The latest European Tech Report indicates that although there was a significant slump in tech funding in Europe in 2023, things seem to have steadied in 2024. However, the forecast still points to potential difficulties lying ahead.

The yearly report, brought out by European venture capital company Atomico, highlights that regional startups are likely to amass $45 million in funding this year. Although this is not as drastic as the 50% drop seen in 2023, it is still $2 billion less than the previous year. It is important to note that Atomico had originally projected a funding of $45 billion for 2023, which was later adjusted to $47 billion.

Atomico, which has been releasing these annual reports for the past decade, underscores the substantial growth in the tech sector. The company states there are currently 35,000 early-stage tech companies in Europe, along with 3,400 late-stage companies and 358 valued at over $1 billion. This is a significant increase from 2015 when there were only 7,800 early-stage startups, 450 late-stage startups, and 72 tech companies valued over $1 billion. Despite the impressive growth, there are still challenges to be faced, particularly given the ongoing geopolitical and economic instability.

The report also sheds light on some key stats:

– The number of exits has seen a sharp decline, indicating reduced liquidity for early-stage tech companies. Mergers and acquisitions (M&As) and initial public offerings (IPOs) are currently scarce in the European tech scene.
– Debt financing has seen a rise, particularly for startups raising growth rounds. This year, debt financing accounted for a full 14% of all VC investments, amounting to around $4.7 billion.
– The average round sizes have recovered. Despite a decrease in the number of funding rounds, startups that are managing to secure deals are raising more funds on average.
– The process of raising rounds has slowed down. Atomico reported a 20% decline in the number of startups raising within a 24-month timeframe.
– Valuations are on the rise after hitting a low in 2023, likely a delayed result of the slow revival of activity in public markets. However, valuations of European startups are still lower than their American counterparts.
– Sentiment in the market is less positive. A record proportion of founders and investors reported feeling less confident than they did 12 months ago.

These findings underline the need for careful navigation and strategic planning for investors and startups in the European tech ecosystem.