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

Atomico has released the ninth edition of its annual 'State of European Tech' report. Here's our run-down of some key findings.
The State of European Tech 2023: Consistent, long-term growth

It's that time of the year when venture capital firm Atomico, in partnership with Orrick, HSBC Innovation Banking, Slush, and a host of data providers, releases its annual report on the State of European Tech.

With 2023 almost behind us, we dove into the report ahead of its release date to give you a high-level view of the key topics covered.

Most notably, according to Atomico’s crunching of numbers, after the two rollercoaster years that were 2021 and 2022, the European tech ecosystem appears to have reached a state of equilibrium. 

Growth in funding

Source: Atomico
Source: Atomico

According to the report, Europe is on track to raise approximately $45 billion in capital this year. While this figure is a notable decrease from the heady days of 2022’s $82 billion and 2021’s record $100 billion, this year's number is the third-highest figure on Atomico’s record.

While the number is lower than Atomico’s $51 billion projection, it should come as no surprise given that July and August were particularly slow months in terms of investment volumes across Europe.

Perhaps even more important to consider is that if we view 2021 and 2022 (a.k.a the Covid years) as red herrings, 2023’s projected $45 billion demonstrates an 18 percent increase in funding over 2020’s numbers.

Source: Atomico
Source: Atomico

In so much, this places Europe on track to be the only global region where long-term investment figures have not plateaued.

According to the State of European Tech report, while Europe is looking at an 18 percent increase in capital invested 2022 versus 2023, the United States records -1 percent, China -7 percent, and Rest of World at -8 percent.

Tighter belts

However, while an 18 percent increase over a four-year period is a positive figure for the European tech ecosystem, 2023 might perhaps be best charaterised by the expression ‘what goes up must come down’.

After 2021 and 2022’s skyrocketing numbers (red herrings) an extended period of muted exit activity was noted across 2022 and into 2023. This absence of liquidity events and a market reset has led to an increasing number of LPs holding onto their assets, making fundraising conditions for investors challenging.

"This year’s report shows that founders and talent in Europe are taking risks and tackling the hardest problems, like AI, climate, and health. We now need to spread the risk taking and embrace more of the potential at our disposal. We need to build an investor landscape that truly matches the ambitions of our founders." - Tom Wehmeier, Partner, Head of Intelligence at Atomico, and co-author of the report.

What this translates into is a situation where despite a record $10 billion of dry powder lining the European tech ecosystem’s coffers, these macroeconomic conditions are forcing investors to prolong funding cycles and become increasingly selective in deployment. This creates a knock-on effect making fundraising for founders all the more challenging.

Europe outpacing the US, but …

Source: Atomico
Source: Atomico

Despite more than 80 percent of founders surveyed indicating that raising funds has become increasingly difficult, Europe is outpacing the US when it comes to the sheer number of startups founded at approximately 14,000 and 13,000, respectively.

The report also highlights that the probability of scaling to unicorn status is exactly the same for US and European founders if a Seed round investment is secured.

"The ecosystem is growing more and more green shoots - Europe is full of incredible opportunity. Now, it just needs seizing" - Chris Grew, Partner, Technology Companies Group at Orrick.

However, this picture might not be as rosy as it first appears, as Atomico’s State of European Tech report similarly revealed that US founders were nearly (40 percent) twice as likely to secure VC funding within the first five years of operation.

So while Europe might have more outfits spinning up, and the odds of a billion-dollar valuation are equal on both sides of the Atlantic, US counterparts clearly have an advantage when it comes to access to capital.

Climatetech takes top slot

Source: Atomico
Source: Atomico

Overtaking both fintech and software, including sustainability and energy startups, climatetech saw the largest share of investment in European tech at 27 percent, a number up 3x from 2021.

After AI startups, climatetech startups were the second highest funded sector in rounds less than $5 million.


Source: Atomico
Source: Atomico

It should come as no surprise that given this year’s advancements in LLM’s and awareness by the greater public, AI-focused startups received the most investor attention at Seed round level in 2023. 

According to Atomico’s research, 11 percent of all rounds below $5 million can be attributed to AI startups.

While megarounds, i.e. funding rounds in excess of $100 million, saw a 127 percent decline over 2022’s numbers, of the 36, 11 can be attributed to European AI companies including Mistral AI and Aleph Alpha.

And more

Atomico’s State of European Tech 2023 report is now available and goes on to outline a number of additional topics including:

  • Europe’s return to a $3 trillion value

  • 2023’s unicorn creations, or lack thereof

  • Europe has more AI talent than the US

  • Layoffs and tech industry-related immigration patterns

  • Video interviews with OpenAI CTO Mira Murati, the founders of Aleph Alpha, Deepl, Mistral, Corti, Kheiron Medical, and Instadeep.

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

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

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

The entire Atomico State of European Tech 2023 can be accessed at

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