The European tech industry has lost about $400 billion in value in 2022, being valued at $2.7 trillion now, the fresh annual State of European Tech Atomico’s report states. Meanwhile, the startups across Europe are on track to raise $85 billion in funding. It represents a decline of 18% of $15 billion on 2021. These figures reflect the common tendencies in the region that is now faced with an ongoing war in Ukraine, while it is still recovering from COVID-19 pandemic economic consequences.
This year, the report also has spotlighted tech sector of Ukraine, admitting its special role in defense efforts and rebuilding. AIN.Capital picked up the key insights.
European tech ecosystem overview
- The record-breaking level of investment activity that defined 2021 carried over into 2022. In fact, by the end of the first quarter of 2022, investment levels were tracking a staggering 52% up from 2021. In July, the investment frenzy of the past 18 months started to cool off, and in August and September the investment levels drop closer to levels last seen in 2018, at around $3-$5 billion invested per month. As a consequence, total investment in Q3 2022 ended up down more than 40% compared to the same quarter in 2021.
- 2021 was a remarkable year for the European tech ecosystem, with total investment eclipsing a landmark $100 billion for the first time. Given the material slowdown experienced over the summer, a conservative estimate as of 2022 would be just around $85 billion for the full year. It does represent a year-on-year decline of 18% — but in the face of the toughest macroeconomic environment since the Global Financial Crisis, such a minimal decrease is a noteworthy outcome.
- Meanwhile, since the start of 2022, European tech companies across both the public and private markets have seen around $400 billion of value erased. As a result, the total ecosystem value has fallen to $2.7 trillion from its $3.1 trillion peak in late 2021.
- IPOs have been one of the biggest casualties of highly uncertain and volatile public markets and negative public market sentiment. There have only been three tech IPOs with a market cap in excess of $1B in Europe and the US this year. This compares to 86 during the bumper year for IPOs of 2021, representing a 30x reduction in volume.
- Just 31 new unicorns birthed in Europe during 2022. This marks a steep decline from last year, which saw a record number of new unicorns — 105. 45 unicorns have also been “de-horned”, as their value dropped below $1 billion.
- Fundraising became harder. According to the reports’ data, 82% of founder respondents to the survey believing it is now harder to raise venture capital than it was 12 months ago. At the same time, fundraising also is taking longer, according to the 74% of surveyed VCs. More commons become bridge rounds, a financing round that keeps a company afloat at the same valuation until its next larger round of funding.
- One of the financial downturn’s most visible and severe impacts on the tech sector is the wave of layoffs that started this year. Year to date, over 14,000 tech employees of European headquartered companies lost their jobs, representing 7% of all tech employee layoffs globally.
Ukrainian ecosystem during the war
- The report says that Ukrainians and the Ukrainian tech ecosystem have demonstrated incredible resilience, and even growth, in the face of war. For the first eight months of 2022, ICT exports actually grew by 16% year over year, according to the monitoring service Opendatabot. The volume of Ukrainian computer services increased by 13% (to almost $5.5 billion). Meanwhile, 85% of Ukraine’s IT companies have restored pre-war indicators like revenue.
- According to the latest mapping of the Ukrainian tech ecosystem by Dealroom, Ukraine is home to more than 1500 startups, while there are a further 600 Ukrainian-founded tech companies that are based outside the country. Dealroom estimates that the combined enterprise value of Ukrainian tech companies totals almost $23 billion and, while this has declined in 2022 in line with the global technology market changes, their overall value has grown by more than 8x since 2017.
- Despite the war, a total of $241 million has been raised by startups born in Ukraine in 2022, dating to the end of October. To put that within the contest of the wider CEE region, this places Ukraine in sixth place overall, just behind Romania.
