European startup funding down more than half at $45B in 2023

While 2023's $45 billion is down more than half from 2022, historic trends reveal a pattern of long-term growth and stability across the European tech ecosystem.
European startup funding down more than half at $45B in 2023

Released today, Atomico's State of European Tech 2023 report highlights that total capital investment into the European tech ecosystem in 2023 is on track to reach around $45 billion, representing a decrease of more than half (55 percent) from the record year of 2021 (when the ecosystem reached over $100 billion for the first time), and around 38 percent compared to 2022 (with a total of $82 billion).

The report also states that this decline is unsurprising, as there were some shifts in the broader macroeconomic landscape.

Thus, there happens to be the dual effect of many later-stage companies delaying fundraising, but also materially slower deployment pacing by investors which led to a decline of the growth stage investment rounds. But, even though there has been a decline in the last two years, with the total capital invested, 2023 is on track to the third-largest year on record.

Atomico Report
Source: Atomico

Europe is the only region that records growth in investments (18 percent) compared to 2020

The report states that the early-stage investments are still stable despite the turbulence in the investment volume since 2021. But, if we exclude the period from Q1 2021 to Q2 2022, we can see the constant long-term growth investment in the European tech ecosystem which might give us the confirmation that even with the lower numbers, the ecosystem is on the right track.

Compared with other regions, Europe is the only region that records a growth (18 percent) compared to 2020.

Atomico Report
Source: Atomico

Foreign investment retreats

The number of active investors in European tech companies has steadily increased over the past decade. In the period from 2021 and the first half of 2022, these investments were largely fueled by investors from outside the region, especially from North America.

Although there's been a retreat in 2023 due to reduced participation from non-European investors, the overall base of active investors remains more than double a decade ago which signals a commitment to supporting the European tech ecosystem through market cycles.

Venture debt

Venture debt funding in European tech has decreased in absolute terms from the highs of 2021 and 2022. Still, it aligns with the overall trend in equity investment volumes.

The projected total debt financing for 2023 is around $1.5 billion, constituting approximately 3.4 percent of the total equity investment capital over the same period. These numbers indicate a decline from the peak of $4.4 billion in 2021 but remain consistent with 2019 or 2020 levels.

Women-led companies

There is some progress when it comes to the share of capital invested by women-led companies compared to a year before, but, still not enough.

As stated in the report, in the funding landscape for women-led companies, there is a notable drop-off in shares as companies progress beyond the Pre-Seed stage, with women-only teams capturing a mere 2.2 percent of funding in Series B and beyond.

This underscores unequal expectations for male and female founders, highlighting the need for more equal opportunities across all stages of company maturity.

UK market share slipping

The decline in capital investment in private European tech companies is widespread, with significant year-on-year decreases in every major European country between 2022 and 2023.

Although still in the leading position, when it comes to capital invested, the UK has been gradually losing market share on the European level.

In terms of the number of tech startups founded each year, approximately a quarter of all new companies in Europe come from the UK. On the other side, the fastest-rising country in terms of the share of new tech startups created each year is France, which has seen its share increase from 18 percent in 2019 to 22 percent in 2023.

Speaking of the startup concentration, smaller countries like Estonia emerge as leaders highlighting the importance of considering population size to benchmark the true level of startup activity.

Estonia stands atop

One of the clearest indicators of the tech entrepreneurship and diversity of Europe's startup ecosystems is the number of countries that have produced a breakout, billion-dollar company. Today, a total of 356 companies are currently valued in excess of $1 billion, and they have been started and scaled from 29 countries and 136 cities.

Source: Atomico
Source: Atomico

From a geopolitical point of view, Estonia consistently stands out as the top performer in billion-dollar company density, boasting 4.5 companies valued at over $1 billion for every one million inhabitants, a distinction it has maintained for several years.

Slicing the pie

Even though there are differences in the distribution of ecosystem values within the region, in the past five years, it has stayed quite stable. Three regions (UK and Ireland, France and Benelux, and DACH) capture 76 percent of the combined ecosystem value in 2023, underscoring the prevailing disparities across different parts of Europe.

However, the rest of Europe has done some catching up, increasing their share of the pie from 17 percent in 2019 to 24 percent in 2023.

The dominance of the climatech

Almost 27 percent of all capital invested in European tech in 2023 comes from the Carbon and Energy sector, doubling its share of investment since 2021.

This shows the increase of the capital investment behind green transitions and the slowdown of fintech investment volumes since its peak in 2021.

This dominance of the Carbon and Energy sector is present across almost every major European country, while it's the highest in the Nordics, representing 48 percent of all capital invested in Norway and 44 percent in Sweden. However, Health is the single largest investment sector of 2023 in Denmark and Switzerland (with 39 percent and 38 percent of total capital invested, respectively).

Atomico Report
Source: Atomico

Hard on hardware, soft on software

A large share gain of capital investment this year went to Enabling Technologies (which includes core technologies such as AI Infrastructure, Quantum Computing, and Semiconductors).

On the contrary, the Finance and Insurance sector accounted for the largest overall year-on-year declines in the share of investment, followed by the Software sector, which saw a drop of eight percentage points in its 2023 share of investment versus. 2022 levels.

Atomico’s 258-page State of European Tech 2023 report is now available and goes on to outline a number of additional topics, including exclusive video interviews with OpenAI CTO Mira Murati, the founders of Aleph Alpha, Deepl, Mistral, CortiKheiron Medical, and Instadeep and can be accessed at

You might also want to check out our additional coverage of the report at:

The State of European Tech 2023: Consistent, long-term growth

2023 is a tough year to work in tech but an influx of foreign talent and successful post-unicorn startup employees offers hope

Lead image via Atomico

Follow the developments in the technology world. What would you like us to deliver to you?
Your subscription registration has been successfully created.