December 13, 2022: Europe’s tech industry has lost over $400 billion in value, according to venture capital company Atomico.
The combined value of every public and private European tech company has decreased to $2.7 trillion from a peak of $3.1 trillion in the previous 2021, Atomico said in every year “State of European Tech” report on Wednesday.
This underscores what has been a tough year for tech. Once richly-valued technology firms have seen their shares, they are under pressure from global factors, like Russia’s invasion of Ukraine and monetary policy.
The Federal Reserve and expected central banks are increasing rates and reversing pandemic-era stimulus to stave off the increasing expectation of future cash flows.
“It’s been a tough year war in Ukraine, inflation, interest rate hikes, geopolitical tensions all over the continent,” Tom Wehmeier, a partner at Atomico, added. “It’s the most challenge macroeconomic environment since the global financial crisis.”
In Europe, some companies have seen steep drops in their market values. Klarna, the Swedish buy, pay later group, is slashing its valuation by 85% from over $45.6 billion to $6.7 billion in a “down round.” Shares of music streams service Spotify, therefore, have fallen over 60% in the previous year.
Overall venture capital funding in European is expected to drop to $85 billion, according to Atomico, based on quantitative outlook and surveys in 41 firms. That is down 18% from the over $100 billion European startups raised in 2021.
It was nevertheless the second-highest amount invested in the European tech ecosystem to date, Atomico added. European tech investment shattered records in the previous year as participation from U.S. investors increased to recent heights.
This year experienced a reversal of that trend, with foreign investors retreating. Several active U.S. investors in “mega-rounds” of $100 million or more, 22% from last year.
“It’s a less liquid funding environment,” Wehmeier added. “We’ve gone from 2021 when the capital was abundant, when it is cheaping, to one where it is harder to increase capital and one where the cost of capital has increased.”
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