Europe’s tech investment landscape is experiencing a hangover post-2020-2021, with VC investment in European startups reaching $60 billion, surpassing pre-pandemic levels, according to a recent report.
Global law firm Orrick analyzed over 350 VC and growth equity investments completed in Europe in the previous year.
The total capital raised in Europe amounted to $61.8 billion, with 2023 marking a reset and major correction in global investment levels. Europe was the only region among the top 3 globally – Europe, Asia, and North America – to surpass 2019 levels.
Europe holds “record levels of dry powder” and is producing more new founders than the U.S., but funding remains sluggish. Only 11 new unicorns emerged in Europe last year, with Climate Tech overtaking FinTech as the most popular sector.
Investors are exercising greater control over investments, with founders increasingly required to stand behind warranties in venture deals. Later-stage financings decreased, pushing founders towards alternative financing methods or focusing on generating revenue and profits.
New investors are entering the tech space, with an increase in convertible debt and alternative financing methods, making up 23% of rounds in 2023. SaaS and AI remained popular, while there was a decline in FinTech investments.
European 2023 tech investment deals (Orrick)
Despite a drop in deal values at each stage, early-stage investments remain the most active. Mega-rounds exceeding $100M+ saw a decline, but there were positive signs in the IPO landscape and M&A activity.
In the UK, VCs are facing pressure to deliver returns, likely leading to increased demand for secondaries, heightened M&A activity, and consolidation. Meanwhile, France and Germany are experiencing shifts in investor-friendly terms and liquidity demands, respectively.
