and talent from outside of tech continues to look past any perceived risk to place significant bets on
the European tech sector.
Although there has been a levelling off in the rate of increase of net new joiners into the tech industry over the
past three quarters and a very small overall decline in total headcount in Q3 2023, it’s remarkable that in just
five short years, European tech has expanded its workforce from slightly over one million employees to more
than 2.3 million today.
Tech employment resilient in face of layoff storm
Total European tech industry employees by quarter, 2019 to 2023YTD
Notes:
To adjust for lags in reporting, we
compare snapshots of data at
different points in time, which
allows us to estimate future
growth of current figures by
extrapolating differences between
time points. Data is as of 20
September 2023, thus Q3 is
incomplete.
Sources:
Total headcount (M)
Q1
20
18
Q3
20
18
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
23
0
1
2
3
New joiners to tech industry
Tech industry headcount
Powered by
| 46
Global tech employee arrivals to Europe, 2023
Notes:
Data for 2023 only, where an
arrival has taken place on or
after 1 January 2023.
Arrivals measured as
employees joining tech
companies only, but could
have previously worked at
either non-tech or tech
companies. Data is as of 20
September 2023.
Sources:
Arrivals to Europe
Departures from Europe
United States
India
Canada
Brazil
Australia
South Africa
Morocco
RoW
Europe
Europe
United States
Canada
Australia
Asia (excl. India)
India
United Arab Emirates
Brazil
RoW
Powered by
Europe is a net beneficiary of talent flows, attracting new starters from across the globe. That means we’re
gaining more international talent than we’re losing.
Notably, more talent is moving from the US to work in European tech than European talent is moving to join
the US tech scene. It really illustrates the pull our companies now have. In fact, Europe is a net gainer from
essentially every single region, apart from Australia.
The movement of talent across borders
47 | Executive summary
The impact of the market reset is also visible in the effects on entrepreneurship and the rate of new company
formation by founders. Globally, the rate at which founders are starting new tech companies has receded by
approximately 30% from its peak in 2020, with this decline reflected in the data for new tech founders in both
Europe and the US.
While a decrease in new companies being founded might appear concerning at first glance, there is a case to
be made that this reflects a return to ‘healthier’ conditions.
Those who are taking the leap into entrepreneurship today face a higher bar to raise money, attract talent,
and win customers. This changes the perceived risk of starting a company and, as a consequence, has the
effect that only the most committed and resilient founders are prepared to embark upon the entrepreneurial
journey.
Subsequently, it is not surprising to see the share of repeat founders remaining stable, while almost all the
decline is accounted for by fewer first-time founders.
What will, however, be surprising to most is the fact that the annual volume of founders starting new tech
startups in Europe exceeds the US, and has done so consistently for every one of the past five years.
Europe outpaces US in new tech founders despite
global slowdown
Number of first-time and repeat founders starting new companies per year, 2019 to 2023
Notes:
To adjust for lags in reporting, we
compare snapshots of data at
different points in time, which
allows us to estimate future
growth of current figures by
extrapolating differences between
time points. 2023F is based on
data adjusted for lag effect and
extrapolated based on data as of
20 September 2023.
Sources:
# of unique founders
Eu
rop
e
US
Eu
rop
e
US
Eu
rop
e
US
Eu
rop
e
US
Eu
rop
e
US
2019
2020
2021
2022
2023E
0
5
10
15
20
25
Repeat founders
First-time founders
Powered by
| 48
It’s one thing to have great talent, but are they working on the hardest problems?
Here, we look at the flow of talent into and within the tech industry, broken down by theme. This helps us to
quantify talent flows and identify the sectors drawing in top talent, whether they are completely new to the
tech industry or moving jobs within it.
Sustainability and health take the #1 and #2 spots, clearly reflecting the powerful magnetic effect of pur-
pose-led companies in attracting talent.
Sustainability and health: Tech’s hottest talent
magnets
Europe is a hotbed for the kind of diversity
needed to build the future of AI – and as an
industry, we have a responsibility to continue
to grow and nurture that talent.
Lila Ibrahim
COO, DeepMind
At Google DeepMind, we believe in the importance of building AI-first
skills, which is why we co-created and launched a program with the
Raspberry Pi Foundation to make AI education accessible to students
aged 11-14. Experience AI offers cutting-edge resources on the re-
sponsible development of artificial intelligence and machine learning
to teachers and their students, including lesson plans, slide decks,
worksheets, and videos. Programs like this, alongside the fellow-
ships, scholarships and other education initiatives we support are all
designed to help more learners, from more diverse backgrounds build
an AI ecosystem that works for everyone.
49 | Executive summary
Top 10 themes by number of new joiners, by type
Notes:
To adjust for lags in reporting, we
compare snapshots of data at
different points in time, which
allows us to estimate future
growth of current figures by
extrapolating differences between
time points. 2022 data shown as of
20 September 2023. Companies
may be assigned to multiple
themes, causing talent to also
being assigned to more than one
theme.
Sources:
# of new joiners
Sustainability / Climate
Health
Digital care
Supply Chain &
Logistics
Hardware
HR Tech
Electric Vehicles
Insurance
Transportation
Sales & Marketing
0
50k
100k
150k
200k 250k
New joiners from within tech
Net new tech joiners
Powered by
It is not just talent that is being drawn to the hardest problems. Capital is flowing in the same direction too in-
vestment volumes are broken down by sector. Remarkably, the Carbon & Energy sector, which encompasses
climate tech, accounts for 27% of all capital invested in European tech in 2023, more than doubling its share
of investment since 2021.
This has seen the sector overtake Finance & Insurance, as well as horizontal Software as the single largest
sector by capital raised. This not only represents a dramatic increase in the scale of capital invested behind
the green transition, but also a clear slowdown in fintech investment volumes since the peak of the market.
Climate tech outstrips fintech in European markets
| 50
Distribution of total capital invested by sector (%), 2014 to 2023
Notes:
Data is as of 30 September 2023. Excludes the
following: biotech, secondary transactions,
debt, lending capital, and grants.
Sources:
% of total capital
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
100
25
50
75
Transportation
Food and Drinks (incl. Agriculture)
Education
Wholesale & Retail
Warehousing & Manufacturing
Social, Arts, Entertainment & Recreation
Digital infrastructure
Finance & Insurance
Enabling technologies
Health
Software
Carbon & Energy
Powered by
In the wake of 2022’s challenges, we’ve
witnessed a remarkable shift in the dynamics
between investors and founders.
Shawn Atkinson
Partner and global co-head of Tech Companies Group, Orrick
Investors are increasingly drawn to visionary founders tackling big
societal, environmental and health problems, forging a more collabo-
rative and resilient tech ecosystem.
51 | Executive summary
Top themes ranked by capital invested for rounds of less than <$5M, 2023
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, dept,
lending capital, and grants.
Sources:
#1
AI
#2
Sustainability /
Climate
#3
Health
Powered by
Looking more closely at the most popular sectors at the earliest stages, we see other key trends starting
to take off as well for Seed investments. Not surprisingly, the most notable one is the rise of AI, with a huge
number of companies popping up to capitalise on the wave of innovation ignited by breakthroughs in large
language models (LLMs). This has catapulted AI/ML to the top of the charts as the number one earliest-stage
category, as ranked by the count of rounds of investment of $5M or less.
Though things are certainly incredibly active at the earliest stages in AI, Europe already has a growing and
maturing ecosystem of growth stage companies with AI at their core.
AI innovation wave ignites Europe’s Seed scene
There has been no shortage of perspectives on Europe’s position in the AI race. Amidst the noise, it is easy to
overlook the fact that the AI theme has actually hit a stride in Europe in recent years, with European AI com-
panies consistently securing mega-rounds of $100M or more. In fact, this year will come close to matching the
record set in 2021, despite the huge headwind of a steep drop in overall investment levels in Europe in 2023.
As of the end of Q3 2023, European AI companies had raised 11 rounds of $100M or more, compared to 37
rounds by US AI companies over the same period. So far, however, European AI companies have not yet raised
the type of billion-dollar or multi-billion-dollar rounds that have become crucial sources of firepower for
the most important and fastest-growing US AI companies, such as OpenAI or Anthropic. The multi-$100M+
rounds, however, certainly are beginning to appear in Europe too.
Rapidly sc-AI-ling up
| 52
The most remarkable subset within the AI space this year has undoubtedly been Generative AI.
Generative AI companies focus on developing and applying artificial intelligence technologies, particularly
machine learning techniques, to generate new content, data, or media. This category features companies like
Mistral AI and Aleph Alpha in Europe, alongside OpenAI (the makers of ChatGPT) and Inflection AI in the United
States.
While Generative AI companies may represent a relatively small fraction of overall tech fundraising activity
on an absolute count basis, they have swiftly had an outsized impact on workflows, regulatory discourse, and
society at large.
Generative AI sector rises in Europe’s tech scene
Number of $100M+ rounds in AI / ML, 2014 to 2023
Notes:
2023 data is based on data to
September 2023. Excludes the
following: biotech, secondary
transactions, debt, lending capital,
and grants.
Sources:
# of rounds
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
Eu
rop
e US
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0
25
50
75
100
125
150
$1B+
$250M-$1B
$100M-$250M
Powered by
53 | Executive summary
Count of rounds in GenAI in respective regions, 2019 to 2023
Notes:
Data is as of 30 September 2023.
Excludes the following: biotech,
secondary transactions, debt,
lending capital, and grants.
Sources:
# of rounds
2019
2020
2021
2022
2023YTD
0
25
50
75
100
125
Europe
US
What is also notable is that whilst generative AI companies have leapt into the public consciousness in 2023,
they have been quietly being started and funded in greater numbers for many years, both in Europe and the
US.
The fact that AI is flourishing under the radar in Europe should not be a surprise. Europe has a strong tech-
nical talent pool, owing its strength to world-class scientific and technical institutions and the depth of its
engineering talent.
This strength extends into the field of AI. Over the past decade, Europe has not only witnessed a greater than
10x increase in the number of people working in AI roles but also claims a larger resident population of high-
ly-skilled AI professionals compared to the US.
A decade of growth in Europe’s AI talent pool
| 54
Number of professionals actively employed in AI/ML roles by region, 2014 to 2023
Notes:
To adjust for lags in reporting, we
compare snapshots of data at
different points in time, which
allows us to estimate future
growth of current figures by
extrapolating differences between
time points. 2023F is based on
data adjusted for lag effect and
extrapolated based on data as of
20 September 2023. Data consists
of all companies, including
non-tech. This is based on an
analysis of the job titles of 216m
professionals. The universe of
professional considered to be
actively employed in AI/ML roles is
based on a search utilizing both
common job titles in the field (e.g.
AI Researcher, ML Engineer), as
well as key phrases used in job
titles (e.g. Deep Learning,
Reinforcement Learning). The
query includes titles and keywords
both common today and histori-
cally. A consistent methodology is
applied consistently across all
profiles in all geographies.
Sources:
# of active AI / ML roles
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
0
25
50
75
100
125
150
Europe
United States
Powered by
Of course, many of these AI professionals are working in roles at US-headquartered technology companies
that have built a large AI research presence in Europe, such as Alphabet or Meta. But as the example of Mistral
AI demonstrates - a company founded by European former leading AI researchers at Meta and DeepMind -
these European-based pools of AI talent have become an incredibly rich breeding ground for the founders and
talent behind the next generation of European AI companies.
What we’re seeing is a digital renaissance
that’s really pushing the bounds of creativity,
curiosity, self expression and intelligence.
Mira Murati
CTO, OpenAI
If you really push these bounds, natural language - how we talk to one
another - is really becoming a new coding language. And with that,
people have this superpower to build anything. What we use this for
is up to us.
55 | Executive summary
As the AI wave initiates a new technology supercycle, it’s an important moment to reflect on what it will take
for Europe to capture a meaningful share of this opportunity.
Europe has experienced a remarkable surge in tech entrepreneurship over the last decade, resulting in the
largest pool of tech startups ever seen in the region. More than 350 startups have grown to become breakout,
billion-dollar companies. But this metric is inherently backwards-looking, and therefore not as useful.
The forward-looking opportunity of the European tech ecosystem is best illustrated by the nearly 4,000
growth stage tech companies that have the potential to become the next generation of European breakout
success stories. What’s more, this number itself is poised to double over the next five years, thanks to the
breadth and depth of early stage startup activity across Europe and these companies’ expected progression
through the startup lifecycle.
Of course, the pool of startups at the early stages also keeps expanding. Today, Europe has 41,000 early stage
startups, and in the next five years alone, this pool will be expanded by the emergence of at least 25,000 tech
startups that are anticipated to start their journey.
Meteoric rise of tech entrepreneurship
We need to take an empirical, research-driven
approach to safety.
Matt Clifford
Prime Minister’s Representative for the AI Safety Summit, Co-
founder of Entrepreneur First
Regulation often fails when policy makers try to predict the future.
Much better to commit to building public sector capacity to properly
understand the capabilities, opportunities and risks of fast develop-
ing AI systems - as the UK has done with the AI Safety Institute.
| 56
Snapshot of unique companies headquartered in Europe by stage
Notes:
Data as of 30Sep 2023. Based on historial analysis of conversion rates: 15%
of Seed stage companies convert A on average and 33% of Series A convert
to Series B(for the majority of those converting, it takes place within 2 years);
these rates have been applied to the current cohort of Seed and Early stage
companies for illustrative perposes.
Sources:
Early stage companies
$1B companies
Growth stage companies
Powered by
Europe’s blend of purpose, talent and
investment potential is unrivalled, putting it
on a clear trajectory to becoming the next
tech superpower.
Erin Platts
CEO, HSBC Innovation Banking UK
Startup creation in Europe outpaces any region and we expect the breadth and depth of this activity to grow,
with 25,000 more in the next five years. What sets us apart is not only the pace of growth – it’s local investors
stepping up to support mission-driven founders that bring together the best and brightest to solve critical
challenges. Sustainability and climate in particular have been at the heart of the European ecosystem, with
the Energy & Carbon sector attracting the most VC investment this year alone. The rise in funding for growth
stage companies and the potential for more IPOs in 2024 also sets the scene for a maturing tech ecosystem
in Europe, unlocking more pathways to growth for purpose-driven founders.
57 | Executive summary
Europe is seeing more new tech startups being formed than any other region, supported by the strongest
ever teams working on the most challenging and urgent problems. Europe has all the essential raw ingredi-
ents to become the next tech superpower. But for Europe to be able to shape the future of tech, the ecosys-
tem needs to take further action to embrace the opportunity and to embrace the risk that comes with it.
Europe’s ability to fund and build true innovation has evolved by leaps and bounds over the past decade. Nev-
ertheless, a noticeable disparity with the US persists in terms of access to capital.
More European tech startups are formed each year, but over time, a growing gap emerges when it comes to
their likelihood to secure external investment.
After five years, US tech startups are 40% more likely to have successfully secured venture capital funding.
This is in spite of the fact that once companies secure an initial round of Seed investment, the probability of
scaling to a billion-dollar valuation is the same in Europe as it is in the US.
This underlines the imperative for the European tech ecosystem to ensure that funding flows to European
talent, to give them the firepower to compete globally and to ensure Europe can play a meaningful role in
shaping the future.
Europe’s tech startup boom meets funding
bottleneck
| 58
When asked the same simple question - what do founders really want from their VCs - there is a surprising
divergence in responses depending on whether you ask this of the founders themselves, or whether you put it
to VCs.
While VC respondents are most likely to cite the importance of building a relationship with founders early (the
top ranked answer selected by 29% of VC respondents), this features way down the list of priorities for found-
ers (13% of founder respondents).
For founders, however, what truly matters is finding a VC that truly ‘gets them’, highlighted by the fact that a
shared alignment of vision/purpose is by far the most cited response (36%) selected by founder respondents.
This desire to find an investor with a strong connection to their company is also indicated by the high share of
Founders are looking for alignment on vision
Early stage funnel for 2018 cohort of companies, Europe vs United States
Notes:
Data as of 20 September 2023.
Based on historical analysis of
conversion rates: 15% of Seed
stage companies convert to Series
A on average and 33% of Series A
convert to Series B (for the
majority of those converting, it
takes place within 2 years); these
rates have been applied to the
current cohort of Seed and Early
stage companies for illustrative
purposes.
Sources:
# of startups funded (years post funding)
# of startups ('000)
Startups
formed
+1 Year
+3 Years
+5 Years
0
10
5
15
20
Europe
United States
Powered by
59 | Executive summary
founder response highlighting the importance of industry or thematic expertise (22% of founders), as well the
importance of having chemistry with the investor partner (28% of respondents).
What is also interesting is just how low down the priority list certain oft-discussed considerations rank for
both founders and VCs, such as the diversity of the investment team, prior founder experience, and brand
affinity.
What are the most important considerations when selecting an investor to lead your next round?
The past 12 months, and thinking generally about market, what in your opinion have been the most
decisive factors to win a competitive deal situation?
Notes:
Founder and VC
respondents only.
Respondents who
selected”other” are
excluded from data.
Numbers do not add to
100 as respondents
could choose multiple
options.
Sources:
| 60
A single success story can have an outsized impact on the tech ecosystem. This is exemplified by Skype,
co-founded 20 years ago by the CEO of Atomico, Niklas Zennström.
Skype’s workforce absorbed a culture of innovation and subsequently went on to start Europe’s next gener-
ation of leading tech companies. In total, the first- and second-generation entrepreneurs to have emerged
from the Skype alumni network have gone on to start more than 900 companies across 50 countries all
around the world.
This alumni network has already produced additional billion-dollar companies and, today, Skype alumni com-
panies employ more than 65,000 people worldwide.
It’s astonishing to witness the ecosystem-level effect that a single game-changing company can have over
time.
Reflecting on Skype’s 20th anniversary
Cumulative number of founding roles across the Skype ecosystem, 2004 to 2023YTD
Notes:
Data is as of 20 September 2023.
Sources:
Cumulative # of founding roles
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
0
200
400
600
800
1000
1st Generation (Post-Skype)
Next Generations
Powered by
61 | Executive summary
Skype acted as a launchpad for diverse entrepreneurial ventures. The visual below illustrates a fascinating
network of innovation and entrepreneurship stemming from a single origin point, Skype. What this represents
is the powerful impact that just one successful and influential company can have on its ecosystem and the
broader industry.
The individuals who have branched out from Skype, the ‘next-generation founders’, are building on their prior
experiences and leveraging their expertise to shape the future of their respective industries. The various
companies emerging from Skype demonstrate the diversity in expertise and talent represented.
This visualisation shows that innovation doesn’t stop with one successful company. It has a ripple effect and
continues to boost the European tech flywheel well after it was first established.
Each success story contributes to the health of
the European tech flywheel
I feel incredibly proud of what we started at
Skype.
Niklas Zennström
Founder & CEO, Atomico
At the time, sceptics thought that the European tech scene was over
and that we’d never recover from the dot-com crash. Skype, and all of
the brilliant companies that followed, proved those sceptics wrong.
Together, we’ve built an innovative and, crucially, resilient ecosystem
that’s on the cusp of becoming a superpower.
| 62
Skype network visualised
Notes:
Brand on public Linkedin
profiles only and companies
defined “tech” as per
Atomico’s proprietary
taxonmy model; Nodes size
represent total capital
raised by companies, VC
funds are not sized
according to their AuM. Data
as of 20th of Septem-
ber2023.
Sources:
950
companies
65k
employess
50
countries
Powered by
The Skype effect speaks to the catalytic impact of just one success story.
Back in 2003, during the darkest days for the European technology industry following the dotcom crash, would
anyone have predicted that the value of the ecosystem today would have increased by a factor of more than
45x to hit $3T? Would many have predicted that billion-dollar exits would start to be counted by the hundred?
Surely not.
And yet, in just the past five years alone, there have been a remarkable 111 billion-dollar exits of European
tech companies. This is a huge number, but it is also just the start. Europe’s never had a stronger pipeline of
billion-dollar exit candidates.
This also underlines why it’s so critical for the ecosystem to see a return to a healthy and functioning exit mar-
ket, both in the form of entry to public markets, as well as through M&A.
The next wave
63 | Executive summary
Count of $1B+ European tech IPOs and M&As, 2019 to 2023
Notes:
S&P Capital IQ Platform, as
of date 30 September 2023,
for illustrative purposes
only. Includes announced
and completed M&A
transactions only (excluding
since terminated/with-
drawn).
Sources:
# of $1B+ tech IPOs and M&As
20
19
20
20
20
21
20
22
20
23
YT
D
La
st
5 Y
ea
rs
0
25
50
75
100
125
M&A
IPO
The story of Skype is far from unique in Europe today. In fact, the European tech ecosystem has witnessed an
industry-wide surge in the number of new companies launched by individuals that have spun out of Europe’s
billion-dollar companies. In doing so, they benefit significantly from the established knowledge and networks
they take with them.
Remarkably, nearly 9,000 companies have been initiated by alumni of European exited unicorns that were
founded during the 2000s. To put this into perspective, it is nearly a staggering 50% increase compared to the
unicorns founded in the 1990s.
It is not difficult to imagine how this network effect will significantly influence Europe’s path in the next ten
years.
Talent flywheel accelerating with unicorn alumni
| 64
Number of new 1st and 2nd generation founders spun out from exited European unicorns, by
unicorn founding decade and years since founding
Notes:
Based on founders attrib-
utes and the date they
indicated starting their
company
Sources:
Years since $B+ company founding
# of founders spun out
0
2
4
6
8
10
12
14
16
18 20 22 24 26 28 30
0
2k
4k
6k
8k
10k
2010s
2000s
1990s
Powered by
02
Investment levels
67
Countries


103
Themes


127
Companies
2.1
Investment levels
Key findings
While this is significantly less than the $82 billion raised in 2022, it’s still the
third-highest year on record.
Europe is on track to raise $45 billion of capital in
2023
This year is on track to see the lowest number of $B+ companies emerge from
Europe in the last decade, with only 7 new unicorns.
Few new members admitted to the billion-dollar
startup club
After five years, US tech startups are 40% more likely to have secured venture
capital funding than their European counterparts. That’s despite the fact that af-
ter securing an initial Seed round, a company’s chances of reaching a billion-dol-
lar valuation are the same in Europe and the US.
Europe’s startups are experiencing a funding
bottleneck
69 | Companies
Total capital invested ($B) in Europe, 2014 to 2023E
Notes:
Data is as of 30 September
2023. Full year extrapolated
based on year to date data.
Excludes the following:
biotech, secondary transac-
tions, debt, lending capital,
and grants.
Sources:
Capital invested ($B)
$12B
$17B
$18B
$24B
$29B
$36B
$38B
$100B
$82B
$45B
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023E
0
20
40
60
80
100
120
Powered by
Total capital invested into the European tech ecosystem in 2023 is on track to reach around $45B, starkly
highlighting the impact on capital flows as a result of the shift in the broader macro landscape. This will be
down more than half (55%) from the record year of 2021, when investment volumes surpassed the threshold of
$100B for the first time.
This also represents a steep drop-off of 38% from 2022’s total of $82B. The decline is not surprising given the
dual effect of many later-stage companies delaying fundraising, as well as materially slower deployment pac-
ing by investors, which have both served to drive the large decline in the prevalence of outsized, growth stage
investment rounds - the biggest factor in the lower amounts of capital invested.
While the decline from the peak in 2021 is large, it’s worth highlighting that 2023 is on track to be the
third-largest year on record by total capital invested, and is on track to come in at four times the volume seen
10 years ago in 2014. In fact, the resetting of investment levels appears to reflect a correction to the long-term
upwards trajectory, following two outlier years of overheated activity.
On track for $45B of capital invested in 2023
| 70
To stay ahead in a rapidly evolving industry,
founders and startups must be agile, willing
to experiment, pivot and take risks.
Glen Waters
Head of Early Stage Banking, HSBC Innovation Banking UK
They need to look ahead, keeping up to date on the latest trends and
technologies, whilst being customer centric and ensuring expectations
are exceeded, including creating new products and services. Following
these principles will help founders develop and scale at pace and position
a company for success.
The decrease in investment since 2021 is mainly due to a slowdown at the growth stages. However, after a
sharp drop right after the peak, there has been a stable total investment volume for the past five quarters.
There are two important things to note. First, early stage investment has stayed stable despite the turbulence
in investment volume since 2021, reflecting the vibrancy of Europe’s early stage startup scene. Second, if we
exclude the overheated 18-month period from Q1 2021 to Q2 2022, we get a clearer view of the trajectory of
consistent, long-term growth in investment in the European tech ecosystem.
Beyond the slowdown, a funding equilibrium
Total capital invested ($B) in Europe by stage and by quarter, 2014 to 2023
Notes:
Data is as of 30 September
2023. Excludes the following:
biotech, secondary transac-
tions, debt, lending capital,
and grants.
Sources:
Total capital invested ($B)
Q1
20
14
Q3
20
14
Q1
20
15
Q3
20
15
Q1
20
16
Q3
20
16
Q1
20
17
Q3
20
17
Q1
20
18
Q3
20
18
Q1
20
19
Q3
20
19
Q1
20
20
Q3
20
20
Q1
20
21
Q3
20
21
Q1
20
22
Q3
20
22
Q1
20
23
Q3
20
2
0
5
10
15
20
25
30
35
Growth stage
Early stage
Powered by
71 | Companies
Of course, the market reset isn’t solely a European concern: it’s a worldwide phenomenon with Europe facing
the same downward trend in investment as every other region globally. There has been a notably consistent
reduction in global private tech investment not only in Europe, but also in the US, China, and beyond.
However, zooming out a few years, Europe has continued on an upward trajectory and is on track to raise 18%
more compared to 2020. We are the only region globally where long term growth has not flattened out. Mean-
while the US, China and Rest of World are on track to land on or below 2020 figures.
The market reset is a global phenomenon
Notes:
Data is as of 30th September
2023. Full year extrapolated
based on year to date data.
Excludes the following:
biotech, secondary transac-
tions, dept, lending capital and
grants.
Sources:
Capital invested and chnage in capital invested (%) by region, 2020 versus 2023
+18%
2023E vs
2020
-1%
2023E vs
2020
-7%
2023E vs
2020
-8%
2023E vs
2020
Europe
United States
China
RoW
$45B
2023E
$120B
2023E
$48B
2023E
$45B
2023E
Powered by
| 72
The impact of the market reset is visible in founder sentiment when asked about the change in fundraising
conditions over the past 12 months. 80% of founder respondents to the survey say that it has become harder
to raise venture capital over the past year. Just 7% of respondents stated that conditions had eased.
It’s worth noting that this year’s responses suggest that fundraising conditions have deteriorated even further
from what was already a challenging moment at the time of last year’s survey, when 82% of founder respond-
ents said that it had become more challenging to raise venture capital.
Looking at respondents from different demographics, underrepresented founders are having a relative-
ly harder time. While the views of women and men founders are aligned, non-white founders report facing
tougher barriers (87%) to fundraising compared to their white peers (79%).
The toughest fundraising environment
In your opinion, is it easier or harder to raise venture capital in Europe than it was 12 months ago?
Notes:
Founder respondents only.
Numbers may not add up to
100 due to rounding.
Sources:
% of respondents
2019
2020
2021
2022
2023
0
20
40
60
80
100
Easier
Unchanged
Harder
73 | Companies
Diversification within teams allows for greater
capacity to adapt. However to sustain and
build upon this trajectory, continued targeted
efforts must be made to further dismantle
systemic biases and promote inclusivity.
Karl Lokko
Chairman, Black Seed
Increased accessibility to information has inspired many over
the last decade to embark on ‘starting up’. Empowered by a
culture of experience sharing, entrepreneurial awakenings are
happening all over. This information evolution has contributed
to a burgeoning diversity in seed-stage excellence. The trans-
formative impact of COVID-19 has underscored a need for adapt-
ability. Combined with a post George Floyd era, a paradigm shift
has begun to take place. Under representation was collectively
challenged, allowing for a greater endorsement of black talent
in entrepreneurship, an increased focus on female representa-
tion within founding teams and a wider acknowledgment that
diverse teams out perform their non diverse counterparts. Di-
versification within teams allows for greater capacity to adapt.
However to sustain and build upon this trajectory, continued
targeted efforts must be made to further dismantle systemic
biases and promote inclusivity. The entrepreneurial ecosystem’s
commitment to widening the funnel isn’t just an ethical impera-
tive but a strategic advantage for the entire startup landscape.
| 74
As highlighted in the ‘First Look’ midyear update to the State of European Tech, a consequence of a very dif-
ferent exit landscape has been a huge decrease in - and in some cases a complete withdrawal from - activity
by so-called ‘crossover investors.’ The retreat of these funds that actively invest across both the public and
private markets has been a major factor in the slowdown of late-stage and large-round investment activity.
In 2022, the volume of new investment activity had already started to slow dramatically, especially during the
second half of the year. This year, investment activity has effectively ground to a halt, with just four new in-
vestments announced publicly so far. Interestingly, this slowdown is visible across both large rounds of more
than $100M and smaller rounds.
Crossover investor activity grinds to a halt
Number of new investments by selected crossover investors by quarter, 2019 to 2023
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants. Crosso-
ver investor activity is based
on a representative cohort
of more than 10 of the most
active funds investing
across both the public and
private markets.
Sources:
# of rounds
Q1
20
19
Q2
20
19
Q3
20
19Q4
20
19
Q1
20
20
Q2
20
20
Q3
20
20
Q4
20
20
Q1
20
21
Q2
20
21
Q3
20
21
Q4
20
21
Q1
20
22
Q2
20
22
Q3
20
22
Q4
20
22
Q1
20
23
Q2
20
23
Q3
20
23
0
5
10
15
20
25
30
$100M+
<$100M
Powered by
75 | Companies
The number of unique investors actively deploying into European tech companies has risen consistently over
the past decade, unsurprisingly spiking during the peak period of 2021 and the first half of 2022. This period
was characterised by a significant ramp in the number of investors from outside the region deploying into
Europe, growing especially quickly from North America.
While the full-year numbers for 2023 will end up higher than the year-to-date numbers shown in the chart, the
reset in the market has seen the number of active investors retreat, driven by a significantly reduced level of
participation from non-European investors.
But despite the slowdown in 2023, and even without taking into account full-year numbers, the base of active
investors is still more than double the level of just a decade ago.
This commitment to embrace the perceived risk of investing through market cycles is a critical foundation to
ensure the European tech ecosystem continues to benefit from a significant and stable base of local inves-
tors.
Bench of active European investors is deepening
Number of unique investors investing in European tech by investor HQ region, 2014 to 2023
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants. Other
includes investors with HQ
countries in rest of the
world.
Sources:
Powered by
# of unique investors
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
2k
4k
6k
8k
10k
Other
Asia
North America
Europe
| 76
Number of rounds by size and by year, 2014 to 2023
Notes:
Data is as of 30 September
2023. Full year extrapolated
based on year to date data.
Excludes the following:
biotech, secondary
transactions, debt, lending
capital, and grants.
Sources:
# of rounds
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023E
0
2k
4k
6k
8k
10k
12k
$250M+
$100-250M
$50-100M
$20-50M
$10-20M
$5-10M
<$5M
Powered by
The slowdown in investment activity is reflected in a decreased count of disclosed investment rounds. Look-
ing at the investment activity across the last ten years, 2021 and 2022 are standout years, while 2023 is on
track to land in line with prior years.
The category of rounds involving investment amounts of $5M or less continue to represent the overwhelming
majority of all activity, equating to 73% of all rounds in 2023.
It should be noted, however, that this category is most impacted by the so-called reporting lag, which results
in early-stage investment rounds being systematically unpublicised for an extended period of time until re-
porting catches up to subsequent data disclosures.
This reporting lag notwithstanding, it’s notable that sub-$5M rounds account have been shrinking as a pro-
portion of total investment rounds raised in Europe each year. Over the past three years, $5M+ rounds have
accounted for around one-quarter (24-27%) of all activity each year. A decade ago in 2014, that share stood at
just over one-tenth (11%).
Round volumes trending back to pre-2021 levels
77 | Companies
The combination of the withdrawal of crossover investors and the general slowdown in late-stage investment
activity is unsurprisingly reflected in a huge decline in the number of so-called mega-rounds, meaning round
sizes of $100M or more. In the peak of 2021, there were almost 200 rounds of this magnitude, including more
than 50 rounds greater than $250M.
While this number declined slightly in 2022 to 163 rounds of $100M or more (of which 38 were greater than
$250M), the first nine months of 2023 saw a far more significant decrease. In the first nine months of 2023 to
date, there have been 36 rounds of $100M or more, of which only seven have been sized in excess of $250M.
Mega-round momentum drops
Number of $100M+ rounds, 2014 to 2023YTD
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants.
Sources:
Powered by
# of rounds
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
50
100
150
200
250
$250M+
$100-250M
| 78
Number of new $1B+ European tech companies by year, 2014 to 2023YTD
Notes:
Data is as of 30 September
2023. Excludes the follow-
ing: biotech, secondary
transactions, debt, lending
capital, and grants.
Sources:
# of new $1B+ European tech companies
23
27
23
21
38
31
32
108
48
7
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
YT
D
0
25
50
75
100
125
Predictably, a reduction in growth stage funding round volume and a major reset in the valuation environment
has led to a huge drop in the number of companies surpassing the billion-dollar valuation milestone for the
first time in 2023.
2023 is on track to see the lowest number of new $B+ companies emerge from Europe in the last decade, with
just seven as of the publication deadline at the end of October 2023. This is, of course, in stark contrast to
2021’s record-breaking total when 108 new companies hit a billion-dollar valuation.
In last year’s report we first introduced the concept of de-horned unicorns, $B+ companies whose valuation
has dropped below this milestone since first hitting it. In 2022, we mapped 58 dehorned unicorns. This year,
that number has reduced slightly, with 50, meaning some companies have seen their valuation lifted back up
above the billion-dollar level in 2023. For clarity, when referring to $B+ companies, we have in mind tech com-
panies that command that valuation today.
Tough times for Europe’s billion-dollar companies
79 | Companies
Distribution of $B+ companies by year first surpassed $B+ milestone and status of subsequent
capital raises and valuation
Notes:
Data is as of 31 October
2023.
Sources:
Year company first surpassed $B+ valuation milestone
% of $B+ companies
2018
2019
2020
2021
2022
0
20
40
60
80
100
Disclosed an additional
capital raise at a lower
valuation
Disclosed an additional
capital raise at a higher
valuation
Disclosed an additional
capital raise, but
valuation not disclosed
No additional capital
raise or valuation has
been disclosed
Over the five-year period between 2018 and 2022, a total of 257 European tech companies first surpassed
the milestone of reaching a billion-dollar valuation, including more than 150 in 2021 and 2022 alone during the
most heated period of the market.
This chart seeks to explore the extent to which these valuations have endured as this cohort of companies
has gone on to raise subsequent rounds of investment since first achieving a billion-dollar valuation and, if
they have, whether those rounds were raised at higher or lower valuations. Of course, this analysis is limited
to publicly-disclosed data, but is still directionally helpful to understand the trend.
As is clearly visible in the data, a large number of billion-dollar companies - particularly those that first sur-
passed the milestone in 2021 or 2022 - have yet to disclose additional funding rounds. While many companies
may keep their valuations intact, it seems likely that there is still a meaningful number of others, particularly
from the classes of 2021 and 2022, that may face a correction when next seeking to raise capital.
Many $B+ companies yet to raise amidst new
market reality
| 80
In this year’s survey, we asked founders to share their specific experiences in attempting to raise their most
recent rounds of investment.
The responses make for tough reading. The vast majority of founders highlighted the impact of challenging
fundraising conditions on most aspects of their process. The most notable impacts cited were extended
process timelines, the need to adjust valuation expectations down, and having to reduce round sizes or take
more dilution than hoped.
That being said, there’s always a small number of founders and companies that are able to successfully
navigate challenging market conditions to negotiate with potential investors and command more favourable
terms.
Founders having to adjust expectations
In which areas (if any) did you have to make changes over the course of your most recent
fundraising, were these favourable or unfavourable?
Notes:
Founder respondents only.
Respondents who selected
"No change / Not applica-
ble" are excluded from the
data.
Sources:
% of respondents
Extending the timeline of th…
Expectations on valuation
Round size
Postponing fundraise
Founding team dilution
Investor outreach
Due diligence scope
Investor round composition (…
Introduce liquidation prefer…
Top up ESOP pool
0
20
40
60
80
100
Favourable change
No change
Unfavourable change
81 | Companies
While there has been much discussion about a potential extension of the average time between investment
rounds as founders seek to delay returning to the market to raise additional capital, this hypothesis is yet to
be reflected in publicly-disclosed data.
This is likely due to the fact that companies that have had to elongate the time between their funding rounds
have yet to come back to the market to raise capital in sufficient volume to impact the overall numbers. The
companies that have had difficulty closing new rounds of investment or are simply waiting things out are, of
course, not captured in the data.
As of Q3 2023, the median time between rounds for growth stage companies has remained largely unchanged
throughout the five-year reporting period, clocking in at an average of 23 months between consecutive
rounds.
For early stage companies, meanwhile, only a slight uptick in the median interval between investment rounds
is visible in the data.
Average time between rounds is not yet extending
Building the company for the long-term and
focusing on things within our control is key.
Oskari Saarenmaa
Co-Founder & CEO, Aiven
Aiven, like many growth companies, secured funding during fa-
vorable market conditions. Now everyone’s focus is on product,
customers and execution. Once markets regain momentum,
we’ll be in a great position. As economist and investor Benjamin
Graham put it: “In the short run, the market is a voting machine
but in the long run, it is a weighing machine.”
| 82
Time between rounds by quarter and stage, 2019 to 2023
Notes:
Data is as of 30
September 2023.
Sources:
Months
Q1
20
19
Q2
20
19
Q3
20
19Q4
20
19
Q1
20
20
Q2
20
20
Q3
20
20
Q4
20
20
Q1
20
21
Q2
20
21
Q3
20
21
Q4
20
21
Q1
20
22
Q2
20
22
Q3
20
22
Q4
20
22
Q1
20
23
Q2
20
23
Q3
20
2
0
5
10
15
20
25
30
35
Slowest decile
Median
Fastest decile
Early stage
Growth stage
Months
Q1
20
19
Q2
20
19
Q3
20
19Q4
20
19
Q1
20
20
Q2
20
20
Q3
20
20
Q4
20
20
Q1
20
21
Q2
20
21
Q3
20
21
Q4
20
21
Q1
20
22
Q2
20
22
Q3
20
22
Q4
20
22
Q1
20
23
Q2
20
23
Q3
20
23
0
10
20
30
40
50
60
70
Slowest decile
Median
Fastest decile
83 | Companies
Share of rounds that were bridge rounds by stage, 2019 to 2023YTD
Notes:
Data is as of 31 October
2023. Based on global data.
% of total rounds that were bridge rounds
2019
2020
2021
2022
2023YTD
0
10
20
30
40
50
Seed
Series A
Series B
Series C
Series D
Sources:
In last year’s State of European Tech report, a clear uptick in bridge rounds was already becoming evident
by Q2 2022. Today, that uptick has developed into a clear trend, with 2023 seeing the highest share of bridge
rounds across all stages globally since 2019.
Bridge rounds are more common at the earliest stages of a startup’s fundraising journey, when they serve to
buy more time to find product-market fit. This is also reflected in the data, with Seed stage (38%) and Series A
(39%) seeing the highest share of extension rounds in 2023, as well as in previous years.
The relatively high share of bridge rounds in the later stages underscores uncertainty in the market, as found-
ers look to reinforce balance sheets and boost cash runways.
Continuation of upward trend in bridge rounds
in 2023