Europe is outpacing the US in new tech founders, and the UK is leading the continent in projected VC funding this year, despite strong economic headwinds and an overall downturn in the tech ecosystem.

This is all according to Atomico’s The State of European Tech 2023 report, which outlined how the European tech sphere is competing with major rivals including the US and China for funding, entrepreneurship, and talent pool competition.

The report found that the market reset impacting Europe, and showing a slower growth rate compared to the market’s peak in 2022, is a global phenomenon, affecting superpowers like the US, China, and beyond.

Europe, however, continues to see an upward trajectory and is set to raise 18% capital in tech compared to 2020.

The UK alone is set to secure £10bn in VC funding this year, with all of Europe set to raise £45bn this year – a drastic drop from 2022’s £82bn pot.

European VC funding fell by 45%, and UK funding fell by 54%, solidly above the global tech funding drop of 39%.

Despite this global slowdown, Europe is beating the US in the number of new tech founders, even though the overall number of new tech founders decreased by around 30% this year.

AI Boom

A major contributor to seed funding across the globe, and in Europe especially is, unsurprisingly, AI.

AI is the number one key to gain the most early-stage investment in 2023, followed by sustainability and climate tech and health tech.

Despite this, European AI companies have yet to approach the same level of funding as American AI start ups and companies.

Europe has seen a boom, however, in the AI talent pool, outstripping the US each year over the past decade as far as the number of actively employed AI/ML roles.

“Europe is a hotbed for the kind of diversity needed to build the future of AI – and as an industry, we have a responsibility to continue to grow and nurture that talent,” Lila Ibrahim, COO of Deepmind, commented on the report.

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Funding Bottlenecks

While Europe may be leading the US in terms of number of startups, these emerging tech companies struggle to maintain position and grow due to a lack of access to capital.

US tech startups are 40% more likely to have successfully secured venture capital funding, meaning that Europe is missing out on major scaling opportunities to a lack of continued funding out of seed rounds to bolster these up and coming startups.