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The world economy zigzags. According to Tom Wehmeier, a partner at venture capital firm Atomico, this year has been difficult, with the world entering the most challenging macroeconomic environment since the 2008 global financial crisis.
The most turbulent region in the challenge is undoubtedly Europe, where the development of the technology industry has also been significantly restricted.
In Atomico’s annual State of European Tech report, the European tech industry has lost more than $400 billion in market value this year. The combined value of all public and private technology companies in Europe fell from $3.1 trillion at the end of 2021 to $2.7 trillion.
Among them, the interest rate hikes by the Federal Reserve and major central banks are an important reason for the shrinkage of the European technology industry. Investors reassessed the future cash flow of technology companies and withdrew a large amount of investment.
Foreign investment plummets
Based on data from 41 countries, Atomico expects total venture capital investment in European start-ups to fall to $85 billion this year, an 18% drop from 2021 funding totals.
Atomico pointed out that investment started to slow down in July, and since then the average monthly investment level has remained at around US$3 billion to US$5 billion, which is comparable to the level in 2018.
The birth rate of unicorns has also slowed down significantly. The number of new unicorns with a valuation of more than US$1 billion in 2022 has plummeted from 105 last year to 31.
At the same time, only two technology companies listed in Europe this year have a market capitalization of US$1 billion or more this year, and only three globally. Last year, there were 86 tech IPOs with a market capitalization of more than $1 billion.
Swedish payment company Klarna has seen its value plummet from US$45.6 billion to US$6.7 billion in this year’s financing, and its valuation has dropped by 85%. Spotify, a music streaming service, has seen its share price fall by more than 60% in a year.
One reason for the tech industry’s lull is the ebb of foreign investors, especially U.S. investors.
According to the data, the number of U.S. investors participating in large financings of more than US$100 million this year has dropped by 22% compared with 2021.
We are now in a less liquid funding environment, with the market shifting from a period of abundant capital and low costs in 2021 to one where it will be harder to raise capital and the cost of capital will increase, Wehmeier said.
dark but hopeful
Per Roman, a partner at investment firm GP Bullhound, said it wasn’t all downbeat outcomes.
He believes that the industry prospects of artificial intelligence, cybersecurity and environmental technology are still good. Moreover, the revaluation of the software and Internet markets this year has brought the company back from a huge bubble to a healthy area, which is a very positive change.
He also pointed out that these technologies are shaping people’s future life scenarios, and they can be seen in hospitals, schools and construction sites, so from the perspective of core fundamentals, these technologies will remain strong in the next decade.
In addition, Sarah Guemouri, head of Atomico, said that despite the gloomy market outlook this year, the total investment is still eight times that of 2015.
She pointed out that investment in the technology industry needs to be observed from a longer timeline. This year’s data is still very good on many levels, and she looks forward to future opportunities. She encouraged that the potential of the European technology industry is still huge.
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related events
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