State of European Tech 2023: A Word from Orrick

3 minute read | November.28.2023

The 2023 State of European Tech report, released today, makes clear that tech and innovation continue to drive the European economy. Global venture capital firm Atomico prepares the report in partnership with Orrick, HSBC Innovation Banking, Affinity and Slush.

Tech investment in Europe is far off from the extraordinary highs of 2021 and around 45% down from 2022, the report reveals, with Europe set to reach $45 billion by the end of this year.

It was still a very solid performance with many signs of strength and green shoots in the ecosystem. We see clear indications that tech and innovation remain the engines for economic growth in Europe and across the globe:

1. There is a lot of dry powder.

The pool of investors, including investors exclusively focused on Europe, has never been deeper. The number of unique investors in European tech has risen consistently over the past decade. VCs have raised more than $50B in new funds locally since 2021.

2. The market has heeded the call to action on climate, with carbon and energy gaining the biggest share of funding.

Carbon and energy solutions account for approximately 30% of all capital invested in European tech in 2023, tripling the proportion of investment since 2021. Energy storage, clean energy and energy efficiency top that trend.

3. AI and automation attracted the second most capital and has a robust growth stage pipeline.

AI investment has soared globally, including in Europe. AI & Machine Learning companies accounted for 11% of the total investment in 2023. What’s more, Europe already has a growing and maturing ecosystem of late-stage companies with AI at their core. Eleven mega-rounds of $100M+ were raised by AI companies in Europe in 2023 alone.

4. As one measure of the ecosystem’s maturity, there is an abundance of companies across the lifecycle.

Since 2014, Europe has minted more than 350 new unicorns. The continent’s tech ecosystem is well-stocked with more than 3,900 growth-stage tech companies that have the potential to become the next generation of household names and success stories. Europe also has 41,000 early-stage startups – and in the next five years alone, at least 25,000 more tech startups are expected to be formed.

5. Mind the gap in funding and you’ll find incredible opportunity in Europe.

Funded European companies are as likely as their American counterparts to scale to a billion-dollar valuation after five years in operation. Yet U.S. startups are 40% more likely to have secured venture capital funding in the same timeframe. That said, Europe’s share of global VC reached 17% in 2023 – showing the market is awakening to this opportunity and closing the gap.