Home » Business » Europe’s Start-up Industry Faces Continued Pressure Despite Recovery Hopes

Europe’s Start-up Industry Faces Continued Pressure Despite Recovery Hopes

Pursue
Europe’s start-up industry remains under pressure after a year of crisis

The European start-up industry remains under pressure even after the crisis year 2022. photo

© Sebastian Gollnow/dpa

Stingy investors, falling valuations, thousands of layoffs: the start-up industry has had difficult times. According to an industry study, the environment is likely to remain rough this year.

The European start-up industry remains under pressure even after the crisis year 2022. Investments in tech companies are likely to reach $51 billion this year, venture capitalist Atomico estimates. That would be less than half than in the boom year 2021 with $106 billion in venture capital and even less than in 2022 ($83 billion).

The German tech industry got off relatively lightly. “The new reality of the market will continue,” says the analysis, which is to be presented on Tuesday at the Super Venture trade fair in Berlin.

Ukraine war, weak economy, rise in interest rates

“2021 was a clear outlier and investment volumes and valuations are now returning to long-term averages,” said Atomico partner Tom Wehmeier. “Devaluations will continue and more layoffs may follow.” Investments will remain at current levels but perform a third higher in 2023 than in 2020, according to the venture capitalist, who has also invested in German start-ups Lilium and Infarm.

In Europe, Germany is doing better than Great Britain and France with a decline of 44 percent in the first half of 2023: There, the funds that start-ups urgently need for their growth shrank by 59 and 55 percent respectively within a year.

After a boom year in 2021, when the tech industry benefited from a digitization push during the pandemic and risk-taking investors, the market had completely turned around in 2022. In view of the Ukraine war, the weak economy and the sharp rise in interest rates, investors were reluctant to inject money. Valuations of large startups plummeted. Many companies cut jobs. According to Atomico, there were 185,000 layoffs in the tech industry worldwide in the first quarter of 2023, more than in the whole of 2022 with 165,000.

hope for stabilization

Adverse conditions continued this year, it said. While there are hardly any IPOs by tech companies due to the uncertainty, company valuations have already fallen in a fifth of the financing rounds at the beginning of the year. At the same time, there are fewer start-ups, and experienced founders are increasingly daring to enter the market. However, there is hope for stabilization towards the end of the year with more IPOs.

dpa

2023-06-06 04:30:47
#Europes #startup #industry #remains #pressure #year #crisis

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.